Business context and reporting period
Vistaprint N.V. filed this Form 10-Q for the three months ended September 30, 2013, the first quarter of fiscal 2014. The filing describes an online provider of marketing products and services for micro businesses, alongside digital and personalized consumer offerings. The request identifies CIMPRESS Plc, but the filing names Vistaprint N.V.; investors should verify the issuer and ticker associated with this document.
Financial performance
Amounts below are in U.S. dollars; millions are rounded.
| Metric | Q1 FY2014 | Q1 FY2013 | Change |
|---|---|---|---|
| Revenue | $275.1 million | $251.4 million | +9% |
| Operating income | $8.4 million | $0.2 million | Improved |
| Net income (loss) | $0.4 million | ($1.7 million) | Improved |
| Diluted EPS | $0.01 | ($0.05) | Improved |
| Operating margin | 3.1% | 0.1% | +3.0 percentage points |
| Net margin | 0.1% | (0.7%) | Improved |
| Operating cash flow | ($0.1 million) | $6.7 million | Declined |
| Capital expenditures | $17.6 million | $27.8 million | Declined |
Revenue growth was 9% on a constant-currency basis. Cost of revenue was 34.8% of revenue, versus 35.0%; marketing and selling expense was 37.2%, versus 39.8%; technology and development was 15.4%, versus 15.0%; and general and administrative expense was 9.5%, versus 10.1%. The company attributed improved operating results mainly to revenue growth and better leverage of advertising and operating expenses.
Cash and cash equivalents were $64.7 million at September 30, 2013, up from $50.1 million at June 30. Debt was $270.0 million, up from $238.8 million. The company reported $226.0 million available to borrow under its credit facility, subject to covenants. Current assets of $121.8 million were below current liabilities of $144.3 million. Cash provided by financing was $33.2 million; investing activities used $19.4 million.
Material changes and management commentary
- Revenue increased 9%; unique active customers rose 8% to 17.1 million, while trailing-twelve-month average bookings per active customer increased 4% to $70.
- North America revenue grew 15% in constant currency. Europe grew 2%, and management expected regional growth to remain below historical trends while it works on customer value and marketing execution. Most of World grew 2% in constant currency, down from 29% in the prior-year comparison.
- Other expense, net rose to $4.8 million from $0.5 million, principally due to a $4.9 million mark-to-market loss on currency forwards for which hedge accounting was not applied. These contracts were intended to economically hedge currency exposure.
- The company recorded a $0.8 million loss from its Namex equity investment, compared with $0.1 million in the prior-year quarter, and expected to fund a further $5.0 million investment in the second fiscal quarter.
Outlook, risks and contingencies
Management expected fiscal 2014 net income margin and EPS to improve relative to fiscal 2013, citing its investment strategy and operating expense efficiency. It forecast fiscal 2014 capital expenditures of approximately $85 million to $100 million and a lower annual effective tax rate than in fiscal 2013. The filing does not provide a clear numeric revenue or EPS forecast.
In October 2013, the company announced the closure of its Singapore administrative office and transfer of functions to Paris, with expected restructuring costs of $3 million to $4 million. It also described a corporate restructuring, effective October 1, 2013, that included transfers of most intellectual property among subsidiaries and was expected to benefit fiscal 2014 income tax expense.
Key risks include slower growth in Europe and mature markets, execution of the long-term investment strategy, competition and customer acquisition costs, seasonality, foreign-exchange and interest-rate exposure, and reliance on global operations and supply chains. The company disclosed ongoing tax audits and disputes in the United States and Canada; it believed its reserves were adequate, but stated that final resolution could materially affect financial condition, results or cash flows. It reported compliance with credit-facility financial covenants at quarter-end. A hypothetical 100-basis-point interest-rate increase was estimated to raise interest expense by about $1.7 million over 12 months.
Important facts for investors to verify
- Confirm that this Vistaprint N.V. filing corresponds to the intended CIMPRESS Plc issuer and reporting period.
- Assess whether revenue growth, particularly in Europe and Most of World, supports management’s expected margin and EPS improvement.
- Review the cash-flow shortfall, rising debt, negative working capital and planned capital expenditure against available credit and covenant limits.
- Distinguish recurring operating performance from the $4.9 million derivative mark-to-market loss and consider the associated currency exposure.
- Monitor the Singapore closure costs, Namex investment and unresolved tax audits for effects on cash, earnings and reported tax rates.