Cimpress : Investor Day 2022 – Transcript

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EDITED TRANSCRIPT

CMPR.OQ - Cimpress PLC Investor Day

EVENT DATE/TIME: SEPTEMBER 13, 2022 / 12:00PM GMT

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SEPTEMBER 13, 2022 / 12:00PM, CMPR.OQ - Cimpress PLC Investor Day

C O R P O R A T E P A R T I C I P A N T S

Bryan Kranik Cimpress plc - CEO, BuildASign

Emily Whittaker Cimpress plc - EVP, Commerce & Country Groups, Vista

Florian Baumgartner Cimpress plc - EVP, Design & Service, Vista

Maarten Wensveen Cimpress plc - EVP & Chief Technology Officer, Cimpress & Vista

Meredith Burns Cimpress plc - VP of IR & Sustainability

Michael Fries Cimpress plc - SVP Physical Product, Vista

Paolo Roatta Cimpress plc - CEO of The Print Group

Ricky Engelberg Cimpress plc - EVP & Chief Marketing Officer, Vista

Robert S. Keane Cimpress plc - Founder, Chairman & CEO, Cimpress & Vista

Sean Edward Quinn Cimpress plc - EVP & CFO, Cimpress & Vista

Sebastian Klapdor Cimpress plc - EVP & Chief Data Officer, Vista

P R E S E N T A T I O N

Meredith Burns - Cimpress plc - VP of IR & Sustainability

Hello, and welcome to Cimpress' 2022 Investor Day. My name is Meredith Burns, Vice President of Investor Relations and Sustainability. Today, we will hear from many executives representing Cimpress, Vista, BuildASign and Upload and Print. There are management bios available in the webcast viewer. So I will not spend time today introducing everyone. I will introduce the new face on the slide, Michael Fries, who joined Vista in April, running Vista's physical products teams, including manufacturing.

Here is a view into how we're going to spend the next 3 hours together. Robert will start with some perspective on FY '22, our advantages and market dynamics across Cimpress. Then Maarten will provide a technology update, both MCP as well as the replatforming efforts from around our businesses, including Vista. Paolo will provide an update on our Upload and Print businesses, and Bryan will do the same for BuildASign. Then you can see by the lineup of presenters for Vista that we plan to spend a significant amount of time here. Robert, Sean, Emily, Basti, Michael, Florian and Ricky will take us on a tour of the exciting progress we're making in this business. At that point, we'll all take a short break, and we'll come back to talk about capital allocation and outlook.

Finally, we'll finish with a Q&A session with all of our presenters. So a little bit on what to expect today. We did receive a number of presubmitted questions prior to the event. So thank you to all of you who put time into sending those questions to us. We'll be addressing many of them in the prepared remarks of the presentations or later in the event. Webcast attendees can submit questions at any time using the questions and answers chat button, and we will take as many as we can in the Q&A session at the end of the event. A replay and supporting content will be available on our website within a couple of hours after the event.

Some of the numbers we will show or discuss today are non-GAAP. You can find reconciliations to GAAP measures posted on ir.cimpress.com after the event right now live in the handout section of the live webcast viewer. There's a little tab. And finally, you can expect that we will share our thoughts about the future. So this is a great time to note that our actual results may differ materially from these statements about the future due to risk factors that are outlined in detail in our SEC filings and also here on this slide. We invite you to read them.

So with that, I'd like to turn the presentation over to Robert Keane. Robert?

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SEPTEMBER 13, 2022 / 12:00PM, CMPR.OQ - Cimpress PLC Investor Day

Robert S. Keane - Cimpress plc - Founder, Chairman & CEO

Thank you, Meredith. And as Meredith just did, I really want to welcome all of you to this Investor Day event. I think you'll learn a lot today and hopefully come away excited about what we have for you. So fiscal '22 was a year of significant progress across Cimpress. And we look forward to sharing a lot of examples of that success during today's event. We made very important and substantial investments for the future in the last year, and we overcame a challenging supply chain and inflation environment. And importantly, we also increased our market share.

Now in Vista, during fiscal '22, we also completed multiple foundations that we've been working on for the last 3.5 years. And Vista is now building upon those foundations and is really poised for a new stage in its transformation journey in which we are going to leverage those capabilities to drive tangible customer value and financial value. Maarten is going to speak about this in more detail, but over the last 12 months across Cimpress, in many parts of our business -- in many of our businesses, we've completed technology migrations, and that's increasing our velocity of customer value delivery. We also have continued to invest in our shared Mass Customization Platform or MCP.

In fiscal '22, our businesses leverage different parts of MCP to introduce new products, to improve document rendering for our customers, to run production facilities, and to maintain business continuity during what has been this challenging supply chain environment. Excluding volumes of face masks, which had surged temporarily during the pandemic, MCP enabled continuous rapid growth in the wholesale transactions between our different businesses.

Now this cross business revenue allows our teams to introduce more products faster and to benefit from focused, highly efficient production lines that exist across Cimpress. The chart on the top shows our publicly reported intersegment revenue. The chart on the bottom right shows the cross business activity, which is larger than intersegment because it also includes activities that's taking place between our businesses within any given reporting segment.

Now I've often talked in the past about how Cimpress' many differentiated capabilities, each of them with scale-based advantages help us compete. These include software engineering, product development, data and analytics, manufacturing and supply chain, design and service, globally competitive talent locations, procurement, e-commerce marketing, and team members who are experienced driving synergies through M&A. Cimpress' combination of all these capabilities is unique and it's, as I said, a competitive advantage. These advantages derive from a flywheel we have of talent -- tech and data-driven product development, efficiency, customer value, market share, cash flow and reinvestment and these capabilities (technical difficulty)

Meredith Burns - Cimpress plc - VP of IR & Sustainability

Hello, everybody. It seems that we have lost Robert's feed, unfortunately.

Robert S. Keane - Cimpress plc - Founder, Chairman & CEO

I am back. Yes. I apologize. I'm not sure what happened there. But I believe, Meredith, can you tell me did I get through this slide, I was about to --

I thought I was about to move on to the next slide about...

Meredith Burns - Cimpress plc - VP of IR & Sustainability

Absolutely. Yes. Moving on to the next slide.

Robert S. Keane - Cimpress plc - Founder, Chairman & CEO

Great. Apologies, everyone, for that Wi-Fi snaffle. It's one of the joys of working from home. Hey, thanks to those capabilities. Cimpress has become, as you know, the clear leader in its ongoing multi-decade revolution in the very large and fragmented markets that we serve. We do that through the mass customization of print. We deliver great value to customers through convenience, breadth and depth of choice, lower cost, fast -- production

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SEPTEMBER 13, 2022 / 12:00PM, CMPR.OQ - Cimpress PLC Investor Day

speeds and reduced waste. The groupings of our capabilities on the right-hand side of this slide explain how we do this. The first 2 capabilities on the top, e-commerce and software-driven order aggregation and production are required no matter who the end customer is.

The third democratized design is required to serve customers who don't have graphic design skills. And I'll spend a moment to emphasize that third area of democratized design is something that VistaPrint has historically done very well for small businesses via do-it-yourself online studios and design templates. And as you'll hear later today, we've been investing to expand that design legacy new and valuable ways.

Now the overall opportunity for Cimpress remains enormous. The size of our total addressable market, our TAM in North America, Europe and Australia is over $100 billion, consisting of the product categories you see on the left. We are growing our revenues in all these categories. On the right, you'll see that over 60% of the TAM remains off-line and that off-line portion is surged by tens of thousands of traditional competitors. There is plenty of runway in front of us to continue our growth from the competitive landscape.

And the next slide shows that customers agree. On the left, you see a pie chart, which is from a study we conducted in the middle of the pandemic in July of 2020. It illustrated that the pandemic lockdowns drove a huge percentage of customers to consider switching from off-line to online ordering of printed materials with roughly 80% saying they would probably be switching or yes, they definitively would be switching.

The other 2 charts are from research we just completed in August -- just this August last month. And the middle one shows that 1/3 of all in medium businesses who are not yet using an online service provider for print plan to start using one. And another 1/4 of them are considering that. The right-hand chart shows that the top reasons for moving to online are better prices, ease of ordering, convenience and a wider choice of product variety.

Cimpress' unique capabilities are a very large TAM and the off-line to online tailwinds we have, have all been key factors in our long track record of profitable growth. In fiscal '22, we reached an all-time high consolidated revenue and gross profit in Upload and Print, in National Pen, in BuildASign and in Printi. Our fiscal '22 EBITDA was well above fiscal '19. In other words, well above the last year prior to the pandemic. These businesses are well positioned to continue to grow in the future.

At Vista, if you compare the pre-pandemic fiscal '19 to fiscal 2022, revenue was roughly flat and EBITDA significantly reduced. As we've discussed in the past, and as you're going to hear more about today, we've been investing deeply to transform Vista, and we're going to continue to do that in FY '23, but we've reached a stage where those investments are beginning to translate into clear customer value and are starting to move key financial metrics in the right direction. That is why I stated in this year's Annual Letter to Investors of July 29 that we expect the shape of Vista's profitability improvement will start to be visible in fiscal '23, and that over the next several years, Vista's segment EBITDA and cash flow can return to historical highs and then beyond.

At the Cimpress consolidated level, we are well positioned to continue our multi-decade revenue growth, and we expect to surpass our historical high for EBITDA in 2025 fiscal year with continued strong cash flow conversion. Cimpress has multiple vectors to extend this 25-year history of growth while returning to those higher margins. As described in my annual letter as well, we invested in FY '22 approximately $190 million of unlevered free cash flow into organic growth investments, largely in the 5 areas shown on the left of this slide. We expect to grow our opportunity, revenue and our -- expand our margins through, a, continued market share gains in our traditional markets. These are more mature categories like marketing materials, business cards and lower complexity signage, but they can continue to grow by providing customers with shorter lead times, improved design and service, capabilities and integration with digital media as well as attractive prices and a greater choice of products than competitors offer.

Moving to the right, we are also expanding into more complex products. Multiple product categories remain in the early stages of the business model transition from traditional offline to print customization online. These market segments include packaging, labels, promotional products, logo to apparel, books, catalogs and magazines.

Moving one more rectangle to the right, we can further democratize design to provide solutions for small businesses. Our biggest area of capital allocation right now is that investment to build out these full spectrum of design capabilities that you will hear about from Florian in a little bit. These will build on Vista, as I said before, traditional strength in serving customers who only have limited graphic design skills.

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SEPTEMBER 13, 2022 / 12:00PM, CMPR.OQ - Cimpress PLC Investor Day

Next, we have an opportunity to grow into adjacencies through partnerships. Vista's partnership with Wix is a great example of this. And again, we'll go into more detail in that later today. We also have rationalized our focus in new geographic markets. We've recently announced that we are pulling out of Japan and China where our time line for reaching profitability was too far out and customer needs were too different than in our other country markets. This should improve our fiscal '23 profitability and improve our focus on the countries where we already are winning.

In terms of new markets, we are focusing our geographic expansion on Brazil and India, in which we are growing fast and approaching EBITDA breakeven. And finally, on the right, you see that Cimpress has an established track record of acquiring businesses and driving revenue and cost synergies. While material M&A is not a near-term focus for us given our current leverage ratios and other capital allocation opportunities, M&A does provide us a longer-term opportunity for future growth and capital deployment with strong returns given Cimpress' unique capabilities.

Now today, you're going to hear many examples of how fiscal '23 will be a year of focused execution across Cimpress, helped by the foundations that we've put in place in fiscal '22. The initiatives we have are compelling. The talent we have who is executing upon those initiatives is experienced, capable and aligned. And in summary, today's event should give you a sense of all the great work happening across Cimpress and why it bodes well for the future.

So with that, I'd like to turn the presentation over to our Chief Technology Officer, Maarten.

Maarten Wensveen - Cimpress plc - EVP & Chief Technology Officer, Cimpress & Vista

Thank you, Robert. Good morning, good afternoon, good evening, everybody. Thank you for attending this investor update. My name is Maarten Wensveen. I'm the Chief Technology Officer for Cimpress and Vista brands. And let's dive right in. MCP has a critical mission with Cimpress technology implementing in their mission modular software products so that our businesses can focus on doing the unique thing forward to our customers while we take some of the more complex things that are necessary in our industry and really make scale advantages out of that in our organization.

We do that with an amazing set of talented engineers, UX product managers, data analysts throughout the world. And we certainly have some results of the investment over the last 7 years. You see now that we have over 150 million of our bookings flowing over the platform, a growing amount of suppliers, utilizing our network and over 6 petabytes of artworks under asset management, which basically translates into 8 million designs and over 5.7 of those -- million -- 5.7 million of those designs are actually being modified and being enhanced to make them better into our production work by all of our various assets of MCP.

And we have over 2.5 million shipments going to our customers per month. So these are some pretty big numbers nowadays. Specifically, I want to dive in a little bit into our product catalog.

And in our next slide, what you will see is that we have our MCP product information management system. This is a marketplace where all of our businesses can conduct our business with each other. This takes a little bit of the heavy lifting out of a lot of what we need to do in our industry. In our industry, there's almost as many businesses, there's methods of how to model a product from think about stock keeping units, SKUs to sort of advanced formulas. And it gets really complex quite quickly into the millions, if not billions, of permutation of how you can define a product that is truly unique to that customer.

And then there's a lot of things that go around it. What do you do when a product gets missed in the mill, when it gets damaged, and what are the remediation methodologies? We put a whole system in between that with our marketplace to make that easier for our businesses. And once we got over the hump to start adapting this throughout our organization, we really see this -- the utilization is starting to increase. 70% of all of our businesses are now -- flow is now happening over the platform. And this is something I'm extremely proud of and also very happy that we're over that hump of utilization where this is the shortest path for business to conduct quicker products to their markets.

You will now see more and more of -- by leveraging the scale of MCP, businesses have the ability to bring these new product offerings to their customers with much greater speed and ease. If we go to the next slide, you will see also that we have not only unlocked on the product side, but also on the e-commerce side, a lot of new great functionalities. In many of the Cimpress businesses, we are starting to see much more personalized customer experiences. This is truly what e-commerce sort of in many places that are doing this, but we're really stepping that up to become in

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