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Item 7. Management’s Discussion and Analysis

2020-08-11 compared with 2019-08-09 · 255 added, 210 removed, 312 unchanged (60% of the section changed)

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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 during and after the COVID-19 pandemic, the potential effects of the pandemic, the expected effects of the actions we are taking and intend to take to address the pandemic including cost savings, the size of our market and our ability to take advantage of the market opportunity, expectations with respect to the development and efficacy of our mass customization platform, the competitive landscape and our competitive position, the expected effects of the reorganization of our technology team, 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 certain important factors, including those set forth in this “Management's Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” and elsewhere in this Report.

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;

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;

the willingness of purchasers of customized products and services to shop online;

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 this Report.

You should carefully review those factors and also carefully review the risks outlined in other documents that we file from time to time with the United States Securities and Exchange Commission.

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We limit all other central activities to only those which absolutely must be performed centrally.

During the fourth quarter of fiscal 2019, we revised our internal organizational and reporting structure resulting in changes to our Upload and Print reportable segment.

Due to the organizational changes, our Upload and Print reportable segment was split into two separate operating and reportable segments, PrintBrothers and The Print Group .

These changes in reporting structure are intended to position leaders closer to operations of the businesses, to lower costs, and to drive culture, priorities, technologies and incentives that improve customer and financial outcomes.

During the first quarter of fiscal 2020, we revised our internal organizational and reporting structure leading to changes in our Vistaprint and All Other Businesses reportable segments.

Our Vistaprint Corporate Solutions, Vistaprint India, and Vistaprint Japan businesses, which were previously aggregated based on materiality in our All Other Businesses, are now directly managed within the Vistaprint business.

These businesses are close derivatives or adjacencies of the Vistaprint business and leverage the Vistaprint brand, customers, technology, and/or other assets.

This change in reporting structure positions them closer to the Vistaprint operations, capabilities, and resources.

Additionally, during the fourth quarter of fiscal 2020, we reorganized technology teams that previously existed within our Vistaprint business and our central teams.

The reorganization resulted in some team member reductions in both organizations, and the net transfer of 177 team members from Vistaprint to our central Cimpress technology team.

This change is intended to free up resources to make more Vistaprint technologies available to other Cimpress businesses in the future, to accelerate Vistaprint's re-platforming efforts, and to reduce costs where no longer necessary.

We have revised our presentation of all prior periods presented to reflect our revised segment reporting.

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Refer to Note 16 in our accompanying consolidated financial statements for additional information relating to our reportable segments and our segment financial measures.

In accordance with the SEC's recently issued disclosure simplification rules, we elected to exclude discussion of our fiscal 2018 financial performance as compared to our fiscal 2017 results unless we considered that information material for understanding our financial condition.

Refer to our Form 10-K filed with the SEC on August 10, 2018 for discussion related to these periods.

Through the end of February 2020, Cimpress’ year-to-date revenue and adjusted EBITDA grew over the prior year.

However, the COVID-19 pandemic and related restrictions are impacting our small business customers around the world, which led to materially reduced demand for our products starting in March 2020, but month-over-month demand has been improving through June 2020, as consolidated bookings were down 19% in June, compared to a decline in consolidated bookings of 51% in April.

Our decentralized organizational structure has helped our pandemic response by allowing our decentralized businesses to move quickly to respond to local situations, whether that be related to the health and safety of our team members, reacting to government restrictions and guidelines, or serving our customers' needs.

At the same time, our leaders have shared best practices and approaches to pull on the strength of the collective whole.

Central teams have provided support, guidance, and a structure for coordination, and our businesses have focused on execution and innovation.

Cimpress moved quickly to respond along several dimensions, including team member health and safety, resiliency in continuing to serve our customers, financial flexibility to weather the effects of the pandemic, and innovation to provide customers and our communities the products they need during this pandemic.

All team members who have the ability to do so have been working from home and are doing so productively.

In cases where it is not possible for team members to work from home, such as in manufacturing or some customer service roles, Cimpress businesses are ensuring compliance with relevant laws and health guidelines and best practices, such as social distancing, temperature checks, mandatory face masks or face shields, and frequent deep cleaning of facilities.

While there have been improvements and some reductions to government restrictions in certain countries, the ultimate duration and scope of the pandemic remains unknown, so we have taken a series of decisive and proactive measures starting in March 2020 including the following:

Entered into an amendment to our senior secured credit agreement to provide a temporary suspension of prior maintenance covenants and raised new capital to provide a partial pay down to senior secured credit facility lenders;

Enacted significant cost-reduction and cash-preservation measures;

Maintained operational continuity to the greatest extent feasible while prioritizing the health and safety of our team members;

Protected key investments in technology, data infrastructure and customer value improvements.

We believe the actions we have taken or identified will create the time and financial flexibility to enable us to focus on execution through this pandemic, even if its negative effects were to be deeper and more prolonged than we currently anticipate.

Our near-term outlook has changed significantly in light of the COVID-19 pandemic and the impact it has had on our customers, and therefore, our results.

The timing of the initial impact on demand in March differed by business, with those having significant European exposure impacted earliest, while all segments realized improvements sequentially for the months of May and June 2020.

The improvements are the result of the start in many geographies of relaxed government restrictions that has driven more economic activity, in addition to our shift in focus to products and product templates that our customers need in the current environment.

Cost Reductions

We have reduced variable and semi-variable costs generally in line with the reduction in demand.

As demand fluctuates, the reduction happens naturally for many of these costs such as shipping costs, payment processing fees, and part of our performance advertising where costs are based on keyword searches and clicks.

For other of these costs, reduction requires us to take actions, such as temporarily reducing direct labor in production facilities or service locations or changing payback guidelines on advertising.

In addition, we have taken actions to reduce fixed costs, including, but not limited to, strict hiring limitations across all Cimpress businesses, elimination of discretionary spend such as travel, training and events, reduced work schedules where possible, deferral of all non-essential consulting projects, elimination of non-essential contractors and replacement of cash compensation during the fourth quarter with restricted share units (RSUs) for some team members.

Our goal with the fixed cost reductions made to date is to protect key growth investments and

as much full-time employment as possible so that when demand begins to recover, we are well positioned to regain momentum.

We anticipate that many of these lowered fixed costs will come back into the business when and if activity necessitates such costs including travel or hiring or as the recovery path becomes more certain such that team member benefits can be restored.

In fact, we have already resumed hiring in select areas like technology, data science and analytics.

While we believe it was appropriate to constrain costs in certain areas, we will continue to be disciplined in adding cost back where it makes sense to do so since we can't be certain of the shape and timing of demand recovery.

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, constant-currency revenue growth, operating income, adjusted net operating profit, cash flow from operations and adjusted free cash flow.

however, in evaluating the financial condition and operating performance of our business, management considers a number of metrics including revenue growth, 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 year ended June 30, 2020 as compared to the year ended June 30, 2019 follows:

Fiscal Year 2020

Revenue increased by 6% to $2,751.1 million .

Consolidated constant-currency revenue increased by 9% and, excluding acquisitions and divestitures completed in the last four quarters, increased by 5% .

Operating income increased by $5.8 million to $163.6 million .

Adjusted net operating profit, or NOP (a non-GAAP financial measure), increased by $87.8 million to $253.2 million .

Revenue decreased by 10% to $2,481.4 million .

Consolidated constant-currency revenue decreased by 9% and decreased by 11% when excluding acquisitions and divestitures completed in the last four quarters.

Operating income decreased by $107.6 million to $56.0 million .

Adjusted EBITDA (a non-GAAP financial measure) increased by $13.2 million to $399.8 million .

Cash provided by operating activities increased by $7.3 million to $338.4 million .

Adjusted free cash flow (a non-GAAP financial measure) increased by $32.2 million to $244.0 million .

For our fiscal year 2019, the increase in reported revenue is primarily due to the addition of the revenue of our BuildASign business acquired on October 1, 2018, as well as continued growth in our Vistaprint, PrintBrothers , The Print Group and National Pen reportable segments.

For fiscal year 2020, the decrease in reported revenue is primarily due to a significant decline in order volumes starting in March, driven by the economic disruption associated with the COVID-19 pandemic lock downs and related restrictions.

Our year-to-date revenue results through February 2020, grew on a reported basis;

however we experienced a significant decline in demand starting in March 2020, which worsened in April 2020 before starting to recover in the last two months of fiscal 2020.

Currency exchange rate fluctuations negatively impacted revenue during the current fiscal year.

Constant-currency revenue growth slowed in our Vistaprint business, primarily due to planned reductions in advertising spend while we rebuild our tools to ensure strong returns and improved customer conversion rates.

Our National Pen business also reported lower constant-currency revenue growth relative to the prior year, due in part to strong growth in the prior year period, as well as a reduction in new customer prospecting activities during the second half of the fiscal year because the payback did not meet our expectations.

The lower National Pen growth was also impacted by operational delays in the supply chain and lower response rates for direct-marketing mailings in the second quarter.

For the year ended June 30, 2019 , operating income increased $5.8 million due to incremental profits generated from the revenue growth described above, as well as improved profitability in our Vistaprint business due to a reduction in advertising expense of $39.6 million during the third and fourth quarters of fiscal 2019.

The increase was also impacted by a decrease in share-based compensation expense of $28.8 million , primarily due to the reversal of expenses during the second quarter of fiscal 2019 that were previously recognized for our supplemental performance share units, or supplemental PSUs.

The increase was partially offset by the prior year gain of $47.5 million on the sale of Albumprinter, which did not recur during the current year.

For the year ended June 30, 2019 , adjusted NOP increased year-over-year primarily due to the same reasons as operating income mentioned above, as well as the addition of the profit from our BuildASign business acquired on October 1, 2018, which positively influenced adjusted NOP to a greater degree than operating income because adjusted NOP excludes acquisition-related amortization expense.

Adjusted NOP excludes the prior year gain on the sale of Albumprinter, year-over-year impacts from lower restructuring charges, acquisition-related charges and the goodwill impairment charge recognized for our Printi business and includes realized gains or losses on our currency derivatives intended to hedge EBITDA.

The net year-over-year impact of currency on adjusted NOP was positive for the year ended June 30, 2019 .

For fiscal year 2020, the following items are expected to positively impact trends in our operating income:

full year impact of Vistaprint advertising reductions versus a half year in fiscal year 2019, our plans to decrease investments for our early stage businesses, and reduced investment in National Pen.

Increased investment in Vistaprint technology spend is expected to negatively impact trends in our operating income.

For the year ended June 30, 2020, operating income decreased by $107.6 million , due to the year over year increase in goodwill impairment charges of $93.3 million , as well as a decline in performance starting in March 2020 driven by the aforementioned impacts of COVID-19, which resulted in a decline in profitability for most of our businesses.

While we are not back to pre-pandemic levels of demand, we are steadily recovering, as consolidated bookings were down 19% in June, compared to a decline in consolidated bookings of 51% in April.

Prior to March 2020, profitability increased as a result of planned reductions in advertising spend for our Vistaprint and National Pen businesses combined with operational improvements in several of our businesses.

Our BuildASign business continued to grow and drive profit improvements even when the pandemic hit the U.S.

market as their home decor and pandemic-related signage products showed growth and resiliency, while net investments in our early-stage businesses decreased primarily due to pre-pandemic actions we have taken to improve the efficiency and focus of our Printi business compared to the prior year.

Adjusted EBITDA increased as compared to the year ended June 30, 2019, due to the pre-pandemic performance discussed above, but partially offset by the decline in profitability starting in March 2020 due to the impacts from the pandemic.

Adjusted EBITDA excludes the impact of the goodwill impairment discussed above, and includes the realized gains or losses on our currency derivatives intended to hedge adjusted EBITDA, and the net year-over-year impact of currency on consolidated adjusted EBITDA was not significant.

Consolidated Results of Operations

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Our businesses generate revenue primarily from the sale and shipment of customized manufactured products.

To a much lesser extent (and only in our Vistaprint business) we provide digital services, website design and hosting, and email marketing services, as well as a small percentage from order referral fees and other third-party offerings.

To a much lesser extent (and only in our Vistaprint business) we provide digital services, website design and hosting, and email marketing services, as well as generate 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 years ended June 30, 2019, 2018 and 2017 are shown in the following tables:

Total revenue and revenue growth by reportable segment for the years ended June 30, 2020, 2019 and 2018 are shown in the following table:

Year Ended June 30,

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Revenue from our fiscal year 2019 acquisitions is excluded from fiscal year 2020 revenue growth for quarters with no comparable year-over-year revenue.

For example, revenue from National Pen, which we acquired on December 30, 2016 in Q2 2017, is excluded from revenue growth in Q1 and Q2 of fiscal year 2018 since there are no full quarter results in the comparable periods, but revenue is included in revenue growth for Q3 and Q4 of fiscal year 2018.

For example, revenue from BuildASign, which we acquired on October 1, 2018 in Q2 2019, is excluded from revenue growth in Q1 of fiscal year 2019, with no Q1 results in the comparable period, but is included in organic revenue growth starting in Q2 of fiscal year 2020 and will be included in future quarters.

Our reportable segments-related growth is inclusive of inter-segment revenues, which are eliminated in our consolidated results.

(3) The All Other Businesses segment includes the revenue of the Albumprinter business until the sale completion date of August 31, 2017, VIDA revenue from its acquisition date of July 2, 2018, and BuildASign revenue from its acquisition date of October 1, 2018.

Constant-currency revenue growth excluding acquisitions/divestitures, excludes the revenue results for VIDA and BuildASign since their acquisition dates and Albumprinter through the divestiture date.

(3) The All Other Businesses segment includes the revenue of the Albumprinter business until the sale completion date of August 31, 2017, VIDA revenue from its acquisition date of July 2, 2018 through its divestiture date of April 10, 2020, and BuildASign revenue from its acquisition date of October 1, 2018.

Constant-currency revenue growth excluding acquisitions/divestitures, excludes the revenue results for VIDA and BuildASign since their acquisition dates and Albumprinter and VIDA through their divestiture dates.

We have provided these non-GAAP financial measures because we believe they provide meaningful information regarding our results on a consistent and comparable basis for the periods presented.

Management uses these non-GAAP financial measures, in addition to GAAP

financial measures, to evaluate our operating results.

Management uses these non-GAAP financial measures, in addition to GAAP financial measures, to evaluate our operating results.

These non-GAAP financial measures should be considered supplemental to and not a substitute for our reported financial results prepared in accordance with GAAP.

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Cost of revenue includes materials used by our businesses to manufacture their products, payroll and related expenses for production and design services personnel, depreciation of assets used in the production process and in support of digital marketing service offerings, shipping, handling and processing costs, third-party production costs, costs of free products and other related costs of products our businesses sell.

Cost of revenue as a percent of revenue increased during the year ended June 30, 2019 , compared to the prior year, primarily due to lower gross margins in our Vistaprint business, resulting from product mix that shifted to lower margin products, as well as decreased pricing resulting from higher discounting during the first half of the fiscal year.

Several of our businesses also recognized increasing paper costs during these periods.

Year Ended June 30,

Cost of revenue

For the year ended June 30, 2019 , consolidated cost of revenue increased by $121.5 million partially due to the addition of cost of revenue of $54.8 million from our BuildASign business, which was acquired on October 1, 2018 and is therefore not included in the comparable periods.

Vistaprint's cost of revenue increased by $28.4 million from the prior year, primarily due to changes in product mix and volume increases.

The cost of revenue for our PrintBrothers businesses increased by $23.5 million primarily driven by revenue growth in our WIRmachenDRUCK business, partially offset by favorable currency impact.

We also recognized an increase of $11.2 million of costs within our National Pen business primarily due to increased volume.

For the year ended June 30, 2020 , consolidated cost of revenue decreased by $152.5 million , primarily due to demand-dependent cost of goods sold including third-party fulfillment, material, and shipping costs that have decreased across several of our segments that have been more significantly impacted by the COVID-19 pandemic lock downs and related restrictions.

Additionally, we realized approximately $11.6 million of wage offset benefit from government incentives in the fourth quarter.

This was partially offset by an increase in the cost of revenue from our BuildASign business, which was acquired on October 1, 2018 and is therefore not included for part of the comparable period, as well as an increase of costs for the remainder of the year, driven by BuildASign's continued revenue growth and resiliency through the pandemic.

A majority of our cost of revenue is variable with revenue demand, which contributed to flat year-over-year gross margins for the fourth quarter of fiscal 2020 despite pandemic-driven reductions in order volumes.

Consolidated Operating Expenses

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Restructuring expense

Impairment of goodwill

(Gain) on sale of subsidiaries

Impairment of goodwill and acquired intangible assets

Technology and development expense

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Depreciation expense for information technology equipment that directly supports the delivery of our digital marketing services products is included in cost of revenue.

During the year ended June 30, 2019 , technology and development expenses decreased by $9.0 million as compared to the prior year.

The decrease was primarily due to a decrease in share-based compensation costs of $6.8 million , which is due to the reversal of cumulative supplemental PSU expense during the second quarter of fiscal 2019 as the achievement of the performance condition is no longer probable.

During the year ended June 30, 2019 , we recognized lower expense as a result of cost savings realized in the Vistaprint business from our restructuring initiatives and a year-over-year decrease in costs of $1.6 million resulting from the divestiture of our Albumprinter business.

This was partially offset by the addition of costs from our recent acquisition of BuildASign, which resulted in $2.2 million of costs during the year ended June 30, 2019 .

During the year ended June 30, 2020 , technology and development expenses increased by $16.5 million , as compared to the prior year.

This was mainly driven by increased costs of $11.3 million in our central technology

teams, primarily due to an increase in headcount, as these teams continue to develop new technologies that are intended to support our businesses, combined with higher operating costs driven by our businesses' increased adoption and usage of our central technology capabilities, which was partially offset by a reduction in travel and training expenses during the fourth quarter of fiscal 2020.

Additionally, we had a $2.8 million increase of expense in our Vistaprint business, primarily related to the ongoing rebuild of its technology infrastructure.

The increase during the year ended June 30, 2020 , was also partially due to $5.2 million in the non-recurring reversal of share-based compensation expense for our supplemental PSUs in the comparative period.

Marketing and selling expense

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Our Vistaprint, National Pen and BuildASign businesses have higher marketing and selling costs as a percentage of revenue as compared to our PrintBrothers and The Print Group businesses.

Our marketing and selling expenses decreased by $0.8 million during the year ended June 30, 2019 , as compared to the prior year, primarily due to the reduction of advertising spend in our Vistaprint business of $39.6 million as we seek to eliminate spend that does not meet our return thresholds.

We also recognized a decrease in share-based compensation costs of $5.5 million , which is due to the reversal of cumulative supplemental PSU expense described above, as well as a year-over-year decrease in costs of $4.7 million resulting from the divestiture of our Albumprinter business.

The decrease was offset by the addition of $32.9 million of advertising and customer care costs in our recently acquired BuildASign business during the year ended June 30, 2019 .

In addition, our National Pen business recognized an increase in costs of $18.1 million primarily due to increased customer prospecting activity during the first and second quarters of fiscal 2019.

Our marketing and selling expenses decreased by $139.8 million during the year ended June 30, 2020 , as compared to the prior year.

The decrease from the prior comparative period is primarily due to the reduction of advertising spend in our Vistaprint business of $104.3 million , which was driven by two factors.

The first was our reduction in advertising spend throughout the year as we continued our initiative to work to eliminate spend that does not meet our return thresholds.

This was combined with our response to the decline in order volumes that started in March 2020, whereby we further reduced our advertising spend by eliminating spend in certain marketing channels, while also tightening our required return thresholds.

We also recognized a decrease in marketing costs in our National Pen business of $28.8 million , primarily due to a planned reduction in direct mail prospecting activity as compared to last year's elevated levels, as well as pandemic-related initiatives to lower costs, which included the delay of direct mail marketing campaigns, lower online advertising spend and cost savings initiatives to reduce costs in service centers.

General and administrative expense

General and administrative expense consists primarily of transaction costs, including third-party professional fees, insurance and payroll and related expenses of employees involved in executive management, finance, legal, strategy, human resources and procurement.

For the year ended June 30, 2019 , general and administrative expenses decreased by $14.3 million as compared to the prior periods, primarily due to a decrease in share-based compensation costs of $18.6 million , which was largely due to the reversal of cumulative supplemental PSU expense described above.

The decrease was partially offset by the addition of $6.4 million of costs from our recent acquisition of BuildASign during the year ended June 30, 2019 .

In addition, for the year ended June 30, 2019 , we recognized increases in professional fees, primarily related to our fiscal 2019 acquisitions, as well as certain other strategic projects.

For the year ended June 30, 2020 , general and administrative expenses increased by $20.4 million , as compared to the prior period, primarily due to an increase in consulting costs associated with strategic projects in our Vistaprint business, costs incurred centrally related to the cross-border Irish Merger, and professional fees and costs associated with our May 2020 financing activities.

Also included in the $20.4 million increase is additional share-based compensation expense of $8.1 million , primarily due to the reversal of supplemental PSU expense in the comparative period as well as a loss of $1.5 million associated with the sale of our VIDA business on April 10, 2020.

During the year ended June 30, 2020, we incurred additional costs from our BuildASign business as that business was only included for nine months of the comparable period.

Amortization of acquired intangible assets

Amortization of acquired intangible assets consists of amortization expense associated with separately identifiable intangible assets capitalized as part of our acquisitions, including customer relationships, trade names, developed technologies, print networks, and customer and referral networks.

Amortization of acquired intangible assets increased by $3.4 million during the year ended June 30, 2019 , as compared to the year ended June 30, 2018, due to the addition of amortization for our acquisition of BuildASign.

This increase is partially offset by a reduction of amortization within our PrintBrothers and The Print Group reportable segments due to certain intangible assets becoming fully amortized during the year ended June 30, 2019 .

Amortization of acquired intangible assets decreased by $1.5 million for the year ended June 30, 2020 , as compared to the year ended June 30, 2019 .

The reduction during the year ended June 30, 2020 is due to amortization within our PrintBrothers and The Print Group reportable segments as certain intangible assets became fully amortized during the prior fiscal year, partially offset by additional amortization for our BuildASign business caused by the prior year timing of the acquisition.

Restructuring expense

Restructuring expense consists of costs directly incurred as a result of restructuring initiatives, and includes employee-related termination costs, third party professional fees, facility exit costs and write-off of abandoned assets.

During the year ended June 30, 2019 , we recognized restructuring expense of $12.1 million primarily related to actions within our Vistaprint business.

During the year ended June 30, 2018, we recognized $15.2 million of restructuring costs, primarily associated with actions within our Vistaprint business announced in November 2018.

Refer to Note 18 in our accompanying consolidated financial statements for additional information relating to the restructuring actions.

Gain on sale of subsidiaries

During the year ended June 30, 2018 , we recognized a gain on the sale of our Albumprinter business of $47.5 million , net of transaction costs.

The amount of our gain on the sale of Albumprinter was impacted by the partial allocation of goodwill to our Vistaprint business in past periods, as well as minimal carrying value of Albumprinter's acquired intangible assets at the time of the sale, as well as currency impacts.

Impairment of goodwill and acquired intangible assets

For the year ended June 30, 2019, we recognized a $7.5 million impairment charge related to our Printi reporting unit.

The impairment was the result of Printi's underperformance during the recent period, combined with lower cash flow outlooks.

Refer to Note 8 in our accompanying consolidated financial statements for additional discussion.

During the year ended June 30, 2020 , we recognized restructuring expense of $13.5 million , primarily related to the reorganization of our Vistaprint and central technology teams that were intended to better align technology tribes and accelerate the Vistaprint re-platforming efforts, as well as cost savings actions taken by our National Pen business in response to the pandemic.

Comparatively, we recognized restructuring expense of $12.1 million during the year ended June 30, 2019 , primarily related to actions within our Vistaprint business.

Impairment of goodwill

For the year ended June 30, 2020 , we recognized goodwill impairment charges of $100.8 million .

We recognized a full goodwill impairment charge for our National Pen and VIDA reporting units, which amounted to $34.4 million and $26.0 million , respectively, as well as a partial goodwill impairment charge for our Exaprint reporting unit of $40.4 million .

These impairment charges were primarily due to lower cash flow expectations for each for these business as a result of the decline in demand caused by the COVID-19 pandemic lock down and related restrictions when compared to previous estimates.

Refer to Note 8 in our accompanying consolidated financial statements for additional details.

Other Consolidated Results

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In evaluating our currency hedging programs and ability to qualify for hedge accounting in light of our legal entity cash flows, we considered the benefits of hedge accounting relative to the additional economic cost of trade execution and administrative burden.

Based on this analysis, we decided to execute certain currency derivative contracts that do not qualify for hedge accounting.

Based on this analysis, we execute certain currency derivative contracts that do not qualify for hedge accounting.

The following table summarizes the components of other income (expense), net:

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Total other income (expense), net

During the year ended June 30, 2019 , we recognized net gains of $26.5 million as compared to net losses of $21.0 million during the year ended June 30, 2018.

The increase in other income (expense), net is primarily due to the currency exchange rate volatility impacting our derivatives that are not designated as hedging instruments, in which our Euro and British Pound contracts are the most significant exposure that we economically hedge.

We expect volatility to continue in future periods and we do not apply hedge accounting for most of our derivative currency contracts.

We also experienced currency-related gains due to currency exchange rate volatility on our non-functional currency intercompany relationships, primarily related to an intercompany loan that is denominated in Swiss Francs, which we may alter from time to time.

The decrease in other income (expense), net is primarily due to the currency exchange rate volatility impacting our derivatives that are not designated as hedging instruments, in which our Euro and British Pound contracts are the most significant exposures that we economically hedge.

We expect volatility to continue in future periods, as we do not apply hedge accounting for most of our derivative currency contracts.

We also experienced currency-related gains due to currency exchange rate volatility on our non-functional currency intercompany relationships, which we may alter from time to time.

The impact of certain cross-currency swap contracts designated as cash flow hedges is included in our currency-related gains (losses), net, offsetting the impact of certain non-functional currency intercompany relationships.

Interest expense, net

Interest expense, net primarily consists of interest paid on outstanding debt balances, amortization of debt issuance costs, interest related to capital lease obligations and realized gains (losses) on effective interest rate swap contracts and certain cross-currency swap contracts.

Interest expense, net primarily consists of interest paid on outstanding debt balances, amortization of debt issuance costs, debt discounts, interest related to finance lease obligations and realized gains (losses) on effective interest rate swap contracts and certain cross-currency swap contracts.

As part of interest expense, net, we also recognize changes to the estimated future redemption value of our mandatorily redeemable noncontrolling interests.

Interest expense, net was $63.2 million and $53.0 million for the years ended June 30, 2019 and 2018 , respectively.

Interest expense was higher in fiscal 2019 relative to historical trends primarily as a result of higher debt levels, due to the acquisition of BuildASign, as well as higher interest rates, driven both by higher floating interest rates and the change in mix of our outstanding debt, which resulted from the refinancing of our senior unsecured notes during the fourth quarter of fiscal 2018.

Refer to Note 10 in the accompanying consolidated financial statements for additional details regarding our debt arrangements.

Loss on early extinguishment of debt

During fiscal year 2018, we redeemed all of our senior notes due 2022 and satisfied the indenture governing those senior notes using funds from the senior notes due 2026 that we issued on June 15, 2018.

As a result of the redemption, we incurred a loss on the extinguishment of debt of $17.4 million , which included an early redemption premium for the senior notes due 2022 of $14.4 million and the write-off of unamortized debt issuance costs related to the redeemed notes of $3.0 million .

Income tax expense (benefit)

Interest expense, net increased by $12.7 million during the year ended June 30, 2020 , as compared to the prior comparable period.

This is due to additional interest expense associated with our senior secured credit facility as a result of our higher debt borrowing levels throughout the year, combined with the additional $200.0 million offering of our 7% senior unsecured notes in February 2020 and issuance of our $300.0 million 12% second lien notes in May 2020.

We expect interest expense to increase next fiscal year from the full year impact of the financing transactions described above.

Please refer to Note 10 in the accompanying consolidated financial statements for further detail.

Partially offsetting the increase in interest expense for the year ended June 30, 2020 , is a decrease in interest expense of $7.4 million related to the change in classification of our Waltham, Massachusetts lease upon adoption of ASC 842 in the first quarter of fiscal 2020.

Refer to Note 2 in the accompanying consolidated financial statements for additional details.

Income tax (benefit) expense

Year Ended June 30,

Income tax expense (benefit)

Income tax (benefit) expense

Effective tax rate

Income tax expense for the year ended June 30, 2019 was higher than the prior year primarily due to increased pre-tax earnings.

We also had lower share based compensation tax benefits of $1.5 million as compared to $12.8 million in fiscal 2018.

Offsetting the increase in income tax expense were "Patent Box" tax benefits of $4.3 million granted to our Pixartprinting business in Italy.

Our cash paid for income taxes for fiscal 2019 was lower than our income tax expense primarily as a result of U.S.

tax benefits associated with the acquisition of BuildASign and the realization of tax benefits relating to certain timing differences that were recognized in our income tax expense in prior years.

Income tax expense for the year ended June 30, 2020 decreased as compared to the prior year primarily due to Swiss Tax Reform, as discussed in more detail below.

Also, in addition to a more favorable mix of earnings year-over-year, we recognized tax benefits of $15.7 million related to excess tax benefits from share based compensation, as compared to $1.5 million in fiscal 2019, and $11.2 million for the re-measurement of U.S.

tax losses that will be carried back to tax years with higher U.S.

federal tax rates under the U.S.

Coronavirus Aid, Relief, and Economic Security Act ("US CARES Act").

We also recognized tax expense of $41.9 million to record a full valuation allowance against our U.S.

deferred tax assets and a portion for our Irish deferred tax assets.

On October 25, 2019, the canton of Zurich enacted tax law changes by publishing the results of its referendum to adopt the Federal Act on Tax Reform and AHV Financing (TRAF), which we refer to as Swiss Tax Reform.

Swiss Tax Reform was effective as of January 1, 2020 and included the abolishment of various favorable federal and cantonal tax regimes.

Swiss Tax Reform provided transitional relief measures for companies that lost the tax benefit of a ruling, including a "step-up" for amortizable goodwill, equal to the amount of future tax benefit they would have received under their existing ruling, subject to certain limitations.

We recognized a tax benefit of $113.5 million to establish new Swiss deferred tax assets related to transitional relief measures and to remeasure our existing Swiss deferred tax assets and liabilities.

We don't expect to realize the majority of this benefit until fiscal 2025 through fiscal 2030.

We believe that our income tax reserves are adequately maintained by taking into consideration both the technical merits of our tax return positions and ongoing developments in our income tax audits.

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Reportable Segment Results

Our segment financial performance is measured based on segment profit (loss) which excludes certain non-operational items including acquisition-related expenses, certain impairments and restructuring charges.

Our segment financial performance is measured based on segment EBITDA, which is defined as operating income plus depreciation and amortization (excluding depreciation and amortization related to our Waltham, Massachusetts office lease for prior periods presented);

plus share-based compensation expense related to investment consideration;

plus earn-out related charges;

plus certain impairments;

plus restructuring related charges;

less interest expense related to our Waltham, Massachusetts office lease for prior periods presented;

less gain on purchase or sale of subsidiaries.

Year Ended June 30,

Reported Revenue

Segment Profit

Segment EBITDA

Segment Revenue

Vistaprint's reported revenue growth for the year ended June 30, 2019 was negatively affected by currency impacts of 2% , resulting in constant-currency growth of 3% .

During the year ended June 30, 2019 , revenue growth was driven by continued growth in repeat customer bookings, as well as continued growth in marketing materials, signage and promotional products.

During the third and fourth quarters of fiscal 2019, we reduced our advertising spend that we did not believe was meeting our return thresholds, which negatively impacted revenue growth during these quarters, particularly from new customers.

Revenue growth was also negatively impacted by weakness in consumer products during the current fiscal year.

Vistaprint's reported revenue decline for the year ended June 30, 2020 was negatively affected by a currency impact of 1% for the year ended June 30, 2020 , resulting in constant-currency revenue decline of 10% .

The revenue decline was primarily driven by the pandemic, resulting in reduced demand starting in March 2020, which worsened in April, but started to recover during the months of May and June.

The improvements in May and June are the result of our shift in focus to products and product templates that our customers need in the current environment, but also the start in many geographies of relaxed government restrictions that has driven more economic activity.

While we have experienced improved demand in the last two months of the fiscal year, we expect there to be volatility in future demand, as social distancing measures and other restrictions continue to evolve and impact commerce for small businesses.

Additionally, prior to March 2020, reductions in advertising spend resulted in declines in revenue from new customers as a result of our targeted elimination of inefficient advertising spend, although we still experienced growth in repeat customer revenue.

Segment Profitability

Vistaprint's segment profit increased for the year ended June 30, 2019 driven primarily by a year-over-year reduction to advertising spend of $39.6 million .

Segment profit, which excludes the impacts of restructuring charges, also increased as a result of reductions to operating expenses, partially offset by the gross margin impact of changes in product mix.

Some of the near-term operating expense savings will be temporary, as we recruit additional talent within Vistaprint's data, analytics and technology organizations, and we are not allocating the cost of executives to the Vistaprint business while these positions are filled by Cimpress executives on an interim basis, which resulted in $3.5 million of lower costs as compared to the prior fiscal year.

The benefit to segment profit from the unallocated executive costs is entirely offset by additional costs for third-party consulting fees and recruiting costs.

In the current fiscal year, Vistaprint's segment profit was negatively impacted by currency movements.

For the year ended June 30, 2020 , the increase to Vistaprint's segment EBITDA was primarily due to a reduction to, and improved efficiency of, advertising spend.

Vistaprint also drove improvements to segment EBITDA through new offers, reduced discounting and other operational improvements.

Starting in March segment EBITDA was negatively impacted by lower gross profit driven by decreased demand offset by further reductions to advertising spend as well as other operating cost reduction measures.

Segment EBITDA for fiscal 2020 was also impacted by increases in technology investments to rebuild Vistaprint's technology infrastructure and consulting projects related to Vistaprint's transformation efforts.

Vistaprint's segment EBITDA was also negatively impacted by currency movements during the year.

PrintBrothers

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Reported Revenue

Segment Profit

Segment EBITDA

Segment Revenue

PrintBrothers ' reported revenue growth for the year ended June 30, 2019 was negatively affected by currency impacts of 5% , resulting in constant-currency growth of 13% .

The constant-currency revenue growth was primarily driven by continued growth from our WIRmachenDRUCK business.

During the current period, we continued to experience increased price-focused and advertising competition in certain businesses and product lines that we have been experiencing in recent quarters.

PrintBrothers ' reported revenue decline for the year ended June 30, 2020 was negatively affected by a currency impact of 3% , resulting in constant-currency revenue decline, excluding the impact of acquisitions, of 5% for the year ended June 30, 2020 .

The revenue decline was due to impacts from COVID-19 lock downs and related restrictions, which varied by country.

For each business in the group, revenue improved sequentially in May and June as economic activity started to reemerge in many European countries.

Segment Profitability

PrintBrothers ' segment profit increased during the year ended June 30, 2019 , due to increased gross profit driven by revenue growth discussed above, partially offset by inflation in materials inputs such as paper, increased investments in technology intended to improve the customer value proposition of each business in increasingly competitive markets, pricing reductions in certain products in certain businesses, increased marketing costs due to higher paid search costs, and negative impacts from currency movements.

PrintBrothers ' segment EBITDA decreased during the year ended June 30, 2020 as compared to the prior comparative period, due primarily to the revenue declines as described above.

The decrease was also impacted by increased investments in technology intended to improve the customer value proposition of each business and negative impacts from currency movements, partially offset by operating expense efficiencies earlier in the year as well as the vertical integration of a former supplier in one of our businesses during the first quarter of fiscal year 2020.

The Print Group

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Reported Revenue

Segment Profit

Segment EBITDA

Segment Revenue

The Print Group 's reported revenue growth for the year ended June 30, 2019 was negatively affected by currency impacts of 4% , resulting in an increase in revenue on a constant-currency basis of 6% .

The constant-currency revenue growth was primarily driven by continued growth from our Pixartprinting business.

During the current period, we continued to experience increased price-focused and advertising competition in certain businesses and product lines that we have been experiencing in recent quarters.

The Print Group 's reported revenue decline for the year ended June 30, 2020 was negatively affected by a currency impact of 3% , resulting in a decrease in revenue on a constant-currency basis of 13% .

The constant-currency revenue decrease was driven by a significant decline in order volumes during the fourth quarter, and in particular our Pixartprinting business that was more significantly impacted by tighter government restrictions in Italy and Spain, where the business has meaningful revenue.

For each business in the group, revenue improved sequentially in May and June as economic activity started to resume in many European countries.

Segment Profitability

The Print Group 's segment profit increased during the year ended June 30, 2019 , due to operating expense efficiencies, offset by inflation in materials inputs such as paper, reduced pricing for certain products in certain businesses, combined with increased marketing costs due initiatives to improve customer growth and negative currency impacts.

The Print Group 's segment EBITDA decreased during the year ended June 30, 2020 , as compared to the prior period, primarily driven by the revenue decline described above, as well as investments in technology and unfavorable currency impacts, partially offset by efficiency gains from better leveraging the assets of the group through the mass customization platform (MCP).

Year Ended June 30,

Reported Revenue

Segment Profit (Loss)

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(1) The National Pen segment includes the financial results from its acquisition date of December 30, 2016.

Segment EBITDA

Segment Revenue

National Pen's reported revenue growth for the year ended June 30, 2019 was negatively affected by currency impacts of 2% , resulting in constant-currency revenue growth of 7% .

Following strong performance in the prior fiscal year, we significantly increased our direct mail prospecting in the first two quarters of fiscal 2019, which drove new customer growth.

We reduced mail and telesales prospecting activities in the subsequent two quarters because the payback did not meet our expectations, and that had an impact on National Pen's revenue growth in the current period.

National Pen's revenue was also impacted by operational delays in the supply chain for direct-marketing mailings.

National Pen's reported revenue decrease for the year ended June 30, 2020 was negatively affected by a currency impact of 1% as compared to the prior year, resulting in constant-currency revenue decline of 13% for the year ended June 30, 2020 .

Revenue was negatively impacted starting in March by the pandemic lock downs and related restrictions, as well as actions taken to defer direct mail advertising campaigns until economic activity improves.

Prior to the pandemic, the decline in revenue was also driven by lower direct mail volumes which were expected due to our reductions to our prospecting activity spend targeted at reducing inefficient mail order advertising.

Segment Profitability

The decrease in National Pen's segment profit for the year ended June 30, 2019 , compared to the prior periods, is primarily due to revenue weakness and accelerated investments in e-commerce technology and marketing teams in the year ended June 30, 2019 .

Currency had a slightly negative year-over-year impact on segment profit.

The decrease in National Pen's segment EBITDA for the year ended June 30, 2020 , was due to the top-line revenue decline described above.

A portion of the revenue decline was mitigated by proactive measures to quickly remove variable costs as well as some fixed costs, while protecting key multi-year investments in technology.

In addition, we have realized operational improvements, which included the initial steps of migrating our European mail fulfillment from Mexico to Europe to reduce disruptions that occurred in transit during the prior year period.

Currency had a negative impact on segment EBITDA for the year ended June 30, 2020 .

All Other Businesses

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Reported Revenue (1)

Segment Loss (1)

Segment EBITDA (1)

___________________

(1) Our All Other Businesses segment includes the results of our fiscal 2019 acquisitions, VIDA and BuildASign, from July 2, 2018, and October 1, 2018, respectively, Digipri (a former part of our Japan business) results through the divestiture date of July 1, 2018 and Albumprinter results through the divestiture date of August 31, 2017.

(1) Our All Other Businesses segment includes the results of our fiscal 2019 acquisition, BuildASign, from October 1, 2018, and our VIDA acquisition from July 2, 2018 through the divestiture date of April 10, 2020.

With the exception of BuildASign which is a larger and profitable business, this segment consists of multiple small, rapidly evolving early-stage businesses through which Cimpress is expanding to new markets.

These businesses are subject to high degrees of risk and we expect that each of their business models will rapidly evolve in function of future trials and entrepreneurial pivoting.

Therefore, in all of these early-stage businesses we continue to have operating losses as previously described and as planned.

These early-stage businesses continue to have operating losses as previously described and as planned.

Segment Revenue

The All Other Businesses segment revenue increase was primarily due to the inclusion of the results of BuildASign since the acquisition date of October 1, 2018.

Organic constant-currency revenue, excluding the impacts of the Albumprinter, Digipri, VIDA, and BuildASign businesses, increased by 9% for the year ended June 30, 2019 , driven by growth in the remaining businesses in the segment, particularly in the first half of the year.

Revenue growth was negatively impacted by recent actions we have taken to improve the efficiency and focus of some of these businesses, including the decision to shut down the U.S.

operations of the Printi business during the second quarter of fiscal year 2019, as well as impacts from the conclusion of a legacy partner relationship in our Vistaprint Corporate Solutions business.

The early-stage businesses in this segment delivered mixed revenue results during the current fiscal year.

We are continuing to pivot and evolve these business models as we learn more about the markets they serve, and expect fluctuations in growth.

Organic constant-currency revenue, excluding the year-over-year impact of the BuildASign acquisition during the first quarter of fiscal year 2020 during which there was no comparative revenue in the year-ago period, increased by 4% for the year ended June 30, 2020 .

This was primarily driven by growth throughout the year at BuildASign, even during the pandemic with strength in home decor and pandemic-related signage products.

All Other Businesses revenue was negatively impacted by a decrease in revenue in our Printi business as compared to the prior year period, primarily due to actions we have taken to improve the efficiency and focus of the business, which included foregoing certain revenue channels that we believe did not have a high probability of earning sufficient returns on the capital and focus they consumed.

Segment Profitability

The improvement in the All Other Businesses segment loss for the year ended June 30, 2019 , as compared to the prior period, was primarily due to the addition of BuildASign, which we acquired on October 1, 2018 and contributed $11.5 million of segment profit for the year ended June 30, 2019 .

We also realized currency-related benefits and a decrease in segment losses in our Vistaprint Corporate Solutions, Vistaprint India, Vistaprint Japan, and China businesses.

These improvements in segment loss were partially offset by the inclusion of VIDA operating losses and increased losses in our Printi business.

Printi's investment in capacity and other fixed costs was far too high in fiscal year 2019 relative to the scale of the business and the mid-term outlook.

We do not expect this business to weigh as heavily on our profits and cash flows in fiscal year 2020 as it did in fiscal year 2019.

For the year ended June 30, 2019 , the segment loss was negatively impacted by the divestiture of our Albumprinter business, which contributed $1.7 million of segment profit in the first quarter of fiscal 2018.

The improvement in the All Other Businesses segment EBITDA for the year ended June 30, 2020 , as compared to the prior period, was primarily due to EBITDA growth of BuildASign primarily driven by the revenue growth described above and the timing of the acquisition.

Additionally, we significantly reduced the losses of our Printi business, due to the fiscal 2019 restructuring of our Printi business, which included clarifying its focus and operating model.

Central and Corporate Costs

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These costs also include certain unallocated share-based compensation costs.

Central and corporate costs decreased by $24.6 million during the year ended June 30, 2019 , as compared to the prior year, driven by $25.7 million of lower share-based compensation costs primarily associated with our supplemental PSUs and related supplemental performance cash awards, for which the performance condition is no longer probable of achievement.

Additionally, our share-based compensation is lower due to the changes we made in November 2018 that reduced the number of Cimpress Board members.

This decrease was partially offset by an increase in central technology investments and professional fees, primarily related to our fiscal 2019 acquisitions, as well as certain other strategic projects.

Central and corporate costs increased by $23.1 million during the year ended June 30, 2020 as compared to the prior year, driven by increases to share-based compensation of $13.2 million .

The increase to share-based compensation is driven by the prior year benefit recognized for the reversal of expense associated our supplemental PSUs, that did not recur in the current period.

We also recognized an increase in professional fees of $2.9 million , primarily due to the December 2019 Irish Merger and April 2020 financing activities, an additional $1.2 million of payroll taxes for option exercises, as well as an increase in central technology investments and operating costs driven by our businesses' increased adoption and usage of our central technology capabilities.

Liquidity and Capital Resources

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Net cash used in investing activities

Net cash provided by (used in) financing activities

At June 30, 2019 , we had $35.3 million of cash and cash equivalents and $1,035.6 million of debt, excluding debt issuance costs and debt discounts.

We expect cash and cash equivalents and debt levels to fluctuate over time depending on our working capital needs, our organic investment levels, share repurchases and

acquisition activity.

We increased our debt in October 2018 when we completed the acquisition of BuildASign for $275.1 million , which was funded via proceeds from our senior secured credit facility.

Net cash (used in) provided by financing activities

At June 30, 2020 , we had $45.0 million of cash and cash equivalents and $1,482.2 million of debt, excluding debt issuance costs, and debt premiums and discounts.

Under the terms of our April 28, 2020 credit facility amendment, we are required to use cash balances in excess of $100.0 million , if any, to repay the revolving loans under our senior secured credit facility.

The cash flows during the year ended June 30, 2020 related primarily to the following items:

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Net income of $84.0 million

Adjustments for non-cash items of $209.3 million primarily related to positive adjustments for depreciation and amortization of $173.8 million , share-based compensation costs of $21.7 million and non-cash tax related items of $6.8 million , partially offset by unrealized currency-related gains of $9.7 million

Proceeds of debt of $190.2 million , net of payments and debt issuance costs

The changes in operating assets and liabilities, excluding the impact of restructuring-related payments, were a source of cash during the period, driven by increases in accounts payable and accrued expenses

Adjustments for non-cash items of $215.0 million primarily related to positive adjustments for depreciation and amortization of $167.9 million , goodwill impairment of $100.8 million , share-based compensation costs of $34.9 million and unrealized currency-related losses of $6.9 million , partially offset by non-cash tax related items of $106.9 million

Proceeds of debt and warrants of $426.1 million , net of repayments and debt issuance costs

Proceeds from the settlement of net investment hedges of $29.8 million

The change in operating assets and liabilities were a source of cash during the period, driven by actions taken in response to the pandemic, which included partnering with suppliers and leaseholders to defer payments, as well as receiving timing relief for indirect taxes and employer taxes in certain jurisdictions.

Cash outflows:

Payments for acquisitions of $289.9 million , net of cash acquired

Payments for the purchase, net of proceeds from the sale, of noncontrolling interests of $28.5 million , related to our Exagroup and PrintBrothers businesses (refer to Note 14 in our accompanying consolidated financial statements for additional information)

Capital expenditures of $70.6 million of which the majority related to the purchase of manufacturing and automation equipment for our production facilities, and computer and office equipment

Purchases of our ordinary shares for $627.1 million

Capital expenditures of $50.5 million of which the majority related to the purchase of manufacturing and automation equipment for our production facilities and computer and office equipment

Internal costs for software and website development that we have capitalized of $44.0 million

Payments for capital lease arrangements of $17.1 million

Payments related to realized losses on hedging instruments of $12.0 million

Payments of withholding taxes in connection with share awards of $6.0 million

Payments related to our recent restructuring actions of $6.0 million

Distribution of $3.4 million paid to noncontrolling interest

Payment of withholding taxes in connection with share awards of $41.7 million

Payments for finance lease arrangements of $9.5 million

Payments for acquisitions of $4.3 million , net of cash acquired

Additional Liquidity and Capital Resources Information.

During the year ended June 30, 2020 , we financed our operations and strategic investments through internally generated cash flows from operations and debt financing.

As of June 30, 2019 , a significant portion of our cash and cash equivalents were held by our subsidiaries, and undistributed earnings of our subsidiaries that are considered to be indefinitely reinvested were $32.6 million .

As of June 30, 2020 , a portion of our cash and cash equivalents were held by our subsidiaries, and undistributed earnings of our subsidiaries that are considered to be indefinitely reinvested were $36.6 million .

We do not intend to repatriate these funds as the cash and cash equivalent balances are generally used and available, without legal restrictions, to fund ordinary business operations and investments of the respective subsidiaries.

If there is a change in the future, the repatriation of undistributed earnings from certain subsidiaries, in the form of dividends or otherwise, could have tax consequences that could result in material cash outflows.

Due to the uncertainty created by the COVID-19 pandemic, we took proactive measures to maintain our financial strength and flexibility by raising $300.0 million of capital on May 1, 2020 by issuing second lien notes and warrants.

The net proceeds of this capital raise were used to pay down a portion of the term loans under our senior secured credit facility in order to secure the suspension of our quarterly maintenance covenants related to our leverage and interest coverage ratios until the quarter ending December 31, 2021.

Refer to Note 10 in our accompanying consolidated financial statements for additional details.

In response to the pandemic-related decrease in revenue, we have taken actions to reduce cash costs while protecting key investments we were making prior to the pandemic.

We have historically allocated a material amount of capital to purchases of our ordinary shares and corporate acquisitions.

The April 2020 amendment to our credit facility prohibits us from repurchasing our shares and substantially limits acquisitions for the period in which the financial maintenance covenants associated with our senior secured credit facility are suspended.

We evaluated our liquidity position as of the date of the issuance of our consolidated financial statements and we conclude our financial position, net cash provided by operations combined with our cash and cash equivalents, borrowing availability under our revolving credit facility, and the May 2020 temporary maintenance covenant suspension and capital raise as described in Note 10 will be sufficient to fund our current obligations, capital spending, debt service requirements and working capital requirements over at least the next twelve months.

As of June 30, 2020 , we had aggregate loan commitments from our senior secured credit facility totaling $998.1 million .

The loan commitments consisted of revolving loans of $1,087.3 million and term loans of $505.2 million .

The loan commitments consisted of revolving loan borrowings of $422.4 million and term loans of $148.1 million .

We have other financial obligations that constitute additional indebtedness based on the definitions within the credit facility.

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_________________

(1) The debt covenants of our senior secured credit facility limit our borrowing capacity each quarter, depending on our leverage and other indebtedness, such as notes, capital leases, letters of credit, and any other debt, as well as other factors that are outlined in the credit agreement.

(1) As of June 30, 2020 , our pre-existing financial maintenance covenants are suspended and we are in compliance with the new restrictions in place, with the primary maintenance covenant during the suspension period that we must maintain liquidity above $50.0 million .

Refer to Note 10 in our accompanying consolidated financial statements for further description of the restrictions in place during the covenant suspension period.

(2) Share purchases, dividend payments, and corporate acquisitions are subject to more restrictive covenants, and therefore we may not be able to use the full amount available for borrowing for these purposes.

On January 7, 2019, we executed an amendment to our senior secured credit facility that expanded the total capacity to $1,613.2 million , which included $1,087.3 million of revolving loans and $525.9 million of term loans.

We expect to use our expanded credit facility to fund investments intended to support our long-term growth strategy.

The incremental term loan proceeds, which represented approximately half of the total capacity increase, were used to repay a portion of our outstanding revolving loans.

Refer to Note 10 in our accompanying financial statements for additional details.

Debt Covenants .

Our credit agreement and senior unsecured notes indenture contain financial and other covenants as well as customary representations, warranties and events of default, which are detailed in Note 10 of the accompanying consolidated financial statements.

As of June 30, 2019 , we were in compliance with all financial and other covenants under the credit agreement and senior unsecured notes indenture.

As part of the April 2020 amendment to our senior secured facility, we have suspended our pre-existing maintenance covenants, including the total and senior secured leverage covenants and interest coverage ratio covenant through December 31, 2021.

Refer to Note 10 in our accompanying consolidated financial statements for additional information.

As of June 30, 2020 , we are in compliance with the applicable restrictions under our credit agreement, senior unsecured notes indenture, and second lien notes indenture in place during the covenant suspension period.

Other debt primarily consists of term loans acquired through our various acquisitions or used to fund certain capital investments.

As of June 30, 2020 , we had $11.7 million outstanding for other debt payable through March 2025 .

Our expectations for fiscal year 2020.

We believe that our available cash, cash flows generated from operations, and cash available under our committed debt financing will be sufficient to satisfy our liabilities and planned investments to support our long-term growth strategy.

We endeavor to invest capital that we believe will generate returns that are above, or well above, our weighted average cost of capital.

We consider any use of cash that we expect to require more than twelve months to return our invested capital to be an allocation of capital.

For fiscal 2020, we expect to continue to evaluate opportunities to allocate capital across a spectrum of organic investments, purchases of our ordinary shares, corporate acquisitions and similar investments, and reductions of debt.

We have targeted a capital structure that we believe balances both efficiency and flexibility.

We do not have a specific financial leverage target, but rather will be guided by the availability of attractive opportunities while not putting at risk our ability to comfortably meet our quarterly maintenance covenants on our debt.

Contractual Obligations

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Operating leases, net of subleases (1)

Build-to-suit leases

Purchase commitments

Senior unsecured notes and interest payments

Second lien notes and interest payments

Other debt and interest payments (2)

Capital leases

Finance leases, net of subleases (1)

___________________

(1) Operating and finance lease payments included above include only amounts which are fixed under lease agreements.

Our leases may also incur variable expenses.

Refer to our lease accounting policy in Note 2 in our accompanying consolidated financial statements for additional information.

(2) Other debt and interest payments include the effects of interest rate swaps, whether they are expected to be payments or receipts of cash.

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Accordingly, uncertain tax positions of $6.2 million as of June 30, 2020 have been excluded from the contractual obligations table above.

For further information on uncertain tax positions, see Note 13 to the accompanying consolidated financial statements.

For further information on uncertain tax positions, see Note 13 in our accompanying consolidated financial statements.

Operating Leases.

We rent office space under operating leases expiring on various dates through 2034 .

Future minimum rental payments required under our leases are an aggregate of approximately $99.6 million .

The terms of certain lease agreements require security deposits in the form of bank guarantees and letters of credit in the amount of $2.1 million .

Build-to-Suit Leases.

Represents the cash payments for our leased facilities in Waltham, Massachusetts and Dallas, Texas, USA.

Please refer to Note 2 in the accompanying consolidated financial statements for additional details.

Purchase Commitments .

At June 30, 2020 , we had unrecorded commitments under contract of $109.7 million .

Purchase commitments consisted of inventory purchase commitments of $46.4 million , third-party web services of $8.1 million , production and computer equipment purchases of approximately $3.4 million , commitments for professional and consulting fees of $1.1 million , commitments for advertising campaigns of $0.6 million , and other unrecorded purchase commitments of $12.1 million .

Purchase commitments consisted of third-party web services of $61.7 million , inventory purchase commitments of $21.8 million , commitments for professional and consulting fees of $3.8 million , production and computer equipment purchases of approximately $0.9 million , commitments for advertising campaigns of $1.0 million , and other unrecorded purchase commitments of $20.5 million .

Senior Unsecured Notes and Interest Payments.

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Interest on the notes is payable semi-annually on June 15 and December 15 of each year and has been included in the table above.

Second Lien Notes and Interest Payments.

Our 12.0% senior secured notes due 2025 bear interest at a rate of 12.0% per annum and mature on May 15, 2025.

Interest on the notes is payable semi-annually on May 15 and November 15 of each year and has been included in the table above.

At our option, we may elect to pay interest on up to 50.0% of the then outstanding principal amount of the notes as paid-in-kind and applied to the outstanding principal balance of the notes.

Other Debt and Interest Payments.

At June 30, 2019 , the term loans of $505.2 million outstanding under our credit agreement have repayments due on various dates through June 14, 2023, with the revolving loans outstanding under our $1,087.3 million revolving credit facility due on June 14, 2023.

At June 30, 2020 , the term loans of $148.1 million outstanding under our credit agreement had repayments due on various dates through November 15, 2024, with the revolving loans outstanding under our $422.4 million revolving credit facility due on November 15, 2024.

Interest payable included in this table is based on the interest rate as of June 30, 2020 , and assumes all LIBOR-based revolving loan amounts outstanding will not be paid until maturity, but that the term loan amortization payments will be made according to our defined schedule and all Prime rate based revolving loan amounts will be paid within a year.

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In addition, we have other debt which consists primarily of term loans acquired through our various acquisitions or used to fund certain capital investments, and as of June 30, 2020 we had $11.7 million outstanding for those obligations that have repayments due on various dates through March 2025 .

Capital Leases.

We lease certain machinery and plant equipment under capital lease agreements that expire at various dates through 2022.

The aggregate carrying value of the leased equipment under capital leases included in property, plant and equipment, net in our consolidated balance sheet at June 30, 2019 , is $29.2 million , net of accumulated depreciation of $42.0 million .

Finance Leases.

We lease certain machinery and plant equipment under finance lease agreements that expire at various dates through 2027 .

The aggregate carrying value of the leased equipment under finance leases included in property, plant and equipment, net in our consolidated balance sheet at June 30, 2020 , is $20.8 million , net of accumulated depreciation of $43.5 million .

The present value of lease installments not yet due included in other current liabilities and other liabilities in our consolidated balance sheet at June 30, 2020 amounts to $26.7 million .

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Additional Non-GAAP Financial Measures

Adjusted net operating profit (NOP) and adjusted free cash flow presented below, and constant-currency revenue growth and constant-currency revenue growth excluding acquisitions/divestitures presented in the consolidated results of operations section above, are supplemental measures of our performance that are not required by, or presented in accordance with, GAAP.

Adjusted NOP is defined as GAAP operating income excluding certain items such as acquisition-related amortization and depreciation, expense recognized for earn-out related charges, including the change in fair value of contingent consideration and compensation expense related to cash-based earn-out mechanisms dependent upon continued employment, share-based compensation related to investment consideration, certain impairment expense, restructuring charges, and the gain on purchase or sale of subsidiaries.

The interest expense associated with our Waltham, Massachusetts lease, as well as realized gains (losses) on currency derivative contracts that do not qualify for hedge accounting, are included in Adjusted NOP.

Adjusted NOP is the primary profitability metric by which we measure our consolidated financial performance and is provided to enhance investors' understanding of our current operating results from the underlying and ongoing business for the same reasons it is used by management.

Adjusted EBITDA and adjusted free cash flow presented below, and constant-currency revenue growth and constant-currency revenue growth excluding acquisitions/divestitures presented in the consolidated results of operations section above, are supplemental measures of our performance that are not required by, or presented in accordance with, GAAP.

Adjusted EBITDA is defined as GAAP operating income plus depreciation and amortization (excluding depreciation and amortization related to our Waltham, Massachusetts office lease) plus share-based compensation expense plus proceeds from insurance plus earn-out related charges plus certain impairments plus restructuring related charges plus realized gains or losses on currency derivatives less interest expense related to our Waltham, Massachusetts office lease less gain on purchase or sale of subsidiaries.

We note that with the adoption of ASC 842, the Waltham, Massachusetts office lease has been reclassified from a build-to-suit lease to an operating lease, and therefore the depreciation and interest expense adjustments that were made in comparative periods will no longer be made beginning in the first fiscal quarter of 2020, as any impact from the Waltham lease will be reflected in operating income.

Refer to Note 2 in our accompanying consolidated financial statements for additional details.

Adjusted EBITDA is the primary profitability metric by which we measure our consolidated financial performance and is provided to enhance investors' understanding of our current operating results from the underlying and ongoing business for the same reasons it is used by management.

For example, as we have become more acquisitive over recent years we believe excluding the costs related to the purchase of a business (such as amortization of acquired intangible assets, contingent consideration, or impairment of goodwill) provides further insight into the performance of the underlying acquired business in addition to that provided by our GAAP operating income.

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Additionally, the mix of property, plant and equipment purchases that we choose to finance may change over time.

We believe it is important to view our adjusted free cash flow measure only as a complement to our entire consolidated statement of cash flows.

The table below sets forth operating income (loss) and adjusted net operating profit for the years ended June 30, 2019, 2018 and 2017 :

We believe it is important to view our adjusted free cash flow measure

only as a complement to our entire consolidated statement of cash flows.

The table below sets forth operating income and adjusted EBITDA for the years ended June 30, 2020, 2019 and 2018 :

Year Ended June 30,

GAAP operating income (loss)

GAAP operating income

Exclude expense (benefit) impact of:

Acquisition-related amortization and depreciation

Depreciation and amortization

Waltham, MA lease depreciation adjustment (1)

Proceeds from insurance

Share-based compensation expense (2)

Earn-out related charges

Share-based compensation related to investment consideration

Certain impairments and other adjustments (3)

Restructuring-related charges

Interest expense associated with Waltham, MA lease

Gains on the purchase or sale of subsidiaries (3)

Realized gains (losses) on certain currency derivatives not included in operating income (loss)

Interest expense for Waltham, MA lease (1)

Gain on purchase or sale of subsidiaries

Realized gains on currency derivatives not included in operating income

Adjusted EBITDA

_________________

(1) Includes expense recognized for the change in fair value of contingent consideration and compensation expense related to cash-based earn-out mechanisms dependent upon continued employment.

(2) Includes the impact of certain impairments of goodwill and other long-lived assets as defined by ASC 350 - "Intangibles - Goodwill and Other", as well as reserves recognized for loans as defined by ASC 326 - "Financial Instruments - Credit Losses."

(3) Includes the impact of the gain on the sale of Albumprinter, as well as a bargain purchase gain as defined by ASC 805-30 - "Goodwill or Gain from Bargain Purchase" for an acquisition in which the identifiable assets acquired and liabilities assumed are greater than the consideration transferred, that was recognized in general and administrative expense in our consolidated statement of operations during the year ended June 30, 2018 .

(1) Upon the adoption of the new leasing standard on July 1, 2019, our Waltham, MA lease, which was previously classified as build-to-suit, is now classified as an operating lease under the new standard.

Therefore, the Waltham depreciation and interest expense adjustments that were made in comparative periods are no longer adjusted beginning in the first fiscal quarter of 2020, as any impact from the Waltham lease will be reflected in operating income.

Refer to Note 2 in our accompanying consolidated financial statements for additional details.

(2) The adjustment for share-based compensation expense excludes the portion of share-based compensation expense included in restructuring related charges, if any, to avoid double counting.

(3) Includes the impact of certain impairments of goodwill and other long-lived assets as defined by ASC 350 - "Intangibles - Goodwill and Other", as well losses recognized for fair value adjustments to the disposal group associated with held for sale assets and liabilities as defined by ASC 360 - "Property, Plant, and Equipment" and reserves recognized for loans as defined by ASC 326 - "Financial Instruments - Credit Losses."

The table below sets forth net cash provided by operating activities and adjusted free cash flow for the years ended June 30, 2020, 2019 and 2018 :

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_________________

(1) For the year ended June 30, 2018 includes a portion of the earn-out payment that is presented within net cash provided by operating activities as part of the change in accrued expenses and other liabilities.

(1) Includes a portion of the earn-out payment that is presented within net cash provided by operating activities as part of the change in accrued expenses and other liabilities for the year ended June 30, 2018.

This portion of the earn-out was deemed to be a compensation arrangement since it included an employment-related contingency.

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To apply these principles, we must make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

In some instances, we reasonably could have used different accounting estimates and, in other instances, changes in the accounting estimates are reasonably likely to occur from period to period.

In some instances, we reasonably could have used different accounting estimates and, in other instances, changes in the

accounting estimates are reasonably likely to occur from period to period.

Accordingly, actual results could differ significantly from our estimates.

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We refer to accounting estimates and judgments of this type as critical accounting policies and estimates, which we discuss further below.

This section should be read in

conjunction with Note 2, "Summary of Significant Accounting Policies," of our audited consolidated financial statements included elsewhere in this Report.

This section should be read in conjunction with Note 2, "Summary of Significant Accounting Policies," of our audited consolidated financial statements included elsewhere in this Report.

Revenue Recognition .

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The fair value is determined using a Monte Carlo simulation valuation model.

As the PSUs include both a service and market condition the related expense is recognized using the accelerated expense attribution method over the requisite service period for each separately vesting portion of the award.

As the PSUs include both a service and market condition the related expense is recognized using the

accelerated expense attribution method over the requisite service period for each separately vesting portion of the award.

For PSUs that meet the service vesting condition, the expense recognized over the requisite service period will not be reversed if the market condition is not achieved.

The compensation expense for these awards is estimated at fair value using a Monte Carlo simulation valuation model and compensation costs are recorded only if it is probable that the performance condition will be achieved.

In addition to service vesting and market condition requirements, we have certain PSUs that contain an additional performance condition, based on a multi-year performance target.

In addition to a service vesting and market condition (based on the three year moving average of the Cimpress share price) contained in our standard performance share units, we also issue awards that contain financial performance conditions.

These awards with a discretionary performance condition are subject to mark-to-market accounting throughout the performance vesting period.

We are required to reassess the probability each reporting period.

If we determine the awards are not probable at some point during the performance vesting period, we would reverse any expense recognized to date.

Beginning in the second quarter of fiscal 2018, we concluded that the achievement of the performance condition was probable and recognized $15,397 of expense cumulatively through the first quarter of fiscal 2019.

In the second quarter of fiscal 2019, which is seasonally significant, we concluded that the achievement of the three-year cumulative performance condition was no longer probable, and we reversed the previously recognized expense of $15,397 .

As of June 30, 2019 we continue to consider achievement of the performance condition to not be probable.

If, in a future period, we determine that it is probable that the financial performance condition will be achieved based on our financial performance, we will cumulatively catch up the expense in that period.

Income Taxes .

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We allocate any excess purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed to goodwill.

The assumptions used in the valuations for our acquisitions may differ materially from actual results depending on performance of the acquired businesses and other factors.

While we believe the

assumptions used were appropriate, different assumptions in the valuation of assets acquired and liabilities assumed could have a material impact on the timing and extent of impact on our statements of operations.

The assumptions used in the valuations for our acquisitions may differ materially

from actual results depending on performance of the acquired businesses and other factors.

While we believe the assumptions used were appropriate, different assumptions in the valuation of assets acquired and liabilities assumed could have a material impact on the timing and extent of impact on our statements of operations.

Goodwill is assigned to reporting units as of the date of the related acquisition.

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We are required to compare the fair value of the reporting unit with its carrying value and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value.

During the fourth quarter of fiscal 2019, we identified triggering events associated with our Printi reporting unit, which indicated that it was more likely than not that the fair value of the reporting unit is below the carrying amount.

Printi is the leader in Brazil's online printing industry and has grown quickly since its founding.

That said, investment in capacity and other fixed costs was far too high in fiscal year 2019 relative to the scale of the business and the mid-term outlook.

As a result, we implemented restructuring activities and aligned future operating plans during the fourth quarter of fiscal 2019 that negatively impacted our cash flow forecasts for this business.

We performed our goodwill impairment test which resulted in an impairment charge of the total goodwill of the Printi reporting unit of $7,503 .

During March 2020, all of our businesses experienced varying levels of decline in revenue due to the disruptions associated with the COVID-19 pandemic.

Although we expect the impacts to be temporary, the negative effects of the pandemic on revenue and profitability triggered an assessment of goodwill, as we expected some of our businesses to achieve materially lower financial results than previously expected.

A triggering event existed for all ten reporting units with goodwill, which required us to perform an impairment test in the third quarter of fiscal 2020.

As part of our assessment, we recognized goodwill impairment charges of $100.8 million .

These impairment charges were due primarily to the deterioration of cash flow that we expect in the near-term for each of these businesses as a result of the decline in demand caused by the COVID-19 pandemic lock downs and related restrictions.

In addition to the declines we expect in near-term cash flows, the long-term profit outlook for each of these businesses has declined when compared to previous estimates, contributing to the recognition of these impairment charges

We are required to evaluate the estimated useful lives and recoverability of definite lived long-lived assets (for example, customer relationships, developed technology, property, and equipment) on an ongoing basis when indicators of impairment are present.

For purposes of the recoverability test, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

The test for recoverability compares the undiscounted future cash flows of the long-lived asset group to its carrying value.

The test for recoverability compares the undiscounted future cash flows of the

long-lived asset group to its carrying value.

If the carrying values of the long-lived asset group exceed the undiscounted future cash flows, the assets are considered to be potentially impaired.

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If the aggregate fair values of the individual net assets of the group are less than the carrying values, an impairment charge is recorded equal to the excess of the aggregate carrying value of the group over the aggregate fair value.

The loss is allocated to each long-lived asset within the group based on their relative carrying

values, with no asset reduced below its fair value.

The loss is allocated to each long-lived asset within the group based on their relative carrying values, with no asset reduced below its fair value.

The identification and evaluation of a potential impairment requires judgment and is subject to change if events or circumstances pertaining to our business change.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis