Cimpress Plc (filed as Vistaprint N.V.) — Form 10-Q summary
Reporting period: Three months ended September 30, 2012, the company’s first quarter of fiscal 2013. The filing identifies the registrant as Vistaprint N.V.; investors should verify the requested company and filing identity. Financial amounts below are U.S. dollars.
Business context and financial performance
Vistaprint sells customized print products, digital marketing services and personalized products, primarily to micro businesses. Revenue rose 18% to $251.4 million from $212.4 million. Growth was 23% on a constant-currency basis and 13% on a constant-currency organic basis; acquisitions contributed approximately 10% to reported revenue growth.
| Metric | Q1 FY2013 | Q1 FY2012 |
|---|---|---|
| Revenue | $251.4 million | $212.4 million |
| Gross profit margin | 65.0% | 63.2% |
| Operating income | $0.2 million | $9.7 million |
| Operating margin | 0.1% | 4.6% |
| Net income (loss) | $(1.7) million | $8.2 million |
| Diluted EPS | $(0.05) | $0.19 |
| Cash from operating activities | $6.7 million | $30.5 million |
Revenue growth was led by North America (+22%) and Most of World (+28%); Europe grew 12% reported, but just 1% on a constant-currency organic basis. Trailing-twelve-month active customers increased 25% to 14.9 million, while average bookings per active customer decreased 8% to $67.
Cost of revenue declined to 35.0% of revenue from 36.8%, reflecting improved production efficiency and overhead absorption, partly offset by higher materials costs. Higher technology, marketing and selling expenses drove the sharp decline in operating profit: those expenses rose 41% and 31%, respectively, with marketing and selling reaching 39.8% of revenue versus 35.9%.
Cash, debt and liquidity
- Cash and cash equivalents were $59.3 million at quarter-end, down $2.9 million from June 30, 2012.
- Operating cash flow was $6.7 million; investing cash outflow was $40.0 million, including $27.8 million of property and equipment purchases and a $12.7 million investment in Namex. Financing provided $29.8 million, including $39.2 million of borrowings and $9.0 million of debt payments.
- Long-term debt was $259.3 million, up from $229.0 million. The revolving facility had $88.3 million available for borrowing after covenant and other limitations; debt matures October 21, 2016. The company reported compliance with its covenants.
- Current assets of $114.6 million were below current liabilities of $129.4 million. Management said available cash, operating cash flow and debt capacity should cover working capital and planned investment needs for the foreseeable future.
Outlook, significant developments and risks
- Management planned fiscal 2013 capital expenditures of approximately $80–$95 million, mainly for manufacturing capacity in Europe and India and other manufacturing and IT equipment. No specific quarterly revenue or EPS guidance is provided in the filing.
- Management attributed the quarterly loss to planned investment in customer acquisition, technology, manufacturing and staffing, as well as acquisition-related share-based compensation and amortization. It expects European growth to improve over the remainder of fiscal 2013 from the quarter’s weak organic performance, but remain below historical trends.
- Beginning July 1, 2012, the company extended the estimated useful life of capitalized software and website development costs from two to three years. This estimate change reduced the quarter’s net loss by approximately $0.7 million and could materially affect future periods.
- In July, the company acquired a 34.5% equity interest in Chinese printing business Namex for $12.7 million cash, with a further $5.0 million funding obligation due by October 1, 2013. It also entered into interest-rate swaps covering $100 million of variable-rate debt.
- Key risks include weak European execution, whether increased marketing and other strategic investments produce returns, seasonal demand, currency and interest-rate movements, acquisition integration, covenant constraints and tax exposures. The IRS issued a disputed assessment concerning Vistaprint Limited for tax years 2007–2009; the company is appealing and believes its position will be sustained, but says tax matters could materially affect results or cash flows.
Important facts for investors to verify
- Confirm the registrant and security identity: this filing is for Vistaprint N.V., despite the request naming CIMPRESS Plc.
- Track whether revenue growth converts into profit as elevated marketing, technology and staffing costs continue.
- Monitor European organic growth, active-customer bookings, and the results of the planned fiscal 2013 capital spending.
- Review debt availability and covenant headroom alongside cash needs, contractual commitments and the Namex funding obligation.
- Follow the IRS and other tax audits, and assess the effect of the software-life estimate change on reported earnings.