Meredith Burns: Exactly. Great. Thank you. All right. Moving on. So Sean, another one for you. We rarely talk about end market exposures, but given performance the past few quarters, it reasons that BuildASign is quite exposed to real estate and DIY home decor. Can you give us a ballpark of what percentage of BuildASign’s revenue comes from these two end markets? Is it fair to say that until these end markets recover, we will see more of the same as BuildASign?
Sean Quinn: Yes. Yes, it’s a good question. And you’re right, we rarely talk about end market exposures because there’s – we have such little concentration in any one industry or end market. And so – and that’s actually a great strength of the business. For BuildASign, there’s a few things that impacting revenue growth here. So I’m just going to walk through that and also respond to the question along the way. The first one, there’s really – there’s two impacts here that we’ve called out. One is the slowness in the home decor category and then the impact of real estate. So I’ll take those in turn. On the home decor side, it changes quarterly, but on an annual basis, home decor is a little less than half of the BuildASign revenue.
And now we say home decor. But by far, the largest product category in there is canvas prints. So you can think about this as mostly canvas prints. Most of that is for consumer use cases, so that could be in the home, it could be for gifts, but there are also business use cases for canvas prints as well. I’m not sure going back to the tie-in to real estate as an end market. I’m not sure I connect home decor here or canvas prints more specifically so directly to the real estate market. There may be some impact there, but I wouldn’t make that direct connection. For home decor or canvas prints, this has really been more about channel performance for BuildASign. And some of the transactional acquisition channels that were very efficient in past years have been less efficient recently.
And so that’s going to take a few quarters to work through, and the team is very actively working through that. But we think the end market is still a good one. And again, that’s more of a channel performance. Of course, for home decor, we had the spike during the pandemic, which was a pull forward of demand. And then we’ve since normalized to lower levels and then more recently, some bumpiness because of that channel performance. On the real estate side, for real estate, it is about 10% of BuildASign’s revenue. And part of that is their enterprise accounts business, which some of their largest accounts – their largest enterprise accounts are national real estate franchises. And so that’s had some impact on growth in the near-term. But the BuildASign team is strong.
We say that regularly. They’ve been working on multiple opportunities. And the foundations of those have been multiyear efforts, but the benefits are still ahead of us. In North America, just to pan out a little bit, the signage category in both BuildASign and in Vista has been really strong. And we should also benefit there in the quarters ahead from the political cycle in the United States. BuildASign is also increasingly an important production partner to Vista with their attractive cost structure for signs for other large-format products but also for supporting new product introductions at Vista as well. And so we expect even more of that as we look forward. So been a little noisy in recent quarters, but it’s a great business, a really strong team, and they have a good ability to adapt and improve over time.
We’ve seen that through the time that they’ve been part of Cimpress. And so they’ve done a lot over the last two years or three years. That should set them up for success in the next few years, including continued expansion as a fulfiller for other Cimpress businesses, most notably Vista.
Meredith Burns: Great. Thank you, Sean. I’m going to have Robert weigh in on this next question. Robert, we have spoken in the past about PP&E or CapEx cycles at Upload & Print and how we were near the end of one. Is this an accurate characterization? And if so, are the new lower spend levels more reflective of where PP&E should be for these businesses moving forward?
Robert Keane: Okay. Well, thanks for the question, and welcome, everyone. We did talk about this in the release. We do expect CapEx overall at Cimpress to be higher next year because we have opportunities in new product introductions and in some important efficiency improving production equipment. Some of that will be in Upload & Print, but we’re looking at these across the Cimpress level. And with our Cimpress volumes, even if the CapEx will end up in one part of Cimpress is one of our segments or another, we do look at it as a return on the overall Cimpress level. So if we talk about CapEx cycles in Upload & Print, specifically, I’d break that into two parts. In our PrintBrothers segment, CapEx has been about 1% of revenues for the last five years.
That includes this year FY2024, because there we use a lot more third-party fulfillment. We do expect CapEx in PrintBrothers to remain relatively low, but it is likely to increase a bit as we vertically integrate where it makes sense to do so. And that comes along with lower cost of goods sold and better margins when we do that. In that segment, there’s – there will continue to be much more third-party fulfillment, but we’re starting to shift it a little bit. It’s traditionally been a very different model than other parts of Cimpress. Sticking within Upload & Print, Print Group does produce the vast majority of our revenues there internally. So you’re correct that over time, that’s where we’ve seen these ways of CapEx intensity tied to both replacement CapEx, but also growth CapEx or even replacing equipment, which is not yet end of life with new equipment, which is just much more economical or higher quality output.
Now as a percentage of revenue, CapEx intensity is down a bit. We do expect it to continue to fluctuate year-to-year over the next year or two. They’re not just in Upload & Print, there are multiple product efficiency opportunities. I wouldn’t set the expectation that, that reduction now is a new norm. It’s going to continue to fluctuate. And that fluctuation of CapEx is a pretty material factor, although not the only factor behind our statement last night that we expect our conversion from EBITDA to free cash flow at the Cimpress level to fluctuate year-to-year within that 45% to 50% range. Now Print Group’s gross profits have been really strong. And on top of that – their gross profit in their direct-to-customer business, on top of that, they are growing fulfillment for other businesses, for example, Vistaprint, which then has a COGS reduction impact at the Cimpress wide level.
