Business context and reporting period
The filing is for Vistaprint N.V., a Netherlands-based online provider of printing, marketing products, and digital services, for the quarter and nine months ended March 31, 2011. This is the company’s fiscal third quarter. The supplied filing does not identify CIMPRESS Plc; verify the issuer and period metadata before attributing these results to that company or to 2010 Q3.
Financial performance
Amounts below are U.S. dollars; financial statement figures reported in thousands are shown in millions.
| Metric | Three months ended Mar. 31, 2011 | Year-over-year | Nine months ended Mar. 31, 2011 | Year-over-year |
|---|---|---|---|---|
| Revenue | $203.7 million | +23% (22% constant currency) | $608.2 million | +20% (22% constant currency) |
| Gross margin | 65.3% | Up from 64.1% | 65.1% | Up from 64.3% |
| Operating income / margin | $25.6 million / 12.6% | Up from $17.8 million / 10.7% | $76.1 million / 12.5% | Up from $62.9 million / 12.4% |
| Net income / margin | $22.9 million / 11.3% | Up from $16.2 million / 9.7% | $67.7 million / 11.1% | Up from $56.1 million / 11.1% |
| Diluted EPS | $0.51 | +46% | $1.50 | +21% |
| Operating cash flow | Not provided for quarter alone | — | $126.3 million | Up from $123.2 million |
At March 31, 2011, cash and cash equivalents were $208.1 million, versus $162.7 million at June 30, 2010. The company had no long-term debt outstanding. Current assets were $245.2 million and current liabilities $93.4 million. Nine-month capital expenditures were $29.2 million; operating lease commitments totaled $43.7 million.
Material changes versus the prior comparable period
- Quarterly revenue growth was broad-based across product offerings and geographies. Conversion rose 140 basis points to 7.3% and average order value increased 3.6% to $36.03, while website sessions fell 3.1% to 79.4 million. Repeat customers generated 68% of quarterly bookings, up from 67%.
- For the nine-month period, sessions increased 3.8% to 236.0 million, conversion rose 100 basis points to 7.3%, and average order value grew 1.1% to $35.70. Repeat customers accounted for 67% of bookings versus 66%.
- Cost of revenue fell as a share of revenue, which management attributed to product mix, shipping-price improvements, and manufacturing productivity, partly offset by lower overhead absorption at the new Australian facility. Quarterly operating margin improved notably; nine-month operating margin rose only slightly as marketing and other expenses grew.
- Marketing and selling expense increased 22% for the quarter and 25% for nine months, primarily from advertising, customer promotions, and staffing. Technology and development expense rose 16% and 18%, respectively, as the company expanded technology and IT teams and website infrastructure.
- Cash from operations was nearly level with the prior-year nine-month period. Investing cash outflow decreased substantially, mainly because prior-year spending included major facility investments and the Soft Sight acquisition. Financing cash outflow included $56.9 million of share repurchases and $5.2 million of debt repayments.
Outlook, commentary, risks, and unusual items
- Management said revenue growth had recently slowed and identified stemming that decline as a near- and mid-term objective. It described organizational changes intended to improve customer value, manufacturing performance, and leadership development.
- Management targets annual performance rather than quarterly EPS. It expected fiscal 2011 capital expenditures of approximately $40–$45 million and said available cash and operating cash flows should meet working-capital and capital-expenditure needs for the foreseeable future. The filing gives no specific revenue or EPS forecast.
- A share repurchase authorization of up to $160 million was approved; $56.9 million had been spent in the first nine months, leaving approximately $103.1 million authorized. The authorization expires May 4, 2012 and may be suspended or discontinued.
- Key risks include customer-acquisition costs and search-engine dependence; intense competition and pricing pressure; seasonality; currency movements; international tax and transfer-pricing uncertainty; cross-border shipping constraints; and operational disruption. The company noted that its website hardware was concentrated in Bermuda, most customer support operations were in Jamaica, and it lacked alternative production capacity for most products.
- The company remained a defendant in a patent suit brought by ColorQuick LLC. It could not estimate a likely outcome or loss range, but did not expect a material adverse effect. Tax audits were ongoing in the United States, Massachusetts, and Canada; unrecognized tax benefits were approximately $2.3 million. An auction-rate security valued at $0.6 million remained illiquid, with recovery expected beyond 12 months.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. Interim results are unaudited and are not necessarily indicative of full-year results.
Important facts for investors to verify
- Confirm the issuer: the filing names Vistaprint N.V., not CIMPRESS Plc, and covers the quarter ended March 31, 2011, not 2010 Q3.
- Check subsequent filings for whether revenue-growth deceleration continued and whether the stated organizational and customer-growth initiatives produced results.
- Assess the sustainability of margin improvement against rising marketing, technology, and staffing costs, as well as the company’s annual investment approach.
- Review subsequent cash use, capital spending, and share repurchases, including the remaining authorization and any effect on liquidity.
- Track the ColorQuick litigation, tax audits, and recovery prospects for the auction-rate security.