Business Overview
Ennis, Inc. (NYSE:EBF) is a leading provider of business forms, pressure-seal forms, labels, tags, envelopes, and presentation folders in the United States. The company's diverse product portfolio and strategic geographic footprint have enabled it to navigate the evolving printing industry landscape and deliver consistent financial performance for its shareholders.Ennis, Inc. was founded in 1909 and has grown to operate 57 manufacturing plants across 19 states. The company's products are primarily sold through independent distributors, including business forms distributors, resellers, direct mail companies, commercial printers, software companies, and advertising agencies. Approximately 96% of Ennis' business products are custom or semi-custom, catering to the specific needs of its diverse customer base.
The company's product offerings span a wide range, including snap sets, continuous forms, laser cut sheets, tags, labels, envelopes, integrated products, jumbo rolls, and pressure-sensitive products. Ennis operates under various brand names, including Ennis®, Royal Business Forms®, Block Graphics®, 360º Custom Labels, ColorWorx®, Enfusion®, Uncompromised Check Solutions®, VersaSeal®, and many others. This diversified portfolio allows the company to serve a variety of industries and adapt to changing market trends.
Financial Performance
Ennis has demonstrated its ability to navigate industry challenges and deliver consistent financial results. In the fiscal year ended February 29, 2024, the company reported annual revenue of $420.1 million and net income of $42.6 million. The company's strong operational performance is reflected in its annual operating cash flow of $69.1 million and free cash flow of $62.6 million.For the three months ended May 31, 2024, Ennis reported net sales of $103.1 million, a decrease of 7.4% compared to the same period in the prior year. This decline was primarily due to weaker demand and increased competition, which put pressure on sales volumes. However, the company was able to maintain a strong gross profit margin of 30.0% during the quarter, a 60 basis point improvement from the previous sequential quarter. This was driven by the successful integration of recent acquisitions and the company's disciplined cost management and pricing strategies.
Despite the challenging market conditions, Ennis' net earnings for the three-month period ended May 31, 2024, were $10.7 million, or $0.41 per diluted share. The company's effective tax rate for the quarter was 27.5%, slightly lower than the 28.0% rate in the same period of the prior year.
Liquidity
Ennis maintains a strong financial position, with a cash balance of $91.4 million and short-term investments of $32.3 million as of May 31, 2024. The company's current ratio stood at 5.7 to 1.0, indicating a robust liquidity profile. Ennis' working capital increased by $6.8 million, or 4.0%, from the end of the previous fiscal year, further strengthening its financial flexibility.The company's capital allocation strategy focuses on a balanced approach, including investments in organic growth, strategic acquisitions, and shareholder returns. Ennis recently completed the acquisitions of Stylecraft Printing, UMC Print, and Eagle Graphics and Diamond Graphics, which have expanded its geographic reach and product capabilities. The company also continues to invest in capital expenditures, with $2.5 million spent in the first quarter of fiscal 2024 to maintain and upgrade its manufacturing infrastructure.
In addition to its growth initiatives, Ennis is committed to returning capital to shareholders. The company's board of directors has authorized a stock repurchase program, under which $21.5 million remained available as of May 31, 2024. Ennis also pays a quarterly dividend, with the most recent declaration of $0.25 per share, payable on August 5, 2024.
Outlook and Risks
While the printing industry continues to face headwinds from technological disruption and competitive pressures, Ennis remains well-positioned to navigate these challenges. The company's diversified product portfolio, strategic geographic footprint, and focus on operational efficiency have enabled it to maintain its market leadership and profitability.However, Ennis is not immune to industry-wide risks, such as fluctuations in raw material costs, changes in customer preferences, and potential consolidation among its distributor network. The company's ability to adapt to these evolving market dynamics and continue to deliver value to its shareholders will be crucial going forward.