1 unchanged sentence
This Report contains forward-looking statements that involve risks and uncertainties.
−Removed: 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, expectations with respect to our cash, capital allocations, and debt position, legal proceedings, and the sufficiency of our tax reserves.
+Added: The statements contained in this Report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including but not limited to our statements about the anticipated growth and development of our businesses and revenues, the potential effects of the COVID-19 pandemic and the actions we are taking to address the pandemic, our expectations with respect to 99designs, 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.
5 unchanged sentences
loss or unavailability of key personnel or our inability to recruit talented personnel to drive performance of our businesses;
+Added: the failure of businesses we acquire or invest in to perform as expected;
unanticipated changes in our markets, customers, or businesses;
1 unchanged sentence
our failure to manage the growth and complexity of our business and expand our operations;
−Removed: the willingness of purchasers of customized products and services to shop online;
−Removed: our failure to maintain compliance with the covenants in our senior secured revolving credit facility and senior unsecured notes or to pay our debts when due;
+Added: our failure to maintain compliance with the covenants in our debt documents or to pay our debts when due;
competitive pressures;
general economic conditions;
−Removed: and other factors described in our Form 10-K for the fiscal year ended June 30, 2019, the risk factor described in Part II, Item 1A of this report, and the other documents we periodically file with the SEC.
+Added: and other factors described in our Form 10-K for the fiscal year ended June 30, 2020 and the other documents that we periodically file with the SEC.
Executive Overview
3 unchanged sentences
We limit all other central activities to only those which absolutely must be performed centrally.
−Removed: As of March 31, 2020 , we have numerous operating segments under our management reporting structure that are reported in the following five reportable segments:
+Added: As of September 30, 2020, we have numerous operating segments under our management reporting structure that are reported in the following five reportable segments:
Vistaprint, PrintBrothers, The Print Group, National Pen, and All Other Businesses.
Refer to Note 11 in our accompanying consolidated financial statements for additional information relating to our reportable segments and our segment financial measures.
−Removed: Through the end of February 2020, Cimpress’ quarter-to-date revenue and adjusted EBITDA grew over the same quarter-to-date results in the prior year.
−Removed: However, the COVID-19 pandemic and related restrictions are impacting our small business customers around the world, leading to materially reduced demand for our products starting in March 2020.
−Removed: Our decentralized model 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.
−Removed: At the same time, our leaders have shared best practices and approaches to pull on the strength of the collective whole.
−Removed: Central teams have provided support, guidance, and a structure for coordination, and our businesses have focused on execution and innovation.
−Removed: 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 where possible to provide customers and our communities the products they need during this pandemic.
−Removed: All team members who have the ability to do so have been working from home and are doing so productively.
−Removed: 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.
−Removed: Because the ultimate duration and scope of the pandemic is unknown, during March and April we have taken a series of decisive and proactive measures, each of which is described further below:
−Removed: 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;
−Removed: Enacted significant cost-reduction and cash-preservation measures;
−Removed: Maintained operational continuity to the greatest extent feasible while prioritizing the health and safety of our team members;
−Removed: Protected key investments in technology, data infrastructure and customer value improvements.
−Removed: 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.
−Removed: 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.
−Removed: The timing of the initial impact on demand in March differed by business, with those having significant European exposure impacted earliest.
−Removed: In all segments bookings performance improved in the last weeks of April relative to the prior weeks.
−Removed: We believe that is the result of our shift in focus to products and product templates that our customers need in the current environment, but also most recently in some geographies the start, although minimal, of relaxing government restrictions to restart economic activity.
−Removed: We expect the COVID-19 pandemic and related restrictions to have a material negative impact on our results for the quarter ending June 30, 2020.
−Removed: Our expectation is that as restrictions are lifted, we will see continued improvement in revenue trends.
−Removed: In National Pen we expect the revenue recovery curve is likely to lag other segments given the amount of their revenue that is generated through direct mail channels that will recover behind e-commerce channels.
−Removed: Cost Reductions
−Removed: We have reduced variable and semi-variable costs generally in line with the reduction in demand.
−Removed: 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.
−Removed: 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.
−Removed: 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 with restricted share units (RSUs) for some team members.
−Removed: 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.
−Removed: To the greatest extent possible, we have also focused on cost reduction measures that do not themselves necessitate material cash outflows and, as a result, our restructuring charges in the March quarter were not material.
−Removed: We do anticipate that many of these lowered fixed cost 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.
+Added: Our near-term outlook has changed significantly in light of the COVID-19 pandemic and the negative impact it has had, and may continue to have, on our customers and financial results.
+Added: It is difficult to predict how the pandemic will continue to impact our results and what the duration will be.
+Added: The pandemic has affected all of our businesses to varying degrees, and we expect this volatility to be reflected in our financial results as government restrictions are implemented on an ongoing basis that impact business activity in geographies we serve.
+Added: We have seen partially offsetting benefits as a result of our shift in focus to products and product templates that are relevant in the current environment such as face masks.
+Added: Additionally, we have executed on a number of actions in response to the pandemic in order to help mitigate the overall impact to our financial results.
+Added: We have taken these actions to help better position our businesses for future success and give them the ability to remain focused on protecting investments we were making prior to the pandemic.
+Added: These actions include, but are not limited to, raising additional capital and reducing costs.
Financial Summary
1 unchanged sentence
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.
−Removed: A summary of these key financial metrics for the three and nine months ended March 31, 2020 as compared to the three and nine months ended March 31, 2019 follows:
−Removed: Third Quarter Fiscal 2020
−Removed: Revenue decreased by 10% to $598.0 million .
−Removed: Consolidated constant-currency revenue (a non-GAAP financial measure) decreased by 8% and decreased by 9% when excluding acquisitions completed in the last four quarters.
−Removed: Operating income decreased by $117.4 million to an operating loss of $87.7 million .
−Removed: Adjusted EBITDA (a non-GAAP financial measure) decreased by $17.9 million to $70.9 million .
−Removed: Year to Date Fiscal 2020
+Added: A summary of these key financial metrics for the three months ended September 30, 2020 as compared to the three months ended September 30, 2019 follows:
+Added: First Quarter Fiscal 2021
• Revenue decreased by 7% to $586.5 million.
−Removed: Consolidated constant-currency revenue increased by 1% and decreased by 1% when excluding acquisitions completed in the last four quarters.
−Removed: Operating income decreased by $55.0 million to $59.2 million .
−Removed: Adjusted EBITDA increased by $66.6 million to $335.9 million .
+Added: • Revenue decreased by 10% when excluding the impact of currency fluctuations and acquisitions ("organic constant-currency revenue growth", a non-GAAP financial measure)
+Added: • Operating income increased by $10.6 million to $36.0 million.
+Added: • Adjusted EBITDA (a non-GAAP financial measure) increased by $9.0 million to $88.5 million.
• Cash provided by operating activities increased by $42.8 million to $105.7 million.
• Adjusted free cash flow (a non-GAAP financial measure) increased by $46.3 million to $82.5 million.
−Removed: For the third quarter of fiscal 2020, the decrease in reported revenue is primarily due to a significant decline in order volumes during the month of March, driven by the economic disruption associated with the COVID-19 pandemic lock downs and related restrictions.
−Removed: For the first two months of the third quarter, revenue grew on a reported basis.
−Removed: Currency exchange rate fluctuations negatively impacted revenue during the current quarter.
−Removed: For the third quarter of fiscal 2020, we incurred an operating loss, as compared to operating income in the the prior comparative period, due to the recognition of a goodwill impairment charge of $100.8 million , as well as a decline in performance driven by the aforementioned impacts of COVID-19, which resulted in a decline in profitability.
−Removed: These reductions to operating income were partially offset by planned reductions in advertising spend for our Vistaprint and National Pen businesses combined with a decrease in restructuring charges.
−Removed: Additionally, growth in our BuildASign business drove profit improvements, while net investments in our early-stage businesses decreased primarily due to actions we have taken to improve the efficiency and focus of our Printi business compared to the prior year.
−Removed: Adjusted EBITDA decreased as compared to the three months ended March 31, 2019, primarily due to the same reasons as operating income mentioned above, with the exception of the goodwill impairment and restructuring charges, which are excluded from adjusted EBITDA.
−Removed: Adjusted EBITDA 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.
+Added: For the first quarter of fiscal year 2021, our revenue declined year over year as the COVID-19 pandemic continues to negatively impact our results, but the decline was less severe in the first quarter of fiscal year 2021 than in the fourth quarter of fiscal year 2020.
+Added: The launch of new products in response to the pandemic, such as face masks, accounts for 8% of total revenue for the first quarter of fiscal year 2021.
+Added: For the three months ended September 30, 2020, operating income increased by $10.6 million, despite the decline in revenue described above.
+Added: The related decrease to gross profit was more than offset by a material reduction in advertising spend across our businesses in response to reduced demand but also as a result of continued improvement in performance advertising efficiency in Vistaprint.
+Added: We also realized benefits from the continued reduction in discretionary spend, including travel and training costs, as well as the cost savings from the prior-year reorganization of our Vistaprint and central technology teams.
+Added: Additionally, we recognized a reduction to restructuring costs year over year.
+Added: In our All Other Businesses segment, our BuildASign business continued to show strong results, delivering revenue and profit improvement as their home decor and pandemic-related products grew year over year, while net investments in our early-stage businesses decreased.
+Added: Adjusted EBITDA increased as compared to the three months ended September 30, 2019, due to our cost mitigation efforts, despite the revenue and gross profit decline.
+Added: Adjusted EBITDA excludes restructuring charges and share-based compensation expense, and includes the realized gains or losses on our currency derivatives intended to hedge adjusted EBITDA, and the net year-over-year impact of currency on consolidated adjusted EBITDA was negative.
Consolidated Results of Operations
3 unchanged sentences
For additional discussion relating to segment revenue results, refer to the "Reportable Segment Results" section included below.
−Removed: Total revenue and revenue growth by reportable segment for the three and nine months ended March 31, 2020 and 2019 are shown in the following table:
−Removed: Three Months Ended March 31,
−Removed: Impact of Acquisitions/Divestitures:
−Removed: Constant- Currency Revenue Growth
−Removed: (Favorable)/Unfavorable
−Removed: Revenue Growth (1)
−Removed: (Favorable)/Unfavorable
−Removed: Excluding Acquisitions/Divestitures (2)
−Removed: PrintBrothers
−Removed: The Print Group
−Removed: All Other Businesses
−Removed: Inter-segment eliminations
−Removed: Total revenue
−Removed: Nine Months Ended March 31,
−Removed: Impact of Acquisitions/Divestitures:
+Added: Total revenue and revenue growth by reportable segment for the three months ended September 30, 2020 and 2019 are shown in the following table:
+Added: In thousands Three Months Ended September 30, Currency
+Added: Currency Impact of Acquisitions/Divestitures:
Constant- Currency Revenue Growth
−Removed: (Favorable)/Unfavorable
−Removed: Revenue Growth (1)
−Removed: (Favorable)/Unfavorable
−Removed: Excluding Acquisitions/Divestitures (2)
+Added: Change (Favorable)/Unfavorable Revenue Growth (1) (Favorable)/Unfavorable Excluding Acquisitions/Divestitures (2)
+Added: Vistaprint $ 329,291 $ 343,171 (4)% (1)% (5)% —% (5)%
PrintBrothers 100,112 109,290 (8)% (5)% (13)% (2)% (15)%
The Print Group 66,437 72,258 (8)% (4)% (12)% —% (12)%
+Added: National Pen 67,649 70,163 (4)% (1)% (5)% —% (5)%
All Other Businesses (3) 43,478 42,276 3% 3% 6% —% 6%
6 unchanged sentences
(2) Constant-currency revenue growth excluding acquisitions/divestitures, a non-GAAP financial measure, excludes revenue results for businesses in the period in which there is no comparable year-over-year revenue.
−Removed: Revenue from our fiscal year 2019 acquisitions is excluded from fiscal year 2020 revenue growth for quarters with no comparable year-over-year revenue.
−Removed: 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.
−Removed: (3) The All Other Businesses segment includes the revenue of the BuildASign business from its acquisition date of October 1, 2018.
−Removed: Constant-currency revenue growth excluding acquisitions/divestitures excludes the revenue results for BuildASign since their acquisition date.
+Added: (3) The All Other Businesses segment includes revenue from our VIDA business from its acquisition date of July 2, 2018 through its divestiture date of April 10, 2020.
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.
3 unchanged sentences
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.
−Removed: Three Months Ended March 31,
−Removed: Nine Months Ended March 31,
+Added: Three Months Ended September 30,
Cost of revenue $ 298,844 $ 325,665
−Removed: For the three months ended March 31, 2020 , consolidated cost of revenue decreased by $33.1 million , primarily due to demand-dependent cost of goods sold including third-party fulfillment, materials, 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.
−Removed: For the nine months ended March 31, 2020 , consolidated cost of revenue decreased by $27.4 million due to a decrease in cost of revenue in our Vistaprint business of $46.8 million for the nine months ended March 31, 2020 , for the same reasons described above.
−Removed: This was 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 continued growth in our PrintBrothers businesses, primarily due to revenue growth in our WIRmachenDRUCK business.
+Added: % of revenue 51.0 % 51.4 %
+Added: For the three months ended September 30, 2020, consolidated cost of revenue decreased by $26.8 million, primarily due to reduced demand-dependent cost of goods sold including third-party fulfillment, material, and shipping costs which decreased across several of our segments that continued to be impacted by the COVID-19 pandemic.
+Added: The majority of our cost of revenue is variable with revenue which, in addition to fixed cost savings contributed to flat year-over-year gross margins for the first quarter of fiscal year 2021 despite pandemic-driven reductions in order volumes.
+Added: We realized approximately $3.1 million of wage offset benefits from government incentives in locations where demand decreased materially but roles were maintained.
Consolidated Operating Expenses
The following table summarizes our comparative operating expenses for the following periods:
−Removed: Three Months Ended March 31,
−Removed: Nine Months Ended March 31,
+Added: Three Months Ended September 30,
Technology and development expense $ 58,489 $ 63,167
+Added: % of revenue 10.0 % 10.0 %
Marketing and selling expense $ 138,150 $ 160,917
+Added: % of revenue 23.6 % 25.4 %
General and administrative expense $ 41,812 $ 43,623
+Added: % of revenue 7.1 % 6.9 %
Amortization of acquired intangible assets $ 13,305 $ 13,018
+Added: % of revenue 2.3 % 2.1 %
Restructuring expense $ (86) $ 2,190
−Removed: Impairment of goodwill
+Added: % of revenue 0.0 % 0.3 %
Technology and development expense
1 unchanged sentence
Depreciation expense for information technology equipment that directly supports the delivery of our digital marketing services products is included in cost of revenue.
−Removed: During the three and nine months ended March 31, 2020 , technology and development expenses increased by $8.0 million and $20.7 million , respectively, as compared to the prior year periods.
−Removed: This was mainly driven by a
−Removed: $5.8 million and $11.1 million increase of expense, respectively, in our Vistaprint business, primarily related to the ongoing rebuild of its technology infrastructure.
−Removed: In addition, we recognized increased costs 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 March.
−Removed: The increase during the nine months ended March 31, 2020, was also partially due to $3.7 million in the non-recurring reversal of share-based compensation expense for our supplemental PSUs in the comparative period.
+Added: During the three months ended September 30, 2020, technology and development expenses decreased by $4.7 million, as compared to the prior year.
+Added: This was mainly driven by decreased costs in our central technology and Vistaprint teams of $1.8 million and $1.3 million, respectively, driven by our fiscal year 2020 reorganization, as well as a reduction in discretionary spend including travel and training expenses.
Marketing and selling expense
4 unchanged sentences
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.
−Removed: Our marketing and selling expenses decreased by $21.4 million and $79.5 million during the three and nine months ended March 31, 2020 , respectively, as compared to the prior year periods.
−Removed: The decrease from the prior comparative periods is primarily due to the reduction of advertising spend in our Vistaprint business of $17.1 million and $69.5 million , respectively, as we continue to work to eliminate spend that does not meet our return thresholds.
−Removed: Additionally, in response to the decline in order volumes during March, we further reduced our advertising spend by eliminating spend in certain marketing channels, while also tightening our required return thresholds.
−Removed: We also recognized a decrease in marketing costs in our National Pen business of $4.8 million and $17.3 million , respectively, primarily due to a planned reduction in direct mail prospecting activity as compared to last year's elevated levels, combined with lower online advertising spend and cost savings initiatives to reduce costs in service centers.
−Removed: For the nine months ended March 31, 2020, the decrease in marketing and selling spend was partially offset by the addition of the costs of BuildASign in our All Other Businesses segment.
+Added: Our marketing and selling expenses decreased by $22.8 million during the three months ended September 30, 2020, as compared to the prior year.
+Added: The decrease from the prior comparative period is primarily due to the year-over-year reduction in advertising spend in our Vistaprint business of $17.5 million, as a result of the effects of the pandemic on demand, as well as continued efficiency gains from improved usage of data and tooling.
+Added: We also recognized a decrease in marketing costs in our National Pen business of $8.5 million, primarily due to pandemic-related initiatives to lower costs, which included reductions to direct mail prospecting activities and cost savings from initiatives intended 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.
−Removed: For the three and nine months ended March 31, 2020 , general and administrative expenses increased by $7.4 million and $21.5 million , respectively, as compared to the prior period, primarily due to an increase in consulting costs associated with strategic projects in our Vistaprint business and costs incurred centrally related to the cross-border Irish Merger, described in the Explanatory Note within this document.
−Removed: We also recognized higher recruiting costs related to hiring in Vistaprint and incurred a loss of $1.0 million associated with the fair value measurement adjustment for the net assets of our VIDA business that is recognized as held for sale as of March 31, 2020.
−Removed: Refer to Note 2 in our accompanying consolidated financial statements for additional details.
−Removed: Additionally, during the nine months ended March 31, 2020 , we incurred additional costs from our BuildASign business as that business was only included for six months of the comparable period.
−Removed: We also incurred additional share-based compensation expense of $7.9 million , primarily due to the non-recurring reversal of supplemental PSU expense in the comparative period.
+Added: For the three months ended September 30, 2020, general and administrative expenses decreased by $1.8 million, as compared to the prior period, primarily due to lower professional fees of $1.5 million as a result of the non-recurrence of costs related to Cimpress' cross-border merger to Ireland in fiscal year 2020.
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.
−Removed: Amortization of acquired intangible assets decreased by $1.3 million for both the three and nine months ended March 31, 2020 , as compared to the three and nine months ended March 31, 2019 .
−Removed: The reduction during the three and nine months ended March 31, 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.
+Added: Amortization of acquired intangible assets increased by $0.3 million for the three months ended September 30, 2020, as compared to the three months ended September 30, 2019.
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 and facility exit costs.
−Removed: During the three and nine months ended March 31, 2020 , we recognized restructuring expense of $0.9 million and $5.0 million , respectively, primarily related to charges incurred within our Vistaprint business as we continue to evolve our organizational structure.
−Removed: Comparatively, we recognized restructuring expense of $7.9 million and $9.1 million during the three and nine months ended March 31, 2019 , respectively.
−Removed: Impairment of goodwill
−Removed: For the three and nine months ended March 31, 2020 , we recognized goodwill impairment charges of $100.8 million .
−Removed: 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 .
−Removed: These impairment charges were due 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.
−Removed: 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.
−Removed: Refer to Note 6 in our accompanying consolidated financial statements for additional details.
+Added: During the three months ended September 30, 2020 we recognized a restructuring benefit of $0.1 million due to a change in estimates from actions taken in the fourth quarter of fiscal year 2020, while we recognized restructuring expense of $2.2 million in the three months ended September 30, 2019.
Other Consolidated Results
−Removed: Other income (expense), net
−Removed: Other income (expense), net generally consists of gains and losses from currency exchange rate fluctuations on transactions or balances denominated in currencies other than the functional currency of our subsidiaries, as well as the realized and unrealized gains and losses on some of our derivative instruments.
+Added: Other (expense) income, net
+Added: Other (expense) income, net generally consists of gains and losses from currency exchange rate fluctuations on transactions or balances denominated in currencies other than the functional currency of our subsidiaries, as well as the realized and unrealized gains and losses on some of our derivative instruments.
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 execute certain currency derivative contracts that do not qualify for hedge accounting.
−Removed: The following table summarizes the components of other income (expense), net:
−Removed: Three Months Ended March 31,
−Removed: Nine Months Ended March 31,
−Removed: Gains on derivatives not designated as hedging instruments
+Added: The following table summarizes the components of other (expense) income, net:
+Added: Three Months Ended September 30,
+Added: (Losses) gains on derivatives not designated as hedging instruments (1) $ (13,495) $ 19,357
Currency-related gains (losses), net (2) 4,075 (3,412)
−Removed: Total other income (expense), net
−Removed: 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 exposures that we economically hedge.
+Added: Other gains (losses) 666 (271)
+Added: Total other (expense) income, net $ (8,754) $ 15,674
+Added: The decrease in other (expense) income, 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.
2 unchanged sentences
Interest expense, net
−Removed: Interest expense, net primarily consists of interest paid on outstanding debt balances, amortization of debt issuance costs, interest related to finance lease obligations and realized gains (losses) on effective interest rate swap contracts and certain cross-currency swap contracts.
−Removed: As part of interest expense, net, we also recognize changes to the estimated future redemption value of our mandatorily redeemable noncontrolling interests.
−Removed: Interest expense, net increased $0.5 million and $0.7 million , respectively during the three and nine months ended March 31, 2020 , as compared to the prior comparable periods.
−Removed: During the three and nine months ended March 31, 2020 , we recognized lower interest expense of $1.8 million and $5.6 million , respectively, due to the impact of the adoption of ASC 842 in the first fiscal quarter of 2020, which resulted in a change in lease classification for our Waltham, MA build-to-suit lease.
−Removed: Refer to Note 2 for additional details.
−Removed: This was offset by additional interest expense associated with our senior secured credit facility as a result of our higher debt borrowing levels.
−Removed: We expect interest expense to increase in future periods as a result of the financing transactions described in Note 16 to our accompanying consolidated financial statements and from our additional offering of $200.0 million of senior notes in February 2020.
−Removed: Income tax expense (benefit)
−Removed: Three Months Ended March 31,
−Removed: Nine Months Ended March 31,
−Removed: Income tax expense (benefit)
+Added: 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.
+Added: Interest expense, net increased by $15.4 million during the three months ended September 30, 2020, as compared to the prior comparable period.
+Added: This is due to 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.
+Added: Income tax expense
+Added: Three Months Ended September 30,
+Added: Income tax expense $ 6,794 $ 6,115
Effective tax rate (206.9) % 23.6 %
−Removed: We have calculated our year-to-date income tax on ordinary income based on the actual year-to-date effective tax rate rather than the estimated annual tax rate for the nine months ended March 31, 2020.
−Removed: We determined that the annual estimated effective tax rate would not provide a reliable estimate as small changes in the estimated annual income would result in significant changes in the estimated annual tax rate.
−Removed: The decreased tax expense for the three months ended March 31, 2020 was primarily due to a lower actual effective tax rate for the nine months ended March 31, 2020, excluding goodwill impairments with no tax benefit and the deferred tax benefit related to Swiss Tax Reform of $114.1 million discussed below, as compared to the estimated annual effective tax rate for the same prior year period.
−Removed: Without this benefit, tax expense would have increased for the nine months ended March 31, 2020 as compared to the same prior year period, primarily attributable to increased pre-tax income, excluding goodwill impairments with no tax benefit.
−Removed: The decrease in effective tax rate year-over-year was primarily due to a more favorable mix of earnings, offset by tax impacts of changing Cimpress N.V.'s tax residency from the Netherlands to Ireland in February 2019.
+Added: Income tax expense for the three months ended September 30, 2020 increased as compared to the prior year primarily attributable to discrete items.
+Added: Excluding the effect of discrete tax adjustments, our estimated annual effective tax rate is higher for fiscal 2021 as compared to fiscal 2020 primarily due to increased non-deductible interest expense.
Our effective tax rate continues to be negatively impacted by losses in certain jurisdictions where we are unable to recognize a tax benefit in the current period.
−Removed: During the three months ended March 31, 2020, we recognized tax expense of $28.5 million to record a full valuation allowance against our U.S.
−Removed: deferred tax assets.
−Removed: The change in judgment to no longer recognize the deferred tax assets was driven by decreased profits due to impacts of the COVID-19 pandemic and goodwill impairments.
−Removed: Also during the three months ended March 31, 2020, we recognized tax benefits of $15.4 million related to excess tax benefits from share based compensation and $10.9 million for the re-measurement of U.S.
−Removed: tax losses that will be carried back to tax years with higher U.S.
−Removed: federal tax rates under the U.S.
−Removed: Coronavirus Aid, Relief, and Economic Security Act, enacted March 27, 2020.
−Removed: In addition, during the nine months ended March 31, 2019, we recognized "Patent Box" tax benefits of $3.5 million granted to our Pixartprinting business in Italy and tax expense of $5.6 million related to a decrease in deferred tax assets under Notice 2018-68 issued by the United States Internal Revenue Service, which provided guidance regarding amendments to Section 162(m) of the Internal Revenue Code contained in the Tax Cuts and Jobs Act.
−Removed: 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.
−Removed: Swiss Tax Reform is effective as of January 1, 2020 and includes the abolishment of various favorable federal and cantonal tax regimes.
−Removed: Swiss Tax Reform provides transitional relief measures for companies that are losing 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.
−Removed: We recognized a tax
−Removed: benefit of $114.1 million to establish new Swiss deferred tax assets related to transitional relief measures and remeasuring our existing Swiss deferred tax assets and liabilities.
−Removed: 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.
2 unchanged sentences
Reportable Segment Results
−Removed: 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);
+Added: Our segment financial performance is measured based on segment EBITDA, which is defined as operating income plus depreciation and amortization;
plus share-based compensation expense related to investment consideration;
2 unchanged sentences
plus restructuring related charges;
−Removed: less interest expense related to our Waltham, Massachusetts office lease for prior periods presented;
less gain on purchase or sale of subsidiaries.
−Removed: Three Months Ended March 31,
−Removed: Nine Months Ended March 31,
+Added: Three Months Ended September 30,
+Added: 2020 2019 2020 vs.
Reported Revenue $ 329,291 $ 343,171 (4)%
Segment EBITDA 90,157 87,303 3%
+Added: % of revenue 27 % 25 %
Segment Revenue
−Removed: Vistaprint's reported revenue decline for the three and nine months ended March 31, 2020 was negatively impacted by currency of 1% for both the three and nine months ended March 31, 2020 .
−Removed: This resulted in constant-currency revenue decline of 11% and 4% , respectively, for the three and nine months ended March 31, 2020 .
−Removed: The revenue decline was driven by the ongoing changes to advertising spend that are continuing to drive an expected shift to our mix of customers, resulting in declines in revenue from new customers as a result of our targeted elimination of inefficient advertising spend, but growth in repeat customer revenue.
−Removed: Despite year-over-year revenue growth in January and February, the reduced demand in March from the COVID-19 lock downs and related restrictions changed the trend for full-quarter results.
−Removed: We expect this decline in revenue to persist as social distancing measures and other restrictions continue to reduce commerce for small businesses.
+Added: Vistaprint's reported revenue decline for the three months ended September 30, 2020 was positively affected by a currency impact of 1%, resulting in constant-currency revenue decline of 5%.
+Added: The revenue decline was primarily driven by the impact of the pandemic on customer demand, partially offset by the sale of pandemic-related products, such as face masks.
Segment Profitability
−Removed: Vistaprint's segment EBITDA decreased for the three months ended March 31, 2020 , mainly due to the revenue decreases described above, partially offset by a reduction to advertising spend of $17.1 million .
−Removed: As described above, the continued reductions in advertising spend were targeted at eliminating inefficient spend, however during March advertising spend was reduced further in response to the decline in demand from COVID-19 lock downs and related restrictions.
−Removed: For the nine months ended March 31, 2020, the increase to segment EBITDA was due to a reduction to advertising spend of $69.5 million , as well as improvements to gross margin.
−Removed: The improvements to gross margin were influenced by the benefits of new offers and reduced discounting, reduced shipping costs as a percent of revenue, and improved plant efficiencies.
−Removed: Segment EBITDA was also impacted by increases in technology investments to rebuild Vistaprint's technology infrastructure and consulting projects related to Vistaprint's focus on foundational basics.
−Removed: Vistaprint's segment EBITDA was also negatively impacted by currency movements during the quarter.
+Added: For the three months ended September 30, 2020, the increase to Vistaprint's segment EBITDA was primarily due to a reduction to, and improved efficiency of, advertising spend.
+Added: This was combined with the benefits realized from management of variable costs in line with the reduced demand, lower professional and consulting fees as compared to the prior year, and the efficiencies gained through the technology reorganization in the fourth quarter of the prior year.
+Added: This decrease was partially offset by increased hiring for critical roles and increased spend related to customer experience in anticipation of the upcoming holiday season.
+Added: Vistaprint received $2.5 million in government incentives to offset wages in locations where demand decreased materially but roles were maintained.
+Added: Vistaprint's segment EBITDA was positively impacted by currency movements during the quarter.
PrintBrothers
−Removed: Three Months Ended March 31,
−Removed: Nine Months Ended March 31,
+Added: Three Months Ended September 30,
+Added: 2020 2019 2020 vs.
Reported Revenue $ 100,112 $ 109,290 (8)%
Segment EBITDA 9,715 10,777 (10)%
+Added: % of revenue 10 % 10 %
Segment Revenue
−Removed: PrintBrothers ' reported revenue for the three and nine months ended March 31, 2020 was negatively affected by currency impacts of 3% and 4% , respectively, resulting in constant-currency revenue growth, excluding the impact of acquisitions, which was flat for the three months ended March 31, 2020 , and 8% for the nine months ended March 31, 2020 .
−Removed: The suppressed revenue growth during the three months ended March 31, 2020 was due to impacts from COVID-19 lock downs and related restrictions, which varied by country, but in those regions that have enacted more restrictive shutdown measures, the declines in order volume were much more severe.
−Removed: Revenue growth for the nine months ended March 31, 2020 was driven by growth across all businesses within the group through February 2020, combined with revenue due to the integration of a former supplier in one of our businesses during the first quarter of fiscal 2020.
+Added: PrintBrothers' reported revenue decline for the three months ended September 30, 2020 was positively affected by a currency impact of 5%, resulting in constant-currency revenue decline, excluding the impact of acquisitions, of 15%.
+Added: The revenue decline was due to impacts from COVID-19, as the pandemic continued to have a negative effect on demand in the quarter.
Segment Profitability
−Removed: PrintBrothers ' segment EBITDA increased during the three and nine months ended March 31, 2020 as compared to the prior comparative periods, due to increased gross profit and for the same reasons as the revenue growth discussed above, combined with favorable product mix shifts, production and operating efficiencies, and for the nine months ended March 31, 2020, the vertical integration of a former supplier in one of our businesses during the first quarter of fiscal 2020.
−Removed: This growth was partially offset by increased investments in technology intended to improve the customer value proposition of each business and negative impacts from currency movements.
+Added: PrintBrothers' segment EBITDA decreased during the three months ended September 30, 2020 as compared to the prior comparative period, due primarily to the revenue declines as described above.
+Added: A portion of the decline in segment EBITDA, as driven by the revenue decline, was partially offset by discretionary cost controls and benefits received of $0.9 million from government incentive programs.
The Print Group
−Removed: Three Months Ended June 30,
−Removed: Nine Months Ended March 31,
+Added: Three Months Ended September 30,
+Added: 2020 2019 2020 vs.
Reported Revenue $ 66,437 $ 72,258 (8)%
Segment EBITDA 12,183 13,634 (11)%
+Added: % of revenue 18 % 19 %
Segment Revenue
−Removed: The Print Group 's reported revenue decline for the three and nine months ended March 31, 2020 was negatively affected by currency impacts of 3% for both periods, resulting in a decrease in revenue on a constant-currency basis of 10% and 1% , respectively.
−Removed: Revenue growth through February was in line with our growth during the first half of our fiscal year.
−Removed: The constant-currency revenue decrease was primarily driven by a significant decline in March order volumes, and in particular our Pixartprinting business based in Northern Italy that was more significantly impacted by tighter government restrictions in March in response to the COVID-19 pandemic.
+Added: The Print Group's reported revenue decline for the three months ended September 30, 2020 was positively affected by a currency impact of 4%, resulting in a decrease in revenue on a constant-currency basis of 12%.
+Added: The revenue decline was due to impacts from the COVID-19 pandemic, but these trends improved as compared to the fourth quarter of fiscal year 2020, as a result of fewer lockdowns in the geographies that these businesses serve and as these businesses launched new products relevant to the pandemic and leveraged by other Cimpress businesses in Europe, which increased inter-segment sales that are included in segment results but eliminated at the consolidated level.
Segment Profitability
−Removed: The Print Group 's segment EBITDA decreased during the three and nine months ended March 31, 2020 , as compared to the prior periods, primarily driven by the revenue decline described above, as well as investments in technology and unfavorable currency impacts.
−Removed: Three Months Ended March 31,
−Removed: Nine Months Ended March 31,
+Added: The Print Group's segment EBITDA decreased during the three months ended September 30, 2020, as compared to the prior period, primarily driven by the revenue decline described above.
+Added: This was partially offset by discretionary cost controls, benefits from government incentives totaling $0.6 million, and efficiency gains from leveraging our mass customization platform to shift production to lower-cost sources.
+Added: In thousands Three Months Ended September 30,
+Added: 2020 2019 2020 vs.
Reported Revenue $ 67,649 $ 70,163 (4)%
Segment EBITDA (10,671) (9,850) 8%
+Added: % of revenue (16) % (14) %
Segment Revenue
−Removed: National Pen's reported revenue decrease for the three and nine months ended March 31, 2020 was negatively affected by currency impacts of 1% for both periods presented, resulting in constant-currency revenue decline of 13% and 3% for the three and nine months ended March 31, 2020 , respectively.
−Removed: The decrease in revenue was primarily driven by lower direct mail volumes which were expected due to our continued reductions to our prospecting activity spend, as we have made efforts to reduce inefficient mail order and online advertising.
−Removed: Revenue was negatively impacted in March from the pandemic lock downs and related restrictions.
+Added: National Pen's reported revenue decrease for the three months ended September 30, 2020 was positively affected by a currency impact of 1% as compared to the prior year, resulting in constant-currency revenue decline of 5%.
+Added: Revenue decreased due to the impact of the pandemic;
+Added: in particular, the year-over-year decline in National Pen's core products was most evident in its sales to larger businesses due to cancelled trade shows and other large-scale events.
+Added: National Pen's e-commerce and direct mail channels experienced more resiliency on a relative basis as a result of year-over-year gains in advertising spend efficiency.
+Added: This revenue decline was partially offset by sales of pandemic-related products sold directly to customers as well as to other Cimpress businesses.
Segment Profitability
−Removed: The decrease in National Pen's segment EBITDA for the three months ended March 31, 2020 , was due to the top-line revenue decline described above.
−Removed: 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 investments in technology as we continue to work toward our long-term plans.
−Removed: For the nine months ended March 31, 2020 , the increase in segment profitability was due to benefits realized from the reduction in advertising spend, as well as 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.
−Removed: Currency had a negative impact on segment EBITDA for the three and nine months ended March 31, 2020 .
+Added: The decrease in National Pen's segment EBITDA for the three months ended September 30, 2020 was due to the top-line revenue decline described above.
+Added: The impacts of lower revenue on National Pen's fixed cost base negatively impacted profitability this quarter in comparison to the year ago period, partially offset by reduced variable cost, advertising and discretionary spend.
All Other Businesses
−Removed: Three Months Ended March 31,
−Removed: Nine Months Ended March 31,
+Added: Three Months Ended September 30,
+Added: 2020 2019 2020 vs.
Reported Revenue (1) $ 43,478 $ 42,276 3%
Segment EBITDA (1) 8,609 1,717 401%
+Added: % of revenue 20 % 4 %
___________________
−Removed: (1) Our All Other Businesses segment includes the results of our fiscal 2019 acquisition, BuildASign, from October 1, 2018.
−Removed: 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.
+Added: (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.
+Added: This segment consists of BuildASign, which is a larger and profitable business, and two 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.
−Removed: Therefore, in all of these early-stage businesses we continue to have operating losses as previously described and as planned.
+Added: These early-stage businesses continue to have operating losses as previously described and as planned.
Segment Revenue
−Removed: For the three months ended March 31, 2020 , the All Other Businesses segment revenue was negatively impacted by a currency impact of 2% , resulting in an increase in revenue of 5% on a constant currency basis.
−Removed: This was primarily driven by relatively strong performance from BuildASign, whose home decor business showed growth and resiliency even when the pandemic hit the U.S.
−Removed: market in March.
−Removed: 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 nine months ended March 31, 2020 .
−Removed: All Other Businesses revenue was negatively impacted by a decrease in revenue in our Printi business as compared to the prior year periods, 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.
+Added: Constant-currency revenue excluding the impact of acquisitions increased by 6% for the three months ended September 30, 2020.
+Added: This was primarily driven by continued growth at BuildASign, even during the pandemic, with strong performance in home decor and pandemic-related signage products.
+Added: In addition, the business benefited from higher volumes of political signage in comparison to the prior year due to the 2020 U.S.
+Added: presidential election and down-ballot races.
+Added: This was partially offset by pandemic-driven decreases in revenue in our Printi and YSD businesses.
Segment Profitability
−Removed: The improvement in the All Other Businesses segment EBITDA for the three and nine months ended March 31, 2020 , as compared to the prior periods, was primarily due to the work to improve the efficiency and focus of Printi.
−Removed: Additionally, for the three months ended March 31, 2020, BuildASign grew profits driven by the revenue growth described above and for the nine months ended March 31, 2020 , the timing of the acquisition of BuildASign positively impacted segment EBITDA.
+Added: Within the All Other Businesses segment, each business improved its profitability for the three months ended September 30, 2020 as compared to the prior year, with the overall improvement primarily driven by revenue growth and advertising efficiency in BuildASign.
+Added: Printi and YSD reduced losses despite the pandemic-related drop in demand through improved efficiency.
+Added: Our divestiture of loss-making VIDA in the fourth quarter of fiscal year 2020 also contributed to year-over-year profit improvements in the current quarter.
Central and Corporate Costs
3 unchanged sentences
administrative costs of our Cimpress India offices where numerous Cimpress businesses have dedicated business-specific team members;
−Removed: and corporate functions including our Board of Directors, CEO, and the team members necessary for managing corporate activities, such as treasury, tax, capital allocation, financial consolidation, internal audit and legal.
+Added: and corporate functions including our Board of Directors, CEO, and the
+Added: team members necessary for managing corporate activities, such as treasury, tax, capital allocation, financial consolidation, internal audit and legal.
These costs also include certain unallocated share-based compensation costs.
−Removed: Central and corporate costs increased by $6.3 million and $22.5 million during the three and nine months ended March 31, 2020 , respectively, as compared to the prior year, driven by increases to share-based compensation of $3.5 million and $12.9 million , respectively.
−Removed: The increase to share-based compensation is driven by higher costs associated with the portion that is not allocated to our businesses.
−Removed: We also recognized an additional $1.3 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.
−Removed: For the nine months ended March 31, 2020, we recognized an increase in professional fees of $1.8 million , primarily due to our December 2019 Irish Merger.
+Added: Central and corporate costs decreased by $2.6 million during the three months ended September 30, 2020 as compared to the prior year, due to a decrease in technology related expenses of $1.8 million primarily due to the prior-year reorganization of our central technology team, combined with lower professional fees of $1.5 million and a reduction in travel related expenses, partially offset by increases to share-based compensation of $2.9 million.
Liquidity and Capital Resources
Consolidated Statements of Cash Flows Data
−Removed: Nine Months Ended March 31,
+Added: Three Months Ended September 30,
Net cash provided by operating activities $ 105,681 $ 62,905
Net cash used in investing activities (21,084) (29,363)
−Removed: Net cash (used in) provided by financing activities
−Removed: At March 31, 2020 , we had $228.3 million of cash and cash equivalents and $1,677.5 million of debt, excluding debt issuance costs, and debt premiums and discounts.
−Removed: Typically we keep a minimal amount of cash on the balance sheet, but we drew down on our revolver toward the end of March as a result of the uncertainty created by the pandemic resulting in a significant cash balance.
−Removed: We expect cash and cash equivalents to reduce to levels closer to recent historical quarters.
−Removed: Per the terms of our May 1, 2020 credit facility amendment, we will be required to use cash balances in excess of $100.0 million , if any, to repay the revolving loans under our senior secured credit facility.
−Removed: The cash flows during the nine months ended March 31, 2020 related primarily to the following items:
+Added: Net cash used in financing activities (91,979) (33,005)
+Added: At September 30, 2020, we had $40.2 million of cash and cash equivalents and $1,400.8 million of debt, excluding debt issuance costs, and debt premiums and discounts.
+Added: 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.
+Added: The cash flows during the three months ended September 30, 2020 related primarily to the following items:
Cash inflows:
−Removed: Net income of $127.0 million
−Removed: Adjustments for non-cash items of $139.6 million primarily related to positive adjustments for depreciation and amortization of $126.7 million , goodwill impairment of $100.8 million , share-based compensation costs of $22.7 million and unrealized currency-related losses of $5.6 million , partially offset by non-cash tax related items of $110.0 million
−Removed: Proceeds from the issuance of senior notes of $205.6 million , net of debt issuance costs
−Removed: Proceeds of debt of $440.6 million , net of payments
−Removed: Proceeds from the settlement of net investment hedges of $27.7 million
+Added: • Adjustments for non-cash items of $63.4 million primarily related to positive adjustments for depreciation and amortization of $42.3 million, share-based compensation costs of $8.3 million and unrealized currency-related losses of $9.7 million.
+Added: • The changes in operating assets and liabilities were a source of cash during the period, driven by an increase in accounts payable and accrued expenses.
+Added: This was driven by increased spend in operating expenses, cost of goods sold and external marketing costs, as a result of the increase in revenue as compared to the fourth quarter of fiscal year 2020, partially offset by an outflow from the prior deferral of supplier and rent payments negotiated in response to the pandemic.
Cash outflows:
−Removed: Purchases of our ordinary shares for $627.1 million
−Removed: Payment of withholding taxes in connection with share awards of $41.4 million
+Added: • Net loss of $10.1 million
+Added: • Payments of debt of $83.7 million, net of borrowings and inclusive of debt issuance costs
+Added: • Internal and external costs of $14.8 million for software and website development that we have capitalized
• Capital expenditures of $8.4 million of which the majority related to the purchase of manufacturing and automation equipment for our production facilities and computer and office equipment
−Removed: Internal costs for software and website development that we have capitalized of $35.8 million
+Added: • Payment of withholding taxes in connection with share awards of $5.6 million
• Payments for finance lease arrangements of $1.6 million
−Removed: Payments for acquisitions of $4.3 million , net of cash acquired
Additional Liquidity and Capital Resources Information.
−Removed: During the nine months ended March 31, 2020 , we financed our operations and strategic investments through internally generated cash flows from operations and debt financing.
−Removed: As of March 31, 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 $35.0 million .
−Removed: 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.
+Added: During the three months ended September 30, 2020, we financed our operations and strategic investments through internally generated cash flows from operations and debt financing.
+Added: As of September 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 $38.3 million.
+Added: 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
+Added: 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.
−Removed: Due to the uncertainty created by the COVID-19 pandemic, we have taken proactive measures to maintain our financial strength and flexibility by raising $300.0 million of capital on May 1, 2020, which was 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.
−Removed: Refer to Note 16 in our accompanying consolidated financial statements for additional details.
−Removed: In response to the pandemic-related decrease in revenue, we have taken actions to reduce cash costs while protecting key investments that we believe will deliver value to our customers.
We have historically allocated a material amount of capital to purchases of our ordinary shares and corporate acquisitions.
−Removed: The May 2020 amendment to our credit facility eliminates our ability to repurchase our shares and substantially limits acquisitions for the period in which the maintenance covenants associated with our senior secured credit facility are suspended.
−Removed: 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 16, will be sufficient to fund our current obligations, capital spending, debt service requirements and working capital requirements over at least the next twelve months.
−Removed: As of March 31, 2020 , we had aggregate loan commitments from our senior secured credit facility totaling $1,551.4 million .
−Removed: The loan commitments consisted of revolving loans of $1,099.4 million and term loans of $452.0 million .
+Added: The April 2020 amendment to our credit facility prohibits us from repurchasing our shares and limits acquisitions for the period in which the financial maintenance covenants associated with our senior secured credit facility are suspended.
+Added: As of September 30, 2020, we had aggregate loan commitments from our senior secured credit facility totaling $996.3 million.
+Added: The loan commitments consisted of revolving loan borrowings of $343.5 million and term loans of $146.3 million.
We have other financial obligations that constitute additional indebtedness based on the definitions within the credit facility.
−Removed: As of March 31, 2020 , the amount available for borrowing under our senior secured credit facility was as follows:
−Removed: March 31, 2020
+Added: As of September 30, 2020, the amount available for borrowing under our senior secured credit facility was as follows:
+Added: September 30, 2020
Maximum aggregate available for borrowing $ 996,250
2 unchanged sentences
Limitations to borrowing due to debt covenants and other obligations (1) (4,049)
−Removed: Amount available for borrowing as of March 31, 2020 (2) (3)
+Added: Amount available for borrowing as of September 30, 2020 (2) $ 502,434
_________________
−Removed: (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, finance leases, letters of credit, and any other debt, as well as other factors that are outlined in the credit agreement.
+Added: (1) As of September 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.
+Added: Refer to Note 8 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.
−Removed: (3) After giving effect to the amendment described above, the proforma amount available under the senior secured credit facility as of March 31, 2020 is $208.5 million, which considers the reduced size of the credit facility and the portion of the outstanding borrowings that was repaid with the proceeds from the newly issued notes, net of transaction fees.
−Removed: The amount available under the credit facility does not consider the excess cash that was held as of March 31, 2020.
−Removed: As of March 31, 2020, our liquidity when considering the effect of this transaction, which is our cash plus availability under our senior secured credit facility is $436.8 million .
−Removed: Despite reducing the size of the credit facility, on March 31, 2020, after adjusting for these transactions, we believe we would have sufficient liquidity under this transaction and the amended terms to operate for the upcoming 12 months from the date of this report.
Debt Covenants .
−Removed: 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 8 of the accompanying consolidated financial statements.
−Removed: As of March 31, 2020 , we were in compliance with all financial and other covenants under the credit agreement and senior unsecured notes indenture.
+Added: The April 2020 amendment to our senior secured facility suspended our pre-existing financial maintenance covenants until December 31, 2021, including the total and senior secured leverage covenants and interest coverage ratio covenant.
+Added: Refer to Note 8 in our accompanying consolidated financial statements for additional information.
Other debt primarily consists of term loans acquired through our various acquisitions or used to fund certain capital investments.
−Removed: As of March 31, 2020 , we had $13.7 million outstanding for other debt payable through March 2025 .
+Added: As of September 30, 2020, we had $11.0 million outstanding for other debt payable through March 2025.
Contractual Obligations
−Removed: Contractual obligations at March 31, 2020 are as follows:
+Added: Contractual obligations at September 30, 2020 are as follows:
Payments Due by Period
2 unchanged sentences
Senior unsecured notes and interest payments 852,000 42,000 84,000 84,000 642,000
+Added: Second lien notes and interest payments 481,500 37,500 72,000 372,000 —
Other debt and interest payments (2) 623,352 65,196 94,242 463,914 —
Finance leases, net of subleases (1) 22,629 7,063 10,018 4,361 1,187
+Added: Other 1,676 931 745 — —
+Added: Total (3) $ 2,302,958 $ 281,105 $ 375,944 $ 966,503 $ 679,406
___________________
(1) Operating and finance lease payments included above include only amounts which are fixed under lease agreements.
−Removed: Our leases may also incur variable expenses.
−Removed: Refer to our lease accounting policy in Note 2 in our accompanying consolidated financial statements for additional information.
+Added: Our leases may also incur variable expenses, which are not included in these payments.
(2) Other debt and interest payments include the effects of interest rate swaps, whether they are expected to be payments or receipts of cash.
1 unchanged sentence
(3) We may be required to make cash outlays related to our uncertain tax positions.
−Removed: However, due to the uncertainty of the timing of future cash flows associated with our uncertain tax positions, we are unable to make reasonably reliable estimates of the period of cash settlement, if
−Removed: any, with the respective taxing authorities.
−Removed: Accordingly, uncertain tax positions of $6.1 million as of March 31, 2020 have been excluded from the contractual obligations table above.
+Added: However, due to the uncertainty of the timing of future cash flows associated with our uncertain tax positions, we are unable to make reasonably reliable estimates of the period of cash settlement, if any, with the respective taxing authorities.
+Added: Accordingly, uncertain tax positions of $13.3 million as of September 30, 2020 have been excluded from the contractual obligations table above.
For further information on uncertain tax positions, see Note 9 in our accompanying consolidated financial statements.
+Added: Operating Leases.
+Added: We rent office space under operating leases expiring on various dates through 2034.
+Added: 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.
Purchase Commitments .
−Removed: At March 31, 2020 , we had unrecorded commitments under contract of $102.8 million .
−Removed: Purchase commitments consisted of third-party web services of $64.3 million , inventory purchase commitments of $12.2 million , commitments for professional and consulting fees of $4.1 million , production and computer equipment purchases of approximately $1.2 million , commitments for advertising campaigns of $0.7 million , and other unrecorded purchase commitments of $20.4 million .
+Added: At September 30, 2020, we had unrecorded commitments under contract of $193.7 million.
+Added: Purchase commitments consisted of third-party web services of $114.5 million, inventory purchase commitments of $29.3 million, commitments for professional and consulting fees of $19.2 million, production and computer equipment purchases of approximately $3.8 million, and other unrecorded purchase commitments of $26.9 million.
Senior Unsecured Notes and Interest Payments.
1 unchanged sentence
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.
+Added: Second Lien Notes and Interest Payments.
+Added: Our 12.0% senior secured notes due 2025 bear interest at a rate of 12.0% per annum and mature on May 15, 2025.
+Added: 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.
+Added: 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.
−Removed: At March 31, 2020 , the term loans of $452.0 million outstanding under our credit agreement had repayments due on various dates through February 13, 2025, with the revolving loans outstanding under our $1,099.4 million revolving credit facility due on February 13, 2025.
−Removed: Interest payable included in this table is based on the interest rate as of March 31, 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.
+Added: At September 30, 2020, the term loans of $146.3 million outstanding under our credit agreement had repayments due on various dates through November 15, 2024, with the revolving loans outstanding under our $343.5 million revolving credit facility due on November 15, 2024.
+Added: Interest payable included in this table is based on the interest rate as of September 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.
Interest payable includes the estimated impact of our interest rate swap agreements.
−Removed: 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 March 31, 2020 we had $13.7 million outstanding for those obligations that have repayments due on various dates through March 2025 .
+Added: 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 September 30, 2020 we had $11.0 million outstanding for those obligations that have repayments due on various dates through March 2025.
Finance Leases.
We lease certain machinery and plant equipment under finance lease agreements that expire at various dates through 2027.
−Removed: The aggregate carrying value of the leased equipment under finance leases included in property, plant and equipment, net in our consolidated balance sheet at March 31, 2020 , is $22.2 million , net of accumulated depreciation of $41.6 million .
−Removed: The present value of lease installments not yet due included in other current liabilities and other liabilities in our consolidated balance sheet at March 31, 2020 amounts to $27.2 million .
+Added: The aggregate carrying value of the leased equipment under finance leases included in property, plant and equipment, net in our consolidated balance sheet at September 30, 2020, is $19.8 million, net of accumulated depreciation of $41.4 million.
+Added: The present value of lease installments not yet due included in other current liabilities and other liabilities in our consolidated balance sheet at September 30, 2020 amounts to $26.2 million.
Other Obligations .
2 unchanged sentences
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.
−Removed: 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.
−Removed: 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.
−Removed: Refer to Note 2 in our accompanying consolidated financial statements for additional details.
+Added: Adjusted EBITDA is defined as GAAP operating income plus depreciation and amortization 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.
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.
−Removed: As another example, as we do not apply hedge accounting for certain derivative contracts, we
−Removed: believe inclusion of realized gains and losses on these contracts that are intended to be matched against operational currency fluctuations provides further insight into our operating performance in addition to that provided by our GAAP operating income.
+Added: As another example, as we do not apply hedge accounting for certain derivative contracts, we believe inclusion of realized gains and losses on these contracts that are intended to be matched against operational currency fluctuations provides further insight into our operating performance in addition to that provided by our GAAP operating income.
We do not, nor do we suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
6 unchanged sentences
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.
−Removed: The table below sets forth operating income and adjusted EBITDA for the three and nine months ended March 31, 2020 and 2019 :
−Removed: Three Months Ended March 31,
−Removed: Nine Months Ended March 31,
−Removed: GAAP operating (loss) income
+Added: The table below sets forth operating income and adjusted EBITDA for the three months ended September 30, 2020 and 2019:
+Added: In thousands Three Months Ended September 30,
+Added: GAAP operating income $ 35,986 $ 25,379
Exclude expense (benefit) impact of:
Depreciation and amortization 42,290 42,535
−Removed: Waltham, MA lease depreciation adjustment (1)
Share-based compensation expense (1) 8,283 4,750
1 unchanged sentence
Restructuring-related charges (86) 2,190
−Removed: Interest expense for Waltham, MA lease (1)
Realized gains on currency derivatives not included in operating income 1,217 4,838
1 unchanged sentence
_________________
−Removed: (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.
−Removed: 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.
−Removed: Refer to Note 2 in our accompanying consolidated financial statements for additional details.
(1) 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.
−Removed: (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."
−Removed: The table below sets forth net cash provided by operating activities and adjusted free cash flow for the nine months ended March 31, 2020 and 2019 :
−Removed: Nine Months Ended March 31,
+Added: The table below sets forth net cash provided by operating activities and adjusted free cash flow for the three months ended September 30, 2020 and 2019:
+Added: In thousands Three Months Ended September 30,
Net cash provided by operating activities $ 105,681 $ 62,905
Purchases of property, plant and equipment (8,383) (14,193)
−Removed: Purchases of intangible assets not related to acquisitions
Capitalization of software and website development costs (14,804) (12,471)
1 unchanged sentence
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.