This Report contains forward-looking statements that involve risks and
uncertainties. The statements contained in this Report that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including but not limited to our statements about the anticipated growth
and development of our businesses and revenues, our expectations with respect to
our business and demand for our products post-pandemic, the anticipated impacts
of global supply chain disruptions on our business, our expectations for the
brand evolution of Vista, the anticipated effects of our investments in our
business including the hiring of talented personnel, sufficiency of our
liquidity position, legal proceedings, and sufficiency of our tax reserves.
Without limiting the foregoing, the words "may," "should," "could," "expect,"
"plan," "intend," "anticipate," "believe," "estimate," "predict," "designed,"
"potential," "continue," "target," "seek" and similar expressions are intended
to identify forward-looking statements. All forward-looking statements included
in this Report are based on information available to us up to, and including the
date of this document, and we disclaim any obligation to update any such
forward-looking statements. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of various
important factors, including but not limited to flaws in the assumptions and
judgments upon which our forecasts and estimates are based; the development,
severity, and duration of the COVID-19 pandemic and the timing and pace of
economic recovery; our failure to anticipate and react to the effects of the
pandemic on our customers, supply chain, markets, team members, and business;
our inability to make the investments that we plan to make or the failure of
those investments to achieve the results we expect; our failure to execute on
the transformation of the Vista business; loss or unavailability of key
personnel or our inability to recruit talented personnel to drive performance of
our businesses; the failure of businesses we acquire or invest in to perform as
expected; unanticipated changes in our markets, customers, or businesses;
changes in the laws and regulations, or in the interpretation of laws and
regulations, that affect our businesses; our failure to manage the growth and
complexity of our business and expand our operations; our failure to maintain
compliance with the covenants in our debt documents or to pay our debts when
due; competitive pressures; general economic conditions; and other factors
described in this Report and the other documents that we periodically file with
the
25 -------------------------------------------------------------------------------- Executive OverviewCimpress is a strategically focused group of more than a dozen businesses that specialize in mass customization, via which we deliver large volumes of individually small-sized customized orders for a broad spectrum of print, signage, photo merchandise, invitations and announcements, writing instruments, packaging, apparel and other categories. We invest in and build customer-focused, entrepreneurial mass customization businesses for the long term, which we manage in a decentralized, autonomous manner. We drive competitive advantage acrossCimpress through a select few shared strategic capabilities that have the greatest potential to createCimpress -wide value. We limit all other central activities to only those which absolutely must be performed centrally. As ofSeptember 30, 2021 , we have numerous operating segments under our management reporting structure that are reported in the following five reportable segments: Vista, PrintBrothers,The Print Group , National Pen, and All Other Businesses. Refer to Note 11 in our accompanying consolidated financial statements for additional information relating to our reportable segments and our segment financial measures. Our Vistaprint business and reportable segment has introduced a new parent brand "Vista", which reflects our ongoing transformation into the expert design and marketing partner for small businesses around the world. This new parent brand encompasses VistaPrint, 99designs by Vista and VistaCreate. This move should help open customers' minds to allow us to serve a broader set of their needs across a wide range of products and solutions that includes design, social media and web presence as well as print. No changes were made to our internal organizational and reporting structure as a result of this rebranding, but we will refer to this reportable segment as "Vista" from here forward and throughout this document. COVID-19 The pandemic continues to drive some volatility, but its overall impact onCimpress has lessened as compared to the first quarter of fiscal year 2021. Customer demand trends are nearing pre-pandemic levels and gross profit, including the relatively small impact of acquisitions, has increased above the pre-pandemic first quarter of fiscal year 2020. Before considering increased growth investment, particularly in Vista, the combination of recovering gross profit and cost savings from actions taken during the pandemic drove increased adjusted EBITDA compared to the pre-pandemic period. Supply chain delays are a developing facet of pandemic impacts which has created both challenges and opportunities forCimpress businesses. Each of our reportable segments has seen material cost increases of product substrates like paper, production materials like aluminum plates, freight and shipping charges and a more competitive labor market. Our scale-based shared strategic capabilities and supplier relationships provide competitive advantage for our businesses to weather these challenges. Through data capabilities, our businesses are regularly testing new pricing approaches, and in every business there has been some form of pricing increases that are mostly offsetting the increased costs. We continue to hire talent and make investments in technology, data, new product introduction, customer experience improvements, and branding that are designed to build on our competitive advantages and drive sustainable growth in our businesses as we come out of the pandemic. We continue to maintain flexibility in our cost structure, while at the same time increasing investment in areas we believe will generate high return on investment. Financial Summary The primary financial metric by which we set quarterly and annual budgets both for individual businesses andCimpress wide is our adjusted free cash flow before cash interest expense; however, in evaluating the financial condition and operating performance of our business, management considers a number of metrics including revenue growth, organic constant-currency revenue growth, operating income, adjusted EBITDA, cash flow from operations and adjusted free cash flow. A summary of these key financial metrics for the three months endedSeptember 30, 2021 as compared to the three months endedSeptember 30, 2020 follows: First Quarter Fiscal Year 2022 •Revenue increased by 12% to$657.6 million . •Constant-currency revenue (a non-GAAP financial measure) increased by 11% and by 9% when excluding acquisitions completed in the last four quarters. 26 -------------------------------------------------------------------------------- •Operating income decreased by$19.0 million to$16.9 million . •Adjusted EBITDA (a non-GAAP financial measure) decreased by$20.9 million to$67.6 million . •Diluted net income (loss) per share attributable toCimpress plc increased to income per share in the first quarter of fiscal 2022 of$0.09 from a loss per share of$0.39 in the comparative period. •Cash provided by operating activities decreased by$69.1 million to$36.6 million . •Adjusted free cash flow (a non-GAAP financial measure) decreased by$70.2 million to$12.3 million . For the first quarter of fiscal year 2022, the increase in reported revenue is primarily due to the recovery of demand, as the impact of the pandemic on our businesses has lessened, as well as the benefit from the addition of 99designs revenue, which was acquired onOctober 1, 2020 , and is included in our Vista business. We continue to experience strong demand for newer fast-growing product categories, while the impacts of the pandemic continue to have a negative effect for certain marketing material products. Demand recovery in our Upload and Print businesses lagged behind our other businesses in prior quarters but reported strong revenue growth this quarter. Currency exchange fluctuations had a positive effect during the current quarter. For the three months endedSeptember 30, 2021 , operating income decreased by$19.0 million , primarily due to increased investments and discretionary costs as we compare against a period that had strict cost control measures in place when the pandemic had a more severe impact on our businesses, as well as increased advertising, primarily in our Vista business. These increased costs include higher compensation costs as we have hired additional team members to support key initiatives, mainly in Vista and our central technology team, while the timing of our annual merit cycle contributed to increased compensation costs. The increase in advertising spend includes a return of performance-based advertising to more normalized levels, as well as a smaller increase in upper-funnel advertising spend in Vista. These cost increases coupled with a reduction in government wage incentives have more than offset the profit increase driven by higher revenue. Adjusted EBITDA decreased year over year, primarily for the same reasons operating income decreased. Adjusted EBITDA excludes restructuring charges and share-based compensation expense, and includes the realized gains or losses on our currency derivatives intended to hedge adjusted EBITDA. The net year-over-year impact of currency on consolidated adjusted EBITDA was unfavorable by approximately$4.0 million . Diluted net income (loss) per share attributable toCimpress plc increased to income per share of$0.09 during the three months endedSeptember 30, 2021 from a loss per share of$0.39 during the three months endedSeptember 30, 2020 . The increase is primarily due to currency exchange rate volatility that resulted in positive year-over-year unrealized currency impacts, as well as decreased interest expense due to our debt refinancing during the fourth quarter of fiscal 2021. Consolidated Results of Operations Consolidated Revenue Our businesses generate revenue primarily from the sale and shipment of customized manufactured products. We also generate revenue, to a much lesser extent (and primarily in our Vista business), from digital services, graphic design services, website design and hosting, and email marketing services, as well as a small percentage of revenue from order referral fees and other third-party offerings. For additional discussion relating to segment revenue results, refer to the "Reportable Segment Results" section included below. 27 --------------------------------------------------------------------------------
Total revenue and revenue growth by reportable segment for the three months
ended
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