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 financial results, the persistence of
higher costs and supply chain disruptions and the expected impacts of those
costs and disruptions on our business; the planned divestiture of our business
in China; the expected impacts of our mass customization platform; our
competitive advantages; the expected effects of our advertising spend;
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 supply chain constraints,
inflation, and the ongoing COVID-19 pandemic; our inability to mitigate
increases in our costs by increasing our prices and taking other measures; 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; our failure to develop and deploy our mass customization platform or
the failure of the platform to drive the efficiencies and competitive advantages
we expect; the anticipated exercise of the PrintBrothers put options;
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, including the possibility of an economic
downturn in some or all of our markets; and other factors described in this
Report and the documents that we periodically file with the SEC.
Executive Overview
Cimpress is a strategically focused group of more than a dozen businesses that
specialize in mass customization of printing and related products, via which we
deliver large volumes of individually small-sized customized orders. Our
products include a broad range of marketing materials, business cards, signage,
promotional products, logo apparel, packaging, books and magazines, wall decor,
photo merchandise, invitations and announcements, and other categories. Mass
customization is a core element of the business model of each Cimpress business
and is a competitive strategy which seeks to produce goods and services to meet
individual customer needs with near mass production efficiency.
As of September 30, 2022, 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 businesses continue to experience supply chain challenges including rising
input costs and some areas of disruption. Each of our reportable segments has
seen material cost increases of product substrates like paper, production
materials like aluminum plates, freight and shipping charges, energy costs and
higher compensation costs due to inflationary pressures and a more competitive
labor market. We believe our scale-based shared strategic capabilities and
supplier relationships provide competitive advantages for our businesses to
weather these challenges. Through data capabilities, our businesses are
regularly testing new pricing approaches, and in all businesses there have been
pricing increases that are partially offsetting the increased costs.
Financial Summary
The primary financial metric by which we set quarterly and annual budgets both
for individual businesses and Cimpress 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.
Reconciliations of our non-GAAP financial measures are included within the
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"Consolidated Results of Operations" and "Additional Non-GAAP Financial
Measures" sections of Management's Discussion and Analysis. A summary of these
key financial metrics for the three months ended September 30, 2022 as compared
to the three months ended September 30, 2021 follows:
•Revenue increased by 7% to $703.4 million.
•Constant-currency revenue increased by 15% and by 14% when excluding the
revenue of acquired companies for the first twelve months after acquisition
(both non-GAAP financial measures).
•Operating income decreased by $34.9 million to an operating loss of $18.0
million.
•Adjusted EBITDA (a non-GAAP financial measure) decreased by $22.0 million to
$45.6 million.
•Diluted net loss per share attributable to Cimpress plc increased to $(0.97)
from $(0.26) in the comparative period.
•Cash provided by operating activities decreased by $61.8 million to an outflow
of $(25.3) million.
•Adjusted free cash flow (a non-GAAP financial measure) decreased by $64.6
million to a use of cash of $(52.3) million.
For the first quarter of fiscal year 2023, the increase in reported revenue was
primarily due to growth across all businesses and markets through increased
pricing and customer demand. Reported revenue slightly benefited from our recent
acquisitions, with the majority of the additional revenue attributable to
Depositphotos, which was acquired on October 1, 2021 and is included in our
Vista business. Pricing changes made during the past year improved our revenue
on a year-over-year basis, as these actions were one tool we used to mitigate
inflationary cost pressures that have arisen from ongoing supply chain
challenges. Currency exchange fluctuations had a significant negative effect on
revenue during the current quarter.
For the three months ended September 30, 2022, the decrease in operating income
was primarily due to increased investments in our Vista business. These
investments include the impact of hiring in Vista throughout fiscal year 2022,
as well as increased advertising spend driven by mid- and upper-funnel
advertising. Inflationary pressures on input costs and wages were significantly
offset by actions taken to pass these increases to customers in the form of
increased pricing. We also recognized an increase in restructuring charges of
$2.1 million, which were partially offset by savings from the related actions
taken in our Vista business in the fourth quarter of fiscal year 2022.
Adjusted EBITDA decreased year over year, primarily for the same reasons
operating income decreased. Adjusted EBITDA excludes restructuring charges,
share-based compensation expense, certain impairments, and non-cash gains on the
sale of assets, 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 a benefit of approximately
$7.9 million.
Diluted net loss per share attributable to Cimpress plc increased for three
months ended September 30, 2022 primarily for the same reasons operating income
decreased, partially offset by unrealized currency gains caused by exchange rate
volatility.
Cash from operations decreased $61.8 million year over year due to the decrease
in operating income described above, as well as decreased working capital cash
flows of $42.5 million, largely driven by higher inventory levels as our
businesses increased raw materials on hand to minimize availability risk during
our seasonally significant second quarter and thereafter.
Adjusted free cash flow decreased by $64.6 million, due to the operating cash
flow decrease described above, as well as a $3.1 million increase in capital
expenditures.
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Consolidated Results of Operations
Consolidated Revenue
Our businesses generate revenue primarily from the sale and shipment of
customized 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.
Total revenue and revenue growth by reportable segment for the three months
ended September 30, 2022 and 2021 are shown in the following table:
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CIMPRESS PLC 
