CIMPRESS plc 10-Q

Item 1. Financial Statements CIMPRESS PLC CONSOLIDATED BALANCE SHEETS (unaudited in thousands, except share and per share data) September 30, 2022 June 30, 2022 Assets Current assets: Cash and cash equivalents $ 132,100 $ 277,053 Marketable securities 101,726 49,952 Accounts receivable, net of allowances of $6,652 and $6,140, respectively 70,533 63,885 Inventory 153,504 126,728 Prepaid expenses and other current assets 121,428 108,697 Total current assets 579,291 626,315 Property, plant and equipment, net 272,625 286,826 Operating lease assets, net 64,389 80,694 Software and website development costs, net 89,661 90,474 Deferred tax assets 114,020 113,088 Goodwill 748,055 766,600 Intangible assets, net 139,864 154,730 Marketable securities, non-current 22,449 — Other assets 67,693 48,945 Total assets $ 2,098,047 $ 2,167,672 Liabilities, noncontrolling interests and shareholders’ deficit Current liabilities: Accounts payable $ 285,226 $ 313,710 Accrued expenses 266,196 253,841 Deferred revenue 54,229 58,861 Short-term debt 9,900 10,386 Operating lease liabilities, current 23,013 27,706 Other current liabilities 33,061 28,035 Total current liabilities 671,625 692,539 Deferred tax liabilities 48,418 41,142 Long-term debt 1,654,529 1,675,562 Operating lease liabilities, non-current 44,783 57,474 Other liabilities 56,443 64,394 Total liabilities 2,475,798 2,531,111 Commitments and contingencies (Note 12) Redeemable noncontrolling interests 129,909 131,483 Shareholders’ deficit: Preferred shares, nominal value €0.01 per share, 100,000,000 shares authorized; none issued and outstanding — — Ordinary shares, nominal value €0.01 per share, 100,000,000 shares authorized; 44,196,093 and 44,083,569 shares issued, respectively; 26,224,846 and 26,112,322 shares outstanding, respectively 615 615 Treasury shares, at cost, 17,971,247 shares for both periods presented ( 1,363,550 ) ( 1,363,550 ) Additional paid-in capital 509,444 501,003 Retained earnings 385,972 414,138 Accumulated other comprehensive loss ( 40,141 ) ( 47,128 ) Total shareholders' deficit ( 507,660 ) ( 494,922 ) Total liabilities, noncontrolling interests and shareholders’ deficit $ 2,098,047 $ 2,167,672 See accompanying notes. 1 CIMPRESS PLC CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited in thousands, except share and per share data) Three Months Ended September 30, 2022 2021 Revenue $ 703,415 $ 657,599 Cost of revenue (1) 377,735 338,989 Technology and development expense (1) 74,475 67,277 Marketing and selling expense (1) 200,930 174,697 General and administrative expense (1) 54,072 46,548 Amortization of acquired intangible assets 12,350 13,458 Restructuring expense (1) 1,820 ( 309 ) (Loss) income from operations ( 17,967 ) 16,939 Other income, net 27,397 13,170 Interest expense, net ( 24,806 ) ( 25,688 ) (Loss) income before income taxes ( 15,376 ) 4,421 Income tax expense 9,365 9,381 Net loss ( 24,741 ) ( 4,960 ) Add: Net (income) attributable to noncontrolling interests ( 700 ) ( 1,738 ) Net loss attributable to Cimpress plc $ ( 25,441 ) $ ( 6,698 ) Basic and diluted net loss per share attributable to Cimpress plc $ ( 0.97 ) $ ( 0.26 ) Weighted average shares outstanding — basic and diluted 26,178,818 26,072,249 ____________________________________________ (1) Share-based compensation is allocated as follows: Three Months Ended September 30, 2022 2021 Cost of revenue $ 193 $ 116 Technology and development expense 3,041 2,903 Marketing and selling expense 2,459 2,677 General and administrative expense 4,782 5,310 Restructuring expense 156 — See accompanying notes. 2 CIMPRESS PLC CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited in thousands) Three Months Ended September 30, 2022 2021 Net loss $ ( 24,741 ) $ ( 4,960 ) Other comprehensive (loss) income, net of tax: Foreign currency translation losses, net of hedges ( 8,182 ) ( 183 ) Net unrealized gains (losses) on derivative instruments designated and qualifying as cash flow hedges 16,760 ( 1,925 ) Amounts reclassified from accumulated other comprehensive loss to net loss on derivative instruments ( 2,938 ) 5,546 Comprehensive loss ( 19,101 ) ( 1,522 ) Add: Comprehensive loss (income) attributable to noncontrolling interests 647 ( 881 ) Total comprehensive loss attributable to Cimpress plc $ ( 18,454 ) $ ( 2,403 ) See accompanying notes. 3 CIMPRESS PLC CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (unaudited in thousands) Ordinary Shares Deferred Ordinary Shares Treasury Shares Number of Shares Issued Amount Number of Shares Issued Amount Number of Shares Amount Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Deficit Balance at June 30, 2021 44,080 $ 615 25 $ 28 ( 18,045 ) $ ( 1,368,595 ) $ 459,904 $ 530,159 $ ( 71,482 ) $ ( 449,371 ) Restricted share units vested, net of shares withheld for taxes — — — — 54 3,516 ( 6,095 ) — — ( 2,579 ) Share-based compensation expense — — — — — — 11,129 — — 11,129 Net loss attributable to Cimpress plc — — — — — — — ( 6,698 ) — ( 6,698 ) Redeemable noncontrolling interest accretion to redemption value — — — — — — — ( 7,592 ) — ( 7,592 ) Net unrealized gain on derivative instruments designated and qualifying as cash flow hedges — — — — — — — — 3,621 3,621 Foreign currency translation, net of hedges — — — — — — — — 674 674 Balance at September 30, 2021 44,080 $ 615 25 $ 28 ( 17,991 ) $ ( 1,365,079 ) $ 464,938 $ 515,869 $ ( 67,187 ) $ ( 450,816 ) Balance at June 30, 2022 44,084 $ 615 — $ — ( 17,971 ) $ ( 1,363,550 ) $ 501,003 $ 414,138 $ ( 47,128 ) $ ( 494,922 ) Restricted share units vested, net of shares withheld for taxes 112 — — — — — ( 2,212 ) — — ( 2,212 ) Share-based compensation expense — — — — — — 10,653 — — 10,653 Net loss attributable to Cimpress plc — — — — — — — ( 25,441 ) — ( 25,441 ) Redeemable noncontrolling interest accretion to redemption value — — — — — — — ( 2,725 ) — ( 2,725 ) Net unrealized gain on derivative instruments designated and qualifying as cash flow hedges — — — — — — — — 13,822 13,822 Foreign currency translation, net of hedges — — — — — — — — ( 6,835 ) ( 6,835 ) Balance at September 30, 2022 44,196 $ 615 — $ — ( 17,971 ) $ ( 1,363,550 ) $ 509,444 $ 385,972 $ ( 40,141 ) $ ( 507,660 ) See accompanying notes. 4 CIMPRESS PLC CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited in thousands) Three Months Ended September 30, 2022 2021 Operating activities Net loss $ ( 24,741 ) $ ( 4,960 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 40,942 44,432 Share-based compensation expense 10,631 11,006 Deferred taxes ( 1,024 ) ( 1,138 ) Unrealized gain on derivatives not designated as hedging instruments included in net loss ( 14,024 ) ( 16,534 ) Effect of exchange rate changes on monetary assets and liabilities denominated in non-functional currency ( 749 ) 174 Other non-cash items 2,158 ( 471 ) Changes in operating assets and liabilities, net of effects of businesses acquired: Accounts receivable ( 9,460 ) ( 7,149 ) Inventory ( 36,434 ) ( 11,744 ) Prepaid expenses and other assets 3,151 ( 4,832 ) Accounts payable ( 12,013 ) 10,290 Accrued expenses and other liabilities 16,312 17,493 Net cash (used in) provided by operating activities ( 25,251 ) 36,567 Investing activities Purchases of property, plant and equipment ( 11,758 ) ( 8,624 ) Capitalization of software and website development costs ( 15,330 ) ( 15,639 ) Proceeds from the sale of assets 122 1,699 Purchases of marketable securities ( 84,030 ) — Proceeds from maturity of held-to-maturity investments 9,953 10,000 Other investing activities — ( 617 ) Net cash used in investing activities ( 101,043 ) ( 13,181 ) Financing activities Proceeds from borrowings of debt 10,000 — Payments of debt ( 13,256 ) ( 4,111 ) Payments of debt issuance costs ( 23 ) ( 1,137 ) Payments of purchase consideration included in acquisition-date fair value ( 225 ) — Payments of withholding taxes in connection with equity awards ( 2,212 ) ( 2,579 ) Payments of finance lease obligations ( 2,412 ) ( 2,526 ) Distributions to noncontrolling interests ( 3,652 ) — Other financing activities — 2 Net cash used in financing activities ( 11,780 ) ( 10,351 ) Effect of exchange rate changes on cash ( 6,879 ) ( 2,827 ) Net (decrease) increase in cash and cash equivalents ( 144,953 ) 10,208 Cash and cash equivalents at beginning of period 277,053 183,023 Cash and cash equivalents at end of period $ 132,100 $ 193,231 Supplemental disclosures of cash flow information Cash paid during the period for: Interest $ 15,060 $ 14,358 Income taxes 4,257 7,767 Non-cash investing and financing activities Property and equipment acquired under finance leases 2,412 865 Amounts accrued related to property, plant and equipment 9,500 7,441 Amounts accrued related to capitalized software development costs 213 2,357 Amounts accrued related to business acquisitions 8,463 44,852 See accompanying notes. 5 CIMPRESS PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited in thousands, except share and per share data) 1. Description of the Business Cimpress is a strategically focused group of more than a dozen businesses that specialize in mass customization of printing and related products, via which we deliver large volumes of individually small-sized customized orders. Our products include a broad range of marketing materials, business cards, signage, promotional products, logo apparel, packaging, books and magazines, wall decor, photo merchandise, invitations and announcements, and other categories. Mass customization is a core element of the business model of each Cimpress business and is a competitive strategy which seeks to produce goods and services to meet individual customer needs with near mass production efficiency. 2. Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements include the accounts of Cimpress plc, its wholly owned subsidiaries, entities in which we maintain a controlling financial interest, and those entities in which we have a variable interest and are the primary beneficiary. Intercompany balances and transactions have been eliminated. Investments in entities in which we cannot exercise significant influence, and for which the related equity securities do not have a readily determinable fair value, are included in other assets on the consolidated balance sheets; otherwise the investments are recognized by applying equity method accounting. Our equity method investments are included in other assets on the consolidated balance sheets. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We believe our most significant estimates are associated with the ongoing evaluation of the recoverability of our long-lived assets and goodwill, estimated useful lives of assets, share-based compensation, accounting for business combinations, and income taxes and related valuation allowances, among others. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from those estimates. Revision of Prior Period Financial Statements Foreign Currency Gains Associated with Intercompany Loan Hedge During the quarter ended December 31, 2021, we identified an error related to the recognition of foreign currency gains that were included in other income (expense), net within our consolidated statements of operations, associated with a net investment hedge. In May 2021, we designated a €300,000 intercompany loan as a net investment hedge to hedge the risk of changes in the U.S. dollar equivalent value of a portion of our net investment in one of our consolidated subsidiaries that has the Euro as its functional currency. As this hedging instrument was designated as a net investment hedge, all foreign currency gains and losses should be recognized in accumulated other comprehensive loss as part of currency translation adjustment. For the three months ended September 30, 2021, we incorrectly recognized $ 9,027 , respectively, of gains in other income (expense), net. This error overstated other income (expense), net; income (loss) before income taxes; and net income for both periods but did not have an impact on cash provided by operating activities, since it is a non-cash currency item. Included below are the revisions made for each period presented. 6 Consolidated Balance Sheets As of September 30, 2021 Reported Adjustments Revised Accumulated other comprehensive loss $ ( 83,732 ) $ 16,545 $ ( 67,187 ) Retained earnings 532,414 ( 16,545 ) 515,869 Consolidated Statements of Operations Three months ended September 30, 2021 Reported Adjustments Revised Other income (expense), net $ 22,197 $ ( 9,027 ) $ 13,170 Income (loss) before income taxes 13,448 ( 9,027 ) 4,421 Net income (loss) 4,067 ( 9,027 ) ( 4,960 ) Net income (loss) attributable to Cimpress plc 2,329 ( 9,027 ) ( 6,698 ) Net income (loss) per share attributable to Cimpress plc: Basic $ 0.09 $ ( 0.35 ) $ ( 0.26 ) Diluted $ 0.09 $ ( 0.35 ) $ ( 0.26 ) Consolidated Statements of Comprehensive Loss Three months ended September 30, 2021 Reported Adjustments Revised Net income (loss) $ 4,067 $ ( 9,027 ) $ ( 4,960 ) Foreign currency translation losses, net of hedges ( 9,210 ) 9,027 ( 183 ) Consolidated Statements of Shareholders' Deficit Three months ended September 30, 2021 Reported Adjustments Revised Net income (loss) attributable to Cimpress plc $ 2,329 $ ( 9,027 ) $ ( 6,698 ) Foreign currency translation, net of hedges ( 8,353 ) 9,027 674 Consolidated Statements of Cash Flows Three months ended September 30, 2021 Reported Adjustments Revised Net income (loss) $ 4,067 $ ( 9,027 ) $ ( 4,960 ) Effect of exchange rate changes on monetary assets and liabilities denominated in non-functional currency ( 8,853 ) 9,027 174 7 Marketable Securities We hold certain investments that are classified as held-to-maturity (HTM) as we have the intent and ability to hold them to their maturity dates. Our policy is to invest in the following permitted classes of assets: overnight money market funds invested in U.S. Treasury securities and U.S. government agency securities, U.S. Treasury securities, specifically U.S. Treasury bills, notes, and bonds, U.S. government agency securities, bank time deposits, commercial paper, corporate notes and bonds, and medium term notes. We generally invest in securities with a maturity of two years or less. As the investments are classified as held-to-maturity they are recorded at amortized cost and interest income is recorded as it is earned within interest expense, net. We will continue to assess our securities for impairment when the fair value is less than amortized cost to determine if any risk of credit loss exists. As our intent is to hold the securities to maturity, we must assess whether any credit losses related to our investments are recoverable and determine if it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. We did not record an allowance for credit losses and we recognized no impairments for these marketable securities during the three months ended September 30, 2022 and 2021. The following is a summary of the net carrying amount, unrealized gains, unrealized losses, and fair value of held-to-maturity securities by type and contractual maturity as of September 30, 2022 and June 30, 2022. September 30, 2022 Amortized cost Unrealized losses Fair value Due within one year or less: Commercial paper $ 50,608 $ ( 261 ) $ 50,347 Corporate debt securities 51,118 ( 518 ) 50,600 Total due within one year or less $ 101,726 $ ( 779 ) $ 100,947 Due between one and two years: Corporate debt securities $ 13,239 $ ( 271 ) $ 12,968 U.S. government securities 9,210 ( 124 ) 9,086 Total held-to-maturity securities $ 124,175 $ ( 1,174 ) $ 123,001 June 30, 2022 Amortized cost Unrealized losses Fair value Due within one year or less: Corporate debt securities $ 49,952 $ ( 546 ) $ 49,406 Total held-to-maturity securities $ 49,952 $ ( 546 ) $ 49,406 Other Income, Net The following table summarizes the components of other income, net: Three Months Ended September 30, 2022 2021 Gains on derivatives not designated as hedging instruments (1) $ 28,645 $ 13,327 Currency-related (losses) gains, net (2) ( 197 ) 323 Other losses ( 1,051 ) ( 480 ) Total other income, net $ 27,397 $ 13,170 _____________________ (1) Includes realized and unrealized gains and losses on derivative currency forward and option contracts not designated as hedging instruments,as well as the ineffective portion of certain interest rate swap contracts that were de-designated from hedge accounting in the prior period. For contracts not designated as hedging instruments, we realized gains of $ 14,621 and losses of $ 3,672 for the three months ended September 30, 2022 and 2021, respectively. Refer to Note 4 for additional details relating to our derivative contracts. (2) Currency-related (losses) gains, net primarily relates to significant non-functional currency intercompany financing relationships that we may change at times and are subject to currency exchange rate volatility. In addition, we have a cross-currency swap designated as a cash flow hedge which hedges the remeasurement of an intercompany loan. Refer to Note 4 for additional details relating to this cash flow hedge. 8 Net Loss Per Share Attributable to Cimpress plc Basic net loss per share attributable to Cimpress plc is computed by dividing net loss attributable to Cimpress plc by the weighted-average number of ordinary shares outstanding for the respective period. Diluted net loss per share attributable to Cimpress plc gives effect to all potentially dilutive securities, including share options, restricted share units (“RSUs”), warrants, and performance share units ("PSUs"), if the effect of the securities is dilutive using the treasury stock method. Awards with performance or market conditions are included using the treasury stock method only if the conditions would have been met as of the end of the reporting period and their effect is dilutive. The following table sets forth the reconciliation of the weighted-average number of ordinary shares: Three Months Ended September 30, 2022 2021 Weighted average shares outstanding, basic and diluted 26,178,818 26,072,249 Weighted average anti-dilutive shares excluded from diluted net loss per share attributable to Cimpress plc (1)(2) 2,688,813 530,011 ___________________ (1) In the periods in which a net loss is recognized, the impact of share options, RSUs and warrants is not included as they are anti-dilutive. (2) On May 1, 2020, we entered into a financing arrangement with Apollo Global Management, Inc., which included 7-year warrants with a strike price of $ 60 that have a potentially dilutive impact on our weighted average shares outstanding. For the three months ended September 30, 2022 and 2021, the weighted average anti-dilutive effect of the warrants were 1,055,377 and 409,561 shares, respectively . Recently Issued or Adopted Accounting Pronouncements Adopted Accounting Standards In May 2021, the FASB issued Accounting Standards Update No. 2021-04 "Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)" (ASU 2021-04), which provides authoritative guidance for the accounting treatment of contracts in an entity's own equity when calculating earnings per share. We adopted the standard on July 1, 2022. We recognize freestanding equity-classified warrants on our consolidated balance sheet and as the standard is applied prospectively, there was no impact on our consolidated financial statements in the current period. Issued Accounting Standards to be Adopted In September 2022, the FASB issued Accounting Standards Update No. 2022-04 "Liabilities - Supplier Finance Programs (Subtopic 405-50)" (ASU 2022-04), which provides authoritative guidance for expanded disclosure requirements for supply chain finance programs. The standard is effective for us on July 1, 2023, and early adoption is permitted. Cimpress businesses have an active supply chain finance program which will require additional disclosure after adoption of this standard. 3. Fair Value Measurements We use a three-level valuation hierarchy for measuring fair value and include detailed financial statement disclosures about fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: • Level 1: Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. • Level 2: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. • Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. 9 A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following tables summarize our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy: September 30, 2022 Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Interest rate swap contracts $ 28,209 $ — $ 28,209 $ — Cross-currency swap contracts 3,448 — 3,448 — Currency forward contracts 26,995 — 26,995 — Currency option contracts 19,173 — 19,173 — Total assets recorded at fair value $ 77,825 $ — $ 77,825 $ — Liabilities Currency forward contracts $ ( 1,409 ) $ — $ ( 1,409 ) $ — Total liabilities recorded at fair value $ ( 1,409 ) $ — $ ( 1,409 ) $ — June 30, 2022 Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Interest rate swap contracts $ 14,336 $ — $ 14,336 $ — Currency forward contracts 20,638 — 20,638 — Currency option contracts 10,611 — 10,611 — Total assets recorded at fair value $ 45,585 $ — $ 45,585 $ — Liabilities Cross-currency swap contracts $ ( 446 ) $ — $ ( 446 ) $ — Currency forward contracts ( 505 ) — ( 505 ) — Currency option contracts ( 9 ) — ( 9 ) — Total liabilities recorded at fair value $ ( 960 ) $ — $ ( 960 ) $ — During the three months ended September 30, 2022 and year ended June 30, 2022, there were no significant transfers in or out of Level 1, Level 2 and Level 3 classifications. The valuations of the derivatives intended to mitigate our interest rate and currency risk are determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each instrument. This analysis utilizes observable market-based inputs, including interest rate curves, interest rate volatility, or spot and forward exchange rates, and reflects the contractual terms of these instruments, including the period to maturity. We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparties' nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements. Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to appropriately reflect both our own nonperformance risk and the respective counterparties' nonperformance risk in the fair value measurement. However, as of September 30, 2022, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall 10 valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 in the fair value hierarchy. As of September 30, 2022 and June 30, 2022, the carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable and other current liabilities approximated their estimated fair values. As of September 30, 2022 and June 30, 2022, the carrying value of our debt, excluding debt issuance costs and debt premiums and discounts, was $ 1,682,977 and $ 1,705,365 , respectively, and the fair value was $ 1,511,108 and $ 1,600,627 , respectively. Our debt at September 30, 2022 includes variable-rate debt instruments indexed to LIBOR that resets periodically, as well as fixed-rate debt instruments. The estimated fair value of our debt was determined using available market information based on recent trades or activity of debt instruments with substantially similar risks, terms and maturities, which fall within Level 2 under the fair value hierarchy. As of September 30, 2022 and June 30, 2022 our held-to-maturity marketable securities were held at an amortized cost of $ 124,175 and $ 49,952 , respectively, while the fair value was $ 123,001 and $ 49,406 , respectively. The securities were valued using quoted prices for identical assets in active markets, which fall into Level 1 under the fair value hierarchy. The estimated fair value of assets and liabilities disclosed above may not be representative of actual values that could have been or will be realized in the future. 4. Derivative Financial Instruments We use derivative financial instruments, such as interest rate swap contracts, cross-currency swap contracts, and currency forward and option contracts, to manage interest rate and foreign currency exposures. Derivatives are recorded in the consolidated balance sheets at fair value. If a derivative is designated as a cash flow hedge or net investment hedge, then the change in the fair value of the derivative is recorded in accumulated other comprehensive loss and subsequently reclassified into earnings in the period the hedged forecasted transaction affects earnings. We have designated one intercompany loan as a net investment hedge, and any unrealized currency gains and losses on the loan are recorded in accumulated other comprehensive loss. Additionally, any ineffectiveness associated with an effective and designated hedge is recognized within accumulated other comprehensive loss. The change in the fair value of derivatives not designated as hedges is recognized directly in earnings as a component of other income, net. Hedges of Interest Rate Risk We enter into interest rate swap contracts to manage variability in the amount of our known or expected cash payments related to a portion of our debt. Our objective in using interest rate swaps is to add stability to interest expense and to manage our exposure to interest rate movements. We designate our interest rate swaps as cash flow hedges. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the contract agreements without exchange of the underlying notional amount. Realized gains or losses from interest rate swaps are recorded in earnings as a component of interest expense, net. Amounts reported in accumulated other comprehensive loss related to interest rate swap contracts will be reclassified to interest expense, net as interest payments are accrued or made on our variable-rate debt. As of September 30, 2022, we estimate that $ 6,490 will be reclassified from accumulated other comprehensive loss to interest expense, net during the twelve months ending September 30, 2023. As of September 30, 2022, we had fourteen effective outstanding interest rate swap contracts indexed to USD LIBOR. These hedges have varying start and maturity dates through April 2028. Interest rate swap contracts outstanding: Notional Amounts Contracts accruing interest as of September 30, 2022 $ 400,000 Contracts with a future start date 430,000 Total $ 830,000 11 Hedges of Currency Risk Cross-Currency Swap Contracts From time to time, we execute cross-currency swap contracts designated as cash flow hedges or net investment hedges. Cross-currency swaps involve an initial receipt of the notional amount in the hedge currency in exchange for our reporting currency based on a contracted exchange rate. Subsequently, we receive fixed rate payments in our reporting currency in exchange for fixed rate payments in the hedged currency over the life of the contract. At maturity, the final exchange involves the receipt of our reporting currency in exchange for the notional amount in the hedged currency. Cross-currency swap contracts designated as cash flow hedges are executed to mitigate our currency exposure to the interest receipts as well as the principal remeasurement and repayment associated with certain intercompany loans denominated in a currency other than our reporting currency, the U.S. dollar. As of September 30, 2022, we had one outstanding cross-currency swap contract designated as a cash flow hedge with a total notional amount of $ 58,478 , maturing during June 2024. We entered into the cross-currency swap contract to hedge the risk of changes in one Euro-denominated intercompany loan entered into with one of our consolidated subsidiaries that has the Euro as its functional currency. Amounts reported in accumulated other comprehensive loss will be reclassified to other income, net as interest payments are accrued or paid and upon remeasuring the intercompany loan. As of September 30, 2022, we estimate that $ 2,132 of income will be reclassified from accumulated other comprehensive loss to interest expense, net during the twelve months ending September 30, 2023. Other Currency Hedges We execute currency forward and option contracts in order to mitigate our exposure to fluctuations in various currencies against our reporting currency, the U.S. dollar. These contracts or intercompany loans may be designated as hedges to mitigate the risk of changes in the U.S. dollar equivalent value of a portion of our net investment in consolidated subsidiaries that have the Euro as their functional currency. Amounts reported in accumulated other comprehensive loss are recognized as a component of our cumulative translation adjustment. In April 2022 we early terminated all of our currency forward contracts designated as net investment hedges, and as of September 30, 2022 we had no currency forward contracts designated as net investment hedges. We have one intercompany loan designated as a net investment hedge with a total notional amount of $ 364,524 that matures in May 2028. We have elected to not apply hedge accounting for all other currency forward and option contracts. During the three months ended September 30, 2022 and 2021, we experienced volatility within other income, net, in our consolidated statements of operations from unrealized gains and losses on the mark-to-market of outstanding currency forward and option contracts. We expect this volatility to continue in future periods for contracts for which we do not apply hedge accounting. Additionally, since our hedging objectives may be targeted at non-GAAP financial metrics that exclude non-cash items such as depreciation and amortization, we may experience increased, not decreased, volatility in our GAAP results as a result of our currency hedging program. As of September 30, 2022, we had the following outstanding currency derivative contracts that were not designated for hedge accounting and were used to hedge fluctuations in the U.S. dollar value of forecasted transactions or balances denominated in Australian Dollar, British Pound, Canadian Dollar, Danish Krone, Euro, Indian Rupee, Japanese Yen, Mexican Peso, New Zealand Dollar, Norwegian Krone, Philippine Peso, Swiss Franc and Swedish Krona: Notional Amount Effective Date Maturity Date Number of Instruments Index $ 675,605 December 2020 through September 2022 Various dates through September 2024 559 Various 12 Financial Instrument Presentation The table below presents the fair value of our derivative financial instruments as well as their classification on the balance sheet as of September 30, 2022 and June 30, 2022. Our derivative asset and liability balances fluctuate with interest rate and currency exchange rate volatility. September 30, 2022 Asset Derivatives Liability Derivatives Balance Sheet line item Gross amounts of recognized assets Gross amount offset in Consolidated Balance Sheet Net amount Balance Sheet line item Gross amounts of recognized liabilities Gross amount offset in Consolidated Balance Sheet Net amount Derivatives designated as hedging instruments Derivatives in cash flow hedging relationships Interest rate swaps Other assets $ 28,209 $ — $ 28,209 Other current liabilities / other liabilities $ — $ — $ — Cross-currency swaps Other assets 3,448 — 3,448 Other liabilities — — — Total derivatives designated as hedging instruments $ 31,657 $ — $ 31,657 $ — $ — $ — Derivatives not designated as hedging instruments Currency forward contracts Other current assets / other assets $ 35,378 $ ( 8,383 ) $ 26,995 Other current liabilities / other liabilities $ ( 1,435 ) $ 26 $ ( 1,409 ) Currency option contracts Other current assets / other assets 19,173 — 19,173 Other liabilities — — — Total derivatives not designated as hedging instruments $ 54,551 $ ( 8,383 ) $ 46,168 $ ( 1,435 ) $ 26 $ ( 1,409 ) 13 June 30, 2022 Asset Derivatives Liability Derivatives Balance Sheet line item Gross amounts of recognized assets Gross amount offset in Consolidated Balance Sheet Net amount Balance Sheet line item Gross amounts of recognized liabilities Gross amount offset in Consolidated Balance Sheet Net amount Derivatives designated as hedging instruments Derivatives in cash flow hedging relationships Interest rate swaps Other current assets / other assets $ 14,336 $ — $ 14,336 Other current liabilities / other liabilities $ — $ — $ — Cross-currency swaps Other assets — — — Other liabilities ( 446 ) — $ ( 446 ) Total derivatives designated as hedging instruments $ 14,336 $ — $ 14,336 $ ( 446 ) $ — $ ( 446 ) Derivatives not designated as hedging instruments Currency forward contracts Other current assets / other assets $ 24,440 $ ( 3,802 ) $ 20,638 Other current liabilities / other liabilities $ ( 505 ) $ — $ ( 505 ) Currency option contracts Other current assets / other assets 10,612 ( 1 ) 10,611 Other current liabilities / other liabilities ( 9 ) — ( 9 ) Total derivatives not designated as hedging instruments $ 35,052 $ ( 3,803 ) $ 31,249 $ ( 514 ) $ — $ ( 514 ) 14 The following table presents the effect of our derivative financial instruments designated as hedging instruments and their classification within comprehensive loss for the three months ended September 30, 2022 and 2021: Three Months Ended September 30, 2022 2021 Derivatives in cash flow hedging relationships Interest rate swaps $ 12,954 $ 519 Cross-currency swaps 3,806 ( 2,444 ) Derivatives in net investment hedging relationships Intercompany loan 12,951 9,027 Currency forward contracts — 3,492 Total $ 29,711 $ 10,594 The following table presents reclassifications out of accumulated other comprehensive loss for the three months ended September 30, 2022 and 2021: Amount of Net Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income Affected line item in the Statement of Operations Three Months Ended September 30, 2022 2021 Derivatives in cash flow hedging relationships Interest rate swaps $ 397 $ 2,497 Interest expense, net Cross-currency swaps ( 3,742 ) 3,987 Other income, net Total before income tax ( 3,345 ) 6,484 (Loss) income before income taxes Income tax 407 ( 938 ) Income tax expense Total $ ( 2,938 ) $ 5,546 The following table presents the adjustment to fair value recorded within the consolidated statements of operations for the three months ended September 30, 2022 and 2021 for derivative instruments for which we did not elect hedge accounting and de-designated derivative financial instruments that did not qualify as hedging instruments. Affected line item in the Statement of Operations Three Months Ended September 30, 2022 2021 Currency contracts $ 28,645 $ 12,863 Other income, net Interest rate swaps — 464 Other income, net Total $ 28,645 $ 13,327 15 5. Accumulated Other Comprehensive Loss The following table presents a roll forward of amounts recognized in accumulated other comprehensive loss by component, net of tax of $ 5,506 for the three months ended September 30, 2022 : Gains on cash flow hedges (1) Losses on pension benefit obligation Translation adjustments, net of hedges (2) Total Balance as of June 30, 2022 $ 5,179 $ ( 86 ) $ ( 52,221 ) $ ( 47,128 ) Other comprehensive income (loss) before reclassifications 16,760 — ( 6,835 ) 9,925 Amounts reclassified from accumulated other comprehensive loss to net loss ( 2,938 ) — — ( 2,938 ) Net current period other comprehensive income (loss) 13,822 — ( 6,835 ) 6,987 Balance as of September 30, 2022 $ 19,001 $ ( 86 ) $ ( 59,056 ) $ ( 40,141 ) ________________________ (1) Gains on cash flow hedges include our interest rate swap and cross-currency swap contracts designated in cash flow hedging relationships. (2) As of September 30, 2022 and June 30, 2022, the translation adjustment is inclusive of both the unrealized and realized effects of our net investment hedges. Gains on currency forward and swap contracts, net of tax, of $ 15,079 have been included in accumulated other comprehensive loss as of September 30, 2022 and June 30, 2022. Intercompany loan hedge gains of $ 76,073 and $ 56,743 , net of tax, have been included in accumulated other comprehensive loss as of September 30, 2022 and June 30, 2022, respectively. 6. Goodwill The carrying amount of goodwill by reportable segment as of September 30, 2022 and June 30, 2022 was as follows: Vista PrintBrothers The Print Group All Other Businesses Total Balance as of June 30, 2022 $ 291,498 $ 130,828 $ 143,969 $ 200,305 $ 766,600 Adjustments — — — 225 225 Effect of currency translation adjustments (1) ( 2,836 ) ( 7,430 ) ( 8,504 ) — ( 18,770 ) Balance as of September 30, 2022 $ 288,662 $ 123,398 $ 135,465 $ 200,530 $ 748,055 ________________________ (1) Related to goodwill held by subsidiaries whose functional currency is not the U.S. dollar. 16 7. Other Balance Sheet Components Accrued expenses included the following: September 30, 2022 June 30, 2022 Compensation costs $ 69,156 $ 78,521 Income and indirect taxes 45,696 41,886 Advertising costs 26,534 25,925 Shipping costs 12,200 10,228 Third party manufacturing and digital content costs 16,290 15,790 Variable compensation incentives (1) 7,978 — Sales returns 6,793 6,286 Purchases of property, plant and equipment 1,445 642 Professional fees 3,712 2,394 Interest payable (2) 13,076 2,477 Other 63,316 69,692 Total accrued expenses $ 266,196 $ 253,841 ______________________ (1) Includes cash-based employee bonus incentives, which are variable based on the performance of individual businesses and vest over four years. (2) The increase in interest payable as of September 30, 2022, is due to the interest on our 2026 Notes being payable semi-annually on June 15 and December 15 of each year. Refer to Note 8 for further detail. Other current liabilities included the following: September 30, 2022 June 30, 2022 Current portion of finance lease obligations $ 6,452 $ 6,684 Short-term derivative liabilities (1) 9,713 4,299 Other 16,896 17,052 Total other current liabilities $ 33,061 $ 28,035 ________________________ (1) The increase in short-term derivative liabilities is due to volatility in interest and foreign currency rates. Refer to Note 4 for additional details. Other liabilities included the following: September 30, 2022 June 30, 2022 Long-term finance lease obligations $ 14,669 $ 14,699 Long-term derivative liabilities 104 463 Long-term compensation incentives (1) 14,583 19,934 Other 27,087 29,298 Total other liabilities $ 56,443 $ 64,394 ________________________ (1) Includes cash-based employee bonus incentives, which are variable based on the performance of each individual business and vest over four years. 17 8. Debt September 30, 2022 June 30, 2022 7.0% Senior Notes due 2026 $ 600,000 $ 600,000 Senior secured credit facility 1,076,279 1,097,302 Other 6,698 8,063 Debt issuance costs and debt premiums (discounts) ( 18,548 ) ( 19,417 ) Total debt outstanding, net 1,664,429 1,685,948 Less: short-term debt (1) 9,900 10,386 Long-term debt $ 1,654,529 $ 1,675,562 _____________________ (1) Balances as of September 30, 2022 and June 30, 2022 are inclusive of short-term debt issuance costs, debt premiums and discounts of $ 3,498 for both periods presented. Our various debt arrangements described below contain customary representations, warranties and events of default. As of September 30, 2022, we were in compliance with all covenants in our debt contracts, including those under our amended and restated senior secured credit agreement ("Restated Credit Agreement") and the indenture governing our 2026 Notes (as defined below). Senior Secured Credit Facility On May 17, 2021, we entered into a Restated Credit Agreement consisting of the following: • A senior secured Term Loan B with a maturity date of May 17, 2028 (the “Term Loan B”), consisting of: ◦ a $ 795,000 tranche that bears interest at LIBOR (with a LIBOR floor of 0.50 %) plus 3.50 %, and ◦ a € 300,000 tranche that bears interest at EURIBOR (with a EURIBOR floor of 0 %) plus 3.50 %; and • A $ 250,000 senior secured revolving credit facility with a maturity date of May 17, 2026 (the “Revolving Credit Facility”). Borrowings under the Revolving Credit Facility bear interest at LIBOR (with a LIBOR floor of 0 %) plus 2.50 % to 3.00 % depending on the Company’s First Lien Leverage Ratio, a net leverage calculation, as defined in the Restated Credit Agreement. The Restated Credit Agreement contains covenants that restrict or limit certain activities and transactions by Cimpress and our subsidiaries, including, but not limited to, the incurrence of additional indebtedness and liens; certain fundamental organizational changes; asset sales; certain intercompany activities; and certain investments and restricted payments, including purchases of Cimpress plc’s ordinary shares and payment of dividends. In addition, if any loans made under the Revolving Credit Facility are outstanding on the last day of any fiscal quarter, then we are subject to a financial maintenance covenant that the First Lien Leverage Ratio calculated as of the last day of such quarter does not exceed 3.25 to 1.00 . As of September 30, 2022, we have borrowings under the Restated Credit Agreement of $ 1,076,279 consisting of the Term Loan B, which amortizes over the loan period, with a final maturity date of May 17, 2028. We have no outstanding borrowings under our Revolving Credit Facility as of September 30, 2022. As of September 30, 2022, the weighted-average interest rate on outstanding borrowings under the Restated Credit Agreement was 5.80 %, inclusive of interest rate swap rates. We are also required to pay a commitment fee for our Revolving Credit Facility on unused balances of 0.35 % to 0.45 % depending on our First Lien Leverage Ratio. We have pledged the assets and/or share capital of a number of our subsidiaries as collateral for our debt as of September 30, 2022. Senior Unsecured Notes We have issued $ 600,000 in aggregate principal of 7.0% Senior Notes due 2026 (the "2026 Notes"), which are unsecured. We can redeem some or all of the 2026 Notes at the redemption prices specified in the indenture that governs the 2026 Notes, plus accrued and unpaid interest to, but not including, the redemption date. As of September 30, 2022, we have not redeemed any of the 2026 Notes. 18 Other Debt Other debt consists primarily of term loans acquired through our various acquisitions or used to fund certain capital investments. As of September 30, 2022 and June 30, 2022, we had $ 6,698 and $ 8,063 , respectively, outstanding for those obligations that are payable through March 2027. 9. Income Taxes Our income tax expense was $ 9,365 and $ 9,381 for the three months ended September 30, 2022 and 2021, respectively. The decreased tax expense is due to decreased profits, offset by a higher forecasted effective tax rate. Excluding the effect of discrete tax adjustments, our estimated annual effective tax rate is higher for fiscal 2023 as compared to fiscal 2022 primarily due to decreased forecasted profits. 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. As of September 30, 2022 we had unrecognized tax benefits of $ 14,468 , including accrued interest and penalties of $ 1,500 . We recognize interest and, if applicable, penalties related to unrecognized tax benefits in the provision for income taxes. If recognized, $ 7,620 of unrecognized tax benefits would reduce our tax expense. It is reasonably possible that a reduction in unrecognized tax benefits may occur within the next twelve months in the range of $ 360 to $ 410 related to the lapse of applicable statutes of limitations. We believe we have appropriately provided for all tax uncertainties. We conduct business in a number of tax jurisdictions and, as such, are required to file income tax returns in multiple jurisdictions globally. The years 2016 through 2022 remain open for examination by the U.S. Internal Revenue Service and the years 2015 through 2022 remain open for examination in the various states and non-U.S. tax jurisdictions in which we file tax returns. We believe that our income tax reserves are adequately maintained taking into consideration both the technical merits of our tax return positions and ongoing developments in our income tax audits. However, the final determination of our tax return positions, if audited, is uncertain, and there is a possibility that final resolution of these matters could have a material impact on our results of operations or cash flows. We have not recorded a valuation allowance against deferred tax assets of $ 15,060 and $ 99,924 related to Swiss tax losses and the Swiss amortizable goodwill, respectively, as we expect to realize these assets in the future. Management believes there is sufficient positive evidence in the form of historical and future projected profitability to conclude that it is more likely than not that these benefits in Switzerland will be utilized against future taxable profits within the available carryforward periods. Our assessments are reliant on the attainment of our forecasted operating profits. Failure to achieve these forecasted operating profits may change our assessment of these deferred tax assets, and such change would result in additional valuation allowance and an increase in income tax expense to be recorded in the period of the change in assessment. We will continue to review our forecasts and profitability trends relevant to these Swiss deferred tax assets on a quarterly basis. 10. Noncontrolling Interests Redeemable Noncontrolling Interests For some of our subsidiaries, we own a controlling equity stake, and a third party or key members of the business management team owns a minority portion of the equity, which includes those described below. The put options for several of our noncontrolling interests are exercisable in fiscal year 2023. Exercising a put option is at the discretion of each noncontrolling interest holder, which creates uncertainty around the timing of our cash outflow should an option be exercised . As of September 30, 2022, the total estimated redemption value is $ 88,991 for those noncontrolling interests with put option windows that are exercisable in fiscal year 2023, of which $ 4,726 has already been exercised in the second quarter of fiscal 2023. The remaining equity interests are exercisable through November 30, 2022. PrintBrothers Members of the PrintBrothers management team hold minority equity interests ranging from 11 % to 12 % in each of the three businesses within the segment. The put options associated with the redeemable noncontrolling interests have annual exercise windows for 90% of their minority equity interest to Cimpress in each quarter ending in December. For the exercise window occurring in the second quarter of fiscal 2023, the estimated redemption 19 value for the portion of the put options that could be exercised is $ 84,266 and is based on actual results through June 30, 2022. If the put options are exercised, then Cimpress may redeem the remaining 10% of these holders' minority equity interests concurrently with the put option exercise or on the first, second, or third anniversary of the put option exercise. Cimpress has call options for the full amount of the minority equity interests with the first exercise window occurring during the second quarter of fiscal year 2027. During the three months ended September 30, 2022, the redemption value of a PrintBrothers business increased above its carrying value due to continued strong performance. The increased redemption value resulted in an adjustment to redeemable noncontrolling interest of $ 2,075 . The offsetting amount was recognized within retained earnings as the redemption values for this noncontrolling interest was below the estimated fair value. The following table presents the reconciliation of changes in our redeemable noncontrolling interests: Redeemable Noncontrolling Interest Balance as of June 30, 2022 $ 131,483 Accretion to redemption value (1) 2,725 Net income attributable to noncontrolling interests 700 Distributions to noncontrolling interests (2) ( 3,652 ) Foreign currency translation ( 1,347 ) Balance as of September 30, 2022 $ 129,909 _________________ (1) Accretion of redeemable noncontrolling interests to redemption value recognized in retained earnings or additional paid in capital is the result of the estimated redemption amount being greater than carrying value but less than fair value. Refer above for additional details. (2) Distributions to noncontrolling interests include contractually required profit sharing payments made annually to the minority interest holders in one of the PrintBrothers businesses. 11. Segment Information Our operating segments are based upon the manner in which our operations are managed and the availability of separate financial information reported internally to the Chief Executive Officer, who is our Chief Operating Decision Maker (“CODM”) for purposes of making decisions about how to allocate resources and assess performance. As of September 30, 2022, we have numerous operating segments under our management reporting structure which are reported in the following five reportable segments: • Vista - Vista is the parent brand of multiple offerings including VistaPrint, VistaCreate, 99designs by Vista, and Vista Corporate Solutions, which together represent a full-service design, digital and print solution, elevating small businesses’ presence in physical and digital spaces and empowering them to achieve success. This segment also includes our recently acquired Depositphotos business, whose subsidiary, Crello, was rebranded to VistaCreate soon after the acquisition. • PrintBrothers - Includes the results of our druck.at, Printdeal, and WIRmachenDRUCK businesses. • The Print Group - Includes the results of our Easyflyer, Exaprint, Pixartprinting, and Tradeprint businesses. • National Pen - Includes the global operations of our National Pen business, which manufactures and markets custom writing instruments and promotional products, apparel and gifts. • All Other Businesses - Includes two businesses grouped together based on materiality. In addition to BuildASign, which is a larger and profitable business, the All Other Businesses reportable segment consists of another, smaller business that we continue to manage at a relatively modest operating loss and a recently acquired company that provides production expertise and sells into a growing product category. ◦ BuildASign is an internet-based provider of canvas-print wall décor, business signage and other large-format printed products, based in Austin, Texas. ◦ Printi is an online printing leader in Brazil, which offers a superior customer experience with transparent and attractive pricing, reliable service and quality. 20 Central and corporate costs consist primarily of the team of software engineers that is building our mass customization platform; shared service organizations such as global procurement; technology services such as hosting and security; administrative costs of our Cimpress India offices where numerous Cimpress businesses have dedicated business-specific team members; 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. These costs also include certain unallocated share-based compensation costs. The expense value of our PSU awards is based on a Monte Carlo fair value analysis and is required to be expensed on an accelerated basis. In order to ensure comparability in measuring our businesses' results, we allocate the straight-line portion of the fixed grant value to our businesses. Any expense in excess of the amount as a result of the fair value measurement of the PSUs and the accelerated expense profile of the awards is recognized within central and corporate costs. Our definition of segment EBITDA is GAAP operating income excluding certain items, such as depreciation and amortization, expense recognized for contingent earn-out related charges including the changes 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, and restructuring charges. We include insurance proceeds that are not recognized within operating income. We do not allocate non-operating income, including realized gains and losses on currency hedges, to our segment results. During the fourth quarter of fiscal 2022, we revised our internal reporting to reallocate certain third-party technology costs that were previously held within our Central and corporate costs to our Vista business and reportable segment. These include certain third-party costs that are variable in nature and the cost variability is primarily driven by decisions or volumes in the Vista business. We revised our presentation of the prior period presented to reflect our updated segment reporting, which decreased both Vista segment EBITDA and Central and corporate costs by $ 1,119 for the three months ended September 30, 2021. Our balance sheet information is not presented to the CODM on an allocated basis, and therefore we do not present asset information by segment. We do present other segment information to the CODM, which includes purchases of property, plant and equipment and capitalization of software and website development costs, and therefore include that information in the tables below. Revenue by segment is based on the business-specific websites or sales channel through which the customer’s order was transacted. The following tables set forth revenue by reportable segment, as well as disaggregation of revenue by major geographic region and reportable segment. Three Months Ended September 30, 2022 2021 Revenue: Vista $ 369,369 $ 349,480 PrintBrothers 132,699 125,357 The Print Group 76,823 72,820 National Pen 81,666 69,264 All Other Businesses 51,827 47,871 Total segment revenue 712,384 664,792 Inter-segment eliminations (1) ( 8,969 ) ( 7,193 ) Total consolidated revenue $ 703,415 $ 657,599 _____________________ (1) Refer to the "Revenue by Geographic Region" tables below for detail of the inter-segment revenue within each respective segment. 21 Three Months Ended September 30, 2022 Vista PrintBrothers The Print Group National Pen All Other Total Revenue by Geographic Region: North America $ 266,486 $ — $ — $ 49,447 $ 43,292 $ 359,225 Europe 70,496 132,382 74,991 24,945 — 302,814 Other 31,877 — — 2,552 6,947 41,376 Inter-segment 510 317 1,832 4,722 1,588 8,969 Total segment revenue 369,369 132,699 76,823 81,666 51,827 712,384 Less: inter-segment elimination ( 510 ) ( 317 ) ( 1,832 ) ( 4,722 ) ( 1,588 ) ( 8,969 ) Total external revenue $ 368,859 $ 132,382 $ 74,991 $ 76,944 $ 50,239 $ 703,415 Three Months Ended September 30, 2021 Vista PrintBrothers The Print Group National Pen All Other Total Revenue by Geographic Region: North America $ 244,449 $ — $ — $ 41,038 $ 41,308 $ 326,795 Europe 71,533 125,128 71,155 20,851 — 288,667 Other 32,796 — — 3,533 5,808 42,137 Inter-segment 702 229 1,665 3,842 755 7,193 Total segment revenue 349,480 125,357 72,820 69,264 47,871 664,792 Less: inter-segment elimination ( 702 ) ( 229 ) ( 1,665 ) ( 3,842 ) ( 755 ) ( 7,193 ) Total external revenue $ 348,778 $ 125,128 $ 71,155 $ 65,422 $ 47,116 $ 657,599 The following table includes segment EBITDA by reportable segment, total income from operations and total income (loss) before income taxes: Three Months Ended September 30, 2022 2021 Segment EBITDA: Vista $ 30,737 $ 66,920 PrintBrothers 14,991 16,283 The Print Group 12,220 14,389 National Pen ( 1,297 ) ( 8,048 ) All Other Businesses 6,178 4,891 Total segment EBITDA 62,829 94,435 Central and corporate costs ( 34,578 ) ( 34,153 ) Depreciation and amortization ( 40,942 ) ( 44,432 ) Certain impairments and other adjustments ( 3,456 ) 780 Restructuring-related charges ( 1,820 ) 309 Total (loss) income from operations ( 17,967 ) 16,939 Other income, net 27,397 13,170 Interest expense, net ( 24,806 ) ( 25,688 ) (Loss) income before income taxes $ ( 15,376 ) $ 4,421 22 Three Months Ended September 30, 2022 2021 Depreciation and amortization: Vista $ 14,670 $ 16,403 PrintBrothers 4,773 5,234 The Print Group 5,862 6,584 National Pen 5,891 5,908 All Other Businesses 4,516 5,042 Central and corporate costs 5,230 5,261 Total depreciation and amortization $ 40,942 $ 44,432 Three Months Ended September 30, 2022 2021 Purchases of property, plant and equipment: Vista $ 3,124 $ 2,478 PrintBrothers 708 1,512 The Print Group 4,819 1,428 National Pen 1,601 1,188 All Other Businesses 1,068 1,515 Central and corporate costs 438 503 Total purchases of property, plant and equipment $ 11,758 $ 8,624 Three Months Ended September 30, 2022 2021 Capitalization of software and website development costs: Vista $ 6,635 $ 7,572 PrintBrothers 389 232 The Print Group 490 426 National Pen 588 678 All Other Businesses 924 1,184 Central and corporate costs 6,304 5,547 Total capitalization of software and website development costs $ 15,330 $ 15,639 The following table sets forth long-lived assets by geographic area: September 30, 2022 June 30, 2022 Long-lived assets (1): United States $ 90,481 $ 95,589 Switzerland 71,901 72,394 Netherlands 69,353 67,240 Canada 57,730 58,498 Italy 45,239 48,262 France 23,431 25,383 Jamaica 18,341 18,744 Australia 17,838 17,751 Japan 10,489 11,392 Other 88,406 90,677 Total $ 493,209 $ 505,930 ___________________ (1) Excludes goodwill of $ 748,055 and $ 766,600 , intangible assets, net of $ 139,864 and $ 154,730 , deferred tax assets of $ 114,020 and $ 113,088 , and marketable securities, non-current of $22,449 and zero as of September 30, 2022 and June 30, 2022, respectively. 23 12. Commitments and Contingencies Purchase Obligations At September 30, 2022, we had unrecorded commitments under contract of $ 251,011 , including inventory, third-party fulfillment and digital service purchase commitments of $ 86,678 ; third-party cloud services of $ 80,997 ; software of $ 42,238 ; advertising of $ 15,181 ; production and computer equipment purchases of $ 5,952 ; professional and consulting fees of $ 5,019 , and other unrecorded purchase commitments of $ 14,946 . Other Obligations We deferred payments for several of our acquisitions, resulting in the recognition of a liability of $ 8,463 as of September 30, 2022, which primarily relates to a deferred payment for our acquisition of Depositphotos that is payable in October 2022, subject to any outstanding indemnification claims. Legal Proceedings We are not currently party to any material legal proceedings. Although we cannot predict with certainty the results of litigation and claims to which we may be subject from time to time, we do not expect the resolution of any of our current matters to have a material adverse impact on our consolidated results of operations, cash flows or financial position. For all legal matters, at each reporting period, we evaluate whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. We expense the costs relating to our legal proceedings as those costs are incurred. 13. Restructuring Charges Restructuring costs include one-time employee termination benefits, acceleration of share-based compensation, write-off of assets and other related costs including third-party professional and outplacement services. During the three months ended September 30, 2022, we recognized restructuring charges of $ 1,820 . We recognized restructuring expense related to prior quarter actions of $1,456 in our Vista business, $209 in our National Pen business and $155 in our Central and corporate costs. The following table summarizes the restructuring activity during the three months ended September 30, 2022. Severance and Related Benefits Other Restructuring Costs Accrued restructuring liability Balance as of June 30, 2022 $ 13,449 $ — $ 13,449 Restructuring charges 1,032 788 1,820 Cash payments ( 7,931 ) — ( 7,931 ) Non-cash charges (1) ( 156 ) ( 788 ) ( 944 ) Foreign currency translation ( 419 ) — ( 419 ) Balance as of September 30, 2022 $ 5,975 $ — $ 5,975 ________________ (1) During the three months ended September 30, 2022, non-cash restructuring charges primarily include the Vista segment's write-off of inventory for the Japan market which has no alternative use, the write-off of equipment from National Pen's ongoing move of its European production operations from Ireland to the Czech Republic, and share-based compensation expense upon modification to accelerate the vesting of share-based compensation awards for the actions taken in the fourth quarter of fiscal year 2022. 24