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VistaPrint Increases Operating Income by 75%

Wednesday, January 28, 2009

Press release from the issuing company

HAMILTON, Bermuda -- VistaPrint Limited, the small business marketing company, today announced financial results for the 2009 second fiscal quarter ending December 31, 2008.

"VistaPrint executed well in the second quarter with revenue and earnings that exceeded guidance," said Robert Keane, president and chief executive officer. "We believe that VistaPrint remains on track to achieve our goal of transforming small business marketing thanks to a superior value proposition, numerous competitive advantages, dedicated and talented employees, and financial and operating discipline."
 
 Financial Metrics:

-- Revenue for the second quarter of fiscal year 2009 grew to $138.9 million, a 32 percent increase over revenue of $105.0 million reported in the same quarter a year ago.

-- Gross margin (revenue minus the cost of revenue) in the second quarter was 63.5 percent, compared to 62.0 percent in the same quarter a year ago.

-- Operating income in the second quarter was $20.7 million, or 14.9 percent of revenue, and reflected a 75 percent increase compared to $11.8 million, or 11.2 percent of revenue in the same quarter a year ago.

-- GAAP net income for the second quarter was $18.5 million, or 13.4 percent of revenue, representing a 66 percent increase compared to $11.2 million, or 10.6 percent of revenue in the same quarter a year ago.

-- GAAP net income per fully diluted share for the second quarter was $0.42, representing a 75 percent increase compared to $0.24 in the same quarter a year ago.

-- Non-GAAP adjusted net income for the second quarter, which excludes share-based compensation expense, was $23.5 million, or 16.9 percent of revenue, representing a 57 percent increase compared to $15.0 million, or 14.3 percent of revenue in the same quarter a year ago.

-- Non-GAAP adjusted net income per fully diluted share for the second quarter, which excludes share-based compensation expense, was $0.53, representing a 66 percent increase compared to $0.32 in the same quarter a year ago.

-- Capital expenditures in the second quarter were $27.3 million, or 19.6 percent of revenue.

-- During the second quarter, the Company generated $44.1 million in cash from operations and $15.1 million in free cash flow, defined as cash from operations less purchases of property, plant and equipment, net, and capitalization of software and website development costs.

-- The Company had $111.0 million in cash, cash equivalents and short-term marketable securities as of December 31, 2008.

-- During the second quarter the Company repurchased 2,554,302 common shares for $45.5 million, at an average per-share price of $17.82, as part of the share repurchase program authorized by the Board of Directors.

 Operating Highlights:

-- VistaPrint acquired approximately 1.5 million new customers in the second fiscal quarter ended December 31, 2008.

-- Repeat customers generated approximately 65 percent of total quarterly bookings in the second quarter, compared with 63 percent in the same quarter a year ago.

-- Average daily order volume in the second quarter of fiscal 2009 exceeded 43,000, reflecting an approximate 43 percent increase over an average of more than 30,000 orders per day in the same quarter a year ago.

-- Advertising spending in the second quarter was $27.8 million, or 20.0 percent of revenue, compared to $20.9 million, or 19.9 percent of revenue in the same quarter a year ago.

-- Non-U.S. markets contributed 42 percent of total revenue in the second quarter, up from 39 percent in the same quarter a year ago.

-- Average order value in the second quarter including revenue from shipping and processing was $33.57, a 5 percent decrease when compared to $35.50 in the same quarter a year ago.

-- Web site sessions in the second quarter were 61.4 million, a 16 percent increase over 53.0 million in the same quarter a year ago.

-- Conversion rates were 6.5 percent in the second quarter of fiscal 2009, compared to 5.4 percent in the same quarter a year ago.

"VistaPrint exceeded its second quarter targets thanks to the success of seasonal holiday product lines, gross margin improvements, and effective cost controls," noted chief financial officer Mike Giannetto. "However, economic conditions and exchange rates remain uncertain, and we have attempted to factor these risks into our financial guidance for future periods."
Financial Guidance as of January 27, 2009:
Based on current and anticipated levels of demand, the Company expects the following financial results:
 Revenue

-- For the third quarter of fiscal year 2009, ending March 31, 2009, the Company expects revenue of approximately $121 million to $130 million.

-- For the full fiscal year ending June 30, 2009, the Company expects revenue of approximately $495 million to $515 million.

 GAAP Fully-Diluted Earnings Per Share

-- For the third quarter of fiscal year 2009, ending March 31, 2009, the Company expects GAAP fully-diluted earnings per share of approximately $0.23 to $0.28, which assumes 43.0 million weighted average shares outstanding.

-- For the full fiscal year ending June 30, 2009, the Company expects GAAP fully-diluted earnings per share of approximately $1.07 to $1.16, which assumes 44.1 million weighted average shares outstanding.

 Non-GAAP Adjusted Net Income Per Fully-Diluted Share

-- For the quarter ending March 31, 2009, the Company expects non-GAAP adjusted net income per fully diluted share of approximately $0.34 to $0.39, which assumes a non-GAAP fully diluted weighted average share count of approximately 43.6 million shares, and share-based compensation expense of approximately $4.9 million.

-- For the full fiscal year ending June 30, 2009, the Company expects non-GAAP adjusted net income per fully diluted share of approximately $1.52 to $1.61, which assumes a non-GAAP fully diluted weighted average share count of approximately 44.6 million shares, and share-based compensation expense of approximately $20.9 million.

 Capital Expenditures

-- For the third quarter of fiscal year 2009, ending March 31, 2009, the Company expects to make capital expenditures of approximately $25 million to $30 million.

-- For the full fiscal year ending June 30, 2009, the Company expects to make capital expenditures of approximately $77 million to $87 million.
   
Planned capital investments in fiscal 2009 include two major facility projects: the construction of a new service center facility to accommodate the company's Montego Bay, Jamaica operations, which is expected to be completed at the end of calendar year 2010, and continued work on the expansion of the Company's Windsor, Ontario manufacturing facility, the current phase of which is expected to be completed in the third quarter of fiscal year 2009.

The foregoing guidance supersedes any guidance previously issued by the Company. All such previous guidance should no longer be relied upon.

At approximately 4:20 p.m. (EST) on January 27, 2009, VistaPrint will post, on the investor relations section of www.vistaprint.com, a link to a pre-recorded audio visual end-of-quarter presentation along with a downloadable transcript of the prepared remarks that accompany that presentation. At 5:00 p.m. (EST) there will be a Web cast of a live Q&A session with VistaPrint management. Links to this Q&A session will also be posted on the investor relations section of the Company's Web site. A replay of the Q&A session will be available on the Company's Web site following the call on January 27, 2009.

About non-GAAP financial measures

To supplement VistaPrint's consolidated financial statements presented in accordance with U.S. generally accepted accounting principles, or GAAP, VistaPrint has used the following measures defined as non-GAAP financial measures by the SEC: non-GAAP adjusted net income and non-GAAP adjusted net income per diluted share. The item excluded from the non-GAAP measurements is share-based compensation expense inclusive of income tax effects. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of Non-GAAP Financial Measures" included at the end of this release. The table has more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliation between these financial measures.

Share-based compensation expense

VistaPrint adopted SFAS 123(R), Share-Based Payments, on July 1, 2005 and began expensing the fair value of share option grants issued to employees and directors. Prior to that date, the Company had accounted for share option grants under the provisions of APB No. 25, Accounting for Stock Issued to Employees, and therefore had not recorded any compensation expense related to such grants.

VistaPrint's management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenses that may not be indicative of our core business operating results. VistaPrint believes that both management and investors have historically benefited from referring to these non-GAAP financial measures in assessing VistaPrint's performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also have facilitated management's internal comparisons to VistaPrint's historical performance and our competitors' operating results. Management believes that these benefits were particularly important during the period following adoption of SFAS 123(R), as prospective equity grants resulted in incremental share-based compensation expenses not previously reported by VistaPrint prior to adoption of SFAS 123(R), which management believes were not indicative of core business operating results.

VistaPrint previously announced the Company's intention to eliminate the use of non-GAAP financial measures in its financial reporting and guidance beginning with the first quarter of the fiscal year ending June 30, 2009, other than to facilitate non-GAAP comparisons during a transition period, because management believed that the reporting of non-GAAP measures would by that time no longer provide meaningful supplemental information to investors regarding the Company's performance. However, based on subsequent investor feedback, management has concluded that many investors believe they would continue to benefit from referring to these non-GAAP financial measures in assessing VistaPrint's performance and when forecasting and analyzing future periods. Therefore, the Company intends to continue to use non-GAAP financial measures in its financial reporting and guidance in fiscal year 2009 and will reevaluate their use in future periods. Until VistaPrint ceases to include non-GAAP financial measures in its reporting, it expects to compute non-GAAP financial measures using the same consistent method from quarter to quarter and year to year.

Management provides these non-GAAP financial measures as a courtesy to investors. However, to gain a more complete understanding of the Company's financial performance, management does (and investors should) rely upon GAAP financial statements.

 

 

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