Cimpress plc (CMPR) Q2 2017 Earnings Report, Transcript and Summary

Ladies and gentlemen, welcome to the Cimpress Fiscal 2017 Second Quarter Q&A Earnings Conference Call. My name is Stephanie, and I will be your operator for today. This call is being hosted by Robert Keane, President and CEO; and Sean Quinn, Executive Vice President and CFO. As noted in the Safe Harbor statement at the beginning of the earnings presentation, comments may include forward-looking statements including statements regarding revenue and earnings guidance and actual results may differ materially. Risks that could impact statement those statements are described in the documents that are periodically filed with the Securities and Exchange Commission. We turn now to Robert Keane for opening remarks.

Hello, everyone, and thank you for joining us this morning. Before we take your questions, I would like to make a few brief comments about the announcements we made yesterday. Overall, we had a solid quarter. Our revenue performance was in line with our expectations and our earnings document highlights multiple operational accomplishments including the successful first large-scale demonstration of our mass customization platform technology. In our earnings document, we also discussed reasons for lower profits year over year. Most of this was expected as a result of our increased organic investment spend this year versus what we did last year. And several other items which we discussed at our August Investor Day and at the end of last quarter. Importantly, last night we issued a separate announcement of our intention to decentralize our business in order to improve accountability for customer satisfaction and capital returns to simplify decision-making and to improve the speed of execution. We are making these changes proactively from a position of strength, and we believe a relatively centralized organizational structure like that which we had for the past two decades, although historically it made sense when we are predominantly just Vistaprint, it is not the right organizational structure for our future. Today, we operate a large number of business units. Each of these shares the core competency of mass customization, and so we are keeping two central teams that we believe will drive great value across all of our business units. Those two components are MCP technology and procurement. But other than those two operational areas, plus essential corporate functions such as capital allocation, we want to place the vast majority of our team members and associated decision rights close to our customers on the frontlines of our business. We expect this decision to come along with some sobering loss of talent in certain roles including those of four executive officers whose roles are no longer required. And the planned headcount reductions would be about 1.6% of our 10,000 person workforce. I want to thank each of the departing members for their tremendous contribution to Cimpress over the years, and we all wish them the very best in the future. This organizational change is not tied to our quarterly financial results but of course it's highly relevant to you, our shareholders, and analysts given the restructuring charges and the savings we expect. At its early stage, we do not believe the intended actions will have a significant net impact on our planned 2017 results or investment spending. As a Company with as I said roughly 10,000 employees, more than a dozen, actually more than 15 business units and operations across the globe, a thin corporate center with deep decentralization should allow us to stay small as we get big. In other words, to be nimble and to be entrepreneurial. We will be placing in the hands of our talented frontline leaders unambiguous accountability for customer value delivery and for returns on invested capital for their portion of Cimpress. Once we are through the restructuring, we will have also removed a significant annualized amount of operating cost from our business, which will free up capital to redeploy in line with our uppermost financial goal of maximizing the intrinsic value per share. So now, we would like to turn it over to you and take your questions. Operator?

[Operators Instructions] Our first question comes from Youssef Squali with Cantor Fitzgerald. Your line is open.

Good morning, Robert and Sean. A few questions. Sean, maybe just starting with some numbers. Ex flood effect in Q1 and Q2, what was the organic growth year on year? At least just doing some back of the envelope math, it would suggest that it's relatively flat year-on-year growth on a sequential basis. So are we seeing any sequentially improvement to the year-on-year growth based on the several changes that you've been making? We don't have a lot of visibility into the contra to revenue or the headwinds from the lower shipping fee, so maybe can comment on that. And then on the upload and print growth at 11%, I know there are many, many moving parts there, but you seem to be getting pretty close to breaking that double-digit target that you have. Just hoping you can shed some light on what gives you confidence that you can revert that. I know some lower growing acquisitions have been added to that, which accounts for that but how you reaccelerate growth of the overall portfolio? And lastly, Robert, I think in the prepared remarks, you guys have talked about how during the quarter, higher labor costs in Windsor has caused you to see a couple hundred basis points increase in operating expenses from some supply chain challenges. Why is this temporary? And how do you guard against that in the future? Thanks.

Great. Thank you, Youssef. I'm going to pass that to you, Sean first.

Youssef, I think your first question, I missed the first part but I think you were saying -- referenced the impact of the flood so let me just take you through that. For the Vistaprint business, which was I think what your first question was focused on, 9% growth this quarter. As you referenced, we talked about at the end of last quarter, we had a flood at the very end of Q1 which led to some build-up backlog which did flush through at the beginning of the quarter. The impact of that on Q2 is smaller than the impact that it had on Q1 in terms of growth just because the base is much bigger in Q2. That's about roughly 100 basis points that came through related to just that flush through of the backlog. That said, we do have some headwinds from shipping, as you referenced, which are certainly in the numbers although this quarter in percentage terms, a little bit smaller than Q1. And we didn't see just operationally, we didn't see actually the full benefit of that flush through the backlog just because the quarter ending on a Saturday and so just the backlog did not fully clear out. But that's relatively small. Overall, though, stepping back from the specific growth, this is an important holiday quarter for the Vistaprint business, as you know. And what we see there is really a continuation of the story that we've been telling over the last couple of quarters and what you heard from Trynka at our investor day in August. Really right on track with our expectations. We had double-digit bookings growth from repeat customers again. The repeat trends there, really healthy for both the active and new customers. New customer count grew for the third quarter now in a row as we finally see that trend continue to take shape. MPS scores remained stable, and if you think about the priorities, too that we outlined at the beginning of the year for the Vistaprint business that Trynka talked about at investor day was to really expand product selection, to reduce shipping prices, get that right, and start to focus on design services as well. We've introduced 350 new SKUs this quarter for the Vistaprint business, which is tremendously more than we have in recent quarters so we're making good progress there. The work that we're doing on shipping remains on track. We like what we see in the data there, and we see shipping as a percentage of total bookings coming down as we expected. And then in design services, which isn't that material, we are making good progress. So, all of that points to a quarter that we would describe as right on track and continuing to make good progress. You had two other questions, the first of which was for the upload and print business. As a whole, which was 12% organic growth last quarter, 11% this quarter, and there again, we continue to overall for that portfolio see things moving as planned. Each quarter, there are fluctuations underneath that which you don't have the benefit of seeing and so there's some that accelerate, there's some that decelerate, and they are trying to each move quickly to continue to grow. And we are staying true to what we said over the last couple quarters which is that we still see double-digit growth there for the foreseeable future for that portfolio as a whole. Of course, the organic growth doesn't yet include WIRmachenDRUCK, which it will as we get into the fourth quarter of this fiscal year.

And that was just quickly on that, that's a rapidly growing business right? I think you guys talked about it growing faster than the average and it's pretty sizable?

We haven't said the latter part but it does pull up the average. We have said that in the past.

Okay. Good. Thanks.

Youssef, no problem. Your question was why we do see the higher production costs, roughly 200 basis points we referred to as being temporary going forward, and I think there are several reasons. One is the economy is doing very well, and that changed over the last year more quickly than we realized and the teams who do the seasonal hiring don't go out and do that seasonal temporary hiring traditionally until September or October because these are really November and early December temporary labor surges. In the future, we know that with future planning, we can manage that more directly. The labor component was -- relatively speaking was lower component of the increase than the fact that short staffing made a turn to outsourcing on a short notice much faster than we would have if we had planned to do it on the normal course of business. We do intend to use more outsourcing as we've talked about but this was done in more of an urgent cycle because of that new information about the labor market. We believe that with better planning, we can achieve economies. Secondly or third I guess, we had for the first year MCP available to us, and MCP as a software system proved its ability to manage across multiple plants via our own or a third party's and literally shift demand flow day by day depending on the shift and mix of products or the volumes. However, our structure was not really in place to do that as tightly as we think it can be in the future because one, we didn't plan on having that much outsourcing, and two, if we look at our new organizational structure, the change that we are doing in the organizational structure has nothing to do with this particular problem. It wasn't created by this problem but we see this as an example where very fast feedback between cross functional teams that are closely working together will be enhanced by the new organizational structure. So I think the biggest summary is we did a lot of this in an unplanned fashion that was sparked by the labor shortage, but that was not the primary driver of it.

Okay. Thanks, Robert. Thanks, Sean.

Our next question comes from Matthew Thornton with SunTrust. Your line is open.

Hello. Good morning, guys. Thanks for taking the question. A follow-up to the prior, when we think about organic growth in the VBU business going forward I guess, I think in January you started kind of going full bore with the price reductions in the US markets. I would assume we should expect maybe some I guess sequential incremental headwind there going forward. I just want to make sure that's kind of fair. And then kind of stepping back, as we think about the shipping initiative as a whole, is this something that is somewhat self-contained in fiscal year '17 or is this something that you envision continuing to kind of ratchet down over time to maybe pursue the Amazons or kind of the trend in eCommerce in general as it relates to shipping? And then maybe just coming back to MCP, you guys have talked about gross investment spend I think of about $50 million this year. You talked last year about maybe some synergies, cost synergies somewhere in the range of $7 million or something like that. I know it's still very early but the question is, should we think about or I guess how are synergies kind of tracking through the first half of this year and can we think about MCP net investment kind of being at a trough this year and we kind of work up from there on a net basis? And I've got one follow-up if I could. Thanks.

Great. All right. We will try to hit all those, Matt. Thanks for the questions. The first one was related to headwinds for shipping. So you're thinking about that the right way. The impact for Q2 in terms of headwinds was not as large as what we would expect for Q3. And just to give kind of the full-year view, in Q1 we had launched in some of our European markets and in the UK. In the US, we were doing extensive testing so whilst we weren't fully rolled out, we were doing extensive testing. We pulled that back in Q2 in the US and then in January, as we've said, Matt, we've now gone full speed ahead in the US with the shipping price reduction. That will be a little bit more of a headwind in Q3 than in Q2. In terms of whether or not it's self-contained within this fiscal year, I think the short answer is no. That this is something that we expect to continue to do. We're addressing this in our major markets first, and that is the focus in fiscal year '17. There are some of the smaller markets that we'll need to continue to address as we go beyond that. Now of course, we do expect that the reduction -- the net reduction from the shipping price changes will decrease over time as we start to get the benefit that kicks in, and as I referenced in answer to Youssef's question before, we do see continued strong trends in the data as a result of these shipping price changes. So we expected that would kick in more in fiscal year '18 in some of our larger markets. For your question around MCP, so, as you said, Matt, about a $50 million investment that we outlined from an operating income standpoint or net standpoint at the beginning of the year, that is a gross investment. One of the things that we referenced in our materials is that as we study that more, we think that there's a piece of that is not specifically related to the building of the platform itself but related primarily to other growth investments that are probably more appropriately described in our diverse other category, and that is something that as we are working through the restructuring that we announced last night, we were really trying to get crisp on what is the cost, what is the investment of the technology itself versus the previous organization that was around that. So we will be peeling that apart but we do think the other part is primarily growth investments still. But that number is not a net number. Any of the synergies that we get in the business are represented in the business results and not reflected net against that number. And so, we will continue to report that gross but going forward as we update these as we normally do on an annual basis, we would expect that number in our major organic investments would just represent specifically the technology build and not the other things around that that we've now moved into the business largely.

All right. That's really helpful. Maybe just one follow-up to that and then one bigger picture, I guess. On the MCP, I guess, when we think about the net outflow towards that project this year, I guess could this be the trough? And then not number wide but just directionally, we start to kind of grow from there. And then just kind of taking a step back. In terms of policy impact, I know it's kind of murky and hard to know at this point but have you guys thought about or can you give us any context on how to think about what the impact of a border tax might be here in the US? Maybe versus a lower kind of corporate tax rate for you guys. Any way we can start to think about the net effect there would be very helpful. Thanks, guys.

I'll take the first question and let you describe what may be an unknowable question right now depending on what our president is going to do. In terms of the MCP investment, I think just to highlight something that Sean mentioned and we mentioned in our prepared remarks, as we've gone into the planning for this restructuring, we recognize a portion of that $55 million in free cash flow we talked about, you can describe as the cost of team members to operate the technology and another portion of actually creating the technology. Those people who are operating that technology are creating new functionality and driving new value broadly above and beyond what we refer to as our steady-state capabilities. So they are an allocation of capital, the cost to run those teams. We believe those team members that are operating as opposed to developing the technology are best placed for decision effectiveness reasons and for clarity of accountability in the business units, which is part of, not exclusively, but a portion of the restructuring that we are announcing last night. That will then be separated into components and diverse other, and we would look at the MCP technology component in the platform, which is a cost that is only a portion of the $55 million we focused on this year, and that would continue to grow but the net impact of that I do believe we would see a trough this year because we already see synergies coming through and even though the growth in the technology would probably grow as we grow the business for new development, assuming success as we expect, the net cost without getting into specifics I would see getting less costly in the future years.

And I'll do my best to answer your last question, Matt, which is more of a policy question around border taxes. This is a topic that we monitor closely but frankly until we know more about what the new administration will do here, it's very difficult to give any sort of answer with precision other than to say it's something we monitor closely. That said, if you think about where we are now versus even just a few years ago if this were to happen, a couple of things that as we look at any of our potential risks not just related to policy change but even just operationally, Robert mentioned the platform that from a technology standpoint was proved our on a large scale through holiday and now we have more of an ability to route to different fulfillers whether that be our own or third parties. We have production that we've just opened up in Reno, and we also through the National Pen acquisition have production in Tennessee. So we have a very different footprint than we did even just a few years ago that I think spreads our risk out no matter what the particular risk might be, in this case the border tax. And for now, we monitor very closely and we'll obviously let you guys know more about any impacts to the extent that we learn more from what the administration wants to do.

Our next question comes from Brian Fitzgerald with Jefferies. Your line is open.

I wanted to drill down a little bit further on a couple of points. In the prepared remarks, you noted the investments that you previously classified as major organic investments might be better classified as ongoing expenses. Any more color on the process there and maybe quantifying the impact. Could you give us a sense for what type of investments you are talking about here and what the impact could be on steady cash flow that you talked to earlier. Thanks.

Robert, here. I will give you a few thoughts but really it's too early for us to give details to be transparent on the timing. We've obviously been considering this restructuring for multiple weeks and months as we've evaluated it. It was only earlier this week which we had confirmation and approval from our Board to move forward with it. As part of this, we are moving 3,000 people out of 10,000 people, and if you exclude National Pen, 3,000 out of about 8,000 people from central roles into decentral roles. We will reduce, as we said, our cost structure and by the numbers we talk about in the press release, and it's quite significant. What that is doing is understandably I hope for you, I hope it's understandable for you and the listeners, it's going to change a lot of how we classify different costs, and we just want to go back and really look at this with a proper amount of time and planning and then go to the steady-state cash flow analysis which we have done for two years in a row and we intend to do annually. There's no major change in the concept, in the premise that we have in the MCP or in other major investment categories we've talked about and we're making those investments to grow the business beyond our steady-state capability at a cost -- a return on our investment of well above our hurdle rates or at least at our hurdle rates and above our cost of capital. What will differ is who is responsible for it. Is it the center or is it the business units? And again, there, we're just too early and too fresh in the announcement which just happened internally last night as well to be able to go into details on how that's going to fall. But I don't see this as a net -- this whole change as being a net reduction to what we see is our steady-state free cash flow. Frankly, we believe it is an increase where we may recognize that a lot of the corporate costs we had which we felt were more -- traditionally, we might have felt were more necessary to maintain steady-state, we now believe we don't need going forward.

Great. Thanks, Robert. Maybe one quick follow-up with respect to the MCP. Any insights or lessons learned during the quarter with respect to implementing MCP across this printer and holiday rush, are you still confident in the timeline that you rolled out -- would expect to rollout and with the restructuring impact of rollout of MCP to the various brands at all?

I think the restructuring actually could accelerate and is intended to accelerate the rollout of MCP in many ways. The restructuring will place team members that are in different functions, let's say manufacturing, supply chain, and merchandising, or marketing under the same managing director or other lead of the individual business unit, and that will speed up the coordination. Secondly, the restructuring will really focus our central efforts on the software services which constitute the platform, and we are making very significant progress there. So the lessons learned looking back in the last quarter, I would say one very positive reinforcement that the technology is scalable. We talked about 2.5 million orders over a two-month period but at the peak period, we were doing very large numbers of orders on a daily basis. Secondly, we proved out the ability to very quickly shift between different suppliers as we found which often happens in a peak period. Capacity constraints are shifting mix of demand. I did mention that we were caught in North America a little surprised by the need to outsource more but without MCP, we would've been in significant trouble and we would not have been able to do that rapid shift of outsourcing from a technological perspective, and we would have lost a lot of contribution that still came through the business. We were happy there. I would say in terms of constructive lessons learned, that is where we can improve in the future. I think I referred to before, we actually did not plan this restructuring in light of what we learned in early December, in late November, in terms of the extra cost of outsourcing but I think that when we look back at that peak period, we think the new organizational structure could be very effective in applying these capabilities -- the MCP capabilities, more efficiently and more proactively than we were able to. So, net-net, we were very happy with the way the technology rolled out and there is many opportunities in the future to optimize. This is really a demonstration for us of the scalability as opposed to the optimization.

I would just add to verify -- this is Meredith, that in terms of the timeline that we outlined at investor day for the majority of the orders to be flowing across the platform by the end of this fiscal year, that remains essentially unchanged, and we're working hard in the back half of the year to bring the rest of the Vistaprint products online to the platform as well as upload and print businesses and National Pen as well. Some of that may spill into fiscal year '18, of course, but it's essentially unchanged.

And Meredith, I just want to clarify what you just said. We do believe the vast majority of Vistaprint, which by definition will get us to the majority of our transactions will come on, we will have multiple numbers of our upload and print will be starting to transact but we do not and we have never did plan on having the majority of our upload and print transactions going across the platform by June. We see that as something that we will be working through the following 12 months.

Our next question comes from Chris Merwin with Barclays. Your line is open.

I just had a couple of questions. You called out the 200 basis points of gross margin headwind from shifting production to third-party fulfillers and over time as MCP grows, I imagine third party is going to be a larger and larger percentage of production. So I think you already said that MCP is handling the majority of orders now. What percent do think it will handle in the future and what does that mean for the gross margins of the business? And then just a second, a follow-up on one of the prior questions about the decentralization. I think in the slide you talked about how some of the investments that you're making in Columbus and in MCP are going to be part of ongoing cost of operations for Vistaprint or other business units. In calling them ongoing, it seems like as it sounds sort of steady-state costs. Does that mean that these costs that were considered effectively nonrecurring by being called out as diverse organic other and being added back to get to steady-state free cash flow or actually as it sounds ongoing costs that might lower the steady-state free cash. I know, Robert, you mentioned that it wouldn't but just was hoping for some clarity on why that was the case. Thanks.

I think I'll start with your second question. What we define as net steady-state is the ability to grow our free cash flow per share at the rate of US inflation. And all of our businesses we hope to grow in right now at least in the high-single digits but we have said many times we would like to get Vistaprint and our other businesses into that double-digit range. So that's beyond steady-state. We do believe that although there will be some reorganization of how we may classify this that the steady-state cash flow to business will not be negatively impacted by this restructuring or the reorganization of the costs. In your question about the orders and what will the impact of outsourcing have on cost, I just want to clarify and correct one point you said. We did not say the majority of orders are currently going across the platform. We announced there were 2.5 million orders and more than $100 million of revenues that transacted across the platform but that's less than a third of our revenues in the last quarter. It is more of our transactions because Vistaprint orders are relatively small compared to the upload and print transactions. So, we do see that by June, we hope to have in that quarter move towards the majority of our transactions coming across the platform and into 2018 move our upload and print onto the platform. What will happen as we outsource? Outsourcing is not a panacea for production. Simply outsourcing often can be more expensive. This quarter was an example of that. But well-managed outsourcing where we complement our internal production operations, and we very much want to continue to invest in internal production operations where we are the best in the world at, complemented by partners which we expect to grow, we think is an excellent combination. There are multiple things that can happen when we outsource proactively and we have the tools like MCP to allow the teams to find the best fulfillers. One thing is we can optimize by geography. In North America, yes. We are building a Reno, Nevada facility and opened that up but if we can shift things out of say Florida, that's far from Ontario, and it's far from Reno, and we don't have something there and hypothetically, we could use a production supplier there across the platform. That would help on our shipping costs. Likewise, specialization of production helps a lot where we can find partners who are very good at a given type of product, and regardless of any impact of shipping the specialization of that supplier is advantageous from a cost perspective. And it's finally not just costs. We see things like product breadth and depth and the ability to introduce new products and specialized product lines that we wouldn't want to spend the capital on internally. It's the ability to manage for peak periods from a capital perspective to reduce our capital expenditures, and it's an ability to optimize speed and quality to the customer by finding partners that are complementary to what we do internally. So if we look at a multi-year period, we think that a mix of internal and external production is where we will live. We certainly do not want to become 100% outsourcing. We have great faith in the competitiveness of our production facilities, and inversely, we have great faith in our production partners that they also can grow the business and it will be a mix going forward.

All right. Great. Thank you.

Our next question comes from Kevin Kopelman with Cowen and Company. Your line is open.

Just a few questions. The first one is just on revenue growth. Given the VBU and upload and print fell off a little bit versus targets in FQ2, and also that it's the holiday quarter, can you give us a sense of what growth looks like in those segments in FQ3 to date? Should we think of it as starting to move back towards the targets or do think it's going to get slower before it improves? And then I have a couple of follow-ups.

Great. Good morning, Kevin. Thanks for your questions. Great questions, and as you know, we don't give revenue guidance so but I'll try and just give a little bit of color. One is you had mentioned that growth being a little lower than target. That is certainly not the case for our targets which we said internally. The Vistaprint business was very much on track, really exactly on track with our expectations, and I described earlier all the many things that we see underneath that give us continued confidence that we can achieve our objective there over the coming years and continued progress. Likewise for the total portfolio. Upload and print was on track with expectations, too. So that's at least our view of that, and there's really nothing that changes as we look forward to the remainder of the year relative to the commentary that we provided at the beginning of the year, which is that for the Vistaprint business what we are really focused on is getting that to consistent double-digit growth, which is something that we expect to happen over years, not months or quarters. And for the upload and print business continuing to have that grow at double digits. So that all remains the case.

Okay. Thanks, Sean. Then just some follow-ups on revenue. The first one, when you talk about the some of the consumer demand being better than expected with the economy doing well, is that a comment that is geared towards VBU or U&P or kind of the entire business? And then one other one on revenue was can you just -- you had National Pen for a couple of days but it hasn't been broken out yet. What segment did that fall into in FQ2?

Okay, on your first question, I think you miss heard what I said or I misspoke. The strong economy was the industrial economy in North America is doing very well especially in the Detroit Windsor area, and in the automotive area where traditionally we have recruited temporary labor. And the automotive companies had offers for labor out in the labor market which were stronger and more competitive from a labor recruitment perspective than what we see traditionally in Windsor, Ontario, and because of that, we had to react in bringing in temporary labor as we do every year at a higher cost, but most importantly turn to outsourcing at a cost which is above our expectations because we did not expect to outsource that much. Obviously, the economy globally or at least in North America is doing quite well and was doing very well in this quarter. But we didn't comment and link that to the performance to any of our businesses.

Kevin, it's Sean. It's difficult for the Vistaprint business to correlate sort of macro trends to the results but when we look at our business kind of separate from that, the spend patterns that we see especially as we shift towards higher expectations remain strong. Your second question was around National Pen. We closed that acquisition on December 30. We are very excited about that and bringing them into the Cimpress group. They are -- in our results this quarter, the only thing that is reflected is some transaction costs that would be customary for a deal like that. The one day's results does not materialize and is not reflected in this quarter. That will going forward -- you asked what segment that's in. Going forward, actually be a separate segment and those results you will see starting in our third fiscal quarter.

Okay. Thanks for both of those clarifications, and then if I may, one last question on gross profits on currency. The currency, is it fair that the -- does the currency have a bigger impact on gross profit than on revenue this quarter and can you quantify that at all? Thanks a lot.

Sure. Yes, Kevin. Currency actually was a fairly significant drag on gross margin this quarter. To answer your specific question, it was slightly less than the impact on revenue. Revenue, there was significant impact in the pound, features very significantly in that. We pick up a little bit of benefit in the COGS line especially given the movements in the Canadian dollar and Australian dollar year over year, so it's a little bit less when you get down to gross margin. If you were to follow that all the way through, when you get all the way down to the bottom line inclusive of the gains that we have on our currency hedges then the impact is small, but the impact throughout the P&L is actually quite substantial.

Our next question comes from Kevin Steinke with Barrington Research. Your line is open.

So following up on the discussion of the mass customization platform, in the earnings release you state that the Vistaprint business unit fulfilled approximately 2.5 million orders for holiday products across the platform. So I just wanted to confirm that most of what flowed through the MCP this quarter was the holiday related kind of to handle the seasonal spike and then going forward you're going to migrate more the core small business marketing products onto the platform. Is that the right way to think about it?

That's correct, Kevin.

Okay. And then the product launch continues to be aggressive. I think the release said 350 new Vistaprint products in the quarter were launched. So, can you just maybe touch on what categories those product launches were in and then what you're doing to continue to drive awareness of some of these newer product categories that you're pushing into like promotional and signage, et cetera, to increase awareness of those areas beyond kind of where your core products?

Kevin, you mentioned two of them in promotional products and signage in the Vistaprint area, the 350 new products, those were significant components. We also had quite a few holiday specific products that were gift like items that we don't produce internally. I will come back to how we see promotion around these in a moment, but I think that this is a good example of a combined -- an output of a combined technology investment made. And one is in our diverse other, we talk about technology for all BUs. We had a $40 million free cash flow investment this year planned. Without updating that investment, I can say that a big chunk of that is for a project internal to the Vistaprint business unit to restructure how we have the whole front end technology to make it much easier amongst other things to introduce new product. That is directly complemented by the investments in MCP, which make it much easier to go to outsourcers than it has in the past. And so those two have opened up a previous bottleneck in new product introduction where we might have in past years introduced 10 to 20 products a year to do 350 in a quarter, it was only enabled by those technology investments. We see that type of product introduction both at Vistaprint and as we bring on new technology investments in other business units and as those business units come onto the platform as accelerating because we do believe the customer demand for multiple products is pretty material. Once the customer trusts our brands, they often like to turn to other products. What we are doing that is different than what we've done in the past in addition to things I just mentioned is we are not doing heavy-duty hard pushes on marketing for these products. We are instead relying on the core customer satisfaction that we have in the first initial customer experience and that's why things like reducing the shipping prices, or improving the customer experience in other ways we've talked about is so important because without that, we don't get the loyalty that drives the repeat purchases. And we mentioned that we do see strength in the Vistaprint business unit specifically in repeat purchases and the value of customers. A lot of that is driven by movement into new product areas that traditionally we lost because we didn't have as part of our product line but very importantly we didn't have the type of customer loyalty we are now developing. So there's not an all-out or a proactive marketing push that we do, of course merchandise it on the site. We merchandise it in our printing catalogs, in our television advertising, and the like. But it's much more weighted towards customer pull and a strong value proposition enabled by the things I mentioned.

Okay. That's helpful. And then one last question for me is, you have made this decision to decentralize the organization. One of the stated reasons for that was to improve accountability and your ability to evaluate performance. So could you just talk about how you're going to be evaluating performance going forward with this decentralized structure and what if things maybe get off track a little bit, what you can do to get things back on track or take corrective action?

Sure. Absolutely. So let me first provide some context on the decentralization. We mentioned that at our current structure, we have about 10,000 employees net of the unfortunate redundancies that we're planning. So we say about 3% of that will be central and the majority of that central team will be in our MCP, the Cimpress technology team which is developing MCP. The actual corporate team, which you think of finance, legal, human resources, or the like, will be well under 100 people. And so if you look at what that means is from our balance sheet and our income statement and cash flows, we have more than 15 business units. Each of those will have their own P&Ls, balance sheets, and cash flows. And to your question specifically, how we evaluate them from a financial perspective, we will evaluate them on return on invested capital, and there will be very, very light capital in the corporate center, and so we think it will be much more explicit and easier for us to make those measurements. Obviously, returns on invested capital come from improvements to customer value proposition and recruitment and retention and motivation of great talent and multiple other things which those leaders will be responsible for driving, and they'll have all the resources in their hands to do that.

And Kevin, just to add little bit more from a financial perspective there, as I'm sure you can relate to, when you look at our segment results, there is a significant amount of our costs that reside today in our corporate and global functions, and that's consistent with kind of our old organizational structure and Robert just described some of the changes there. One of the things that we've talked about internally, we've also sometimes get questions from our shareholders on this, so how do we compare the results of one business against another and the reality is that when you have a lot of central costs, that's actually a difficult thing to do with precision. And so we think one of the benefits of the change that we announced last night is that we will get a lot more comparability and that's as much true internally as it is externally. I had mentioned at our August investor day one of the things we wanted to do this year is to improve the comparability of our segments, and we had actually taken some steps to do that by moving some of our technology resources in our first quarter from a central team to the Vistaprint business but this will do it in a very significant way. And so I would expect that going forward internally and also externally, there's going to be a lot more clarity on the performance of each of our segments solely because the amount of costs that we hold central are going to be dramatically less.

All right. Thanks for taking the questions.

[Operator Instructions] Our next question comes from Matthew Thornton with SunTrust. Your line is open. Matthew, if your line is open?

Sorry. I was on mute there. Can you hear me now?

Yes, Matt. Thanks.

Couple of quick follow-ups if I could. On the all other business as we kind of tease that apart, I think you guys have previously talked about the Albumprinter, VSU business, I think grew about 12% last year. You saw that kind of accelerating this year I think was the prior commentary. Most of world, I've been assuming is still growing healthy double digits. Is that still fair? And then I guess two other little points within there I guess, China maybe getting update there on just kind of getting that off the ground, and finally the corporate solutions piece excluding Staples seems like it is growing based on the commentary. Just making sure I'm kind of got that all correct or any other color you would add across those. Thanks.

You're correct with one clarification. Albumprinter and the Company-owned brands, albelli, fotoknudsen, and the like, is growing strongly and at double-digit rates, and we're very happy with the business. The -- we had a contract with HEMA, which is a Dutch retailer, which has gone away and so when you look at year over year just like in the corporate solutions area, we have a reduction due to the loss of a partner contract as we did with Staples in corporate solutions. You are also correct that MOW is growing at healthy double-digit rates, and China, we are pleased with the progress there but we for competitive reasons are not commenting on what we're doing.

And Matt, just you've got a good handle on these things. If you step back and just think about all other as a segment, the impact of the partners that we've lost is significant. If you were to take that out, that group is low-double-digit growth this quarter, which I think is what Robert was referring to before and Albumprinter did have a strong performance in their important holiday quarter given their consumer focus.

Great. And just any relative sizing there. My final question. I always thought of Albumprinter maybe being 50% and then most of the world and corporate solutions being 20, 20, but obviously with the loss of a couple of partners that's kind of shifting. Any color you can add there? Thanks, guys.

Yes. Thanks, Matt. We haven't provided the breakdown within that. Although we did provide some actual commentary at our investor day in Q4 where we if you will recall showed kind of a pie chart that didn't provide the specific percentages but of course visually you can get a sense where our magnitude, how that breaks down and that was in Q4 showed that Albumprinter was more than half of that. The mix there, as you can imagine, will continue to shift quite a bit over time. The most of world business growing quickly and corporate solutions really with the new mandate grew nicely but still shedding off the anniversarying of the loss of the partners.

One quick comment on the pie chart that we showed at investor day, that was a Q4 view. So for Albumprinter, that did exclude HEMA because that HEMA contract wound down in February of last year. But the corporate solutions bucket that is reflected in that pie chart did still include Staples revenue and, therefore, if you take that out, the pie would look a bit different.

All right. That's very helpful. Thanks, guys.

Our next question comes from Naved Khan with Cantor Fitzgerald. Your line is open.

On National Pen, can you just touch upon the potential it will create within the [indiscernible] to sell more SKUs that will become available to you, and is there any scope for margin improvement within National Pen?

We do expect National Pen as with all of our business units to expose via MCP their production capabilities and their product line to other business units so via for Vistaprint or the other business units, we do see National Pen becoming a fulfiller on our platform, and therefore leading to product expansion, not just in Vistaprint but in the upload and print and other parts of our business. In terms of margin expansion in National Pen, we certainly don't want to give forward-looking guidance. We talked about in the press release our historical EBITDA there, and we are very happy with what we think we will drive from a free cash flow relative to our investment in the business. Part of that will come directly through the National Pen P&L. A significant part of that will also come through abilities to do things much more quickly in that space in our other brands throughout the business.

Naved, I would just like to make a plug for next week, we're going to have a webcast about National Pen and the reorganization and anything else that our investors would like to talk about. That will be on Thursday, February 2 at 1:00 PM Eastern time. That will be webcast on IR.Cimpress.com.

That's helpful. Thank you.

I'm showing no further questions. I'll now turn the call back over to Robert Keane for closing remarks.

Thank you all for your time today. Obviously, it was a busy quarter with a lot of moving parts but as we said in the prepared remarks, we are very happy with the progress we're making and we look forward to speaking to you three months from now and for those of you who call into the webcast doing so next week when we focus on National Pen and the restructuring. Have a great day, everyone.

Thank you, ladies and gentlemen. That does conclude today's conference. You may all disconnect and everyone, have a great day.