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Vistaprint Q4 & FY14 Adjusted Earnings Zoom Past Estimates

Zacks Equity Research

Business services provider Vistaprint N.V. (VPRT) reported solid fourth-quarter fiscal 2014 results as revenues and adjusted earnings improved year over year due to the successful implementation of major pricing and marketing changes. GAAP net income for the reported quarter dropped to $1.0 million from $2.3 million in the year-earlier quarter, primarily due to a loss of $12.7 million related to the disposal of a minority equity interest in China. On a per share basis, earnings for fourth-quarter fiscal 2014 fell to 3 cents from 7 cents in the year-ago quarter.

Excluding one-time items, adjusted earnings for the reported quarter increased to $25.6 million or 75 cents per share from $14.1 million or 41 cents per share in the prior-year period. The quarterly adjusted earnings were way above the Zacks Consensus Estimate of 35 cents.

For fiscal 2014, GAAP net income was $43.7 million or $1.28 per share compared with $29.4 million or 85 cents in the previous fiscal. Adjusted earnings for the reported fiscal increased to $102.6 million or $2.95 per share from $75.8 million or $2.15 per share in fiscal 2013. The fiscal adjusted earnings surpassed the Zacks Consensus Estimate of $1.92.

Quarter Details

Total revenue in fourth-quarter fiscal 2014 surged 21% year over year to $338.2 million. The year-over-year increase in revenues was primarily attributable to tailwinds in the leading markets – the U.S., Germany and the U.K. – due to changes in pricing and marketing practices. Geographically, revenues were up 6% in North America to $179.9 million, up 50% in Europe to $142.2 million and up 3% in Most of the World to $16.1 million.

Vistaprint is shifting its value proposition away from deep discounts and free-offer direct marketing efforts to tap the large market opportunity beyond the traditional base of highly price-sensitive customers. Quarterly revenues also exceeded the Zacks Consensus Estimate of $320 million.

For fiscal 2014, revenues were up 9% year over year to $1,270.2 million as growth in North America and Europe was partially offset by a decline in Most of the World. In North America, revenues increased 9% to $700.2 million, while in Europe it climbed 11% to $502.1 million. Revenues in Most of the World decreased 4% year over year to $67.9 million largely due to a challenging macroeconomic environment.

Gross margin in the reported quarter fell to 60.5% from 64.6% in the year-ago period. The year-over-year reduction in gross margin was driven by the recent acquisitions of People & Print Group and Pixartprinting, which have different business models with a relatively lower gross margin than Vistaprint-branded business.

Operating income improved to $19.7 million from $3.1 million in the prior-year period. The year-over-year increase in operating income was largely on the back of higher revenues due to better customer service, improved product substrate quality, more reliable shipping methods, assistance for graphic design creation, new options for premium finishes and more stock keeping unit (:SKU) choices. Management remains confident of healthy returns in the long run as it hopes to retain customer loyalty with focused services that translate into renewed organic growth.


During the reported quarter, Vistaprint signed an agreement to acquire Italian design firm Pixartprinting Srl. The acquisition involves a base purchase price of about €127 million. The acquisition is expected to be accretive to revenues and operating cash flow for fiscal 2014. However, it will have a dilutive effect on GAAP earnings per share (EPS) till fiscal 2015, owing to transaction costs and expected amortization of intangible assets connected to the acquisition. For non-GAAP EPS, the acquisition is expected to be neutral to earnings in fiscal 2014, but accretive to fiscal 2015 results.

Balance Sheet & Cash Flow

The company exited the fiscal with $62.5 million in cash and cash equivalents compared with $50.0 million at fiscal-end 2013. Long-term debt increased to $410.5 million from $230.0 million at fiscal-end 2013. At quarter end, the company had $172.6 million of borrowing capacity available under its credit facility. Vistaprint purchased 1,044,136 ordinary shares for $42.0 million during the quarter under its share repurchase program.

The company generated $50.5 million of cash from operations during the quarter compared with $36.7 million in fourth-quarter fiscal 2013, bringing the respective tallies for the entire fiscal to $148.6 million and $140.0 million. Capital expenditures for the fourth quarter and fiscal 2014 were $18.1 million and $72.1 million, respectively.


For fiscal 2015, the company provided its revenue and earnings guidance based on three factors. Vistaprint is focused on leveraging its investments for a strategic repositioning of its brand and expects modest revenue growth during the transitional phase in fiscal 2015. The company also expects to benefit from the recent acquisitions, expansion in new geographic areas and customer additions. At the same time, Vistaprint expects to further improve on its margins through a continued focus on improving its productivity and efficiency levels. Although we expect the company to face short-term headwinds, it is likely to deliver solid results in the future on the back of these initiatives.

Revenues for fiscal 2015 are expected in the range of $1,470 million to $1,540 million. Fiscal 2015 GAAP earnings are expected in the range of $2.15–$2.65 per share, while adjusted earnings are expected in the range of $3.46–$3.96 per share. Capital expenditures are likely to range within $80 million and $100 million.

Vistaprint currently has a Zacks Rank #3 (Hold). Stocks that look promising and are worth considering now include Convergys Corporation (CVG) and FTI Consulting, Inc. (FCN), both carrying a Zacks Rank #2 (Buy), and Huron Consulting Group Inc. (HURN) that carries a Zacks Rank #1(Strong Buy).

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