Cimpress : Annual Letter to Investors – July 2022

TABLE OF CONTENTS
	Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
CAPITAL ALLOCATION ASSESSMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
STEADY STATE FREE CASH FLOW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
SUMMARY & CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
HISTORICAL ESTIMATES OF STEADY STATE FREE CASH FLOW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
NET DEBT PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
NON-GAAPRECONCILIATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18

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July 27, 2022

Dear Investor,

This annual investor letter reflects on our strategic progress and capital allocation over the past year and describes our ambitions looking forward. For a detailed look at our financial results please review our separate Q4 and FY2022 earnings document that we posted today at ir.cimpress.com. Note that our annual investor day will be held on September 13, 2022 - later than in recent years - to incorporate past investor feedback on its timing.

I hope that by the end of reading this letter you will take away the following:

1. The financial results of many parts of Cimpress demonstrate successful value generation despite difficult macro conditions. While Vista's profit continues to be constrained by the significant investments we have made, following the completion of its technology migration, we are focused on leveraging these investments to demonstrate Vista's growth and profitability potential.
2. Our opportunity to serve customers while growing revenue, profits and cash flow, and our competitive advantages relative to the many offline and smaller online suppliers in the market, both remain significant.
3. We are focused on the tactical execution of our established strategy and believe that, over the coming year, we can deliver attractive top-line growth while also enhancing profitability and reducing net leverage.

In the following pages we will provide thoughts on macroeconomic trends, risk management, capital allocation options, our strategic performance by business component, our estimate of steady state free cash flow for FY2022, and why we are confident as we turn to FY2023.

In FY2022 we reached all-time high consolidated revenue and gross profit. Our upload and print businesses, National Pen, BuildASign, and Printi all are generating similar or more revenue and profit than they did prior to the pandemic despite lingering pandemic headwinds throughout this past year, supply chain disruption, and cost inflation. There is much to celebrate here about their demonstration of our competitive advantages and our execution.

The Vista segment generates our highest profits, but those profits and cash flow are currently depressed relative to past and potential levels. To return Vista to sustained revenue growth and to its traditional levels of profit, we have been investing deeply in the multi-year transformation journey that we have discussed extensively in past investor communications. In summary, we seek to build what will become best-in-world design and service capabilities that will integrate seamlessly with a broad range of physical and digital small business marketing products. These capabilities should allow Vista to serve as the expert design and marketing partner to small business, elevating what is remarkable about each small business.

Multiple factors weighed heavily on Vista's FY2022 profitability: revenue growth that was not as strong as Cimpress' other businesses, cost inflation not offset by price increases as price testing in major markets was limited prior to Vista's platform migration, and high levels of discretionary long-term investment. That long-term investment includes major increases to talent in domains such as data & analytics, design and service, user experience design, and brand marketing. It also includes a three-year dedication, now nearly complete, of almost all of Vista's engineering resources to rebuild its technology stack. The re-platforming work constrained our bandwidth to innovate and improve our customer offering but its architecture and leveraging of best-in-classthird-party SaaS tools means that it is vastly better suited for such improvements going forward than our old tech platform, which we built in the first decade of this century.

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With our foundational investments in place, the entire Vista team now has a clear focus on demonstrating that Vista's transformation can yield rapid improvements to customer value and the attractive financial returns we seek through the significant investments we have made. In light of our uppermost financial objective of maximizing our intrinsic value per share, there is nothing more critical than this so our focus is prioritized accordingly. We look forward to sharing specific examples of this in our upcoming investor day. We expect that the shape of Vista's profitability improvement will start to be visible in FY2023, and over the next several years, Vista's segment EBITDA and UFCF can return to historical highs.

Our strong FY2022 growth and record revenues in many parts of Cimpress reinforced our position as the leader in the long-term secular shift of the printing market, from offline to online and from traditional production to mass customization. Both of these shifts have plenty of runway in front of them. We have seen clear evidence over the past year of our advantages relative to traditional printers and smaller online competitors, namely our scale-driven cost position, global procurement leverage, and technology. In fact, some of the growth we have seen is the direct result of traditional competitors and customers who previously worked offline turning to Cimpress; our two largest upload and print businesses had record new customer acquisition during the past quarter. New product introduction and shared fulfillment have been sources of profit expansion in FY2022: intra-segment revenue has more than tripled from its pre-pandemic levels and grown even more when including cross-business sourcing within segments. We have access to talent from around the globe, including in multiple lower-cost locations, which allows our businesses to recruit and retain high-quality team members when smaller competitors are scrambling to do so.

Our cost structure remains highly variable and, as evidenced two years ago when pandemic lockdowns severely reduced revenues, we have a proven ability to flex it if demand drops. Across our business, we have invested strongly in talent, technology, and capabilities development, and the positive impact we expect from those investments are not yet significant in our results. In summary, we see Cimpress as being competitively advantaged and able to continue to grow profitably for years to come.

We often receive questions from investors about the impact of macro conditions on our outlook. The biggest pressure we face is significant inflation for raw materials, energy, shipping and team member compensation. In our history we haven't experienced an inflation-driven recession so, if that comes to pass, there is uncertainty on the impact to demand, but past economic recessions have accelerated both small business formation and the shift of demand to online players in our market. The following liquidity and risk management topics also allow us to keep our focus on operational execution despite increased volatility:

• We have ample liquidity ($327 million of cash and marketable securities as of June 30, 2022) and no material debt maturities until May 2026, when our bonds mature.
• A significant percentage of our EBITDA and cash flow is generated in currencies other than the U.S. Dollar. However, we consistently apply a robust currency hedging program that reduces our exposure to this volatility. For our two largest currency exposures (the Euro and British Pound) we average into a mix of currency forwards and options to hedge exposures over a rolling 24-month period, which means we have full visibility to our contracted rates for the upcoming year. We also have a portion of our debt denominated in Euro and use other balance sheet hedging to manage currency risk.
• We have fixed-rate and floating-rate debt. We use interest rate swaps to fix the interest rate for a portion of our floating-rate debt to arrive at a fixed/floating mix that is in line with our risk management policies. A hypothetical 100 basis point increase in the base rate beyond rates as of June 30, 2022 would lead to an approximate $6.4 million increase in our cash interest costs if in place for a full year, not factoring in any offsetting interest income that could be earned based on the rate increase.

Next we'll review some selected historical financial measures that put FY2022 into a long-term perspective before turning to our assessment of capital allocation.

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Selected Historical Financial Measures1,2

Revenue ($M)

Adjusted EBITDA ($M)

$2,593$2,751	$2,888				$400
$2,576				387
$2,481					$349
$2,135					326
			283
$1,788					$281
			243	238
$1,494
$1,167$1,270			165	181
$1,020			143
		140
$817
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22	FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22

Adjusted FCF ($M)	Unlevered Free Cash Flow (UFCF)
			($M)
	$244
	$212				$317
				$269	$283
	$166
$157
$152
	$139		$184	$189		$198
$121
$95	$100		$165
	$121
$72
		$96	$83
$54
$45		$78
		$59
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22	FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22

Net Debt ($M)

Shares Outstanding (M)

$237		Wtd. Avg. S/O				S/O at End of Period
	45.0
$(167)$(189)	39.0
$(386)$(419)
43.1	34.5	34.2
$(609)		33.8	33.0	32.6	32.2	31.7
$(857)$(795)
34.1							27.8
$(1,000)	32.8	32.3	33.2	31.5	31.4	30.9	26.5	26.3
					30.4
$(1,379)$(1,378)								25.9	26.0	26.1
$(1,437)
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22	FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22

• Please see reconciliation of non-GAAP measures at the end of this letter.

• Diluted weighted average shares outstanding for FY2017, FY2021 and FY2022 represent the number of shares we would have reported if we recorded a profit instead of a loss that year. The basic weighted shares outstanding we reported those years was 31.3M, 26.0M and 26.1M, respectively.

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