Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Cimpress Third Quarter Fiscal Year 2025 Earnings Call. Now, I will introduce Meredith Burns, Vice President of Investor Relations and Sustainability. Please go ahead.
Meredith Burns: Thank you, Carmen, and thank you everyone for joining us. With us today are Robert Keane, our Founder, Chairman and Chief Executive Officer; and Sean Quinn, our EVP and Chief Financial Officer. We appreciate the time that you’ve dedicated to understanding our results, our commentary and our outlook. This live Q&A session will last about 45 minutes or so and we will answer both pre-submitted and live questions. You can submit questions 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 on our IR website, and we invite you to read them. And now I will turn things over to Robert.
Robert Keane: Thanks, Meredith and thank you to our investors for joining us today. I’m going to start with some overall remarks, then I’ll pass it to Sean to cover our Q3 results and the tariff topic then we’ll go to your questions. As I noted in the earnings document in the letter that was attached to that, which we published yesterday, in the third quarter, we remained focused on the exact same things we’ve been talking about throughout this year. That consistent focus and the operational progress, which we’ve made gives me and gives us confidence that we can deliver attractive growth in per share cash flow over the coming years despite what is a pretty noisy backdrop right now. At the highest level, there were a few themes to the quarter. First, we continue to see strong growth in what we now refer to as elevated products. Examples of these are promotional products, apparel, signage, packaging and labels. Expanding into elevated products helps us serve customers with a higher lifetime value, because it both increases our share of wallet with existing customers and helps us acquire new customers directly into these categories. For example, at Vista, the number of new customers acquired via signage, packaging and labels in Q3 grew more than 10% over the prior year. And we think these markets have a lot of opportunity ahead of them. Another bright spot is cross-Cimpress fulfillment, which continues to grow quickly. This is when one business unit in Cimpress produces for another, and cross-Cimpress fulfillment is both accelerating our rate of new product introductions and lowering our cost of goods. Likewise, at Pixartprinting, we have their new production facility live in the U.S., on schedule. That facility is already fulfilling for Vista. That’s allowing for new product introductions and access to lower cost production, much of it which was outsourced in the U.S. market and it’s things we’ve honed in Europe and our Upload and Print businesses for quite some time. Likewise, Pixartprinting will soon be launching its U.S. website at pixartprinting.com over the coming month or two, and that’s going to mark our entry into the U.S. Upload and Print market. So we have a lot of strong progress throughout the company. On the other hand, as we’ve discussed over recent quarters, we do face headwinds in some of our legacy products and legacy channels that are reducing our consolidated growth rate. Of course, a lot of our time this past quarter was spent dealing with tariffs and the threat of future tariffs, the uncertainty of what that market – those tariffs are going to be. Our teams across Cimpress have responded with impressive velocity and are focusing on how to assess a ever-changing situation to develop action plans, action scenarios depending on what happens and to reduce our impact on our customers and our shareholders. Based on what we know today, we have a good handle on that impact for tariffs. We have a relatively strong position, and we’re confident in our plans. To help you understand where we stand as of now, in an 8-K filing in early March we provided a framework for how tariffs impact our business, and we have updated that information in last night’s earnings document. We certainly do not enjoy the volatility that tariffs are imposing on us or on our market. That being said, it’s often in times of volatility that we’ve shown that our competitive advantages can become even clearer. And we’ve always strived to build a transformational enduring business. We value customer focus, innovation, learning from mistakes, data-driven decision making, attracting and retaining great talent, driving for greater scale. And all of that is in service of disrupting a market, so that we can profitably serve the world’s small, medium businesses, which power so much of the economy. Now, those traits, which we’ve pursued for decades, have served us well over our history, including in multiple periods of adversity. That could be start-up challenges long ago. It could be the global financial crisis. It could be the challenges of staying nimble as we get big, the COVID pandemic, the post-COVID supply chain challenges, through all of that, we’ve not only navigated those periods of adversity, but we’ve extended our industry leadership, we’ve leveraged our scale-based advantages, and we’ve taken market share. So we are focused on doing the same thing here, and we look forward to the longer-term because of that response we’re able to bring to this period of challenge and adversity from tariffs. Let me now turn things over to Sean to go through our financial results and our tariff response as well as some outlook commentary.
Sean Quinn: Great. Thanks a lot, Robert, for that overview and thanks everyone for joining us today. I’ll just start with a brief overview of our financial results. First, on the revenue side, our consolidated revenue grew 1% on a reported basis and 3% on an organic constant currency basis. In Vista, we had 3% organic constant currency growth. And there, as Robert alluded to, key growth categories of promotional products, signage, packaging and labels, those all grew at double-digit rates, which is a continuation of the strength that we’ve seen there for some time being able to serve higher-value customers. We also returned to 5% growth in the consumer products category after a disappointing decline in the holiday-focused Q2. Vista’s performance remained strong in Europe despite some macro headwinds there, which is good to see, and that’s been a consistent trend as well. In the U.S., Vista’s revenue and profitability continue to be affected by the organic search algorithm changes that we discussed during Q2 earnings. And those changes have had a more significant impact on the business cards and stationery product category, which, in total, that category declined 3% year-over-year, a slight improvement from the 4% decline last quarter. The work that we’ve been doing there to optimize organic search for those changes did start to show improvement, particularly in March relative to the first 2 months of the quarter. And you could see that, that was evident in the Vista U.S. results in the month of March. Turning to profitability. Consolidated adjusted EBITDA declined by $3.5 million year-over-year. A few things to point out from a profitability perspective. Gross profit was impacted by a $2.6 million impairment charge related to the planned sale of a National Pen facility, which is backed out of EBITDA, but impacts gross profit. That planned sale has been in progress for some time, but we met the conditions from an accounting perspective to write down the book value this quarter. We also had around $1.1 million in pre-production start-up costs in our cost of goods sold related to our new Pixartprinting facility in the United States, which began taking orders in March. And if you exclude those two items, gross profit would have increased modestly during the quarter. Ad spend was flat as a percentage of revenue year-over-year, and we do continue to expect ad spend to be lower year-over-year in Q4. And just as a reminder, that’s due to the elevated mid- and upper funnel spend that we had for Vista in Q4 of last year. And then finally, operating expenses that impact adjusted EBITDA were up about $3 million year-over-year, and we do expect to continue to drive efficiencies in OpEx over time, and we’ve constrained OpEx in the current environment over the last quarter or so as well. On the tariff front, in the earnings document, as Robert mentioned, we updated our overview of impact. On the call last quarter, there were a lot of questions on this topic, and most of those questions related to our production in Canada or Mexico and how that was going to be impacted. We estimate that the USMCA and the informational products exclusions that we’ve outlined cover about 90% of the relevant cost for products that have a country of origin Canada and Mexico. We also still benefit from the de minimis exemption for individual orders below $800 for hose two countries, and that’s applicable for much of the remaining 10%. And so the impact for Canada and Mexico at this time remains minimal. Our primary exposure, as we outlined in last night’s document, relates to the increased tariffs on Chinese sourced raw materials, particularly in the PPAG category. And here, we’ve been hard at work as well identifying alternative sourcing and other mitigation actions. And it will take a few months for that to be fully implemented. But through the supply chain actions that we plan to take, we do expect to substantially reduce our exposure to less than $20 million annually for direct sourced PPAG materials from China. We do plan to increase prices as well to at least partially offset increased costs where that’s applicable, and then we can adjust that approach quickly if things change. Given the uncertainty of the tariff and trade environment and how that may or may not continue to change and also any impact on demand where price increases are implemented, we have withdrawn, as you would have seen last night, our guidance for FY 2025 and beyond. Generally speaking, our fourth quarter that we’re now in is seasonally a higher profit and a higher cash flow quarter. And so while we do expect some near-term impact from tariffs, we do expect also to finish the year with increased liquidity from where we ended Q3, and that puts us in a position to be able to take advantage of opportunities as we approach our next fiscal year, fiscal ‘26. We’ll continue to balance capital deployment between organic growth investments, reducing leverage and then also taking advantage of what we believe is today an exceptional opportunity to repurchase our shares at attractive prices. I’m sure we’ll talk about that some more in the questions. And so with that, Meredith, why don’t we turn it over to the questions.
A - Meredith Burns: Thank you, Sean. As a reminder, you can submit questions during this webcast via the questions and answers box at the bottom left of the screen. We did receive a number of pre-submitted questions, some in overlapping areas, and so we’ll combine some of these to make sure that we’re thoroughly addressing what’s on people’s minds. And we look forward to your live questions as well, which are coming in as I speak. So I’m going to start with the tariff topic. I think we should start there. So my first question, I’m going to throw to Robert, which customer verticals do you consider most exposed to tariff impacts in their businesses? And what percentage of revenue do they each represent?
Robert Keane: Okay. We serve millions, tens of millions of customers across an extremely diverse range of industries. We have very little concentration by end customer vertical. If you take a broad grouping of customer vertical, something like health care or – that’s not our biggest vertical, but as an example, a broad vertical like that, represents no more than 7% or 8% of our revenue, but even within that, there is many, dozens of sub-verticals. And so we don’t regularly track this on a consolidated level. I think what’s more helpful is to think of it from a category perspective. As we’ve outlined in the earnings document, the largest exposure from tariffs right now is for promotional products, apparel and gifts, what we call PPAG, just given traditionally some of the product substrates that we have there have come from China. PPAG has been one of our faster growing product categories globally in the U.S. for some time. It’s also a large category. It’s over 20% of consolidated revenue. The U.S. portion itself is about 11% of global revenues. Now remember, the gross margin there is lower than overall, so it’s less than that from a gross profit perspective. Within that, only a subset of that has sourcing from China. Much of the products that are in apparel comes from Southeast Asia or Central and South America. Again, those countries, of course, could be seeing tariffs imposed on them as well, but China is only a subset of that and China is where the biggest tariffs are as of now. As we mentioned in our earnings document, the U.S. tariffs are affecting and will affect the whole of the promotional products and apparel industries, not just Cimpress. That being said, many of these products are seen as important cost-effective marketing mechanisms for companies of all different sizes. And for the products that do see increases to prices due to tariffs, we do believe there’s some substitution that could happen. So if someone wants to give a promotional product, they don’t necessarily need to give – as an example, drinkware with their logo on it, they could give a product that also has their logo on it to their customers. And that substitution may help us move from the highest tariff countries, places like China to other areas. So that replacement of lower tariff country products, replacing something with a higher tariff rates is something we also can be pretty purposeful about in our customer experience and our merchandising experience. It’s also possible that there might be some trade down in quantity size, number of items ordered for products that have significant price increases. But we have actually always been very focused on having minimum order quantities of 1 or very low quantities. So compared to the competition, we think we’ll be very well positioned to serve those needs.
Meredith Burns: Thank you, Robert. Okay. A couple of questions in similar area, Sean, this is going to be for you. It’s going to take me a bit to get through the questions, so stick with me guys. The letter indicates that after supply chain changes that will take several months, there will be $20 million remaining in China COG subject to tariffs. Is it reasonable to expect that based on a 145% tariff rate the associated tariff expense on the remaining $20 million will be about $30 million? How much of this China tariff expense was included in the disclosure in the March 8-K that tariff impacts would be less than $10 million? In other words, how much is incremental relative to your expectations before the Liberation Day tariffs? What is the current annualized level of China COGS that is planned to be shifted to other countries? And what level of charges do you expect to incur in the interim? And in the areas where you’ve already raised prices in response to tariffs, what has been the impact on order volumes? And we had a similar live question that covers most of those same topics. The one that gets added with the live question, does the $20 million of exposure to China post mitigation efforts account for exposures from third-party suppliers? And if not, what is that total exposure to China, including third-party suppliers?
Sean Quinn: Okay. Yes, let me do my best, Meredith. Keep me honest if I haven’t picked up on some part of that. So for China sourcing, the math that was in the question is correct – broadly correct, but I need to give a few caveats. So with the $20 million of COGS that’s connected to our direct sourcing in China, after we make changes to our supply chain, that’s the number that was referenced in the document last night. Yes, $29 million would be the additional cost. That’s just 145% times $20 million. That’s not necessarily the net impact on us though. So we have to be careful about that. One, we expect to have pricing changes to at least partially offset the tariffs. So that’s one. Two, I mean, that could lead to lower volume on those particular products, but we also wouldn’t accept losses on the sale of any of our goods. So the net impact would not be the $20 million. We also will have, and I think Robert alluded to this we’ll have alternative products available. And so we believe that there’s opportunity to reduce exposure either through being able to provide our customers with different products that solve that particular use case or continuing to evolve our supply chain. And we think that $20 million is not the end state. That is just where we can get to over the next month, and then we can continue to optimize after that. But of course, the environment will be changing. So those things will just take a little bit more time. I think keep in mind that where we are after our changes still sourcing product from China, it’s likely that competitors are for the same reason because of availability of those particular products or other reasons. But this represents like a really small portion of our products. Our overall COGS for the last 12 months through March was about $1.7 billion. And so, to put it in perspective, it’s a very small portion of our product portfolio. In terms of trying to figure out how much of this is incremental to what we outlined in the 8-K. In the 8-K, we had talked about impact of $10 million or less. And in that, there was a small amount of impact from the Chinese tariffs. The 2 things that have moved here to combine and drive a larger impact than that is, one, of course, the tariff rate increase for China to 145%. And then the second one is the elimination of the de minimis exemption for Chinese sourced goods. And we’re not in that yet. That’s planned to take effect on May 2. Those aren’t finished products that are imported from China, but the materials that we import for China where that’s relevant, are still impacted by the de minimis exemption because they – these particular products maintain their country of origin China designation, even though they may be decorated in North America. And so that’s why de minimis is still relevant for us on the China part of it. We haven’t disclosed the current amount of the annual cost in terms of our prior sourcing from China. And the reason that we didn’t do that is, because we’ve already begun to take action and so that number would no longer be relevant. But I think it’s fair to say that, that number would be – would have been substantially higher than the $20 million that we referenced. Finally, just for pricing actions, there was a question about what are we seeing in terms of impact on demand. We’ve so far only had to do this for a very limited set of products as of today. And that’s because the de minimis exemption – the removal of the de minimis exemption for China has not happened yet, and so we don’t really have any data to share there in terms of what we’re seeing on impact on demand from those price changes. On the live question, there was a reference to a question on like fill rates and availability, and we’re not seeing any impact there in terms of availability as yet. And so we don’t expect material impact there from everything that we can see today. And then from a 3PS perspective, it is correct that we will have some exposure from 3PS as well, that’s not part of the $20 million number. The reason that we didn’t specifically quantify that is that’s a bit tougher because we don’t have full visibility to changes that our 3PSs are making in their supply chain as well, which is a very active topic. And so it’s impossible to fully quantify that, but there will be some impact there too. I would categorize that piece of it similarly in terms of the – that’s primarily PPAG where those 3PSs are impacted. We will also address any increases there with price to at least partially mitigate any impact. And then we also, there, too, will address with alternative sourcing, and those conversations are very much active today. And then the last thing I’d say is just the – what we can see from many of our 3PS in that space, generally, there were – there was a forward buying of inventory prior to tariffs going into a place. And so we’re in a period where that inventory is still being run out. And generally, there’s been postponement of new buys. And so we’re in a period now where that impact of any increased cost hasn’t been felt yet. And it’s probably unlikely until June in most cases that, that would start, and then we’ll go from there with all the other actions that we’ve outlined.
Meredith Burns: Thanks, Sean. Super helpful. I am going to stick with you for this next question. Post Liberation Day, April 2, have you given any thought to offsetting tariff and demand-related impacts by cutting costs? At what point would you do so?
Sean Quinn: Yes, certainly. And as a general response, I’d say, yes, we’ve given it thought we could and would reduce costs as needed. And I mentioned in the earlier remarks, today, we have put some constraints in place. But if we were not able to mitigate increased costs or we saw a drop in demand, then we would make adjustments. And I think that we’ve shown our ability to do that in the past. And so hopefully, that’s been clear over the last many years. As we disclosed each quarter and the spreadsheet that we published on our IR site, we do have a significant amount of costs that’s either variable or semi-variable in nature. And so we can flex that to the extent that we’re seeing impact on demand for certain products. And again, we’ve done that in the past. As it relates to growth investments and we indicated this in the release as well, we are maintaining a high bar there, but we have not made any significant changes there. We think it’s important to maintain consistency there where we have conviction. And then given the fact that we’re in the depths of our FY ‘26 planning right now, just cost awareness is certainly an important topic that we’re focused on.
Meredith Burns: Thanks, Sean. One more for you here as we shift away from the tariff topic, at least for now, can you please give an update on revenue growth in April? To the extent that you’re seeing revenue softness thus far in the quarter, is it limited to U.S.-based customers or not? And a related question, can you comment on each segment’s revenue performance for the month of April versus last year? And what trends have you noticed?
Sean Quinn: Yes. We try to stay away from that generally, but I understand the importance of that question in the current environment. We certainly don’t get into the segment by segment on an interim basis. But maybe just a few things that I can provide, we are not going to provide a specific update on April. But the – I mean, actually, just to start, there’s – it’s a little bit complicated by the fact that there’s some shift in timing of holidays with the Easter holiday relative to last year. And then – and that has an impact on bookings and how backlog moves and so on. By the way, I should mention that last year was a leap year, so there was – that was actually a negative in Q3, which we didn’t necessarily call out. But if you were to normalize for the holiday timing, I would describe April as stable to the trends that we were seeing in March. And I would say that, across regions. So I think that would be the way I would characterize April.
Meredith Burns: Thank you, Sean. Okay. Robert, this next question is for you. This is the second quarter in a row where we have been surprised by the very low growth at National Pen. Beyond what you shared in the earnings release about the reductions of mail order advertising, what else is driving the lackluster growth here?
Robert Keane: There really is not much to add beyond what we published last night. Where the growth is happening is in the e-commerce channel and in cross-Cimpress fulfillment, especially, I would say, fulfilling for both Vista and our Upload and Print businesses. You can see in our disclosures that excluding cross-Cimpress fulfillment, Europe is growing and it’s North America where the headwinds at National Pen are leading to the low overall growth. That is in the mail order channel, and we are just not seeing enough returns here to justify the past levels of direct mail advertising. So we’ve reduced that, and that has been a drag on revenues this year.
Meredith Burns: Thanks, Robert. I’m going to stick with you for the next couple of questions here. So historically, your business has held up well during economic downturns as people turn to side hustles and in doing so, need the products that our businesses provide. Is there any reason to believe that this time it’s different?
Robert Keane: Well, the specific circumstances of each downturn that we’ve seen over the past decades have been, of course, different from each other. But generally speaking, Cimpress has outperformed the overall market for printing and similar products during those downturns for the reasons you bring up, the rise of self-employment that comes out of necessity, as well as larger companies moving to lower quantities than they had previously and print mass customization players like us are very well suited to address that shift. As we enter – or I’d say, if we enter a downturn here, we would expect to see some of this play out again. That doesn’t mean that we’re immune to some economic slowdown or muted profitability. But as a company with global operations, with scale advantages, a diverse product and customer set, as well as a strong balance sheet and liquidity, we are able to navigate that quite well. And then there are some, as Sean alluded to in one of the prior questions, cost levers, which we could pull, and we’ve done that in the past when needed.
Meredith Burns: Thanks, Robert. Could you please provide any noteworthy observations on demand trends for our largest submarkets, namely small format, signage, promotional products and apparel and packaging and labels?
Robert Keane: Well, as I mentioned in my prepared remarks, the overall observation is that these products, which we now call elevated products, are products that customers typically consider to be more sophisticated. They are newer to the mass customization paradigm, which we master so well. They typically have more complex production operations and more complex design processes, and they are all growing rapidly across Cimpress’ different businesses. These are products that often have higher order values. They have very often replenishment needs that are higher than average. They include products that our customers see as part of simply delivering their own products to our customers’ customers as opposed to being a discretionary expense. For example, once we become part of a customer’s packaging that requires ongoing purchases for the customer to ship their product. And customers of these elevated products typically have higher lifetime value than Cimpress’ average and higher retention rates. So they’re desirable for us to continue to crack the code on building both the supply chain, manufacturing capabilities that are competitive at all quantities our customers want. That ranges from very small quantities to pretty large quantities and importantly, for us to help our customers with the more complicated graphic design needs, which we refer to as design enablement. And there is a clear need for these products and offering them alongside our more legacy products helps us capture more wallet share of the highest value customers and does help us drive leverage of our advertising and our operating expense. Now, the products, we’re talking about fall into the categories you just mentioned, signage, promotional products, apparel, packaging, labels. And even within some of the small format marketing materials, there are pockets of fast-growing products for us like books, catalogs and magazines that are elevated compared to simple rectangles on paper like a flyer or a holiday card or a business card. And then there are some parts of these categories that are growing slower, decline, and we consider those largely be legacy products like business cards, of course, but holiday cards and the mail order channel at National Pen for writing instruments.
Meredith Burns: Thank you, Robert. Next question, can you please describe the competitive landscape in the complex products, which as we’re talking about on this call, the elevated product area versus the legacy products, for example, business card segments. What is the specific gross margin differential between the two broader product lines? And why can’t Cimpress price the complex products higher to get higher margins?
Robert Keane: Okay. There is a lot of similarity in what I’ll say here with the last question. But yes, there’s often a gross margin difference on the various product categories, but it’s not always. For example, signage, packaging labels, depending on the type of subcategory are often having gross margins that can be similar to some of our legacy materials. Promotional products and apparel do tend to have a lower gross margin, but they also rank among some of our most valuable product categories in terms of how much absolute gross profit we generate per customer, which is very distinct from the percentage gross margin. So when you think about gross margin, which you think of describing a percentage but not an absolute monetary value, I would give you a very simple example. If we make 40%, a relatively low gross margin for us on a $200 promotional product order, we earn $80 in gross profit. If we make 70% gross margin on a $50 business card order, we earn $35 in gross profit. They have different gross margin rates, but the cash flow from the PPAG products are actually quite attractive. So we’re not solving for a gross margin percentage. We’re solving to improve, first and foremost, the value we deliver to customers, which then translates to the gross profit per customer. And of course, a high percentage gross margin improves our gross profit. But if volume drops because of high pricing, that does not necessarily help. So it’s the total revenue times the gross margin that matters. And growing gross profit dollars in a way that delights customers and strengthens their loyalty, increases their lifetime value can be great at driving leverage elsewhere in the P&L, for example, in advertising costs if we have higher value across our customers or in technology costs in other areas. So our businesses look at pricing. There is a question you had about why not price higher, based on what competitors are pricing, we test around the elasticity of demand to figure out where to price a product at any given quantity. So there has been no recent changes of any significance in the competitive landscape to either traditional local printers who still serve the majority of this market or with online players. But it is a competitive space, and we certainly want to ensure we never become complacent just because we’re the largest online mass customization player in print and the only one with international operations like we have, doesn’t mean that we are in any way taking this for granted. So we constantly look at pricing and the overall value proposition. That’s why you will hear us talking about strengthening our scale advantages, why we’re excited about the years of investment we’ve made in the replatforming investments we’re making, as an example, right now to bring our Upload and Print production capabilities into the North American market. And all of that should help, make it easier to further grow our scale advantages and deliver ever better customer value. Going back to competitors, there are great competitors out there. They are nimble, they are focused. And so we have to constantly strive every day to serve our customers better. That’s the way to win. It’s a big market. We’re never going to have the market to ourselves.
Meredith Burns: Thanks, Robert. Okay. Sean, this next question is for you, and it’s along a similar vein. So I think people can incorporate what they have heard from Robert answering the last few questions for part of the answer to this one. What gives management confidence that there’s not a fundamentally negative change to the long-term gross margin profile of the business? And then some new places to add some commentary, how would Cimpress fail in executing on the transformation to higher lifetime value products? And what specific guardrails are in place to avoid such pitfalls?
Sean Quinn: Sure. Yes, I’d say, there is some similarity there to what Robert just outlined. I think, in general – and this question comes up with some frequency. In general, as Robert said, too, we don’t focus on gross margin, we focus on gross profit. I mean, interestingly, and I’ll kind of get back to some of the more recent evolution. But if you take a step back, we used to get this question oftentimes when we started to acquire into our, what is now our Upload and Print portfolio. And our Upload and Print portfolio for a variety of reasons has structurally different gross margins. They’re lower than what are – at least, at the time when we started to acquire those businesses what our gross margins were at the time, so they were kind of gross margin dilutive. And we get a lot of questions about that. Well, those businesses have grown their gross profit very significantly. They have grown their profit dollars very significantly, and they have grown their cash flow very significantly. And if you look at it in terms of the return on invested capital, as we’ve outlined in some of our annual letters, those businesses that we acquired in Upload and Print have generated more cash than the invested capital we put in. They are still growing very nicely. They still have very attractive profit generation and cash flow generation. And so, yes, it would be difficult to argue that just because there was gross margin dilution that, that was not a good thing. Like, it was definitively a good use of capital, and those are great businesses. They are just different. And so, I think if everything was held constant, coming back to like the more recent product mix evolution, if you had constant order size, you have constant repeat rate, constant cost of customer acquisition, constant growth opportunity and so on, of course, then you wouldn’t pursue lower gross margins, right? It would be better to have higher gross margins. But the reality is, everything isn’t constant. And Robert just did some math too on different – differences by category. I think the Upload and Print example is another example. And the reality is that where we started at least in Vista was small format products and those are relatively simple design, relatively low order values. And once they got to scale, they also had high gross margins for a variety of reasons, and that’s a great thing. As things evolve, technology evolve, design capabilities evolve, production equipment evolve, all parts of the value chain, more complex products from a production and design standpoint started to become possible and be possible to be done in small quantities. And so as that has happened, many of those markets are very large and are still newer to come into an online marketplace. And so there’s a nice growth opportunity there. And those products have, just have some characteristics that are different. The order sizes tend to be larger. As Robert noted, they tend to serve customers that oftentimes have a larger amount of annual spend. The repeat patterns are different. Things like packaging, the repeat patterns are different. And that’s where the growth opportunity is. So we’re focused on growing gross profit and contribution profit dollars in those categories. We think that’s a good thing. How would we fail was part of the question? And there’s certainly plenty of ways that we could fail. But I think fundamentally, it would be if we’re not serving these high-value customers really well in a way that makes them customers for life. And I don’t know what specific guardrails I would call out to avoid pitfalls. But I think, frankly – I think that in terms of guardrails, that goes back to how we run the business every day. And in these categories, especially as we’ve pushed deeper into them, we have very clear objectives laid out, key results laid out around those initiatives. We have KPIs that we track so we can establish how we’re making progress and where we need to get better. We have clear areas that we’ve been investing in to attract and retain those customers. And that can range from things like expanding our expert services, which we’ve talked about in various Investor Days, providing more assurance, how do we take friction out of the experience, how do we have more dedicated customer care to handle high-value use cases? And then all the things that we’re doing from a CapEx perspective as well to have both new product introduction, but also to be the low-cost producer in some of these categories that are newer. And of course, we could list a number of other things. And so, I think really it comes down to the mechanisms that we use to run the business every day and monitor performance and then making sure that we’re talking to customers and getting feedback that informs our progress.
Robert Keane: Hi, Meredith. I just wanted to…
Meredith Burns: Sorry about that. I was on mute.
Sean Quinn: A lot of questions coming in to queue.
Meredith Burns: No, I was talking. I was reading the next question, and I was on mute. Sorry about that, guys. So we’re going to shift to a question on CapEx for you, Sean. CapEx is higher this year, which is what you told us to expect at the beginning of the year. How long do you think this investment cycle will take, a few more quarters? Or is this a multi-year affair?
Sean Quinn: Yes. The vast majority of the increase that we’ve had is in our Vista business and then in the Print Group segment. And for the Print Group, we were just talking about the new U.S. facility. So that includes the initial build-out of that new facility and then also, of course, the equipment for that facility. And that one I would characterize as very much a multi-year plan. We’ll be increasing the capacity of that facility, we’ll be increasing the capabilities at that facility as for the next years. And we’ll be doing that as our trajectory of volumes and revenue are also ramping. And I think that over time, as we continue to put more CapEx into that facility, that will be – while that revenue is increasing, given that the facility just went live, so far the CapEx that we’ve had there has not been generating revenue and gross profit. So you don’t see that flowing through yet. So that’s one that I would say is overall a multi-year effort. For the rest, I would characterize the CapEx as primarily ongoing choices that we have rather than a multi-year investment cycle that’s like preordained in any way. And there is maintenance CapEx that we have, there’s replacement CapEx for efficiency. And over our history, like you can see that, that can have some waves to it. And then we do have some larger pieces of equipment that are being replaced with new technology this year. But on the growth investment side of things, I think, as an example, we have some sizable CapEx for expansion of our packaging range, which is something that we’re excited about. We see starting to impact our results. We think there’s more opportunities like that if we’re seeing success, but those are all decisions that we’ll be able to evaluate over time based on the returns that we’re generating on similar investments. And so, it’s not necessarily a multi-year investment. We’ll take those one at a time as we go and can evaluate progress. We are still right now in the process of finalizing our fiscal ‘26 plans. Each year we go through, especially on the CapEx side, very much a bottoms-up assessment of where we’re investing in CapEx. And we evaluate that each year, both on individual products, but then also taking a step back in the aggregate and making sure that, that total number makes sense relative to other opportunities. And I would say, just generally that these CapEx projects have – in general, have high and predictable returns. And so we’d want to do them if we’re confident that it’s a high probability outcome.
Meredith Burns: Thank you, Sean. I’m going to move on to a question sort of related in thinking about capital allocation and different types of capital allocation that we can make. So given the current stock price of $40 to $45 a share, how does the company think about share buybacks versus internal investments and debt paydown? We note from prior calls that the company targets 12-plus percent for OpEx and CapEx. Given where Cimpress is trading from a cash flow yield perspective, will CapEx in FY ‘26 be more muted to capitalize on the opportunity to repurchase shares? What’s management’s expectation regarding timing to resume repurchasing shares, assuming no appreciation in share price?
Sean Quinn: Yes, sure. First of all, it’s absolutely a trade-off that we think about frequently. It features in our discussions with the Board, with our – across the management team. So it’s absolutely a regular feature of our discussions. Specifically on FY ‘26 CapEx, we’re still – as I said on the prior question, we’re still working through our plans there. But as I said, too, there, we do this bottoms up, and we’re evaluating individual projects and returns on those. But then we also look at that in the aggregate too, and are looking at the returns on those things versus share repurchases. And so that’s something that will be factored in, but we’re still finalizing the plans on FY ‘26 CapEx. I’d say just generally, we’ll evaluate the relative returns on all the stuff. And we do have a bias to internal investments like CapEx. Some of the examples I mentioned like expansion of packaging or the expansion of Upload and Print to the United States. If we think that those are high probability outcomes than those are things that we’re going to want to do. They’re beneficial from a growth perspective. They have attractive returns on the capital that we’re investing there. And then we are looking at all the stuff also with kind of a wraparound it of a view towards our net leverage target as well, right? So that’s a balance. And we’ve been actively managing that over the last years, and I think I’ve managed that in a good direction. The fact that we didn’t buy shares in February and March was largely a function of just making sure that we had a handle on the tariff situation. It was a situation that was constantly evolving. And frankly, it was one that was quite complex. And once we felt like we had established sufficient clarity, we updated through the 8-Ks in early March. But like these things take time, and we want to make sure that we have a handle on things. And so kind of that’s where our focus was. And then we also, of course, have our stated plans to continue to delever. So that was in the back of our mind as well. But those are trade-offs that we’re going to continue to actively consider, including in Q4, but also as we move into FY ‘26. And we’re in a situation where we have a strong balance sheet, we have strong liquidity. We’re in a quarter where, as we said in the earnings document last night, we expect to be increasing that liquidity in Q4 because it’s seasonally a quarter where we have higher profitability and cash flow. So we’ll be prepared to seize opportunities, and we’ll stay nimble there, but we’ll be considering that across the spectrum of these capital allocation choices.
Meredith Burns: Thanks, Sean. Okay. We’ve had a couple of questions come in about our decision to withdraw guidance. So Sean, I’ll stick with you on this one. Please provide color on the rationale for pulling the long-term guidance. Is it solely due to the tariff uncertainty or has something else fundamentally changed about management’s view of the go-forward business opportunity? And another very similar question, but more like thinking about, hey, there’s only one more quarter left in the year, considering that we’re already 1 month in, is there really that little visibility over the next few months?
Sean Quinn: Sure. Yes. I mean, as I said in my prepared remarks, and I can completely get the focus on this topic and the question. But as I said, it was given the uncertainty of tariff and trade environment, and then any potential continued changes on that front, which we have seen on a pretty regular basis and then also any impact on demand where that might be relevant that we withdrew our guidance. And so yes, it is specifically related to the uncertainty of the tariff and trade environment and any related impacts. Now, I completely get it, like, hey, we’re sitting here on May 1, and there is only 2 months left. But like we just trying to forecast and then communicate to all of you what the next 2 months are going to be, like we just don’t think is that helpful of an exercise given the uncertainties that do exist. And so we feel like we have a good handle on the impact in terms of what’s in our control. We’ve attempted to lay that out. We hope quite clearly, including in the 8-K that we provided in early March, but then also the updates that we provided last night. And then we had long-term guidance in place and including over the last 3 months, frankly. And I’m not so sure that, that long-term guidance over the last 3 months provided anyone more certainty when the tariff discussion became the focus. And so we’re going to continue to operate the business as we have. We’ve communicated a lot on where our long-term focus is, what our objectives are. And so hopefully, that’s been clear. And none of that changes. That’s where we’re going to continue to focus. And then we’ll have an opportunity 3 months from now to update you on our progress.
Meredith Burns: Thanks, Sean. Robert, going to switch to you on this next one, did you reevaluate your leverage target during the quarter? What’s driving the net 2.5x leverage target? It seems unusually low. Is the target independent of where the stock price is trading at?
Robert Keane: Well, no, we’ve not changed the net leverage target. We’ve talked in the past about why we came up with that target and everyone is going to have different views on this. We have shown our ability to delever, but also to flex the variability of our cost structure in the past. So we could argue that we could handle higher leverage. But we’ve discussed this extensively. And the main reason is that when there’s volatility, we want to be able to stay focused on doing the right things and not have to do anything unnatural because of leverage. That target is independent of where the share price is because the policy does provide flexibility to increase for the right opportunities, and that very much includes share repurchases, which, as we said today and last night, we consider to be very attractive right now. The reality is it will take us longer than we originally envisioned to get to that 2.5x, because of the opportunities you’re alluding to and others, but we still view this as an appropriate destination, again, for the reasons I just discussed.
Meredith Burns: Thanks, Robert. So related topic, as you mentioned leverage as a guardrail, share repurchases in their other capital allocation. So we’ve had a couple of questions on share repurchases from different angles. One of them, what drove the halt in stock purchases, if you loved it at $69 a share, why not $59 or $49? And then the other side of that coin that just came in live, to be able to cope with potentially really bad economic conditions, for example, a deep recession without raising expensive new capital and given your negative working capital, should you not be cautious with the buybacks and avoid a rerun of pre-COVID buybacks, which with hindsight were too aggressive? Sean, if you want to take that one?
Sean Quinn: Yes. And seeing the live questions come in like that there’s, obviously, different perspectives on this and depending on kind of where you sit in the market. We mentioned in the earnings stock, we purchased a little under $4 million in January, and then we didn’t do anything in February and March. And as I previously mentioned as well. The reason for that was because, we want to make sure we had a good handle on what was a pretty complex and dynamic topic still is. And so we didn’t do any share repurchases. And so maybe going to the second question first, I think that behavior indicates that we are being thoughtful about when uncertainty increases, making sure that we’re not putting ourselves in a position where we’re tying up liquidity that might be needed and we end up having to raise expensive capital or something like that. We are far, far – like, we’re far, far away from that, but we, of course, have learned from what we experienced in the pandemic. And so that led us to be – to not act in February and March. And so to that question, I think you can see our behavior factoring those things in. On the other side of it, in terms of we bought at $69, why not at the lower levels? We bought just under $4 million in January, not particularly a huge sum. And then once the executive actions – sorry, executive orders came across that first weekend of February, which happened to be just after our last earnings release, we didn’t do anything further after that. And again, we felt it was important to first prioritize making sure that we have the appropriate handle on the situation. And from what we’ve outlined, we think that we do, and we’ll go forward from there.
Meredith Burns: Thanks, Sean. Alright. We’ve got time for one more question and a sign off from Robert. So Robert, other than stock repurchases, what other factors are you focused on to increase the likelihood that the price of Cimpress’ shares will better reflect our true intrinsic value?
Robert Keane: Okay. First and foremost, and way ahead of share repurchases is constantly improving the value we deliver to our customers. Markets change, customer needs change, they evolve and improving that customer value on an ongoing basis is absolutely the most important driver of a great future. So that’s where we are focused. In the end, success there will drive free cash flow per share, and that’s what matters. Now we – really, that’s what we’re focused on. Next, I think we do recognize the consistency of results and leverage levels are aspects that we think have an impact on the stock price. And so we certainly want to be aware of that, and we’ve spoken about in the past. And then in the end, what it really comes down to is how we allocate capital where we can invest it or pay down debt or use it in different uses of capital deployment that we can control. So we do try to be transparent and consistently communicate with all of our shareholders, all of our debt holders about where we are focused, where we’re investing, what we’re getting in return for that and how those things can impact again, our share value over time. And share value for me is really the underlying ability to generate cash per share after everything, after taxes, after interest, et cetera. And then our share price will move around that. We don’t like where it is right now, but we just have to keep growing the core cash flow capabilities of the business. And if that’s not appropriately reflected in our share price, we certainly will look to take advantage of that ourselves. So with that, let me wrap up the call. Thank you very much for your time today. We continue to execute on exactly the same strategy we’ve talked about with you last September at the Investor Day. We’ve talked about – with you before that. And to navigate this very strange environment of tariffs that we are all across the economy trying to deal with. There are a lot of good signs of strategic progress happening across Cimpress. I’m very confident that we’re going to continue to strengthen how we deliver value to our customers. We are facing, as we’ve talked about in the past, some headwinds in some legacy products, but there are huge markets where we’re growing fast. And we are – despite the current period of tariff adversity, we feel very comfortable that, that transition is going to continue to be a success. So let me wrap up by saying thank you to all of you for joining the call. Thank you for continuing to entrust your capital with us, and have a great day.
Operator: And this concludes the program, and you may now disconnect.
