CIMPRESS plc 10-Q for FY2020 Q2

CIMPRESS plc (CMPR)

10-Q 2020-01-30 For: 2019-12-31

Added on April 11, 2026

About this 10-Q

CIMPRESS plc filed this 10-Q on January 30, 2020, covering the quarter ended December 31, 2019 (FY2020 Q2).

Headline figures

Quarter ended December 31, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $820.33M; down 0.6% from $825.57M a year earlier
Net income: $190.22M; up 175.6% from net income of $69.01M a year earlier
Diluted EPS: $6.81; up 213.8% from $2.17 a year earlier

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(Mark One)
☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	December 31, 2019
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to



Ireland			98-0417483
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)



Title of Each Class	Trading Symbol(s)	Name of Exchange on Which Registered
Ordinary Shares, nominal value of €0.01 per share	CMPR	NASDAQ Global Select Market



Large accelerated filer	þ	Accelerated filer	☐	Non-accelerated filer	☐
		Smaller reporting company	☐
		Emerging growth company	☐



		Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)		1
Consolidated Balance Sheets as of December 31, 2019 and June 30, 2019		1
Consolidated Statements of Operations for the three and six months ended December 31, 2019 and 2018		2
Consolidated Statements of Comprehensive Income for the three and six months ended December 31, 2019 and 2018		3
Consolidated Statements of Shareholders' Equity for the three and six months ended December 31, 2019 and 2018		4
Consolidated Statements of Cash Flows for the six months ended December 30, 2019 and 2018		6
Notes to Consolidated Financial Statements		8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		32
Item 3. Quantitative and Qualitative Disclosures About Market Risk		47
Item 4. Controls and Procedures		48

PART II OTHER INFORMATION
Item 1A. Risk Factors		48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		48
Item 6. Exhibits		49
Signatures		50



	December 31, 2019			June 30, 2019
Assets
Current assets:
Cash and cash equivalents	$	36,917		$	35,279
Accounts receivable, net of allowances of $9,970 and $7,313, respectively	70,496			60,646
Inventory	80,151			66,310
Prepaid expenses and other current assets	72,751			78,065
Total current assets	260,315			240,300
Property, plant and equipment, net	364,155			490,755
Operating lease assets, net	173,156			—
Software and website development costs, net	72,148			69,840
Deferred tax assets	160,058			59,906
Goodwill	721,057			718,880
Intangible assets, net	235,031			262,701
Other assets	37,414			25,994
Total assets	$	2,023,334		$	1,868,376
Liabilities, noncontrolling interests and shareholders’ (deficit) equity
Current liabilities:
Accounts payable	$	216,991		$	185,096
Accrued expenses	237,171			194,715
Deferred revenue	32,574			31,780
Short-term debt	73,755			81,277
Operating lease liabilities, current	37,698			—
Other current liabilities	11,444			27,881
Total current liabilities	609,633			520,749
Deferred tax liabilities	36,216			44,531
Long-term debt	1,296,535			942,290
Lease financing obligation	—			112,096
Operating lease liabilities, non-current	143,276			—
Other liabilities	49,997			53,716
Total liabilities	2,135,657			1,673,382
Commitments and contingencies (Note 14)
Redeemable noncontrolling interests	68,201			63,182
Shareholders’ (deficit) equity:
Preferred shares, nominal value €0.01 per share, 100,000,000 shares authorized; none issued and outstanding	—			—
Ordinary shares, nominal value €0.01 per share, 100,000,000 shares authorized; 44,080,627 shares issued; and 26,205,347 and 30,445,669 shares outstanding, respectively	615			615
Deferred ordinary shares, nominal value €1.00 per share, 25,000 shares authorized, issued and outstanding	28			—
Treasury shares, at cost, 17,875,280 and 13,634,958 shares, respectively	(1,275,057		)	(737,447		)
Additional paid-in capital	424,058			411,079
Retained earnings	745,326			537,422
Accumulated other comprehensive loss	(75,494		)	(79,857		)
Total shareholders' (deficit) equity	(180,524		)	131,812
Total liabilities, noncontrolling interests and shareholders’ (deficit) equity	$	2,023,334		$	1,868,376



	Three Months Ended December 31,						Six Months Ended December 31,
	2019			2018			2019			2018
Revenue	$	820,333		$	825,567		$	1,454,292		$	1,414,548
Cost of revenue (1)	394,018			411,496			719,683			713,967
Technology and development expense (1)	64,427			56,707			127,594			114,885
Marketing and selling expense (1)	173,336			210,661			334,253			392,334
General and administrative expense (1)	51,910			40,216			95,533			81,392
Amortization of acquired intangible assets	13,150			14,846			26,168			26,147
Restructuring expense (1)	1,897			1,026			4,087			1,196
Income from operations	121,595			90,615			146,974			84,627
Other (expense) income, net	(9,040		)	9,629			6,634			19,881
Interest expense, net	(15,701		)	(16,808		)	(30,788		)	(30,585		)
Income before income taxes	96,854			83,436			122,820			73,923
Income tax (benefit) expense	(93,795		)	14,399			(87,680		)	19,880
Net income	190,649			69,037			210,500			54,043
Add: Net (income) loss attributable to noncontrolling interest	(426		)	(23		)	(246		)	332
Net income attributable to Cimpress plc	$	190,223		$	69,014		$	210,254		$	54,375
Basic net income per share attributable to Cimpress plc	$	7.04		$	2.24		$	7.41		$	1.76
Diluted net income per share attributable to Cimpress plc	$	6.81		$	2.17		$	7.19		$	1.70
Weighted average shares outstanding — basic	27,036,675			30,863,339			28,391,855			30,873,478
Weighted average shares outstanding — diluted	27,916,759			31,820,497			29,223,116			31,913,510



	Ordinary Shares			Treasury Shares
	Number of Shares Issued	Amount		Number of Shares		Amount			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at June 30, 2018	44,080	$	615	(13,206	)	$	(685,577	)	$	395,682		$	452,756		$	(69,814	)	$	93,662
Restricted share units vested, net of shares withheld for taxes	—	—		20		64			(1,533		)	—			—			(1,469		)
Grant of restricted share awards	—	—		(2)		(288		)	—			—			—			(288		)
Share-based compensation expense	—	—		—		—			8,856			—			—			8,856
Net loss attributable to Cimpress plc	—	—		—		—			—			(14,639		)	—			(14,639		)
Adoption of new accounting standard	—	—		—		—			—			(3,246		)	—			(3,246		)
Net unrealized gain on derivative instruments designated and qualifying as cash flow hedges	—	—		—		—			—			—			1,413			1,413
Foreign currency translation, net of hedges	—	—		—		—			—			—			(2,185		)	(2,185		)
Balance at September 30, 2018	44,080	$	615	(13,188	)	$	(685,801	)	$	403,005		$	434,871		$	(70,586	)	$	82,104
Restricted share units vested, net of shares withheld for taxes	—	—		7		146			(506		)	—			—			(360		)
Issuance of ordinary shares due to share option exercises, net of shares withheld for taxes	—	—		55		2,887			(445		)	—			—			2,442
Grant of restricted share awards	—	—		6		312			—			—			—			312
Share-based compensation expense	—	—		—		—			(5,997		)	—			—			(5,997		)
Purchase of ordinary shares	—	—		(118	)	(14,043		)	—			—			—			(14,043		)
Net income attributable to Cimpress plc	—	—		—		—			—			69,014			—			69,014
Adjustment to noncontrolling interest for share forfeiture	—	—		—		—			591			—			—			591
Redeemable noncontrolling interest accretion to redemption value	—	—		—		—			—			(7,140		)	—			(7,140		)
Net unrealized loss on derivative instruments designated and qualifying as cash flow hedges	—	—		—		—			—			—			(4,623		)	(4,623		)
Foreign currency translation, net of hedges	—	—		—		—			—			—			5,887			5,887
Balance at December 31, 2018	44,080	$	615	(13,238	)	$	(696,499	)	$	396,648		$	496,745		$	(69,322	)	$	128,187



	Ordinary Shares			Deferred Ordinary Shares			Treasury Shares
	Number of Shares Issued	Amount		Number of Shares Issued	Amount		Number of Shares		Amount			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at June 30, 2019	44,080	$	615	—	$	—	(13,635	)	$	(737,447	)	$	411,079		$	537,422		$	(79,857	)	$	131,812
Restricted share units vested, net of shares withheld for taxes	—	—		—	—		4		87			(259		)	—			—			(172		)
Grant of restricted share awards	—	—		—	—		(2	)	(187		)	—			—			—			(187		)
Share-based compensation expense	—	—		—	—		—		—			5,164			—			—			5,164
Purchase of ordinary shares	—	—		—	—		(1,964	)	(232,286		)	—			—			—			(232,286		)
Net income attributable to Cimpress plc	—	—		—	—		—		—			—			20,031			—			20,031
Adoption of new accounting standards	—	—		—	—		—		—			—			3,143			—			3,143
Net unrealized loss on derivative instruments designated and qualifying as cash flow hedges	—	—		—	—		—		—			—			—			(3,037		)	(3,037		)
Foreign currency translation, net of hedges	—	—			—		—		—			—			—			(70		)	(70		)
Balance at September 30, 2019	44,080	$	615	—	$	—	(15,597	)	$	(969,833	)	$	415,984		$	560,596		$	(82,964	)	$	(75,602	)
Restricted share units vested, net of shares withheld for taxes	—	—		—	—		1		55			(152		)	—			—			(97		)
Issuance of ordinary shares due to share option exercises, net of shares withheld for taxes	—	—		—	—		1		8			(2		)	—			—			6
Issuance of deferred ordinary shares	—	—		25	28		—		—			—			—			—			28
Share-based compensation expense	—	—		—	—		—		—			8,228			—			—			8,228
Purchase of ordinary shares	—	—		—	—		(2,280	)	(305,287		)	—			—			—			(305,287		)
Net income attributable to Cimpress plc	—	—		—	—		—		—			—			190,223			—			190,223
Redeemable noncontrolling interest accretion to redemption value	—	—		—	—		—		—			—			(5,493		)	—			(5,493		)
Net unrealized loss on derivative instruments designated and qualifying as cash flow hedges	—	—		—	—		—		—			—			—			4,986			4,986
Foreign currency translation, net of hedges	—	—		—	—		—		—			—			—			2,484			2,484
Balance at December 31, 2019	44,080	$	615	25	$	28	(17,875	)	$	(1,275,057	)	$	424,058		$	745,326		$	(75,494	)	$	(180,524	)


(1)	Primarily relates to both realized and unrealized gains (losses) on derivative currency forward and option contracts not designated as hedging instruments.


•	whether a lease under the prior standard continues to meet the definition of a lease under the new standard;


•	whether the application of the new standard would have an impact on the classification of our existing leases, with the exception of our build-to-suit leases; and


•	the existence of any initial direct costs associated with our leases.



Consolidated Balance Sheet	As reported at June 30, 2019		ASC 842 adjustments			Adjusted balance at July 1, 2019
Assets
Prepaid expenses and other current assets	$	78,065	$	(59	)	$	78,006
Property, plant and equipment, net	490,755		(121,254		)	369,501
Operating lease assets, net	—		169,668			169,668
Deferred tax assets	59,906		(817		)	59,089
Liabilities and shareholders' equity
Operating lease liabilities, current	$	—	$	37,342		$	37,342
Other current liabilities	27,881		(12,569		)	15,312
Lease financing obligation	112,096		(112,096		)	—
Operating lease liabilities, non-current	—		139,041			139,041
Other liabilities	53,716		(7,169		)	46,547
Retained earnings	537,422		2,989			540,411


•	Level 1: Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.



	Six Months Ended December 31,
	2019			2018
Operating activities
Net income	$	210,500		$	54,043
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	84,891			85,220
Share-based compensation expense	13,847			6,196
Deferred taxes	(105,575		)	8,244
Unrealized loss (gain) on derivatives not designated as hedging instruments included in net income	7,548			(9,581		)
Effect of exchange rate changes on monetary assets and liabilities denominated in non-functional currency	1,359			(2,663		)
Other non-cash items	3,045			2,420
Changes in operating assets and liabilities:
Accounts receivable	(8,240		)	(11,866		)
Inventory	(10,680		)	(9,454		)
Prepaid expenses and other assets	(2,255		)	(8,397		)
Accounts payable	24,432			48,839
Accrued expenses and other liabilities	46,225			42,489
Net cash provided by operating activities	265,097			205,490
Investing activities
Purchases of property, plant and equipment	(28,094		)	(38,767		)
Business acquisitions, net of cash acquired	(4,272		)	(289,269		)
Purchases of intangible assets	—			(22		)
Capitalization of software and website development costs	(23,417		)	(21,921		)
Proceeds from the sale of assets	847			523
Other investing activities	1,120			(52		)
Net cash used in investing activities	(53,816		)	(349,508		)
Financing activities
Proceeds from borrowings of debt	634,085			692,938
Payments of debt	(292,446		)	(474,997		)
Payments of debt issuance costs	—			(1,471		)
Payments of withholding taxes in connection with equity awards	(462		)	(2,125		)
Payments of finance lease obligations	(5,364		)	(8,780		)
Purchase of noncontrolling interests	—			(41,177		)
Purchase of ordinary shares	(537,573		)	(14,043		)
Proceeds from issuance of ordinary shares	6			2,891
Distribution to noncontrolling interest	(3,921		)	(3,375		)
Other financing activities	(1,715		)	—
Net cash (used in) provided by financing activities	(207,390		)	149,861



	Six Months Ended December 31,
	2019		2018
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	33,313	$	29,805
Income taxes	5,183		10,961
Non-cash investing and financing activities:
Capitalization of construction costs related to financing lease obligation (1)	—		6,223
Property and equipment acquired under finance leases	140		7,225
Amounts accrued related to business acquisitions	2,831		5,729



Interest rate swap contracts outstanding:	Notional Amounts
Contracts accruing interest as of December 31, 2019	$	500,000
Contracts with a future start date	—
Total	$	500,000



Notional Amount	Effective Date	Maturity Date	Number of Instruments	Index
$581,807	February 2018 through December 2019	Various dates through October 2024	617	Various


•	Level 2: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.


•	Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.



	December 31, 2019
	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets
Cross-currency swap contracts	$	3,048		$	—	$	3,048		$	—
Currency forward contracts	16,007			—		16,007			—
Currency option contracts	3,463			—		3,463			—
Total assets recorded at fair value	$	22,518		$	—	$	22,518		$	—

Liabilities
Interest rate swap contracts	$	(12,824	)	$	—	$	(12,824	)	$	—
Currency forward contracts	(904		)	—		(904		)	—
Currency option contracts	(447		)	—		(447		)	—
Total liabilities recorded at fair value	$	(14,175	)	$	—	$	(14,175	)	$	—



	June 30, 2019
	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets
Interest rate swap contracts	$	144		$	—	$	144		$	—
Currency forward contracts	15,268			—		15,268			—
Currency option contracts	4,765			—		4,765			—
Total assets recorded at fair value	$	20,177		$	—	$	20,177		$	—

Liabilities
Interest rate swap contracts	$	(12,895	)	$	—	$	(12,895	)	$	—
Cross-currency swap contracts	(915		)	—		(915		)	—
Currency forward contracts	(2,486		)	—		(2,486		)	—
Currency option contracts	(42		)	—		(42		)	—
Total liabilities recorded at fair value	$	(16,338	)	$	—	$	(16,338	)	$	—



	December 31, 2019
	Asset Derivatives								Liability Derivatives
Derivatives designated as hedging instruments	Balance Sheet line item	Gross amounts of recognized assets		Gross amount offset in Consolidated Balance Sheet			Net amount		Balance Sheet line item	Gross amounts of recognized liabilities			Gross amount offset in Consolidated Balance Sheet		Net amount
Derivatives in cash flow hedging relationships
Interest rate swaps	Other current assets / other assets	$	—	$	—		$	—	Other liabilities	$	(12,824	)	$	—	$	(12,824	)
Cross-currency swaps	Other assets	3,048		—			3,048		Other current liabilities	—			—		—
Derivatives in net investment hedging relationships
Currency forward contracts	Other current assets / other assets	10,716		—			10,716		Other liabilities	(429		)	—		(429		)
Total derivatives designated as hedging instruments		$	13,764	$	—		$	13,764		$	(13,253	)	$	—	$	(13,253	)

Derivatives not designated as hedging instruments
Currency forward contracts	Other current assets / other assets	$	6,819	$	(1,528	)	$	5,291	Other current liabilities / other liabilities	$	(706	)	$	231	$	(475	)
Currency option contracts	Other current assets / other assets	3,495		(32		)	3,463		Other current liabilities / other liabilities	(535		)	88		(447		)
Total derivatives not designated as hedging instruments		$	10,314	$	(1,560	)	$	8,754		$	(1,241	)	$	319	$	(922	)



	Amount of Net Gain (Loss) on Derivatives Recognized in Comprehensive Income
	Three Months Ended December 31,						Six Months Ended December 31,
	2019			2018			2019			2018
Derivatives in cash flow hedging relationships
Interest rate swaps (1)	$	4,394		$	(5,686	)	$	(196	)	$	(4,436	)
Cross-currency swaps	1,737			(1,121		)	(861		)	(1,761		)
Derivatives in net investment hedging relationships
Cross-currency swaps	—			3,225			—			5,015
Currency forward contracts	(4,153		)	5,433			8,565			7,319
Total	$	1,978		$	1,851		$	7,508		$	6,137



	Amount of Net Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income												Affected line item in the Statement of Operations
	Three Months Ended December 31,						Six Months Ended December 31,
	2019			2018			2019			2018
Derivatives in cash flow hedging relationships
Interest rate swaps	$	485		$	378		$	455		$	209		Interest expense, net
Cross-currency swaps	(2,026		)	2,534			3,538			3,774			Other (expense) income, net
Total before income tax	(1,541		)	2,912			3,993			3,983			Income before income taxes
Income tax	396			(728		)	(987		)	(996		)	Income tax (benefit) expense
Total	$	(1,145	)	$	2,184		$	3,006		$	2,987



	Amount of Gain (Loss) Recognized in Net Income												Affected line item in the Statement of Operations
		Three Months Ended December 31,						Six Months Ended December 31,
		2019			2018			2019		2018
Currency contracts		$	(11,666	)	$	11,171		$	7,691	$	18,544		Other (expense) income, net
Interest rate swaps (1)		—			(418		)	—		(214		)	Other (expense) income, net
Total		$	(11,666	)	$	10,753		$	7,691	$	18,330



	Gains (losses) on cash flow hedges (1)			Gains (losses) on pension benefit obligation			Translation adjustments, net of hedges (2)			Total
Balance as of June 30, 2019	$	(11,282	)	$	(204	)	$	(68,371	)	$	(79,857	)
Other comprehensive (loss) income before reclassifications	(1,057		)	—			2,414			1,357
Amounts reclassified from accumulated other comprehensive loss to net income	3,006			—			—			3,006
Net current period other comprehensive income	1,949			—			2,414			4,363
Balance as of December 31, 2019	$	(9,333	)	$	(204	)	$	(65,957	)	$	(75,494	)



	Vistaprint			PrintBrothers			The Print Group			National Pen		All Other Businesses			Total
Balance as of June 30, 2019	$	145,961		$	124,089		$	198,363		$	34,434	$	216,033		$	718,880
Acquisitions (1)	—			6,879			—			—		—			6,879
Adjustments (2)	3,919			—			—			—		(3,919		)	—
Effect of currency translation adjustments (3)	(116		)	(1,664		)	(2,922		)	—		—			(4,702		)
Balance as of December 31, 2019	$	149,764		$	129,304		$	195,441		$	34,434	$	212,114		$	721,057



	December 31, 2019		June 30, 2019
Compensation costs	$	56,519	$	58,864
Income and indirect taxes (1)	59,233		40,102
Advertising costs (1)	42,327		22,289
Shipping costs (1)	10,968		7,275
Production costs (1)	10,475		9,261
Interest payable	1,870		2,271
Sales returns	5,868		5,413
Purchases of property, plant and equipment	2,203		2,358
Professional fees	3,038		2,786
Other	44,670		44,096
Total accrued expenses	$	237,171	$	194,715



	December 31, 2019		June 30, 2019
Current portion of finance lease obligations	$	8,538	$	10,668
Current portion of lease financing obligation (1)	—		12,569
Short-term derivative liabilities	1,727		1,628
Other	1,179		3,016
Total other current liabilities	$	11,444	$	27,881



	December 31, 2019		June 30, 2019
Long-term finance lease obligations	$	20,530	$	16,036
Long-term derivative liabilities	14,326		15,886
Other	15,141		21,794
Total other liabilities	$	49,997	$	53,716



	December 31, 2019			June 30, 2019
Senior secured credit facility	$	965,676		$	621,224
7.0% Senior unsecured notes due 2026	400,000			400,000
Other	15,387			14,361
Debt issuance costs and debt discounts	(10,773		)	(12,018		)
Total debt outstanding, net	1,370,290			1,023,567
Less: short-term debt (1)	73,755			81,277
Long-term debt	$	1,296,535		$	942,290


•	Revolving loans of $1,087,257 with a maturity date of June 14, 2023


•	Term loans of $477,600 amortizing over the loan period, with a final maturity date of June 14, 2023


•	Vistaprint - Includes the operations of our global Vistaprint websites and our Webs-branded business, which is managed with the Vistaprint-branded digital business. Also included is our Vistaprint Corporate Solutions business which serves medium-sized businesses and large corporations, as well as a legacy revenue stream with retail partners and franchise businesses


•	PrintBrothers - Includes the results of our druck.at, Printdeal, and WIRmachenDRUCK businesses


•	The Print Group - Includes the results of our Easyflyer, Exagroup, Pixartprinting, and Tradeprint businesses


•	National Pen - Includes the global operations of our National Pen business, which manufactures and markets custom writing instruments and promotional products, apparel and gifts