Cimpress N.V. (NASDAQ:CMPR), a global leader in mass customization, has reported a solid performance in its third fiscal quarter of 2024, with both revenue and adjusted EBITDA experiencing growth.
The company's consolidated revenue increased by 5% on a reported basis and 4% on an organic constant currency basis. Adjusted EBITDA saw a significant rise, increasing by $25 million to reach $94 million, with margins expanding by nearly 300 basis points to just over 12%.
Cimpress also announced its multiyear guidance, expecting mid-single-digit organic constant currency revenue growth and slightly faster growth in adjusted EBITDA for FY2025 and beyond.
Key Takeaways
- Consolidated revenue grew by 5% on a reported basis and 4% organically on a constant currency basis.
- Adjusted EBITDA increased by $25 million to $94 million, with margins improving by nearly 300 basis points.
- Upload & Print businesses and National Pen showed improved trends; other businesses remained stable.
- Cimpress repurchased 1.3 million shares for $120 million and targets a net leverage of 2.5x or below.
- Multiyear guidance anticipates mid-single-digit organic constant currency revenue growth and faster adjusted EBITDA growth.
- The company plans higher CapEx for new product introductions and efficiency improvements.
Company Outlook
- The company provided multiyear guidance for FY2025, expecting mid-single-digit organic constant currency revenue growth.
- Slightly faster growth in adjusted EBITDA is anticipated.
- Annual conversion rate of adjusted EBITDA to adjusted free cash flow projected to be 45% to 50%.
- Target net leverage is approximately 2.5x or below, with a temporary increase to around 3.0x for investments with good returns.
Bearish Highlights
- Home decor category, specifically canvas prints, which accounts for less than half of BuildASign's revenue, is impacted by channel performance changes.
- The real estate market downturn, representing about 10% of BuildASign's revenue, is affecting growth due to its enterprise accounts.
Bullish Highlights
- The signage category remains strong in both BuildASign and Vista, with BuildASign being an important production partner for Vista.
- Cimpress expects continued expansion and success in the signage category over the next few years.
Misses
- The company does not anticipate significant M&A activity; however, share and debt repurchases will be considered based on price and net leverage constraints.
Q&A Highlights
- Executives discussed the impact of the home decor and real estate market on BuildASign's growth.
- The company is actively working on opportunities to improve BuildASign's performance.
- Cimpress is focused on operational execution, customer improvement, and maintaining a strong financial position.
Cimpress N.V. has demonstrated a strong third fiscal quarter with notable growth in revenue and adjusted EBITDA. The company's focus on operational efficiency and strategic investments in its Upload & Print and National Pen businesses have contributed to this positive outcome.
Cimpress's share repurchase initiative and leverage policy reflect a commitment to shareholder value and financial health. Despite challenges in specific categories like home decor and real estate, the company remains optimistic about its future growth and operational execution.
The planned increase in CapEx for FY2025 underscores Cimpress's dedication to innovation and efficiency improvements, ensuring the company's competitive edge in the mass customization market. With a clear multiyear guidance and a strategic approach to capital allocation, Cimpress is poised to continue its trajectory of growth and operational excellence.
InvestingPro Insights
Cimpress N.V. (CMPR) has shown resilience and strategic prowess, as reflected in their recent fiscal performance. With a market capitalization of approximately $2.11 billion and a P/E ratio of 25.6, the company stands as a significant player in the mass customization sector. The adjusted P/E ratio for the last twelve months as of Q3 2024 is slightly lower at 24.63, indicating a favorable earnings outlook relative to its current share price.
InvestingPro Tips highlight several key factors supporting Cimpress's financial narrative. The company's aggressive share buyback program underscores management's confidence in the intrinsic value of the stock. Moreover, a high shareholder yield and impressive gross profit margins of 48.29% demonstrate Cimpress's ability to generate substantial returns and maintain cost efficiency. These factors, coupled with the stock's notable price uptick of 35.11% over the last six months and a 76.49% return over the last year, paint a picture of a company on a robust growth trajectory.
However, it's worth noting that the stock price has experienced some volatility, with a 14.45% decline over the last month. This volatility is a factor for investors to consider, especially those looking for stable returns. Additionally, the company's short-term obligations exceeding its liquid assets is a point of caution, indicating a potential liquidity risk that should be monitored.
For investors seeking a deeper dive into Cimpress's financial health and future potential, InvestingPro offers additional insights. Currently, there are 10 more InvestingPro Tips available, providing a comprehensive analysis to help investors make informed decisions. Interested readers can utilize the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro, unlocking access to these valuable tips and real-time metrics.
Full transcript - Vistaprint N.V. (CMPR) Q3 2024:
Operator: Welcome to Cimpress' Third Quarter Fiscal Year 2024 Earnings Call. I will introduce Meredith (NYSE:MDP) Burns, Vice President of Investor Relations and Sustainability.
Meredith Burns: Thank you, Amber, and thank you, everyone, for joining us. With us today on the call are Robert Keane, Founder, Chairman and Chief Executive Officer; and Sean Quinn, EVP and Chief Financial Officer. We appreciate the time that you've dedicated to understand our results, commentary and outlook. This live Q&A session will last about 45 minutes and we'll answer both presubmitted and live questions. You can submit questions live via the questions and answers box at the bottom left of the screen. Before we start, I'll note that in this session, we will make statements about the future. Our actual results may differ materially from these statements due to risk factors that are outlined in detail in our SEC filings and the documents we published yesterday on our website. We also have published non-GAAP reconciliations for our financial results and outlook on our IR website, along with historical financial results. We invite you to read them. And now I'll turn things over to Sean.
Sean Quinn: Great. Thanks a lot, Meredith, and thanks to everyone who's joined us today. We're on a recording. Before we take any questions that you have, I'm just going to highlight a few key points from our earnings document that we published yesterday. Cimpress delivered strong results in the third quarter. Consolidated revenue grew 5% on a reported basis and 4% on an organic constant currency basis. The timing of the Easter holiday, which was at the end of Q3 this year versus Q4 last year, had about $6 million of impact or 80 basis points of negative impact on consolidated organic revenue growth for the quarter. So the underlying consolidated revenue growth trends were consistent with what we've seen year-to-date. Adjusted EBITDA grew $25 million year-over-year in Q3 to $94 million, and our adjusted EBITDA margins were up nearly 300 basis points to just over 12% this year, driven by continued gross margin expansion, but also operating expense efficiency. From a segment perspective, we saw an improved trend for our Upload & Print businesses and also for National Pen, both despite a tough Q3 comp for those businesses and growth in our all other businesses remain flat, where there are puts and takes beneath the surface consistent with the last few quarters. We had a pretty submitted question on that, so we'll get into a little bit of detail there. In Vista, if you take the Easter timing out of the mix, revenue growth was a continuation of the trends in the first half of the year. So very strong. Vista continues to grow the value of its customer cohorts through growth in both customer count but also per customer value. And we've also had year-over-year growth in the value of the new customer acquisition cohort again this quarter, which is a pattern that's been in place for six quarters now. Adjusted free cash flow was an outflow of $16.6 million this quarter. We do typically have an outflow in Q3 just due to our seasonal working capital patterns. There was a $3.8 million year-over-year increase in that outflow versus last year despite the improved adjusted EBITDA, and that was a function of the quarterly variability of working capital versus last year. Q2 was very favorable this year, if you recall. And importantly, our year-to-date adjusted free cash flow is up over $155 million versus last year. During the third quarter and also in April, together, we repurchased a total of 1.3 million shares for $120 million at an average price of $93 per share. That's a reduction of about 5% of our shares outstanding. These repurchases were done within the limitation that we disclosed last quarter that we would still exit FY2024 with net leverage at or below approximately 3.0x trailing 12-month EBITDA, and that still remains our expectation. Our liquidity position remains strong. We ended the quarter with cash and marketable securities of $160.8 million, full access to our $250 million revolving credit facility. And during the month of April, we also received net proceeds of $16.8 million for the sale of our building in Jamaica that had previously been classified as held for sale. Our net leverage at the end of Q3 was 3.0x trailing 12-month EBITDA as defined by our credit agreement, and that compares to net leverage of 4.8x one year-ago. With these continued strong results and just one quarter left in the fiscal year, we're confident in our ability to meet or exceed our prior guidance that we shared in last quarter's earnings document. As we also discussed in the earnings document that we published last night, we provided detailed near-term guidance over the past five quarters because we had plans to dramatically improve our profitability and our cash flow, and we felt that it was appropriate it is also necessary for us to be more specific about those expectations that we had. With these improvements now reflected in our actual results going forward, we will replace the near-term guidance with multiyear guidance commentary. So let me just walk through that commentary that we provided for FY2025 and beyond in last night's release. First, we expect to grow organic constant currency revenue at mid-single-digit rates, possibly a little higher. We expect to grow adjusted EBITDA slightly faster than revenue, and we expect the annual conversion rate of adjusted EBITDA to adjusted free cash flow to be in the range of 45% to 50%, with fluctuations from one year to the next. Finally, we disclosed a new leverage policy in our earnings document yesterday evening. We think it's really important to have this information for investors. It's so important for our capital allocation philosophy and decisions and what you can all expect in the coming years. And so we think it's a really useful piece of information, but also a useful input for modeling along with the multiyear outlook commentary that we shared last night and I just went through. So net new leverage policy is to target net leverage at approximately 2.5x or below, with the possibility to take net leverage up to as high as approximately 3.0x from time to time for investments that we think have good returns, but also with a clear path to delever to the target of approximately 2.5x or below. We believe we can reach this 2.5x net leverage target in FY2025. However, if we continue to have attractive opportunities for share repurchases next fiscal year, as we have recently, we expect to exit FY2025 with net leverage at or below approximately 2.75x. We're still in the process of finalizing our plans for next year, but just to set expectations as we look to next year and subject to all the commentary that's already been provided, we do expect our OpEx investments to continue at roughly the current rate. We expect higher CapEx in FY2025 just based on opportunities that we see for both new product introduction, but also efficiency improvements. We continue to not expect material M&A, and we'll consider share and debt repurchases depending on price and subject to the specific net leverage constraint that I outlined. So with that, Meredith, let's open it up for questions.
Q -:
A - Meredith Burns: You bet. Thanks, Sean. As a reminder, you can submit questions during this webcast via the questions and the answers box at the bottom left of the screen. We received a number of presubmitted questions. And so I will ask those questions now, and we'll cover the live questions in as they start to come in. So we're going to kick off with a question on the quarter. So Sean, EBITDA was up $25 million year-over-year. You grew revenue and gross margins, and you had expected Q3 to benefit from about $25 million of year-over-year cost savings. How come EBITDA didn't grow more than $25 million?
Sean Quinn: Yes. Just first on the cost savings piece. Our cost savings were exactly as planned. And so that's been great. I think what we disclosed one year-ago, we delivered and maybe a little bit more than that even. And now those are fully in our run rate by the end of – end of March here. So those are in the numbers. We did have a currency headwind on EBITDA, which was, again, consistent with what we had previously disclosed in our commentary. That was a little over $4 million in the quarter. And there's – just as a reminder, in Q4, there's still another about $4 million of headwind in front of us. We do have in OpEx, just naturally in any year, you have things like merit increases or other kind of inflationary increases in your OpEx space. And so you have to factor that in. So we had $25 million of year-over-year cost savings. That's in the math. But then you also have some growth in OpEx just from normal inflationary increases that eats into that. So the way I would think about it for the quarter is that our contribution profit on a consolidated basis grew $24 million and our EBITDA grew $25 million. And so you can see that the contribution profit growth basically dropped through to EBITDA, and that's because of the OpEx efficiency and specifically the cost reductions that we implemented last year, allowing that contribution to profit to flow through. I think the other thing is that just from a – I mentioned this in my earlier remarks that there was a little bit of impact from the Easter holiday timing as well. And so you can expect a little bit of flow-through from that. That was a timing shift as well.
Meredith Burns: Yes. And I'll just say that as I was watching people dialing in, a few people after you made that comment, Sean, and you can see this in the transcript just to reiterate that we did size that at the start of the call, Sean sized that at about $6 million of an impact from the Easter timing in Q3 that would shift into Q4.
Sean Quinn: And just to be clear, that $6 million is impact on revenue, and that was about 80 basis points.
Meredith Burns: Exactly. Great. Thank you. All right. Moving on. So Sean, another one for you. We rarely talk about end market exposures, but given performance the past few quarters, it reasons that BuildASign is quite exposed to real estate and DIY home decor. Can you give us a ballpark of what percentage of BuildASign's revenue comes from these two end markets? Is it fair to say that until these end markets recover, we will see more of the same as BuildASign?
Sean Quinn: Yes. Yes, it's a good question. And you're right, we rarely talk about end market exposures because there's – we have such little concentration in any one industry or end market. And so – and that's actually a great strength of the business. For BuildASign, there's a few things that impacting revenue growth here. So I'm just going to walk through that and also respond to the question along the way. The first one, there's really – there's two impacts here that we've called out. One is the slowness in the home decor category and then the impact of real estate. So I'll take those in turn. On the home decor side, it changes quarterly, but on an annual basis, home decor is a little less than half of the BuildASign revenue. And now we say home decor. But by far, the largest product category in there is canvas prints. So you can think about this as mostly canvas prints. Most of that is for consumer use cases, so that could be in the home, it could be for gifts, but there are also business use cases for canvas prints as well. I'm not sure going back to the tie-in to real estate as an end market. I'm not sure I connect home decor here or canvas prints more specifically so directly to the real estate market. There may be some impact there, but I wouldn't make that direct connection. For home decor or canvas prints, this has really been more about channel performance for BuildASign. And some of the transactional acquisition channels that were very efficient in past years have been less efficient recently. And so that's going to take a few quarters to work through, and the team is very actively working through that. But we think the end market is still a good one. And again, that's more of a channel performance. Of course, for home decor, we had the spike during the pandemic, which was a pull forward of demand. And then we've since normalized to lower levels and then more recently, some bumpiness because of that channel performance. On the real estate side, for real estate, it is about 10% of BuildASign's revenue. And part of that is their enterprise accounts business, which some of their largest accounts – their largest enterprise accounts are national real estate franchises. And so that's had some impact on growth in the near-term. But the BuildASign team is strong. We say that regularly. They've been working on multiple opportunities. And the foundations of those have been multiyear efforts, but the benefits are still ahead of us. In North America, just to pan out a little bit, the signage category in both BuildASign and in Vista has been really strong. And we should also benefit there in the quarters ahead from the political cycle in the United States. BuildASign is also increasingly an important production partner to Vista with their attractive cost structure for signs for other large-format products but also for supporting new product introductions at Vista as well. And so we expect even more of that as we look forward. So been a little noisy in recent quarters, but it's a great business, a really strong team, and they have a good ability to adapt and improve over time. We've seen that through the time that they've been part of Cimpress. And so they've done a lot over the last two years or three years. That should set them up for success in the next few years, including continued expansion as a fulfiller for other Cimpress businesses, most notably Vista.
Meredith Burns: Great. Thank you, Sean. I'm going to have Robert weigh in on this next question. Robert, we have spoken in the past about PP&E or CapEx cycles at Upload & Print and how we were near the end of one. Is this an accurate characterization? And if so, are the new lower spend levels more reflective of where PP&E should be for these businesses moving forward?
Robert Keane: Okay. Well, thanks for the question, and welcome, everyone. We did talk about this in the release. We do expect CapEx overall at Cimpress to be higher next year because we have opportunities in new product introductions and in some important efficiency improving production equipment. Some of that will be in Upload & Print, but we're looking at these across the Cimpress level. And with our Cimpress volumes, even if the CapEx will end up in one part of Cimpress is one of our segments or another, we do look at it as a return on the overall Cimpress level. So if we talk about CapEx cycles in Upload & Print, specifically, I'd break that into two parts. In our PrintBrothers segment, CapEx has been about 1% of revenues for the last five years. That includes this year FY2024, because there we use a lot more third-party fulfillment. We do expect CapEx in PrintBrothers to remain relatively low, but it is likely to increase a bit as we vertically integrate where it makes sense to do so. And that comes along with lower cost of goods sold and better margins when we do that. In that segment, there's – there will continue to be much more third-party fulfillment, but we're starting to shift it a little bit. It's traditionally been a very different model than other parts of Cimpress. Sticking within Upload & Print, Print Group does produce the vast majority of our revenues there internally. So you're correct that over time, that's where we've seen these ways of CapEx intensity tied to both replacement CapEx, but also growth CapEx or even replacing equipment, which is not yet end of life with new equipment, which is just much more economical or higher quality output. Now as a percentage of revenue, CapEx intensity is down a bit. We do expect it to continue to fluctuate year-to-year over the next year or two. They're not just in Upload & Print, there are multiple product efficiency opportunities. I wouldn't set the expectation that, that reduction now is a new norm. It's going to continue to fluctuate. And that fluctuation of CapEx is a pretty material factor, although not the only factor behind our statement last night that we expect our conversion from EBITDA to free cash flow at the Cimpress level to fluctuate year-to-year within that 45% to 50% range. Now Print Group's gross profits have been really strong. And on top of that – their gross profit in their direct-to-customer business, on top of that, they are growing fulfillment for other businesses, for example, Vistaprint, which then has a COGS reduction impact at the Cimpress wide level. And we've been – in other words, we've been able to export some of the great innovation we see in Print Group and to a lesser extent, but a growing extent PrintBrothers into other parts of Cimpress. And that CapEx required for that has prevented CapEx in other parts of Cimpress. So we're very happy with the returns we've seen so far. And then finally, we're confident that all of this CapEx we're talking about, if you look at it as an overall portfolio is high return, it's also behind our growth and it's improving our competitive advantage. So we're pretty comfortable with what we're doing there.
Meredith Burns: Great. Thank you, Robert. All right. We're going to switch from CapEx to cap software. This one is going to be for Sean. The amount of capitalized software in National Pen and all other businesses seems very high relative to their contribution to Cimpress overall. Why are they so elevated? And how are these investments expected to evolve moving forward? And I'll just say the reason why the person who asked this question knows this is because they're reading our financial and operating metrics spreadsheet, which we post on our website every quarter. So a way to go to the person who asked this question looking at all of the documents that we provide.
Sean Quinn: I'm sure whoever asked this appreciates that, Meredith. Yes, so National Pen's capitalized software has been pretty consistently 1% of revenue for the last, I think, four or five years. BuildASign for that same time period has been about 2%, and that's been consistent as well. We don't talk about it as much as we did the Vista tech transformation. But each of these businesses has done a lot in terms of rearchitecting their e-commerce front-end, but also building additional services on top of that, that also leverage MCP. And so that's very much been in play for – yes, for the last four or five years. And we're through a lot of the heavy lifting on that. So we should see leverage out of that as we look to the future. But that's why these capitalized software levels are where they are. And I think if you look at National Pen, for example, is 1% of revenue, but where their growth is coming from is in the e-commerce segment, Pens.com, and that's been very strong growth that is becoming more and more of the mix. And so I think that the – if you look at the capitalized software relative to the absolute growth there and just the size of that channel now, which is going beyond $100 million and growing high teens, low 20s percentage. If you look at it from that perspective, I would say that capitalized software investment has been productive.
Meredith Burns: That's great. Thanks, Sean. All right. I think I'm going to switch gears now. We're going to talk about cap structure, capital allocation, fun stuff like that. So Sean, I'll stick with you for this next question. What is the timeline for refinancing your high-yield notes? Is there still a place for them in your future cap structure given your new leverage policy with a lower target?
Sean Quinn: We haven't made decisions on either when or how we'll refinance the bonds. And we have time before we need to make those decisions. We do like having both secured and unsecured debt in our capital structure. And so yes, we do think that remains a place for unsecured debt in the future. And the reasons for that are – there are a few, but diversification of the capital base is a good thing. Keeping secured capacity is a good thing. And also, over time, gives us some optionality because we do expect that our base of profitability is going to grow and therefore, we'll need to access some of these markets in the future. As I said, we don't have a specific timeline. We still have a little more than two years before our high-yield notes mature. And starting in just a few months here, we can call the bonds at par. And so we'll keep a close eye on where the market is at. I think for us, we're going to just continue to focus on consistent execution and what we've outlined even for our leverage expectations between that and the continued strong results should position us to have further credit rating upgrades as well. And all of that should be favorable when we eventually do come to market. So feel like we're in a good spot there.
Meredith Burns: Thanks, Sean. Great. Okay. I'm going to ask Robert this next question. So Robert, it was great to read that we repurchased 5% of the float at what – at what we believe to be an attractive price to IVPS GAAP. What IRR do we typically target with our repurchases so that we can objectively say that repurchasing $1 of stock is better or worse use of capital than investing $1 in automating process X, Y, Z?
Robert Keane: Okay. Let me just quickly answer your specific question and then give some context. I'd say 15%, and then I'll come back to talk about that in a little bit more detail. So I share – we share your point of view that it was an attractive price relative to our intrinsic value per share. And if you look at it via other metrics, it was roughly 8x trailing 12-month EBITDA, and you can do the multiples of unlevered free cash flow or free cash flow or steady state free cash flow. And again, those are all indications that it was also an attractive price. Now there's a few ways we look at returns on our share repurchases. Again, as you point out, your question, the most important thing is what our estimate of intrinsic value per share is relative to the price we can buy the shares at, which drives that. But we also look at cash flow yield, what we expect that cash flow to grow over time relative to what we pay per share. And of course, alternative investments, what can we do to improve the customer value to drive our competitive advantage. We believe we should be targeting an IRR on these in excess of 15%, which we believe is happening when we look at the purchases we've made based on the information we have. And so we think that they also will have a very attractive free cash flow per share return over time. So going back to alternative investments, that is a really important question. We look at other opportunities where, in general, all things being equal, we'd be biased towards organic investments, be that OpEx or CapEx first. When we are sticking within the leverage guidance we just provided last night and the policy we just described and where the returns and the profitability justify those investments organically on the individual projects. So going back to what I answered in the question before about our commentary last night in the earnings document, we're going to be making an increase we expect in CapEx in fiscal year 2025. And those have very good IRRs, and we like those projects, but there's limits to how much we can do in a given period of time and also do so while ensuring operational execution. So if I step way back right now, we're really doing as we've said for the last 12 months, 18 months, stay focused on what's most important from an operational and customer improvement perspective. And when the need for capital in that bucket get filled up and there's excess cash that we can use to either build liquidity and bring down our debt or earning yield or buy shares, we continue to do that. And once again, we think our new leverage policy and the target of continuing to delever down towards the 2.5x mark, we'll keep the bar high in terms of what investments we do, whether it's organic or share buyback or anything else.
Meredith Burns: Thanks, Robert. So I've got a related question that I'm going to have Sean answer this time. Could you please remind us of what IRR thresholds we target for each of the capital allocation activities you identified on Page 3 of the earnings document, namely operating expense growth investments, CapEx for new products and enhancing productivity, M&A, repurchasing shares and debt repurchases?
Sean Quinn: Sure. I'll remind everyone what we've said in the past. And then I think there's probably a practical overlay on top of that, that, that might even be more relevant. So the ones that we talked about historically and the residual risk that's dependent as well was 10% for OpEx or CapEx investments in well-understood areas, where we have a long track record of driving returns and things that are very close into how we run the business every day, 15% for M&A of profitable businesses or for new product introduction areas that are adjacent to the ones that we know well and then 25% for investment in either new geographies or riskier new product introduction. And so those have been outlined in Robert's past annual letters and other venues. A lot has changed since we talked about those publicly, the last time, most importantly, cost of debt is a bit higher. And we've also learned some lessons about some of those areas of capital allocation, in particular, new developing geographies. And so the bar there is very high, practically speaking. Given the commentary that we gave last night and also the leverage policy that we've outlined, there's really – we have a strong desire to continue to maintain our focus and operational rigor. And so practically speaking, I think organic investments should right now have a bar that's a bit higher than that, let's call it 12% plus. But some of it, like some of the CapEx opportunities that we see for next year, will be much higher than that and very quick payback. So this should be very obvious. We're – from an M&A perspective, as we've said, we're not considering material M&A right now. And so anything that we've done there, which has been relatively small or even anything that we would expect to consider in the near future, which would also be smaller, would have that very obvious high returns. And that's how I would classify anything that we've done in our very recent past, and that would be 20% plus. So it should be just extremely obvious and relatively small. For share repurchases, Robert went through that, and so I won't repeat what he went through there. And then for debt repurchases, that return threshold is a bit lower. And I think the framework there is a bit different. So if we have sufficient liquidity, which we do, and we have cash on the balance sheet that is excess cash that's earning money market return right now, let's say, 5% plus, we can compare that to buying bonds. And if we can do that at a known yield in excess of 10%, which we've been able to do, that also reduces our gross debt and there's no execution risk attached to that, that's a no-brainer. And so that's been the framework we've used for those. And again, that's more of a function of cash liquidity position and then the relative opportunities to use excess cash.
Meredith Burns: Thank you, Sean. All right. Another question for Robert. Robert, can you please elaborate on why philosophically it makes sense to run our business with 2.5x leverage and not 1x leverage or 4x leverage?
Robert Keane: So in summary, philosophically, not 4x because 2.5x makes us much more robust and resilient and not 1x because debt does have clear advantages in returns to equity. And we think the new policy strikes the right balance between those. But to dive a little bit more behind that, the 2.5x, which is approximate – or we could go below that is not the output of a spreadsheet. There's a lot of discussion that got it there. But when we did look at it analytically and factoring in the possibilities of shocks to profitability, including future mega shocks like the pandemic we had four years ago and also considering the cost of debt at different leverage levels, we pretty quickly got to the 3x leverage and then the discussion continued from there about what's the advantage of delevering further than that. I would say it's not for Cimpress, a question about optimizing tax benefits of financing costs because of the way our corporate structure works, we don't get benefit of all of our interest costs. So there is a cost of capital part of this. There's a risk management piece from being more robust. And there's an intangible piece of this, which is how do we want to sleep at night and how do we want to operate the business. Again, stepping way back to the pandemic, we were in the midst of turning around Vista when the pandemic hit, we chose to continue that turnaround, but it led to an uncomfortably high leverage, which we've now come back out of and we'll go further. Another factor we talked about, and again, there's no overriding factor in this conversation, but just to expose you to some of the conversations we had in a world of real interest rates, which are materially higher, and having seen the shocks that have happened, we think delevering is just healthy and will help us through that volatility. Who knows when and if the interest rates will ever go back to where they were before. Finally, I'd say that there's a lot of value in not doing unnatural things that disrupt the business. And again, we've seen that in the pandemic. We – in the very early days, we had to really quickly cut costs, but then we had to go back and invest in areas we felt we needed to turn around the business for the longer term. And again, being at a lower level really helps us give us the flexibility in those types of cases, which are out of the middle of the bell curve of future events. That's all why it come down, going back to why we can go lower. Again, we do see a lot of opportunity to invest capital at above our cost of capital, and this level still gives us that, and therefore, again, it helps us in terms of returns on equity. And again, we don't know where we're not going to necessarily pay 2.5x and stay there. We certainly have no problem with building up dry powder with operating cash flow. We'll cross that bridge when we get to it.
Meredith Burns: Great. Thank you, Robert. All right. We have exhausted the list of questions from a presubmitted and live perspective. And so I am going to ask Robert to wrap up the call.
Robert Keane: Okay. Well, thank you, Meredith. And thank you to all of the investors for joining this call, and thank you for continuing to entrust your capital with us. We remain very focused on execution. Our team is very motivated and incentivized to continuously improve. Most importantly, the value we deliver to our customers, and we really believe in doing so that will continue to drive the financial results we deliver to our shareholders. Strategically and operationally, our significant investments over the past five years have really positioned us well for the future. Financially speaking, our strong profitability and a return to stronger profitability as we plan to do does mean that we're going to be operating at much more comfortable levels of leverage, as I just spoke about in the last question, even as we will continue to invest in our customer value and in doing so, investing and continuing to grow our intrinsic value per share. So have a great day, everyone. Again, we appreciate your interest and trust with us.
Operator: Thank you. This concludes today's conference, ladies and gentlemen. Thank you for your participation. Have a great day. You may now disconnect.
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