Cimpress plc Price & Performance (CMPR)

We got a lot of questions and we'll 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 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. Site and we invite you to read all of them. And now I will turn things over to Robert.

Well, thank you, Meredith, and thanks to all of you who are joining us today. As we covered in last night's release, we continue to progress against the objectives that I outlined in my letter to you and to all investors at the July,. Which we also covered in detail in our September Investor Day. That being said, our results were not what we were planning to deliver And that was due to a number of different items, which Sean is going to cover in a moment. To be clear, we consider the financial results we just delivered to be disappointing. We understand the underlying issues. Behind them. We are addressing those issues and we're doubling down to ensure that we continue to progress against what are very well established and communicated strategic and operational objectives. And that's why we believe that in the coming quarters and years when we look back at the it's going to be seen as turbulence rather than a change of the upward financial path, which we have been on for the past several years. In our earnings document, I outlined a number of examples that give us confidence in our ability to grow our profits and our cash flow in the ways we've described.

Focused production hubs that cut the cost of goods that we produce and also increased revenues via new product introduction are 1 example of that. Others are the pending launch of our upload and print business model in The U. S. Another example is the high growth of Vista's highest value customers and their strong growth at Vista and across all of Sendpress in new growth categories. All of these exemplify the progress that we've made and the opportunity we have ahead for the remainder of the fiscal year and beyond this fiscal year. If you haven't read that part of the earnings document yet, do strongly encourage you to do so. And I look forward to taking your questions on these topics shortly. More details also available in the September '10 Investor Day presentation All the things we're doing here described in those documents are activities that we believe are going to extend our competitive advantages and enable Cimpress to continue our long track record of profitable growth for years to come. In most of our businesses, we do face headwinds of slowing growth in some products and channels. However, we have tailwinds from higher growth product categories that are growing stronger every year.

And those tailwinds are in areas of our market that represent a much larger portion of our total addressable market, then the market segments of our legacy products. Now I founded this business thirty years ago this month and there are a lot that has stayed true over the last three decades. First of all, we continue to operate in a very large market that's still is served primarily by traditional suppliers and competitors. Second, our scale based competitive advantages [indiscernible] multiple parts of our value chain and give us market leading capabilities, Importantly, our strategy remains constant what we've been pursuing for the last several years and we are maintaining our what we call our focus on focus. In other words, an ex opportunity, Financially speaking, as I just mentioned before, we do feel confident that having exited the turbulence of the past quarter, we can return to the financial path of our previously provided outlook. And when you combine all this together, I'm very confident that as ever, we have a ability to grow our per share value over time. And with that, I'd like to turn this over to you, Sean, to discuss the financial results and outlook in more detail.

Great. Thanks a lot, Robert, and thanks to everyone that's joined us today.

We did provide a lot of information in the document yesterday. I'll try to keep my remarks brief just so we can get to the question. There's a lot of questions that come in. That's altered our outlook for the full year as we outlined last night. Robert commented on our strategic focus. I'm going to turn to an overview of our financial results and let me just start a little bit more big picture as an overview. There are a lot of 1 time items including the lapping of significant benefits that we had last year which frankly was more than normal and that does create some noise We've quantified those things and so hopefully that was clear in what we've provided. But beyond that, the vast majority of what drove the weakness relative to our was in The United States And the biggest dollars are in Vista, but that was also present for National Pen and for BuildASign as well. In this said, there's a few things to call out. First, as we noted, in The U. S. Overall, we saw lower performance organic search and that was impacted by changes to the Google core algorithm and search engine results page in The U. S. That impacted new customer acquisition and that was most notable in business cards consumer which in terms of customer count from a new customer acquisition perspective, those are the largest categories in for new customers.

We've been optimizing now against those changes. In our December, the revenue mix in Vista changes to about 25% of our bookings coming from the consumer category. It's actually a higher percentage in Europe than it is North America. And we had planned for only slight growth in that category on the back of really 2 things. 1, a strong holiday season last year and also the shortened holiday season this year just in terms of the number of buying days between American Thanksgiving and Christmas. In The U. S, it was also a less favorable environment than last year just overall. The cost of performance advertising was significantly higher nearly 50% higher And the competitive intensity was also higher from discounting from some of our from competitors, particularly in some of our legacy products. For business cards and holiday cards in The U. S, we do see market demand down and that's also factored into our multiyear forecast. So there was not necessarily anything new there. But that was further accentuated by these other topics that I just mentioned that were particularly there in As a point of reference, business cards in Europe were stable year over year and consumer in Europe was slightly up versus last year, actually a little bit ahead of our plan.

Also as we turned to the month of Jan. 0, which is now nearly complete, consumer in North America is back to modest growth. In National Pen and Build A Sign, there are some specifics there tied to go to market channels. But overall, we don't see a dramatic change that cuts across The U. S. Market, the despite the fact that that's where most of the weakness was in the quarter. So nothing new that indicates that something has changed. There were a number of specific [indiscernible] As we talked about at our September Investor Day, Business Card to Consumer have been growing more slowly in the last years than other categories. And in the case of business cards more recently have had slight decline We do expect that to continue, but there are other additional factors at play this quarter. As for the specific results, consolidated revenue grew 2% on both the reported basis and organic constant currency basis, but adjusted EBITDA declined just over $34,000,000 We were expecting a slight decline in adjusted EBITDA because of the extent of 1 time benefits in last year's results, which is about $12,000,000 last year, And we, of course, are comping those But we also had a short holiday buying season.

We had factored that into our forecast. Beyond that, we also had unfavorable 1 time impacts to our profitability this quarter as well that weighed on adjusted EBITDA by another nearly $5,000,000 and we outlined those in the release last night. That leaves about $18,000,000 of year over year EBITDA [indiscernible] and as previously outlined most of that coming from The U. S. Market with weaker sales of consumer related holiday products like holiday cards and home decor not just specific to Vista. As Well As Year Over Year Declines In Business Cards In Vista, Signage Promotional Products And Packaging Categories Had Strong Growth Globally. That Strength Was Not Enough To Overcome The Weakness In Those Higher Margin Legacy Products In The U. S. Market. And with that weakness concentrated in free channels like organic search, the shortfall had a more direct impact on EBITDA than we would typically see given advertising spend and operating expenses increase year over year. We have a lot of improvements in flight already addition to the examples of progress against our strategic objectives that Robert outlined will get some of those in the questions. As for our outlook, we remain committed to multiyear growth in revenue [indiscernible] in light of our financial results, we are resetting our expectation for the year to incorporate our underperformance For the second half of the year, we expect revenue and constant currencies to grow at least 4% We expect adjusted EBITDA to be at least $2.20,000,000 dollars and adjusted free cash flow to be at least $50,000,000 We have initiated multiple actions to improve performance reduce operating expenses or slow their growth and to optimize our pricing.

Again, we'll get into some more of that in the questions. That's factored into our updated guidance. As is some prolonged effect from just some of the weakness that we experienced this past quarter.

Also now expect to exit this year with net leverage of approximately 3 times our trailing 12 trailing 12 bonds EBITDA as calculated under our credit agreement. We do remain committed to our plans to reduce net leverage to our target of approximately 2.5 times or below but that will be slightly delayed from our prior expectations. With that, Meredith, let's open it up for questions.

Great. Thanks, Sean. As a reminder, you can submit questions during this webcast via questions and answers box at the bottom left of the screen. We received a number of pre submitted questions questions and we're getting live questions now too. Some of them in overlapping areas. So I'm going to combine some of these to make sure that we're thoroughly addressing what's on people's minds.

Let's take our first question. Sean, I'm going to ask this question to you. To what do you attribute the underperformance in business cards and holiday cards? Should we be thinking about this as incremental secular pressure on those product lines what trends in these categories are baked into your multiyear outlook?

Yes, thanks. I touched on a little bit of this in the remarks just now, but an important topic. Let me try and get a little bit more specific. I'll start on the consumer side. We said overall that Vista consumer revenue declined 3% that was in the release last night.

That's about $4,000,000 when you play through the math year over year. And nearly $3,000,000 of that was attributable to the Canadian postal strike which is not indicative of normal market demand. And by the way, we see Canada kind of snap back to to more normal expected performance once that strike was over. And including in Jan. 0. We did have growth in part of that consumer category, but the main driver of the and to a lesser extent calendars. I covered this earlier, but there were a number of factors that play that impacted that, the shorter holiday season, the higher cost of performance advertising, I mentioned it was up 50% in the peak weeks in The U. S. Competitive behavior was different than last year. I said earlier that consumer products grew overall in Vista's European markets, including from holiday cards. Holiday cards as a subcategory is is more mature and we don't expect it to be a growth product based on market demand. We do have some credit card data that we have visibility to that indicates it was there was decline for most of our competitors in The U. S. In that area this season.

And at similar rates to ours. And some of those competitors were quite intense with discounting and advertising. We can see that But in our multiyear outlook, we don't assume growth from those specific products. For Build Assign sticking with consumer, for Build Assign, Canvas Prints revenue is down year over year about $5,000,000 And this is part of a trend we've seen really since going back to the pandemic. There was a pretty tremendous acceleration of demand in those products. And then since then, we've seen some decline. Those are still relevant products. We have strong capabilities, but that was down year over year this quarter. Is seasonally important for consumer, of course. But these the weight of consumer does come down in the next during the rest of the year. So as we noted in our earnings document, outside of the holiday period, Vista has been growing revenue from consumer products modestly outside of the holiday period. When it's not the concentration of holiday cards, calendars, Canvas Prints and so on, And we did see that continue in Jan. 0 once we're out of the holiday season. We're back to modest growth in consumer across this. We did receive another I just got to touch on here while we're on the consumer topic just around competitive behavior and on the marketing front, if we tighten marketing investment in response to higher advertising costs And on the competitive behavior, it does change every year.

Last year was overall a more benign environment, I would say. We set our plans in terms of promotions that we run and our advertising and so on. For the season and then we make adjustments along the way. But we don't chase if we see behavior changing that we view to be irrational when it comes to the thinking about the impact on unit economics. That's what we did from an ad spend perspective this year as well, the increase in our ad spend this in North America was mostly in display and TV channel. So that was not specific to consumer. We held to our marginal return thresholds and that spend in Performance Shattles was therefore a good return. But it didn't go as far as last year because the unit pricing was far higher. So it just had less less impact overall in terms of especially new customer acquisition.

The question asked about business cards as well. Business cards and stationary category was down about $5,000,000 year over year in in The U. S. We don't think that there's any sort of sudden change in the [indiscernible] for that product that happened in We have been seeing pretty stable trends over many years where our our volumes were decreasing slowly over time, but that was being offset by more feature enhancements or change in order sizes as we attract different types of customers, but also optimizing net pricing since discounts had come down from where they were some years ago. As I mentioned in my earlier remarks, in business cards in The U. S. Were also impacted by organic search. And I won't go into that again, but like that definitely had an impact on business cards. We'll continue to make improvements and optimizations in that category. Whether it be in the product offering, how we merchandise, design services and how that's integrated into the offering, acquisition offers and a number of other things, all with the goal to protect that profit pool that's what we talked about at our Investor Day as well. Our H2 guidance that we've outlined does factor in modest growth in consumer per Vista.

And we're back to that in Jan. 0. It does factor in continued pressure in build a sign. In terms of their end market. And then for business cards and Vista, it does factor in a decline that's a bit more modest than what we saw in And by the way, that's also consistent with what we're seeing so far in Jan. 0 bookings. From a multiyear outlook perspective on business cards, we don't assume growth. We do factor in some modest consumer growth, as I said, outside of the holiday period. Thank you, Sean. Excellent.

Okay. My next question, Robert, is going to be for you. Why does it make sense why does it make more sense to have Pixar printing enter The U. S. Market versus extending an existing Cimpress business with infrastructure already built stateside into upload and print.

Well, at the highest level, Our strong success we've had in Europe, with the upload and print business model, has taught us that it is very complementary to other segments we have in Cimpress like Vista National Pen. So let me explain that a little bit by speaking about 2 different perspectives. First, let me talk to the customer need we're addressing with upload and print. And then I'll turn more specifically to the production infrastructure that you're asking about. For the customer value that we need to deliver, of course, all the Cimpress segments produce mass customized print. But the customers and the customer needs are typically different across our reporting segments. They are concentric circles. They overlap each other, but in general, they serve different customers that we've spoken about for many years. And to give a quick synopsis of the Upland Print customers, These are people who feel comfortable using professional graphic design tools, you can think of something like Adobe Illustrator or Adobe InDesign or [indiscernible] they use that with and the skills they have to create complex graphic design that is inherent in more complex products like packaging booklets, catalogs, very large format signage and other products [indiscernible] beyond the graphic design, they often have higher quantity orders They're still low by industry standards, but they're higher than Vistaprint So a focused business unit or business segment is very helpful in understanding these needs and serving them given they differ from customers that typically come to Vista, National Pan or Build A Sign.

So that's first and foremost why we want to enter the market. Is to serve those customer needs. Now as to the production operations or infrastructure, let me step back and we've talked about this for many, many years, but the mass customization of print, the economic and operational skill we've developed depends on aggregating together very large numbers of very similar orders highly specialized production lines. And so you get a lot of repetitive production operations because we aggregate all these orders together. And that specialization has a bunch of different factors. It could be by quantity. Did someone typically order 10 or 100 versus 1000 or 5000 or something? By decoration type. Is it embroidery versus laser versus print versus different types of print? Sometimes by proximity to the customer that helps shipping or proximity to suppliers. And all that specialization means that the production lines although it's all mass customization of print, do vary between our different businesses. For example, Vista is generally focused on smaller orders of relatively simple to produce products and with orders that are where we very often ship multiple items put together in the same box and ship together. On the other hand, upload and print businesses tend to focus on larger order quantities, again, still small compared to traditional competitors.

And more complex products. And so that second type of product, the upload and print products, represent the type of production lines, which we are building out in our new Pennsylvania facility. Now that being said, there's definitely overlap. I mentioned the concentric circles. And that overlap in some ways is growing over time, which is why we are pushing [indiscernible] and why we are moving more and more towards focused production hubs to further aggregate volumes and get some of the benefits I just spoke about. So to be clear, the new Pixar printing facility in The U. S. Will produce products for Vista and Nash likewise, National Pen, Build Design and Pixar Printing I'm sorry, National Pen, Build Design and Vista will fulfill for Pixar Printing in The U. S. Hopefully that helps you understand again why we're entering the market with this very successful brand and business but also why we've chosen the operational footprint that we've described.

Great. Thank you, Robert. Looking forward to seeing that launch and grow in Next question is for Sean. Sean, we were surprised by the low growth experience by both National Pen and all other businesses this past quarter. For National Pen, how material is their mail order business? And is that the main headwind facing that business? [indiscernible] [indiscernible] I'll touch on each of these businesses briefly. And I'll start with National Pen. We have been and we've talked about this for the last few quarters at least now. We've been reducing our direct mail advertising spend in National Pen. And that's really focused around optimizing for profitability in that channel. And of course, when you do that, that does have some impact revenue. And it was a lower growth channel in any case and then that has further impact on revenue, but we're optimizing for profitability. From a profitability perspective, we do also like in National Pen, we often see some timing differences in profitability because of the timing of mailings in that channel. We take the cost when we when the mailings happen and not when they have impact necessarily. And so quarter to quarter, you see some different year over year trends in We were favorable year over year in that regard.

We see some of the opposite of that in Just in terms of the weight of channels, e commerce, tall sales and then the cross impressed fulfillment, [indiscernible] All those are growing well. And now those together are larger than direct mail alone. Direct mail is about 25% of 60% for National Pen and then the remainder is their distributor business for larger accounts. In the profit impact was weaker from direct mail sales. There's also some product mix and higher inbound freight costs as we called out in the release On Build Assign, we've continued to see growth in signage products. That was in offset by the declines that we saw and I outlined earlier in [indiscernible] which is consumer focused in the holiday quarter, That impact from home decor is bigger. That's what drove the year over year decline this quarter. In their standalone business in terms of them serving end customers, The fulfillment for Vista that they're doing as part of the cross Cimpress fulfillment had significant growth. And so at a segment level, [indiscernible] year over year slight growth but in their standalone business, that was a decline and a lot of the growth driven from cross impressed fulfillment.

Outside of the Dec. 0 quarter for BuildASign, Cimpress expect that to ramp in cross Cimpress fulfillment it will continue and that will continue to be a more dominant trend in the overall revenue number. Because of Build Assigned strong production capabilities signage in particular and also home decor products, We're moving most production volumes for Vista's U. S. Business to build a sign. And that new products with a lot of focus there. But it's also freed up production space in Vista for new product introduction, which allows us to avoid future CapEx and then lead into these more focused production hubs that Robert was talking about earlier. For Prenchy, just quickly, Prenchy is small and our overall results They've been putting the ingredients in place for a next chapter of growth including necessary technology platforming, which is not unlike what most of our businesses have had to do at some point in time. And then also expansion into new categories, which is really modeled after the success that in our European upload and print businesses. And so they're not recreating the wheel there, but if you will importing some of the some of the capabilities that we've seen be successful in Europe.

PNC is operating near breakeven, sometimes higher. But this quarter, some of the some of these bigger changes that we're rolling out do cause some discrete disruption but they open up opportunity for them in what's still a large and relatively untapped market. But those new capabilities have a lot of opportunity for growth. It'll just it's going to take a few quarters to get ramped up, especially from a production efficiency perspective.

Great.

Thanks. Thank you, Sean. I'm going to stick with you for the next 1. This is a question that we got from multiple people and so this is sort of morphed combined question here. So in the letter you called out that you're taking multiple actions to improve performance slash reduce OpEx and optimize pricing quantitative impact of these actions. [indiscernible] have you already baked that into your revised targets for the year or are these plans still being developed? [indiscernible] Yes, there were a number of questions on this and some live questions there too. Yes, I think if you take a step back and you look at the second last year. About 90% of our adjusted EBITDA from a segment EBITDA perspective came from Vista and Upload and Print. So like that's where the vast majority of the profit came from last year. We expect that roughly that would continue this year, not that specific percentage, but that's where the weight of it will be. So I'll focus on those two first. In upload and print, there was some year over year puts and takes in but like those businesses have been executing well. Investing in new product introduction, driving efficiency gains, Robert outlined, bringing the model to the North America market, And we're going to continue on that path in the back half of and beyond.

So we just stayed of course there in terms of our plans. Those businesses in aggregate were quite close to the the plan that we set out in So we continue the course there. In Some reallocation of our ad spend from a channel perspective, again, in response to where we see the biggest need and the biggest impact as well. Pricing optimization and I could go on there's other examples too. I think it's worth noting that we had already planned you just think about the first half of the year versus the second half of the year, we had already planned for coming into the year that the year over year profile of our advertising spend would be lower in the second half of the year than it was in the first half of the year. And so that will have an impact as well just in terms of year over year profitability. That was already a more favorable setup for the second half of the year than the first half of the year. That includes some large brand partnerships that we had last year, you recall, we won't have those in H2 this year just as 1 example of 1 of the drivers of that.

We're not embarking in Vista or or an offload credit, so we stayed of course there. We're not embarking on major changes or major cost reductions [indiscernible] driving focus and urgency against the areas where we see the most opportunity. Of course, we're driving cost controls along the way. And so that is absolutely in focus. But it's not in the form of large restructuring actions. For National Pen and Build Assign, as I said, smaller part of our overall profit [indiscernible] Where they're focused, especially is on continuing to grow fulfillment for Vista in North America, having been executing well to find opportunities for scale based efficiency gains, but also new product introduction We've seen clear examples of that. That will continue in the second half of the year. And of course, they'll be focused on making sure from a cost perspective, we can We haven't specifically quantified what the aggregate impact of all that is. But it is baked into the at least framework of guidance that we provided for the second half of the year. Thank you, Sean.

Okay. Robert, the next question is for you. It's on a lot of people minds. We have been getting this question If tariffs are put in place on Canadian goods, and if the de minimis exemption on imports to The U. S. Is repealed, And the asker does recognize that those are both big ifs. How might the company respond? What percentage of the company's U. S. Revenues come from the Ontario facility?

And how much of this could be shifted to other U. S. Plants. How much do you estimate it would cost to recreate the Ontario facility in The U. S. And how long would it take? And what is your U. S. Manufacturing capacity?

Okay. Thank you all. I know there's a lot of questions that come in. I can first of all step back and assure you that we've obviously been aware of this for a long time. Even before knowing the election results. And we spend significant amount of time doing scenario planning and as you say in your 1 of the questions, these are big ifs. No one knows what's happening or what will happen And because there are so many unknowns, I can't outline specific plans, but we can provide you with some context and some of the background facts which you're asking for. So let me start with the facilities we have. [indiscernible] Our North American production is across Canada, The U. S. And Mexico. In The U. S, we have 4 facilities, the Reno, Nevada, Tennessee, Austin, Texas and Indiana. We have additional facility, as you mentioned, which we are fitting out outside of Pittsburgh, Pennsylvania. And you add up all those 5 facilities and it's a little bit less than 400000 square feet of production space. I believe and I could be wrong, but I think every one of those are leased and they're in places where we could lease more facilities.

It's not a capital expense if we were to expand them. Our Canadian and Mexican facilities we do own our Canadian facility, but we leased the Mexican facilities. Our collectively about 800000 square feet. So roughly double The U. S. Facilities. Windsor is our biggest facility. And What we look at that given today roughly 2 thirds of our North American production space is in Mexico. And Canada, the facilities that we have now or that we're about to open up in Pennsylvania wouldn't in their current form be able to handle this volume without expansion. That being said, in the case of I'll call the worst case of Trump tariff taxes, the it would not be a question of buying new capital equipment, it would be a question of moving the capital equipment training up new teams or to expand that facility. We do not deny or ignore the fact that that's a possibility. I think it's an personally, I think it's an unlikely possibility would be that extreme, but we are taking that into our scenario planning. Now to the extent we end up do moving facilities, we do have quite a bit of experience doing that. As an example, and again, we are not planning this.

We are planning for scenarios. And if once we have more details, we would decide what we would do. More details about what actually happens in terms of the new tariff taxes. I think that the well, let me start with some more experience. We recently moved our Irish facility to the Czech Republic. For National Pen. We recently moved a very large amount of our production operations from Canada to Mexico for large format production. And I can go into other examples where in Tennessee, we moved facilities and we also moved part of the Tennessee facilities production out to Mexico. So we have experienced moving facilities and we've done that for years. We would not be duplicating CapEx again, we'd be shifting it. Now there's you asked a question about the de minimis exemption or exemption, excuse me, under Section three twenty one. For those who are not familiar with it, that allows smaller value orders to be imported without with exemptions to tariffs. There's a lot of question including under the Biden administration a question of looking into that. And so we've been aware of that for quite some time. To the extent that that changes for us, we do have plans to be able to work around that, not in place right now, but again in our scenario timing.

If was in its worst case permanently eliminated for all products, It would have a material impact on us in the near term until we were able to shift production resources. And we would obviously consider things like pricing, passing that pricing through to customers to the extent we have pricing power. And I think that a lot of these changes we're talking about in tariffs could give us pricing power in different parts of our our product line. So I realize I'm touching on many different hypotheticals because that is where we are right now and that's where I think the entire U. S. Economy that works with imports is right now. But again, I'll go back to what I said at the beginning. We're spending a lot of time on this, understanding different scenarios and [indiscernible] what would happen under different scenarios.

Thank you, Robert. I'm going to stick with you for the next question. It's a quicker 1. In reviewing past transcripts, in the May '2 call, management said of the new customer acquisition cohort for Vista, It was the in a row of growth. But cohorts was not mentioned in this last quarter's announcement. Are you seeing a decline in new customer cohorts? And if so, what is driving that?

So yes, actually customer cohort at Vista was down slightly. It's continuing to grow on trailing twelve month basis. We don't give our cohort data every quarter. So that wasn't an intentional was not an intentional omission. I mentioned earlier in we and Sean talked a lot about these, there were a number of different specific impacts in that were related to our channels, And we don't see that as a longer term change to the cohort growth The cohort growth, just for those who are not familiar, we define the value of cohort as the gross profit we generate from customers acquired in a given quarter or given year. And we can look at that gross profit over the of acquisition or over a longer period like a one or two year period. And the improvements we've been making and here I'm focusing specifically on Vista, which was the question, but it's true across Cimpress, is to grow customer value and that comes from a number of different areas, but the underlying trends we see at Vista remain consistent. And so I certainly expect this to us to continue the long term trend cohort expansion. Importantly, and I'm certainly not making a prediction here, but you have to understand that a cohort because it's a measure of value over time value of gross profit, but then there's the slope at which that grows over time to repeat business.

And we've generally increased the slope of cohort value growth, the rate at which it increases as you move into the future as we've moved higher value customers in Visteon, I certainly expect that to continue.

Which again without getting into specifics of the cohort, it means that sometimes that you can start at a lower value, but still catch up to others because of higher, a steeper slope. This particular quarter did have the unique characteristics again we've talked about in this call. So that may or may not be the case. But overall, that should be the case and we don't expect a change from the general trend we've been seeing in the increase in the value of each cohort going forward.

Thank you. Thank you very much, Robert. Okay, Sean, next one's for you. Vistaprint advertising spend as a percentage of revenue has increased year over year for the past three quarters. [indiscernible] is driving that? Is it also due to your competitors? As a follow-up, is there inflation on advertising costs? Are customers harder to reach Do they need to see an advertisement more times to make a purchase decision? And if so, why?

Yes. I covered some of this earlier. [indiscernible] to add on to that, I think there's a number of things in this question. There's in certainly there were impacts from the free channels that I mentioned before. But we did plan to increase advertising spend Also in if you go back to you can see that too. That was consistent with our plan. And as I mentioned earlier, our plan also was that in the second half of the year, the year over year growth in advertising spend would be less. I think stepping back way back for a second, over the last years, we've said in a number of different public forums, the range of advertising spend as a percentage of revenue would be in that 15% to 17% on an annual basis. We were operating on the the low end of that, actually sometimes even slightly below that. And then but we said that that would vary quarter by quarter, year by year. And so I think we're still kind of in that range. We have added more spend into our mid and upper funnel channels in some regions from from time to time. So over the aggregate of this year, that's the case.

It doesn't really show through so much in the consolidated basis this quarter. But that's 1 of the drivers. And so that will change quarter to quarter, but I think we're still in this like this range that we expected. And that will come down likely in and as a point of comparison. In terms of the increased advertising cost or the inflation potential inflation advertising cost, as I said, in in The U. S, cost per click during the peak holiday weeks was up about 50% for in the consumer category. That's a huge increase That was not something that we see across the board. Actually as a point of comparison in Europe, cost per click was actually down. And so these things change from time to time. I think the direction of travel in the cost of advertising and performance channels is an upward 1. But there we're continuing to work on efficiency and again that's a multiyear I don't think there's anything necessarily to read into that. In the back half of the year, we'll see a slightly different picture again consistent with what we had planned coming into the year.

Thanks, Sean. Another 1 for you. What was the $12,000,000 of 1 time favor Yes. I'll probably won't list out all of them, but these are all things that we disclosed last year as well. So it's not like these are kind of new things that we discovered. Just as a couple examples and there were some of these that impacted cost of goods sold and therefore impacted gross margin favorably last year. Some of them were in OpEx. But a few examples, we had a VAT refund last year because of a ruling that we got that was $3,000,000 that favorably impacted Vista's cost of goods sold last year. We had some government subsidies that we received that was kind of in the aftermath of COVID, some of these things shaking out in Europe that favorably impacted And Primm Brothers by a few million last year We had some COGS timing differences we called out last year and Print Brothers as well that had a favorable impact. So I won't go through all of them, but they were kind of these discrete things. We don't I'd like to think we hold the bar high there in terms of the things that we will call out.

And these again, they're all things that we disclosed that are kind of 1 off and across COGS and OpEx. But that adds up to $12,000,000 year over year. And then as I said too, earlier and we called out in the release, there was another $5,000,000 of impact, including from the Canadian postal strike.

In this year's as well. Great.

I'm going to skip to Robert for this next question. Robert, what gives you confidence in visibility to reignite growth in The U. S. And how should we think about the business card business from here on in?

As to what gives us confidence I'd point you to all the things we've highlighted certainly today, but also in our July 0 letter to investors in the September Investor Day presentation, In summary, it's the growth of the more complicated Very important and very large product categories, which we've talked about for years. And that includes Vista growing in that whereas traditionally they were more in our upload and print businesses. I'd also say this to a point of confidence is this to continue success in improving its value proposition, and across the board, but especially with higher value customers and what we've spoken about for the multiple years, the importance and the success that this is having in serving customers that are in its top couple deciles and the value of those top deciles is individual customers in those top deciles is growing over time. As to business cards, we've spoken quite a bit about it today. I won't repeat all that for time, but I would summarize by saying something that Sean said just a few moments ago, which is we don't see this as a we see drop not as a fundamental change suddenly after years of slow growth or slight decline, there was a rapid decline in the market.

We see it as more a variety of short term [indiscernible] factors and we do not plan on that market growing, but we do think that it's going to be returning to its multiyear slow steady move away as society moves away from using that product just like in the past there's been a slow steady way move away from people sending Christmas or other holiday cards. So going back to what gives us confidence I think that in The U. S, we have those tailwinds, which are quite strong, especially when you get out of the In terms of reigniting growth, I'd actually reframe it slightly. In 8% for each of the 2 before this last quarter. And last year, we grew in 9% So again, there's always variation year to year. But we are addressing the specific drivers from this last quarter as we've talked about today. And that I think will give us confidence in the Cimpress revenues overall, not just Vista.

Sean, next 1 for you. Can you unpack the updated FY twenty twenty five guidance as it pertains [indiscernible] how are you thinking about the growth cadence at Vista throughout the remainder of the year? And which businesses are most impactful to the outlook? And the growth rates that you expect to see in the second half.

Earlier, I talked about The help vista's upload and print make up the vast majority of our segment EBITDA last year in the second half of the year and how we expect that would be similar for this year. We're not going to give specific segment level guidance for the back half of the year [indiscernible] and we are expecting more meaningful year over year EBITDA growth in Vista as well in the second half of the year. I mentioned earlier that the year over year ad spend profile had already been planned to be a higher year over year increase in H1 compared to H2. And so that is 1 of the drivers there too that helps that. 1 of the drivers of that as I mentioned too, is just that we had a significant brand partnership last year and there was also media directed at that, and we we don't have that in H2 this year. So that's just 1 of many drivers there. For offload and print, I would expect to see more of what we've been seeing in terms of trends for for growth and profitability. For national pennant build aside, I would continue to expect to see more of their growth coming from cross Cimpress fulfillment as that continues to ramp and be a more material part of what drives their revenue.

Great. Next question also for Sean, housekeeping question. Why did the weighted average share count go up so sequentially by seven thirty eight ks despite the five thirty three ks in share repurchases this quarter.

Yes. This is a little bit more of a technical thing. Our weighted average shares outstanding decreased at actually a few compare it to last year, our weighted average diluted shares are down or shares outstanding are down by over think over 160,000,0.0 shares year over year. The sequential increase there referred to is really an accounting topic. When you have a loss in your GAAP net income, which we did in largely because of unrealized losses that we had on our currency hedges, We're required to use our basic shares as our diluted shares because otherwise you're effectively reducing your GAAP EPS if you have a loss. Per share. So that's just the rule. So that's little bit nuanced. In terms of the actual trend, like the actual diluted shares outstanding, yes, it has come down with the repurchases if you look at the basic shares outstanding that we have, you'll see that sequential decrease because of the repurchases.

Great. [indiscernible] 50 basis point repricing and upsize of its term loan in which closed on December '17, Certain lenders may be frustrated with lower prices today. With management not aware of the severity of the decline in EBITDA that far into the quarter. Was EBITDA tracking in Oct. 0 and Nov. 0?

Yes, understand the question. In which is is unique to The holiday peak is concentrated period of time, of course. And then the extent of our year over year profit impact This year, especially combined with the fact that it was a condensed buying period was really not known until we closed the books for Dec. 0 because Dec. 0 has had the biggest impact. Certainly, relative to what we had planned, Dec. 0 had the biggest impact relative to those plans. Again, with the shift to the holiday season, that was more so the case this year and becomes harder to forecast how that's going to profile from a consumer perspective. So relative to certainly the results were worse than we had expected. And worse than what we were forecasting at that time.

Great.

Last live question. Here given the 3.1 times net leverage versus your target of 2.5 times, combined with the weaker year over year EBITDA do you anticipate buying stock if it remains in the 70s? Will the Board reevaluate its leverage policy and or target if the stock declines into the 60s or lower? Sean, why don't you take that 1?

Yes, we ended with 3.1x leverage net leverage Our guidance now shows that we'd have a slight increase to EBITDA. Again, we've used this at least framework So using that at least framework it implies a slight increase to EBITDA in the back half of the year. So EBITDA is expansion also $50,000,000 of free cash flow at least in the back half of the year. And most of that would be used to bring the leverage back to the approximately 3 times that we've talked about in our guidance. And in the year end. So at those levels, there is some room for share repurchase, but we wouldn't expect be material that would be somewhat dependent on our actual results relative to that guidance. We obviously can't comment on hypotheticals for what the Board might decide future, but there's no plan of changing that leverage policy. As we sit here today.

Thank you, Sean. All right. With that, Robert, I'm going to hand the call back over to you to wrap things up. Okay. Thank you, Meredith.

Let me summarize by saying we're continuing to execute on the plans and strategic plans and operational plans we laid out in Sept. 0 in our Investor Day. Although our results were not good, there are so many signs of progress happening across Synapris today that we do see those results as an undesirable unwanted, but certainly addressable short term turbulence and we do not see them as a change to our overall trajectory. So by staying focused on our plans, by focusing on focus and on execution, we do expect to continue to deliver improvements to the value that we delivered to our customers will in turn continue to support growth year on year in our financial results and the long term trajectory that we've discussed so many times. So let me wrap up by saying thank you to our investors for joining the call and to continuing to entrust your capital with us.