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Operator: Good morning, and thank you for standing by. Welcome to Sempra’s Second Quarter Full Year twenty twenty six Earnings Follow-up. I would like now to turn the conference over to Meredith Byrnes, Vice President of Investor Relations. Please go ahead.

Meredith Byrnes: Thank you, Michelle, 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 understand our results, commentary, and outlook. This live Q and A session will last about forty five minutes or so, and will answer both pre submitted and live questions. You can submit questions live via the questions and answers box at the bottom left of the screen. Before we start, I’ll note that in this session, we will make statements about our future. The actual results may differ materially from these statements due to risk factors that are outlined in detail in our SEC filings and the earnings document we published yesterday on our website.

We also have published non GAAP reconciliations for our financial results on our IR website. We invite you to read them. All right, and now I will turn things over to Robert.

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Robert Keane: Thanks, Meredith. Thank you to our investors for joining us today. Before Sean goes into his review of the Q2 financial results, I will discuss the progress we’ve made on the strategic and the operational themes that we covered in detail in my annual letter to you of July 29 and at our September Investor Days. So I spoke about the following four themes last quarter. First, elevated products are driving a step function improvement in our per customer lifetime value. In other words, the wallets share we have with small business customers. For example, variable gross profit per customer at reported currency rates grew 9% year over year, a continuation of the long trend that Vista keeps putting up in terms of earning in terms of increased wallet share with especially higher value customers.

Second, MTP enabled us to pursue cross SymPres fulfillment or XCF. And that’s helping us drive manufacturing efficiencies, and accelerate new product introduction. In Q2, we continue to make significant progress as we continue to optimize our production footprint building up focused production hubs, and drive innovation in new product introductions in elevated categories. Doing so does involve a period of elevated capital expenditures, largely for manufacturing equipment which we gave examples of at Investor Day. There are many aspects of the work we’re doing across Sympress that is exciting. But this particular area of focus of manufacturing competitiveness is really core to our competitive advantage. I’m very proud of the innovation, the sophistication, and the velocity in which our teams are moving forward to drive manufacturing excellence and advantage the benefit of our customers and our shareholders.

The third area I’ll bring up is shared technology. That means organizational delayering and the artificial intelligence that our tech is allowing us to do. And that’s constraining operating expenses and opening up for future efficiencies even as we improve customer value. For example, we recently announced that we are deepening the collaboration between Vista, National Penn, and Build A Sign to share product development, sourcing, performance marketing, telesales, direct mail, and manufacturing while maintaining separate focused brands. We expect this is gonna drive meaningful efficiencies while also enabling growth. These same capabilities also support the customer experience when something beyond our operational control impacts our operations.

And an example of that in the past quarter was a devastating hurricane that hit Jamaica. We have had huge challenges for our care team members in that location. But we were able to mitigate the impact by quickly shifting call volumes to care teams in other regions and within Jamaica because each of National Penn, Build A Sign, and Vistaprint had facilities to shift people to the facilities that were least impacted. And finally, we’ve been able to increase use of AI chatbots through increasingly sophisticated uses with shared technology. Fourth, we do have a strong financial future. As noted in last night’s earnings document, we’re increasingly confident on our path to fiscal ‘twenty eight EBITDA of at least $600,000,000 coupled with a very significant delevering of our balance sheet.

All of the efforts I just mentioned and more are part of our road map to that FY twenty eight financial target. We expect significant efficiencies across our profit and loss statement with the most meaningful benefits in cost of goods, technology, and marketing. Additionally, the advancements we’ve made over the last couple of years and the investments we’ve made, including technology modernization, product expansion, manufacturing supply chain, have positioned us to evaluate a healthy pipeline of tuck in M and A and potential partnership opportunities that we believe in the aggregate positively impact our results in future years as part of our road map to delivering those FY ’28 targets. So to sum up, halfway into fiscal ‘twenty six, we remain confident in our multiyear plans.

Our past investments have enabled us to increase the pace at which we have improved customer value, and it helps us increase our competitive advantage, our innovation, and increase our efficiency. So now I’ll turn it over to Sean to discuss financial results for the quarter and our outlook.

Sean Quinn: Thanks a lot, Robert, and thanks, everyone, for joining us on the call today. Q2 marked a milestone for CIMPRESS. We exceeded $1,000,000,000 in quarterly revenue for the first time ever. With organic constant currency growth of 4% through the half of the year, which was ahead of the annual guidance range that we had previously provided of 2% to 3%. And year over year adjusted EBITDA growth in the first half of the year that is equal to the full year dollar growth that was in our prior guidance, we are raising our annual guidance for revenue, adjusted EBITDA, and for free cash flow, and I’ll go through those all in a moment. For the quarter in Q2, revenue grew 11% on a reported basis and 4% on an organic constant currency basis, with revenue growth across all of our segments.

Reported revenue was aided by a tuck in acquisition in our Print Brothers segment as well as the benefits from currency. In Vista, organic constant currency growth of 5% was up from 3% in the prior year quarter, and that continued to be supported by growth in promotional products, apparel and gifts, and packaging and labels, each grew double digits. We’ve covered this before, but just as a reminder, and Robert alluded to this as well, our elevated product categories help us to serve and retain high value customers that make up our most profitable customer deciles. In terms of our legacy products, business cards and stationary declined 1% for the quarter. That’s consistent with Q1 and also an improvement from last year’s decay rate. Geographically, while we had growth across all markets in Vista, strong performance in North America was the main driver of the acceleration in growth versus the prior year quarter.

Turning to our other segments. Upload and print customer and order count increased and fueled combined organic constant currency revenue growth there of 6%. The tuck in acquisition that we completed in the quarter contributed $18,000,000 to the Print Brothers segment reported revenue, which grew 26% this quarter and 6% if you exclude that tuck in and also currency benefits. The Pixartprinting Group, National Pen, and Build A Sign continue to increase their cross impress fulfillment volumes as they act as a fulfillment partner on behalf of Vista. And National Penn revenue also benefited from some tariff related price increases. Turning to profitability. Adjusted EBITDA increased by $6,000,000 year over year. Q2 profit dollars increased 8% on a consolidated basis from growth in our higher value elevated product categories, and also supported by favorable currency movements.

Gross margins declined a 110 basis points and most of that was from the tariff impacts at National Penn, both the tariff cost, but also the offset of tariff pricing. In Vista, segment EBITDA improved 10% or approximately $10,000,000 resulting from revenue strength, but also stable gross profit margins and currency benefits. Robert referred to this earlier, but I’ll say it again. Vista’s variable gross profit per customer grew 9% year over year. A continuation of a trend that we’ve seen for some time and a strong indication of our continued strategic progress. Profitability at Vista was negatively impacted by about $2,000,000 associated with the hurricane that hit Jamaica in October that Robert talked about, a portion of which may be recoverable through insurance in future periods.

Profitability was also dampened by 1 and a half million dollars of production start up costs for expansion of our North American production network and also $1,000,000 of tariffs net of pricing increases. We do expect that that impact of tariffs should lessen in future quarters as supply chain remediation continues to ramp up. And lastly, currency provided a $4,100,000 benefit to EBITDA this quarter. That should be a source of some continued year over year favorability in the second half and also as we look ahead to next year as well. Adjusted free cash flow declined $9,200,000 to an inflow of $124,000,000. We had lower net working capital inflows this year versus last year. This is normal timing. And as we’ve guided, capital expenditures were higher as we invest in the expansion of our North America production network, but also we invest behind efficiency and the expansion of our production capabilities for elevated products.

From a balance sheet perspective, net leverage at the end of Q2 was 2.97 times trailing twelve months EBITDA. That’s calculated under our credit agreement. That’s down sequentially from last quarter despite allocating over $25,000,000 to share repurchases in Q2. Our cash position ended the quarter at $258,000,000 and we continue to have $250,000,000 remaining on our credit facility that is undrawn at the end of the quarter. Turning to our guidance. As I said before, we’ve raised our expectations for fiscal twenty six based on the strong results from the first half of the year. We now expect revenue growth of 7% to 8%, 3% to 4% organic constant currency revenue growth. We expect net income of at least $79,000,000 and adjusted EBITDA of at least $460,000,000, up from the previous $450,000,000.

We expect operating cash flow of approximately $313,000,000 and adjusted free cash flow of approximately $145,000,000. That’s up from previously $140,000,000. And we continue to expect net leverage to decrease slightly by the end of fiscal twenty six from the FY twenty five level of 3.1 times. We also, as Robert said, we remain confident in our ability to deliver on our fiscal twenty eight targets, which, again, I’ll reiterate as 4% to 6% organic constant currency growth in fiscal twenty eight, $200,000,000 in net income, adjusted EBITDA of at least $600,000,000, adjusted EBITDA to free cash flow conversion of approximately 45%. And from a leverage perspective, we expect to exit fiscal twenty seven with net leverage of approximately two and a half times as we begin to expand profitability more significantly and then exit fiscal twenty eight with net leverage below two point zero times subject to capital allocation choices such as share repurchases.

With that, Meredith, why don’t we open it up for questions?

Meredith Byrnes: Thanks, 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 had a good number of pre submitted questions on a range of topics. Where there are thematic overlaps, I will combine some questions to make sure that we’re addressing what’s on people’s mind. So let’s take our first question. Sean, this one’s going to be for you. How would you characterize the holiday season that just concluded for VISTA? Did it go as planned, better, or worse? What worked and what did not? And are there any trends within holiday cards or mentioning, either regarding the industry, your market share, or anything else and what was the percentage change in cost per click in US consumer this year?

Sean Quinn: Okay. Overall, it was a strong quarter for Vista, and I said this in my earlier remarks, but I would highlight North America as the source of strength compared to last year. I think on the Q1 call, I talked a little bit about our approach for the holiday season and what gave me optimism. And one of the things is that we had an evolved approach to the holiday season this year with just a more, I would say, more balanced approach leaning into the things that have been working for us, including elevated product. And being intentional about not shifting as much resource to consumer specific messaging. And I would say we’re happy with how that was executed. Team did a great job, and, you know, it’s a strong result overall. In the release, we didn’t get into too many specifics on consumer growth, etcetera, but I’ll give you a few data points.

And the question, I think, was quite focused on the US and also holiday cards. Volume and holiday cards and calendars in the US was flat year over year. And in Canada, it grew double digits. So I think those are good data points. And I think some of that’s because of what we’re comping, especially in Canada. There were a few things last year. But I think that data point coupled actually with the improved decay rate in business cards from last year, I think that shows that these legacy products are still relevant, but also that we can continue to influence these trends through our experience selection, the merchandising, other things in our control. In Europe, we had a tougher comp. Last year was quite a strong holiday quarter for consumer in Europe.

And in Europe, consumer was down a little bit year over year in Q2. So I’d say that was the weak spot if I was gonna name one. But, again, it was the tough comp. As we look at things like data on Google search volumes and such, it would suggest that we took share this quarter. Some of that data is, you know, a little fuzzy in terms of how precise that is with market share, but directionally, I think that would be the case. Year to date, just from a consumer perspective, consumer’s flat year to date in constant currencies in Vista with a little bit of gross profit growth. So yeah, we do continue to expect to see a little bit of consumer growth outside of the holiday peak, in particular from elevated products we’ve launched with consumer use cases.

With respect to the question on cost per click, those aren’t details that we get into in any specific market. But I would say just in general, in terms of, certainly on the performance marketing side of things, I would just say that our channel mix continues to evolve. And that was the case in Q2. It has evolved quite a bit. And that won’t be the case just for Q2. I would say that in general, it’s an exciting area, you know, we’re looking forward to continued progress there.

Meredith Byrnes: Thank you, Sean. I’m gonna stick with you for the next question. So strong Q2 results represent a continuation of trends observed from Q1 and led you to raising your guidance. Can you talk about the biggest areas of outperformance versus your initial FY ‘twenty six guidance?

Sean Quinn: Yeah. Sure. There there weren’t really any big areas of outperformance. I would say it was really a solid quarter of execution really across the board. And, yeah, that was the case in Q1 too. And, yeah, there was, of course, a few unexpected things as well. Robert talked about the hurricane in Jamaica. There were a few others, but we were able to overcome those operationally. And then, we did have some help from currency too. On the revenue side, I think, in terms of how we’re tracking to our plans, I would say we’re basically on track. When we set our guidance, if you go back to the words we put around that, we did note that we factored in potential uncertainty. And I think, for revenue, we’re now confident increasing because of what we’ve been able to deliver in the first half of the year.

The reported growth also factors in now about a 100 basis points of growth from the acquisition that we did in Q2. And then, yeah, you could see currency continues to be a tailwind, and so that’s factored but pretty consistent with the impact that we had included for the original annual guidance. From an EBITDA perspective, again, I would say we’re delivering to our plan almost exactly on our plan for H1. And, you know, now we’ve already attained the full year EBITDA dollar growth that was implied in our original annual guidance. And so we’ve updated that. You may recall Q1 was a record Q1 for us from an EBITDA perspective. And Q2 is always a seasonally really important quarter. So with the solid Q2 now behind us, and, you know, having had a record Q1, we now feel comfortable raising our EBITDA guidance for the year.

And, through the first half of the year, I would say Vista’s on track. Upload and print, overall has been strong. Those are our two biggest sources of EBITDA and the operational themes that are driving those results are all very consistent with what we shared at our investor day and Robert started the call with today. One other thing that has helped to support adjusted EBITDA growth is currency. I mentioned this in my remarks as well. With the euro and the pound strengthening, that’s favorable for our results both from a revenue and EBITDA perspective. And, yeah, that has been a little bit of ahead of our plan. That should continue to be the case with some of the year over year benefit in H2. And then as we lock in our hedges looking out past FY ’26, we have visibility to continued EBITDA favorability from currency as well.

So that was one of the bridge items that we had in our path to our fiscal twenty eight targets, if you can recall the slide that we used at our Investor Day. And I would say there, we feel good about where we’re at, based on what we’ve contracted and then also recent further strengthening in the euro and the pound.

Meredith Byrnes: Thank you, Sean. Alright. We’re gonna move along to a question for Robert. At VISTA, you called out that promotional products, apparel, gifts, and packaging along with labels all grew at double digit clip during the quarter. How are the underlying trends progressing for these customer cohorts? Robert?

Robert Keane: Sorry. I had put myself on mute. So the strong growth you’re talking about really does demonstrate how we’ve been driving our wallet share with SMBs, thanks to the past and the ongoing investments. So those investments especially in elevated products and manufacturing capabilities that allow us to be very competitive in elevated products have really played a part. Now in our investor day, we had a slide and we showed that the top 2% of our customers at Vista generate just about as much total variable gross profit as the bottom 80% combined. And it’s really that top two and the top 10, 20% of our customers in that level of spend, which represents our future. So they play a big role in our results. And the trends that we see in those portions of our new cohorts are very, very healthy.

To your question more specifically, the underlying trends we’re seeing are progressing very well. Starting last quarter, we began discussing the variable gross profit per customer as a way that you, as an investor, can evaluate our progress in serving these higher value customers and growing wallet share. So that includes everything I’ve just talked about for your question. Just to recall, in Q1, that growth was 7%. And in Q2, it was 9%. So we like what we see there. It’s very consistent with our strategy. There’s still a lot of opportunity in elevated categories and amongst all customers who are in markets that are less penetrated from an ecommerce perspective. And there are large addressable markets that we are addressing that we have not done so much so in the past.

We’re investing behind this with CapEx, with expanded capabilities, and fundamentally lowering the cost of production, for example, through focused production hubs, so that we can push further into these categories like packaging, like apparel, etcetera, serving customers with great products that they need at great prices with beautiful quality and delivery times. So that’s where cross SIMPRESS collaboration is playing a role and an increasing role. XCF, cross enterprise fulfillment, is already something we’re doing to lead new product introductions and lower cost. The increased collaboration we just announced between Vista, Build A Sign, and National Pen is gonna accelerate XCF, but also other types of collaboration in promotional products, in packaging, as well as in signage, which I’ll get back to the drivers of the underlying trends in your question.

Meredith Byrnes: Thank you, Robert. Let’s stick with you here for the next question. Can you talk about the North American business for the Print Group? How have things trended versus your initial expectation? And how do you view the opportunity ahead for the business? Can you quantify its contribution in the quarter? And how do you think about its growth going forward?

Robert Keane: Great. We’re on track. As planned, we’re focusing on building out the production capabilities. We have revenues in this unit, but they’re still small. I think it was about 3,000,000 for the first half, but growing quarter over quarter at a fast clip. That being said, from a revenue perspective, we’re just getting started, and we have fixed costs that are weighing down on our overall EBITDA and CapEx, but that is very consistent with our plans and how we think about this. We’ve not yet started putting any ad spend against Pixartprinting.com or our US site other than small tests. We like the opportunity ahead, but we wanna make sure we have everything right from a production and delivery perspective. In the near term, the bigger opportunity is really growing the volume as a fulfiller through cross enterprise fulfillment for Vistaprint in multipage small formats and labels and other products.

Now Pixartprinting has always been very strong in manufacturing innovation around those areas amongst other areas. So we have taken the investments that we’ve made in Europe in the past multiple years and are exporting that capability into North America for these products where we really don’t today have focused production hubs like we do in Europe for those particular product lines. And we are coming… we believe in doing so, we’re going to be the low cost producer in North America that we can scale those categories through Vistaprint as well as the Pixartprinting brand. But a little bit analogous to what we’re doing with National Pen and Build A Sign, we see that a big part of that production operation can be volume that goes to the Vistaprint brand in North America.

Again, we’re quite excited about Pixartprinting in North America as a brand, but it will be part and parcel of a broader entry that we’re planning.

Meredith Byrnes: Thank you, Robert. So you just mentioned the close collaboration between Vista, National Penn and Build A Sign, so we do have a question on that. It seems that in bringing National Pen and Build a Sign closer together, there will be a lot of capability sharing. Product development sourcing, performance marketing, direct mail, and manufacturing were all quoted in the January 13 release as part of the collaboration. What will remain separate and why?

Robert Keane: So we are gonna keep the brands separate and focus on integrating what I’ll call the back end capabilities of National Pen and Build A Sign to drive growth and drive profitability at Vistaprint in North America. I’m actually in Europe as well with Penn as National Penn is strong in Europe and is doing great collaboration already with Vistaprint and our upload and print businesses. So it’s really the brands that will stay separate and more and more collaboration will happen on the back end. We’re doing that because we continue to believe that it is advantageous to have multiple brands in the market both from a search perspective where it shows up in front of the customers, but also in being able to vary our value propositions into different brands.

But on the back end operations, all of these investments we’ve been making over the past years in technology platforms, manufacturing, and other areas are allowing us to take synergies or drive synergies and importantly drive customer value by sharing those capabilities. I’ll give you a couple examples. We talk a lot about cross and press fulfillment. We accelerate the benefit of focused production hubs, which still remain decentralized because teams who are very close to that market focus on not only what the customer needs are, but how to best produce the product, but we are incentivizing volume to flow to the most efficient highest quality production operations we have. And over time, there’s a lot of benefits to that. It increases profitability, increases product introduction.

We get better capacity utilization and so on. On the tech replatforming, that creates opportunities obviously in our technology investments to do two things. First of all, take the best in class or, and certainly at a very minimum, the best in CIMPRES capabilities and share that across different brands. But secondly, to share the cost and therefore drive efficiencies in our software development and other technology investments. So that recent announcement about Vista, National Penn and Build A Sign, we expect to extend this to other areas. Now why this… what’s the reason that these businesses are doing this? Generally speaking, they’re serving similar types of customers and customer use cases. The other thing that is common between these is they have a higher spend in advertising as a percentage of revenue if you were to compare them to our upload print businesses.

So with access to the same product catalogs via MCP and cross enterprise fulfillment that makes the sharing possible and we can optimize our advertising spend across those different brands that all may show up in the same Google search or other areas and make sure we’re getting the best ROI across the board for all of CIMPRES, not an individual brand. So there’s things that will still be unique about these businesses and they will remain with their respective specializations. But we do believe, as I’ve just described, there’s a lot that we can share.

Meredith Byrnes: Thanks, Robert. I’m gonna stick with you for one more question for now. How do you view the opportunity ahead for cross CIMPRESS fulfillment to continue to drive down COGS, and how much headroom do you think there is ahead? Is there a certain level of cross net press fulfillment activity per business that you would like to achieve?

Robert Keane: Okay. I’ve already mentioned a lot of this in today’s call, but in summary, cross enterprise fulfillment is a big opportunity. It’s another example of past and current investments that are driving both top line and bottom line growth. It’s part of our execution plan to achieve the EBITDA expansion to at least $600,000,000 by fiscal twenty eight. So that’s how we view it. Now we’re still early in the opportunity for cross enterprise fulfillment, but it’s growing fast. It was a little over $40,000,000 in the first half of FY ’25, and now it was over $80,000,000 in the first half of this year. So it basically doubled within a year. We believe that last year, that delivered about $15,000,000 of gross profit increase as a result of that.

Again, that was for fiscal twenty five ending June. Our scale based manufacturing advantages that we’ve always talked about for decades in mass customization typically happen on a product by product basis. So we have through these focused production hubs the opportunity to lower cost, improve quality, improve speed, expand our product lines, increase utilization of invested capital by aggregating all this volume into these focus production hubs. And I think beyond that, but very closely related to cross enterprise fulfillment with the announcements we’ve mentioned with National Penn and Build A Sign, but similar things that we’re doing in Europe with our upload and print businesses, we have great very strong teams who are experienced in the product category launch process, the new product introduction process for specific areas, just like we do at Vistaprint.

And we’re able to have teams specialize in the areas they’re strongest at. So as to what level of cross impress fulfillment we’d like to achieve, we don’t disclose that specifically. But we do expect this to grow strongly for some time. To your question, there’s a lot of headroom ahead.

Meredith Byrnes: Thank you, Robert. Alright. Sean, let’s take a technical question. In the quarter, it looks like the company allocated $22,600,000 for the purchase of non controlling interest. What position did the company buy? Any details you can share would be appreciated. What noncontrolling interests remain outstanding?

Sean Quinn: There are two transactions that make up that little bit more than $22,000,000. Both of them were in our Print Brothers segment. $11,000,000 of that was a mandatory redemption that required us to purchase the remaining shares from minority holders that sold a portion of their equity interest to us in fiscal twenty three. And then the other one was the remaining $12,000,000 of that 22,000,000 or so that relates to minority equity holders in a smaller business within Print Brothers that exercised the put option to sell their shares. In terms of other noncontrolling interests that remain outstanding, there’s nothing material; you can see this on the face of the balance sheet. We have $6,000,000 of redeemable noncontrolling interest outstanding at the end of the quarter.

We don’t have anything in terms of anything mandatorily redeemable. And I’ll just maybe add that those two transactions in the quarter were contractual. All of the minority shareholders that were part of these transactions remain active in our business and we are in active discussions with them on buying back into the respective businesses with a long term horizon, and so we look forward to concluding those conversations.

Meredith Byrnes: Thank you. Alright. Next question, on M&A. We got some live questions on M and A too. We’ll definitely cover the answer to those in the next couple of questions. Robert, the company did a tuck in acquisition for $10,400,000 in the quarter. And you noted in your earnings document that the company has a healthy pipeline of potential tuck in M and A opportunities. How much capital is the company willing to allocate here? Also, I believe in the past, the company used 15% hurdle rate for any tuck in m and a deal. I assume the fiscal Q2 tuck in deal clears this hurdle. But any financial details you can provide would be interesting.

Robert Keane: Your assumption is absolutely right. It very easily clears the hurdle. But let me give you a little more detail about this particular tuck in. We purchased an Austrian printing group with annual revenues of about $70,000,000 and annualized EBITDA of about $5,000,000 prior to synergies. We have very significant synergy opportunities ahead. The enterprise value we paid wasn’t just the $10,400,000. It included debt. But if you take the equity plus debt, that enterprise value relative to the pre-synergy EBITDA we paid was comfortably below 5x. Now inclusive of synergies, we expect that multiple to be much lower. And we expect the return on this investment to be very comfortably higher than 15%. The purchase price was also done at a very attractive multiple of after-tax cash flows relative to the cash we deployed there.

Strategically, it really positions us in Austria to grow faster in elevated products like multi page products but also importantly to through cross enterprise fulfillment, use those Austrian production capabilities especially in Germany, and use some of our German production operations to expand products into the acquisition. That is one of many examples of the synergies we see before us that will lower our post-synergy multiple. Now this is a tuck-in acquisition, which brings both customer relationships and vertical integration, has fast payback, and a very clear path to deliver profitability and cash flow now and over the coming years. Importantly, we have a strong leadership team in Austria who’s doing very well at Pixartprinting… that’s part of Print Brothers.

They’ve been with us for years. They sourced the deal. They proposed the deal. Once it was approved, they led it. They’re taking full accountability for it and they’re managing this. And so I think all those things I just talked about exemplifies what we’re looking for in tuck-ins: Strategic fit against our goals of elevated products and manufacturing supply chain. Importantly, also with strong CIMPRES leaders on the front lines who sponsor and lead the deal, with strong cash-on-cash returns to the capital we put there. With high IRR and capabilities that either complement or accelerate our existing capabilities. Now your question, I think, was how much capital we’d be putting into other tuck in M&A. That, frankly, is gonna be depending on other capital allocation opportunities.

We’ll be looking at the relative return and risk versus buying back our own shares, the investments we’re making internally that we’ve been talking about a lot in this call that are driving cash flows through production operations, our commitment to delever our balance sheet, and then, of course, these types of deals. So it’s hard to say what it will be specifically. We don’t see this as a fundamental, you know, singular or even top three driver of how we’re going to get to our FY ’28 goals, but as I think we’ve talked about since the September Investor Day, we do see it as a part that’s consistent with strategy, which has good returns to capital and will be part of that overall path.

Meredith Byrnes: Thanks, Robert. So there is a follow-up question here I think you can touch on pretty quickly because you’ve talked a little bit about this. But the question is: my understanding is that the company measures any potential M and A deals or any capital allocation decisions against the returns from repurchasing shares. With the stock trading at a low valuation, especially if the company achieves its fiscal twenty twenty eight target, does this imply that tuck in M and A deals in the pipeline potentially exceed a 15% hurdle rate?

Robert Keane: Absolutely. Yes.

Meredith Byrnes: I love it. Shortest answer ever. Alright. We’re gonna move on to Sean. Another capital allocation question. On capital allocation, share repurchases stepped up during the quarter and net leverage fell below three times. How should investors be thinking about the magnitude of repurchases in the back half of the year? And Sean, one thing that I want to add to this, just because we got a live question of somebody asking us basically what our position is on our valuation at this time.

Sean Quinn: Okay. Yeah. Well, there’s still some level of repurchases that we can do in the second half of the year within the net leverage guidance that we gave. So yeah, we left some room for that. Of course. And Robert just touched on this too, but any of our capital allocation is always dependent on a lot of factors, including other opportunities. But in this case, you know, share repurchases are always price dependent. But I would say, listen, we are really happy to allocate a little over $25,000,000 to repurchase in Q2. We did that at an average price that was below $70. Still believe it’s a very good use of capital at recent price levels. So I still would expect some in the second half of the year. Probably a bit less in terms of intensity overall in the second half of the year relative to certainly where we’re at in Q2.

But, again, always price dependent. In terms of… I mean, I guess I kind of implicitly covered the other one. I mean, listen, we just ramped up the repurchases that we did in Q2. As you said, we feel that that was a very good use of capital buying back below 70. And as I just said too, like, we would still view that as very attractive at current price levels, and we have room to do repurchases in H2. And so we would put dollars behind them.

Meredith Byrnes: Great. So this next question is basically getting at the math behind what we might do in the back half of the year. What’s left in terms of capital allocation the remainder of the year? The leverage guidance for the end of the year is to be slightly below 3.1 times, which is essentially where the leverage level is currently. EBITDA will be increasing by at least $10,000,000 and the business is expected to generate incremental adjusted free cash flow which includes working capital for the remainder of the year. Is there specific planned share repurchases or M and A that’s driving the guidance?

Sean Quinn: So, yeah, all that math is right. Our free cash flow, as you can see, we reported in the first half of the year was a $107,000,000. So, versus the $145,000,000 in the guidance, that implies $38,000,000 of free cash flow in the second half of the year. That does already include the higher CapEx that we’ve also assumed in our guidance. And then we have $10,000,000 of EBITDA growth implied in the guidance in the second half of the year as well. Yeah, we don’t provide specific guidance on other capital allocation that we do in the normal course because again, as I just said, it depends on a lot of factors, including price, but also relative opportunities, etcetera. But with the free cash flow and the EBITDA that I just outlined and you’ve outlined in the question, yes, there is some room for other capital allocation on top of any organic investments that were already included in the plan.

That includes for repurchases and still allowing us to end the year slightly below 3.1 times. So, we have provided some room for that.

Meredith Byrnes: Thanks, Sean. Alright. We’re gonna take a break for a second from financial questions. Can you talk a bit about how you view the opportunity for you in Agentic Commerce? How are you or are you in talks with any LLM provider today? How far away are you from being able to integrate into ChatGPT or Gemini?

Robert Keane: Alright. So it’s something that I think the entire world will move towards, and we certainly have been investing in that at the highest levels. Myself and our CTO, the entire CIMPRESS executive team, are spending time specifically on these subjects. I won’t go into very specific discussions. But, yes, agentic commerce is coming. We are working on that. And again, we feel comfortable that we will be at, if not in the lead baton thrower, but very much at the front of the parade.

Meredith Byrnes: So next question for Sean. Could you please help us bridge or provide color around the difference between the all time high trailing twelve month EBITDA of $469,000,000 from FY ’24 to the trailing twelve months EBITDA today of $451,000,000? TTM gross profit has increased by $79,000,000 over the same period, and contribution profit has increased by 52,000,000 while EBITDA has decreased by $18,000,000. This is some heavy math on the fly here.

Sean Quinn: I’ll cover this high level. And I do think it’s a good question. And I think, stepping back, we’ve actually used a similar framing as we look to architect what we need to hit in fiscal twenty eight. But, you know, looking back two years and saying, what needs to be true for us to make sure that we’re having more EBITDA flow through? And we have a large cost efficiency component that we’ve talked about in our targets going out to FY ’28. And part of it is we’ll address kind of what is, in the end, this bridge between what was our prior highest ever EBITDA in fiscal twenty four, which is the base that you referenced in the question, and where we’re at today. The… there’s a few things. Again, I’m gonna go high level because I don’t have all the math in front of me.

I think that one of the big things is that if you look at FY ’24, we had about $12,000,000 of nonrecurring benefits in that quarter, which supported the full year. So that’s relevant for your question, but it’s also kind of a good data point as you look back just for Q2 we just reported versus two years ago. So that didn’t repeat. So that’s a bigger one in the math. In fiscal twenty four, that was the year where we were coming off of… we were basically supply chains were normalizing, input costs were kinda normalizing as well and coming down. So we had pretty sizable reductions in input cost that year, but still kind of favorable pricing. There’s some net benefit to that in gross profit which is kind of already covered in your math. We also…

it was after that that we had starting in FY ’25 started to see some overall declines in business cards and holiday cards. You know, those are more stable this year, but that has some impact on the math too. We do also have start up costs this year for plant expansion, and we didn’t have that before. And then really the remainder, and other than the nonrecurring items, probably the biggest impact is just the remainder is in OpEx with technology cost being the largest driver. And, again, I connect that back to where and why we need to drive efficiency as we march to the FY ’28 targets. One of the things that offsets that in the other direction is currency is a little bit more favorable in the current TTM versus where we’re at back in fiscal twenty four.

So that’s high level, but, hopefully, that hits on the key drivers.

Meredith Byrnes: I’ll stick with you for the next one as well. On FY ’28 targets. So should we be thinking about the bridge to FY ’28 a bit differently than what was communicated at the Investor Day? Is 40,000,000 of organic incremental benefits still the target? And is $10,000,000 from tuck in M and A still the target?

Sean Quinn: Okay. This is a great question. Thank you. The bridge that we… so the question reference is this bridge that we did at Investor Day. And in that bridge, the objective of that bridge was to show what we needed to get to at least $600,000,000 in EBITDA in fiscal twenty eight. So it wasn’t necessarily for each of the pillars in there, it wasn’t a target per se. Importantly, the last pillar was what EBITDA contribution we needed from organic growth to get to 600,000,000, and that was the 40,000,000 plus. So that wasn’t to say that that was necessarily the target, but that was the math you needed. And the whole point of that bridge is kinda what you need to believe, especially from organic growth. So we’ll update that bridge at the end of the year.

I think it’s a helpful framing and hopefully, gives gives all of you confidence as well. But the pillars in that bridge, they’re still the right ones. And maybe I’ll just I’ll run through them quickly just to give you a little bit of commentary because it is a really important topic. So the first thing in that bridge—I’m just looking at it on my screen here—was our fiscal twenty six growth and now we’ve increased that by $10,000,000 based on our guidance update today for fiscal twenty six. That’s been updated. That’s been increased by 10,000,000. And so, yeah, that’s an improvement relative to the original bridge. We still feel good about the 78 to $80,000,000 of cost savings. And that’s the… we use the midpoint there in the bridge, 75,000,000.

And you heard today about some of the areas that we’re focused on to drive that. The next one is the runoff of plant start up cost. That is, frankly, that is just massive, so we feel good about that. Tuck in M&A has been a source of some questions today. That was the next one in the bridge. And, again, we feel good about that as well. We’ve covered that. The next one was currency benefits. I touched on that earlier too. We have good visibility to what’s in that bridge based on what we’re already contracted. So I feel good about that. Then the remainder is the organic growth needed to bridge to the at least 600,000,000. And that 40,000,000 plus, you know, that represents two years. That’s 40,000,000 of organic growth flow through for two years.

And, again, that’s just what you have to believe to get there. So as we get… as we’re able to provide all of you with increased confidence on the other pillars, and make that more tangible, that will serve to also make that last element of the bridge more tangible and likely lessen over time in terms of what we need to believe. So that’s how I think about it. And like I said, we’ll update more specifically on that bridge as we get to the end of the year. But, hopefully, that’s helpful in terms of kinda overall commentary. It’s super important. And I just would add the these FY ’28 targets have all the attention of the management team, all the focus of the board, and so we’re laser focused on this and it’s driving a lot in terms of our day to day focus of the management team.

Meredith Byrnes: Thanks, Sean. We have one more live question that came in, just asking for a comment on the current state of our operations in Jamaica following the hurricane. I don’t know which one of you wants to answer it.

Robert Keane: I’ll jump in and say that I wouldn’t say we’re back at a 100% of what we have. We are doing some renovations. But the teams are back at their desks and we also where we don’t have full capacity, we definitely have capacity in our service centers in Tunisia and the Philippines, which all stepped up big time in terms of helping out in the moment of the hurricane. So we’re fine. I’d overlay that with… unfortunately, the hurricane hit right a week or two before our peak period, Black Friday, Cyber Monday—kind of the worst time of year to hit in terms of a peak season capacity. Besides having built back capacity, the volumes we have going through service centers in all parts of our business are lower now than they are in the peak period at the end of November, early December. So we’re fine.

Sean Quinn: And then maybe I could just add two things. One is the… this hurricane devastated Montego Bay. And so our team members suffered devastating impact, and we’ve done a lot to try and help them. But it frankly… these… I said this multiple times internally, made me proud to be part of this team seeing the response to help them, but also the response to help make sure that our operations were running smoothly to support customers too. And I just wanna make sure it’s clear that in terms of the impact financially from an operational standpoint, things are stable. And we don’t expect continued impact in terms of higher cost or lost gross profit in terms of how we support customers. Yes, operationally we’re back to a stable place.

Things continue to improve a little bit, but we’re stable. We will continue to have some cost of just getting the office back to where it needs to be—the normal kind of remediation—that’s where we do expect to have coverage from an insurance perspective. And so, I would not expect this to be of any significance in terms of any drag on results in the second half of the year. And in fact, as we noted, we’ll pursue opportunities to recover some of the costs we’ve already incurred in the second half of the year. It’s unknown when exactly we would recover that—that could stem into next fiscal year—but that process is very accurate.

Meredith Byrnes: Thank you so much, both of you. So that’s it for the live and pre submitted questions that came in, so I’m going turn things over to Robert to wrap up the call.

Robert Keane: Hey. Thank you, Meredith. The critical takeaways from the announcement we made last night and the conversation today are that halfway through fiscal twenty six, we are on track to deliver better financial results compared to our initial guidance for the year. The reason that’s the case is because we are consistently executing and progressing in all the key areas that I’ve discussed today that are very consistent with what we talked about in July, in September, and I would say even in the years before that. These are elevated products that drive a step function improvement to our per customer LTV, measured as gross profit per customer; MCP and the manufacturing capabilities that reduce cost of goods and OpEx by sharing overhead; increasing the velocity of new product introductions and user experience improvements; leveraging AI and other technologies to drive efficiencies; and as someone just alluded to in the last question, I would say also revenue opportunities as we get into things like agentic commerce in the future; increasing cross collaboration via XCF, but also via broader collaborations as exemplified by the announcements we made with Vista, National Pen and Build A Sign.

All these together give us confidence on our path to FY ’28 EBITDA of at least $600,000,000 and approximately 45% free cash flow conversion, coupled with, as we’ve said many times, significant reductions in our net leverage. So I’ll wrap up by saying thank you to our investors for joining the call and thank you for continuing to entrust your capital with us. Have a great day.

Operator: This concludes today’s conference call. Thank you for participating, and you may now disconnect.

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