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, the potential effects of the
COVID-19 pandemic and our expectations with respect to our business and
financial results during and after the pandemic, our expectations with respect
to our market and market share during and after the pandemic, sufficiency of our
liquidity position, our future compliance with our debt covenants, 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; 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 take the actions that we plan to take or the failure
of those actions to achieve the results we expect; 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 our Form 10-K for the fiscal year ended June 30, 2020 and the other
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, 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 across Cimpress through a select few shared strategic
capabilities that have the greatest potential to create Cimpress-wide value. We
limit all other central activities to only those which absolutely must be
performed centrally.
As of December 31, 2020, we have numerous operating segments under our
management reporting structure that are reported in the following five
reportable segments: Vistaprint, PrintBrothers, The Print Group, National Pen,
and All Other Businesses. Refer to Note 12 in our accompanying consolidated
financial statements for additional information relating to our reportable
segments and our segment financial measures.
COVID-19
The pandemic and related restrictions continue to have a negative impact on our
businesses, customers and the markets that we serve. Our year-over-year decline
in reported revenue improved in the second quarter of fiscal 2021 as compared to
the first quarter of fiscal 2021 due to favorable currency movements and
acquisition timing; and otherwise it was flat compared to last quarter, despite
sequentially intensified restrictions in various jurisdictions in which we sell
our products. Even with the impacts of the pandemic, 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 enable our businesses to grow as we come out of the
pandemic. We don't know how long that will take, and while the promise of
COVID-19 vaccinations gives us optimism, recently we see increasingly severe
restrictions in many of our major markets that are impacting small business
activity and our revenue. 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 beyond the pandemic. We believe our financial
results have been stronger through the pandemic than traditional offline
competitors as a result of our diverse product portfolio and economically
advantaged business model, which gives us confidence in our ability to grow as
we come out of the pandemic.
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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 related to borrowing; 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 and six months ended December 31, 2020 as compared to the
three and six months ended December 31, 2019 follows:
Second Quarter Fiscal 2021
•Revenue decreased by 4% to $786.1 million.
•Revenue decreased by 9% when excluding the impact of currency fluctuations and
acquisitions ("organic constant-currency revenue growth," a non-GAAP financial
measure).
•Operating income decreased by $27.4 million to $94.2 million.
•Adjusted EBITDA (a non-GAAP financial measure) decreased by $42.1 million to
$143.4 million.
Year to Date Fiscal 2021
•Revenue decreased by 6% to $1,372.6 million.
•Organic constant-currency revenue decreased by 10%.
•Operating income decreased by $16.8 million to $130.2 million.
•Adjusted EBITDA decreased by $33.1 million to $231.9 million.
•Cash provided by operating activities decreased by $8.9 million to $256.2
million.
•Adjusted free cash flow (a non-GAAP financial measure) decreased by $0.7
million to $212.9 million.
For the second quarter of fiscal year 2021, our revenue declined year-over-year
as the COVID-19 pandemic continues to negatively impact our results. These
results vary by segment because each business has different product mix and
customers with unique challenges. Revenue from event-driven and some small
business products continued to decline, partially offset by revenue from new
products introduced in reaction to the pandemic such as face masks (about 5% of
total revenue for the quarter) and consumer products in Vistaprint and
BuildASign that in total grew 6% year-over-year, excluding invitations and
announcements which is an event-driven category.
For the second quarter of fiscal 2021, operating income decreased by $27.4
million, due to the gross profit decline driven by the decrease in revenue
described above. Additionally, we incurred $4.5 million of expense for
pandemic-related products, most notably for disposable masks in National Pen,
for which pricing and demand have dropped. The negative impact of the pandemic
on demand was partially offset by variable cost controls and fixed cost savings,
but the gross margin profile of our revenue mix was unfavorable compared to last
year particularly in Vistaprint, and advertising and operating expenses
increased with increased investments in talent and strategic projects. Operating
income benefited from $4.0 million of COVID-19-related government incentives,
primarily to offset wages for manufacturing and customer service team members in
countries where demand decreased but roles were maintained.
Adjusted EBITDA decreased year-over-year, primarily due to the gross profit
decrease described above. 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 negative
by approximately $4.0 million.
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