CIMPRESS plc 10-Q

Item 1. Financial Statements CIMPRESS PLC CONSOLIDATED BALANCE SHEETS (unaudited in thousands, except share and per share data) March 31, 2023 June 30, 2022 Assets Current assets: Cash and cash equivalents $ 114,990 $ 277,053 Marketable securities 68,305 49,952 Accounts receivable, net of allowances of $5,957 and $6,140, respectively 67,869 63,885 Inventory 116,379 126,728 Prepaid expenses and other current assets 102,582 108,697 Total current assets 470,125 626,315 Property, plant and equipment, net 284,128 286,826 Operating lease assets, net 75,406 80,694 Software and website development costs, net 95,511 90,474 Deferred tax assets 10,093 113,088 Goodwill 787,291 766,600 Intangible assets, net 119,931 154,730 Marketable securities, non-current 6,466 — Other assets 44,486 48,945 Total assets $ 1,893,437 $ 2,167,672 Liabilities, noncontrolling interests and shareholders’ deficit Current liabilities: Accounts payable $ 263,980 $ 313,710 Accrued expenses 300,013 253,841 Deferred revenue 55,222 58,861 Short-term debt 10,696 10,386 Operating lease liabilities, current 23,855 27,706 Other current liabilities 21,824 28,035 Total current liabilities 675,590 692,539 Deferred tax liabilities 43,759 41,142 Long-term debt 1,682,658 1,675,562 Operating lease liabilities, non-current 53,404 57,474 Other liabilities 87,927 64,394 Total liabilities 2,543,338 2,531,111 Commitments and contingencies (Note 12) Redeemable noncontrolling interests 11,974 131,483 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; 44,285,490 and 44,083,569 shares issued, respectively; 26,314,243 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 528,983 501,003 Retained earnings 206,826 414,138 Accumulated other comprehensive loss ( 35,291 ) ( 47,128 ) Total shareholders’ deficit attributable to Cimpress plc ( 662,417 ) ( 494,922 ) Noncontrolling interests (Note 10) 542 — Total shareholders' deficit ( 661,875 ) ( 494,922 ) Total liabilities, noncontrolling interests and shareholders’ deficit $ 1,893,437 $ 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 March 31, Nine Months Ended March 31, 2023 2022 2023 2022 Revenue $ 742,164 $ 657,412 $ 2,290,781 $ 2,164,727 Cost of revenue (1) 394,908 347,452 1,228,036 1,110,378 Technology and development expense (1) 78,287 75,291 230,485 212,835 Marketing and selling expense (1) 187,234 194,618 593,312 577,931 General and administrative expense (1) 52,578 50,888 156,441 144,162 Amortization of acquired intangible assets 11,239 14,180 35,951 41,520 Restructuring expense (1) 30,115 3,420 43,142 3,418 (Loss) income from operations ( 12,197 ) ( 28,437 ) 3,414 74,483 Other income, net 1,377 12,321 11,382 38,330 Interest expense, net ( 30,515 ) ( 24,247 ) ( 83,918 ) ( 75,304 ) (Loss) income before income taxes ( 41,335 ) ( 40,363 ) ( 69,122 ) 37,509 Income tax expense 8,475 29,529 143,969 56,208 Net loss ( 49,810 ) ( 69,892 ) ( 213,091 ) ( 18,699 ) Less: Net loss (income) attributable to noncontrolling interests 484 ( 1,925 ) ( 1,676 ) ( 5,027 ) Net loss attributable to Cimpress plc $ ( 49,326 ) $ ( 71,817 ) $ ( 214,767 ) $ ( 23,726 ) Basic and diluted net loss per share attributable to Cimpress plc $ ( 1.88 ) $ ( 2.75 ) $ ( 8.19 ) $ ( 0.91 ) Weighted average shares outstanding — basic and diluted 26,268,301 26,102,610 26,226,989 26,090,460 ____________________________________________ (1) Share-based compensation is allocated as follows: Three Months Ended March 31, Nine Months Ended March 31, 2023 2022 2023 2022 Cost of revenue $ 42 $ 137 $ 411 $ 380 Technology and development expense 2,500 3,397 9,808 9,655 Marketing and selling expense ( 323 ) 2,961 3,888 8,436 General and administrative expense 5,023 6,209 15,157 17,744 Restructuring expense 1,492 — 2,141 — See accompanying notes. 2 CIMPRESS PLC CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (unaudited in thousands) Three Months Ended March 31, Nine Months Ended March 31, 2023 2022 2023 2022 Net loss $ ( 49,810 ) $ ( 69,892 ) $ ( 213,091 ) $ ( 18,699 ) Other comprehensive income (loss), net of tax: Foreign currency translation (losses) gains, net of hedges ( 1,526 ) ( 4,281 ) 1,412 ( 922 ) Net unrealized (losses) gains on derivative instruments designated and qualifying as cash flow hedges ( 4,667 ) 7,222 6,444 2,799 Amounts reclassified from accumulated other comprehensive loss to net loss for derivative instruments ( 969 ) 4,401 ( 771 ) 17,715 Gain on pension benefit obligation, net — — — 444 Comprehensive (loss) income ( 56,972 ) ( 62,550 ) ( 206,006 ) 1,337 Add: Comprehensive loss (income) attributable to noncontrolling interests 414 ( 1,563 ) 3,076 ( 3,204 ) Total comprehensive loss attributable to Cimpress plc $ ( 56,558 ) $ ( 64,113 ) $ ( 202,930 ) $ ( 1,867 ) 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 ) Restricted share units vested, net of shares withheld for taxes — — — — 11 743 ( 1,062 ) — — ( 319 ) Share-based compensation expense — — — — — — 12,398 — — 12,398 Net income attributable to Cimpress plc — — — — — — — 54,789 — 54,789 Redeemable noncontrolling interest accretion to redemption value — — — — — — — ( 8,444 ) — ( 8,444 ) Decrease in noncontrolling interest due to share purchase — — — — — — ( 272 ) — — ( 272 ) Net unrealized gain on derivative instruments designated and qualifying as cash flow hedges — — — — — — — — 5,270 5,270 Foreign currency translation, net of hedges — — — — — — — — 4,146 4,146 Unrealized gain on pension benefit obligation, net of tax — — — — — — — — 444 444 Balance at December 31, 2021 44,080 $ 615 25 $ 28 ( 17,980 ) $ ( 1,364,336 ) $ 476,002 $ 562,214 $ ( 57,327 ) $ ( 382,804 ) See accompanying notes. 4 CIMPRESS PLC CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (CONTINUED) (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 December 31, 2021 44,080 $ 615 25 $ 28 ( 17,980 ) $ ( 1,364,336 ) $ 476,002 $ 562,214 $ ( 57,327 ) $ ( 382,804 ) Restricted share units vested, net of shares withheld for taxes — — — — 4 380 ( 580 ) — — ( 200 ) Purchase and cancellation of deferred ordinary shares — — ( 25 ) ( 28 ) — — — — — ( 28 ) Share-based compensation expense — — — — — — 12,727 — — 12,727 Net loss attributable to Cimpress plc — — — — — — — ( 71,817 ) — ( 71,817 ) Redeemable noncontrolling interest accretion to redemption value — — — — — — — ( 29,034 ) — ( 29,034 ) Net unrealized gain on derivative instruments designated and qualifying as cash flow hedges — — — — — — — — 11,623 11,623 Foreign currency translation, net of hedges — — — — — — — — ( 3,919 ) ( 3,919 ) Balance at March 31, 2022 44,080 $ 615 — $ — ( 17,976 ) $ ( 1,363,956 ) $ 488,149 $ 461,363 $ ( 49,623 ) $ ( 463,452 ) See accompanying notes. 5 CIMPRESS PLC CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (CONTINUED) (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, 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 ) Restricted share units vested, net of shares withheld for taxes 15 — — — — — ( 158 ) — — ( 158 ) Share-based compensation expense — — — — — — 12,245 — — 12,245 Net loss attributable to Cimpress plc — — — — — — — ( 140,000 ) — ( 140,000 ) Redeemable noncontrolling interest accretion to redemption value — — — — — — — 10,180 — 10,180 Net unrealized loss on derivative instruments designated and qualifying as cash flow hedges — — — — — — — — ( 2,513 ) ( 2,513 ) Foreign currency translation, net of hedges — — — — — — — — 14,595 14,595 Balance at December 31, 2022 44,211 $ 615 — $ — ( 17,971 ) $ ( 1,363,550 ) $ 521,531 $ 256,152 $ ( 28,059 ) $ ( 613,311 ) See accompanying notes. 6 CIMPRESS PLC CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (CONTINUED) (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 December 31, 2022 44,211 $ 615 — $ — ( 17,971 ) $ ( 1,363,550 ) $ 521,531 $ 256,152 $ ( 28,059 ) $ ( 613,311 ) Restricted share units vested, net of shares withheld for taxes 74 — — — — — ( 1,439 ) — — ( 1,439 ) Share-based compensation expense — — — — — — 8,891 — 8,891 Net loss attributable to Cimpress plc — — — — — — — ( 49,326 ) — ( 49,326 ) Net unrealized gain on derivative instruments designated and qualifying as cash flow hedges — — — — — — — — ( 5,636 ) ( 5,636 ) Foreign currency translation, net of hedges — — — — — — — — ( 1,596 ) ( 1,596 ) Balance at March 31, 2023 44,285 $ 615 — $ — ( 17,971 ) $ ( 1,363,550 ) $ 528,983 $ 206,826 $ ( 35,291 ) $ ( 662,417 ) See accompanying notes. 7 CIMPRESS PLC CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited in thousands) Nine Months Ended March 31, 2023 2022 Operating activities Net loss $ ( 213,091 ) $ ( 18,699 ) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation and amortization 121,567 133,397 Share-based compensation expense 31,405 36,215 Deferred taxes 115,984 26,636 Unrealized loss (gain) on derivatives not designated as hedging instruments included in net loss 32,512 ( 25,639 ) Effect of exchange rate changes on monetary assets and liabilities denominated in non-functional currency ( 6,972 ) ( 5,847 ) Other non-cash items 15,200 ( 8,204 ) Changes in operating assets and liabilities, net of effects of businesses acquired: Accounts receivable ( 4,840 ) ( 17,764 ) Inventory ( 2,595 ) ( 31,964 ) Prepaid expenses and other assets ( 5,071 ) ( 18,776 ) Accounts payable ( 44,994 ) 35,860 Accrued expenses and other liabilities 29,369 26,501 Net cash provided by operating activities 68,474 131,716 Investing activities Purchases of property, plant and equipment ( 37,486 ) ( 42,142 ) Proceeds from the sale of subsidiaries, net of transaction costs and cash divested ( 4,130 ) — Business acquisitions, net of cash acquired ( 498 ) ( 75,258 ) Capitalization of software and website development costs ( 44,181 ) ( 49,875 ) Proceeds from the sale of assets 1,864 27,466 Purchases of marketable securities ( 84,030 ) — Proceeds from maturity of held-to-maturity investments 60,110 93,679 Payments for settlement of derivatives designated as hedging instruments — ( 1,880 ) Other investing activities — ( 617 ) Net cash used in investing activities ( 108,351 ) ( 48,627 ) Financing activities Proceeds from borrowings of debt 48,264 — Payments of debt ( 57,947 ) ( 11,149 ) Payments of debt issuance costs ( 51 ) ( 1,440 ) Payments of purchase consideration included in acquisition-date fair value ( 7,100 ) ( 43,647 ) Payments of withholding taxes in connection with equity awards ( 3,809 ) ( 3,098 ) Payments of finance lease obligations ( 6,017 ) ( 35,099 ) Purchase of noncontrolling interests ( 95,567 ) ( 324 ) Distributions to noncontrolling interests ( 3,652 ) ( 3,963 ) Other financing activities 113 ( 26 ) Net cash used in financing activities ( 125,766 ) ( 98,746 ) Effect of exchange rate changes on cash 3,580 ( 5,854 ) Net decrease in cash and cash equivalents ( 162,063 ) ( 21,511 ) Cash and cash equivalents at beginning of period 277,053 183,023 Cash and cash equivalents at end of period $ 114,990 $ 161,512 See accompanying notes. 8 CIMPRESS PLC CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (unaudited in thousands) Nine Months Ended March 31, 2023 2022 Supplemental disclosures of cash flow information Cash paid during the period for: Interest $ 70,796 $ 63,498 Income taxes 23,494 23,587 Non-cash investing and financing activities Property and equipment acquired under finance leases 14,405 3,755 Amounts accrued related to property, plant and equipment 9,045 10,115 Amounts accrued related to capitalized software development costs 116 215 Amounts accrued related to business acquisitions — 8,555 See accompanying notes. 9 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. Mandatorily Redeemable Noncontrolling Interests Noncontrolling interests held by third parties in consolidated subsidiaries are considered mandatorily redeemable when they are subject to an unconditional obligation to be redeemed by both parties. The redeemable noncontrolling interest must be required to be repurchased on a specified date or on the occurrence of a specified event that is certain to occur and is to be redeemed via the transfer of assets. Mandatorily redeemable noncontrolling interests are presented as liability-based financial instruments and are re-measured on a recurring basis to the expected redemption value. During the second quarter of fiscal 2023, the exercise of put options by the minority shareholders of three PrintBrothers businesses to redeem a portion of their equity interests triggered a mandatory redemption feature for the remaining minority interests after exercise. As such, we reclassified the remaining minority equity interests from redeemable noncontrolling interest to mandatorily redeemable noncontrolling interest, which is presented as part of other liabilities on the consolidated balance sheets. Refer to Note 10 for additional details. 10 Marketable Securities We hold certain investments that are classified as held-to-maturity 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, U.S. government agency securities, bank time deposits, commercial paper, corporate notes and bonds, and medium term notes. We invest in securities with a remaining 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 and nine months ended March 31, 2023 and 2022. 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 March 31, 2023 and June 30, 2022. March 31, 2023 Amortized cost Unrealized losses Fair value Due within one year or less: Commercial paper $ 30,791 $ ( 96 ) $ 30,695 Corporate debt securities 32,242 ( 241 ) 32,001 U.S. government securities 5,272 ( 57 ) 5,215 Total due within one year or less 68,305 ( 394 ) 67,911 Due between one and two years: Corporate debt securities 2,496 ( 54 ) 2,442 U.S. government securities 3,970 ( 61 ) 3,909 Total due within between one and two years 6,466 ( 115 ) 6,351 Total held-to-maturity securities $ 74,771 $ ( 509 ) $ 74,262 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 March 31, Nine Months Ended March 31, 2023 2022 2023 2022 (Losses) gains on derivatives not designated as hedging instruments (1) $ ( 2,428 ) $ 11,210 $ 2,021 $ 31,017 Currency-related gains (losses), net (2) 4,187 ( 672 ) 10,217 5,202 Other (losses) gains ( 382 ) 1,783 ( 856 ) 2,111 Total other income, net $ 1,377 $ 12,321 $ 11,382 $ 38,330 _____________________ (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 periods. For contracts not designated as hedging instruments, we realized gains of $ 4,876 and $ 35,864 for the three and nine months ended March 31, 2023, and gains of $ 2,011 and losses $ 2,407 for the three and nine months ended March 31, 2022. Losses on ineffective interest rate swaps amounted to $ 6,580 and $ 6,364 for the three and nine months ended March 31, 2022, compared to no gains or losses in the current periods. Refer to Note 4 for additional details relating to our derivative contracts. 11 (2) Currency-related gains (losses), 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. 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 March 31, Nine Months Ended March 31, 2023 2022 2023 2022 Weighted average shares outstanding, basic and diluted 26,268,301 26,102,610 26,226,989 26,090,460 Weighted average anti-dilutive shares excluded from diluted net loss per share attributable to Cimpress plc (1)(2) 3,161,275 908,354 3,045,675 770,500 ___________________ (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 and nine months ended March 31, 2023, the weighted average anti-dilutive effect of the warrants was 1,055,377 shares in both periods, and 103,443 and 264,963 shares for the three and nine months ended March 31, 2022, respectively. Recently Issued or Adopted Accounting Pronouncements Adopted Accounting Standards In December 2022, the FASB issued Accounting Standards Update No. 2022-06 "Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848" (ASU 2022-06), which extends the optional transition relief to ease the potential burden in accounting for reference rate reform on financial reporting. The transition relief is provided through December 30, 2024 based on the expectation that the London Interbank Offered Rate (LIBOR) will cease to be published as of June 30, 2023. We applied the transition guidance to our two Term SOFR interest rate swap contracts this quarter and will apply the guidance when updating existing interest rate swap contracts to index to a replacement rate. There was no material impact on our consolidated financial statements in the periods presented. 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 on July 1, 2023. Cimpress businesses have an active supply chain finance program which will require additional disclosure after adoption of this standard. We will include the expanded disclosure requirements starting in the first quarter of fiscal 2024. 12 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. 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: March 31, 2023 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 $ 17,099 $ — $ 17,099 $ — Currency forward contracts 1,522 — 1,522 — Currency option contracts 1,915 — 1,915 — Total assets recorded at fair value $ 20,536 $ — $ 20,536 $ — Liabilities Cross-currency swap contracts $ ( 1,937 ) $ — $ ( 1,937 ) $ — Currency forward contracts ( 4,225 ) — ( 4,225 ) — Currency option contracts ( 1,581 ) — ( 1,581 ) — Total liabilities recorded at fair value $ ( 7,743 ) $ — $ ( 7,743 ) $ — 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 nine months ended March 31, 2023 and year ended June 30, 2022, there were no significant transfers in or out of Level 1, Level 2 and Level 3 classifications. 13 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 March 31, 2023, 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 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 March 31, 2023 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 March 31, 2023 and June 30, 2022, the carrying value of our debt, excluding debt issuance costs and debt premiums and discounts, was $ 1,710,187 and $ 1,705,365 , respectively, and the fair value was $ 1,624,353 and $ 1,600,627 , respectively. Our debt at March 31, 2023 includes variable-rate debt instruments indexed to LIBOR and Euribor 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 March 31, 2023 and June 30, 2022 our held-to-maturity marketable securities were held at an amortized cost of $ 74,771 and $ 49,952 , respectively, while the fair value was $ 74,262 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 14 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 March 31, 2023, we estimate that $ 6,830 of income will be reclassified from accumulated other comprehensive loss to interest expense, net during the twelve months ending March 31, 2024. As of March 31, 2023, we had sixteen effective outstanding interest rate swap contracts. Fourteen of our swaps are indexed to USD LIBOR, while the remaining two are indexed to Term SOFR. The transition relief guidance from ASC 848 was applied to designate the two Term SOFR swap contracts that we entered into during the current quarter for hedge accounting. After USD LIBOR sunsets on June 30, 2023, we may convert our contracts to index to Term SOFR, otherwise the contracts will be subject to the fallback language within our credit agreement. Our interest rate swap contracts have varying start and maturity dates through April 2028. Interest rate swap contracts outstanding: Notional Amounts Contracts accruing interest as of March 31, 2023 $ 400,000 Contracts with a future start date 430,000 Total $ 830,000 Hedges of Currency Risk Cross-Currency Swap Contracts 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 hedged 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 March 31, 2023, 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 March 31, 2023, we estimate that $ 1,744 of income will be reclassified from accumulated other comprehensive loss to interest expense, net during the twelve months ending March 31, 2024. 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. As of March 31, 2023, 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 and nine months ended March 31, 2023 and 2022, 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 15 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 March 31, 2023, we had the following outstanding currency derivative contracts that were not designated for hedge accounting and were primarily 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, Mexican Peso, New Zealand Dollar, Norwegian Krone, Philippine Peso, Swiss Franc and Swedish Krona: Notional Amount Effective Date Maturity Date Number of Instruments Index $ 532,504 June 2021 through March 2023 Various dates through March 2025 553 Various 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 March 31, 2023 and June 30, 2022. Our derivative asset and liability balances fluctuate with interest rate and currency exchange rate volatility. March 31, 2023 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 in cash flow hedging relationships Interest rate swaps Other current assets / other assets $ 17,962 $ ( 863 ) $ 17,099 Other current liabilities / other liabilities $ — $ — $ — Cross-currency swaps Other assets — — — Other liabilities ( 1,937 ) — ( 1,937 ) Total derivatives designated as hedging instruments $ 17,962 $ ( 863 ) $ 17,099 $ ( 1,937 ) $ — $ ( 1,937 ) Derivatives not designated as hedging instruments Currency forward contracts Other current assets / other assets $ 2,142 $ ( 620 ) 1,522 Other current liabilities / other liabilities $ ( 7,217 ) 2,992 $ ( 4,225 ) Currency option contracts Other current assets / other assets 2,139 ( 224 ) 1,915 Other current liabilities / other liabilities ( 1,959 ) 378 ( 1,581 ) Total derivatives not designated as hedging instruments $ 4,281 $ ( 844 ) $ 3,437 $ ( 9,176 ) $ 3,370 $ ( 5,806 ) 16 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 ) The following table presents the effect of our derivative financial instruments designated as hedging instruments and their classification within comprehensive (loss) income, net of tax, for the three and nine months ended March 31, 2023 and 2022: Three Months Ended March 31, Nine Months Ended March 31, 2023 2022 2023 2022 Derivatives in cash flow hedging relationships Interest rate swaps $ ( 4,007 ) $ 12,446 $ 7,681 $ 17,986 Cross-currency swaps ( 660 ) ( 5,224 ) ( 1,237 ) ( 15,187 ) Derivatives in net investment hedging relationships Intercompany loan ( 3,418 ) 2,515 ( 9,102 ) 19,901 Currency forward contracts — 1,176 — 7,590 Total $ ( 8,085 ) $ 10,913 $ ( 2,658 ) $ 30,290 The following table presents reclassifications out of accumulated other comprehensive loss for the three and nine months ended March 31, 2023 and 2022: Amount of Net Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income Affected line item in the Statement of Operations Three Months Ended March 31, Nine Months Ended March 31, 2023 2022 2023 2022 Derivatives in cash flow hedging relationships Interest rate swaps $ ( 1,939 ) $ 2,684 $ ( 2,632 ) $ 8,154 Interest expense, net Cross-currency swaps 595 2,538 1,459 10,346 Other income, net Total before income tax ( 1,344 ) 5,222 ( 1,173 ) 18,500 (Loss) income before income taxes Income tax 375 ( 821 ) 402 ( 785 ) Income tax expense Total $ ( 969 ) $ 4,401 $ ( 771 ) $ 17,715 17 The following table presents the adjustment to fair value recorded within the consolidated statements of operations for the three and nine months ended March 31, 2023 and 2022 for derivative instruments for which we did not elect hedge accounting and de-designated derivative financial instruments that did not qualify as hedging instruments. Amount of Gain (Loss) Recognized in Net Loss Affected line item in the Statement of Operations Three Months Ended March 31, Nine Months Ended March 31, 2023 2022 2023 2022 Currency contracts $ ( 2,428 ) $ 4,630 $ 2,021 $ 24,653 Other income, net Interest rate swaps — 6,580 — 6,364 Other income, net Total $ ( 2,428 ) $ 11,210 $ 2,021 $ 31,017 5. Accumulated Other Comprehensive Loss The following table presents a roll forward of amounts recognized in accumulated other comprehensive income (loss) by component, net of tax of $ 5,959 for the nine months ended March 31, 2023 : 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 before reclassifications 6,444 — 6,164 12,608 Amounts reclassified from accumulated other comprehensive loss to net loss ( 771 ) — — ( 771 ) Net current period other comprehensive income 5,673 — 6,164 11,837 Balance as of March 31, 2023 $ 10,852 $ ( 86 ) $ ( 46,057 ) $ ( 35,291 ) ________________________ (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 March 31, 2023 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 March 31, 2023 and June 30, 2022. Intercompany loan hedge gains of $ 39,463 and $ 56,743 have been included in accumulated other comprehensive loss as of March 31, 2023 and June 30, 2022, respectively. 6. Goodwill The carrying amount of goodwill by reportable segment as of March 31, 2023 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 Acquisitions (1) — 4,724 — — 4,724 Adjustments — — — 225 225 Effect of currency translation adjustments (2) 3,527 5,874 6,341 — 15,742 Balance as of March 31, 2023 $ 295,025 $ 141,426 $ 150,310 $ 200,530 $ 787,291 ________________________ (1) During the third quarter of fiscal year 2023, we completed the purchase accounting for an immaterial acquisition that closed on December 12, 2022 resulting in the recognition of goodwill of $ 4,724 . The consideration for this purchase included the effective settlement of the company's existing liabilities to a Cimpress business as well as cash consideration of $ 498 . (2) Related to goodwill held by subsidiaries whose functional currency is not the U.S. dollar. 18 7. Other Balance Sheet Components Accrued expenses included the following: March 31, 2023 June 30, 2022 Compensation costs $ 71,649 $ 78,521 Income and indirect taxes 50,839 41,886 Restructuring costs (1) 28,728 13,449 Advertising costs 24,074 25,925 Third party manufacturing and digital content costs 17,038 15,790 Interest payable (2) 13,563 2,477 Variable compensation incentives (3) 11,506 — Shipping costs 11,060 10,228 Sales returns 6,602 6,286 Professional fees 3,278 2,394 Other 61,676 56,885 Total accrued expenses $ 300,013 $ 253,841 ______________________ (1) During the third quarter of fiscal 2023, we executed against a plan to reduce costs and implement organizational changes to support expanded profitability, reduced leverage, and increased speed, focus, and accountability. The impact of these cost reductions occurred within the Vista business and Cimpress central teams. Refer to Note 13 for additional details. (2) The increase in interest payable as of March 31, 2023 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. (3) Includes cash-based employee long-term incentives, which are variable based on the performance of individual businesses and vest over four years. As the first potential payout will occur within one year, a portion of the balance is now classified as a current liability within accrued expenses. Other current liabilities included the following: March 31, 2023 June 30, 2022 Current portion of finance lease obligations $ 8,990 $ 6,684 Short-term derivative liabilities 8,020 4,299 Other (1) 4,814 17,052 Total other current liabilities $ 21,824 $ 28,035 ______________________ (1) The decrease is due in part to the payment of an acquisition-related liability associated with our Depositphotos acquisition of $ 6,785 that occurred during the third quarter of fiscal 2023. Other liabilities included the following: March 31, 2023 June 30, 2022 Long-term finance lease obligations $ 28,129 $ 14,699 Long-term derivative liabilities 4,799 463 Mandatorily redeemable noncontrolling interest (1) 13,113 — Long-term compensation incentives 17,527 19,934 Other 24,359 29,298 Total other liabilities $ 87,927 $ 64,394 ______________________ (1) During the second quarter of fiscal year 2023, we reclassified the noncontrolling interest for three businesses in the PrintBrothers reportable segment to other liabilities, due to the exercise of a put option for a portion of the minority equity interests that triggered a mandatory redemption feature for the remaining minority equity interest . Refer to Note 10 for additional details. 19 8. Debt March 31, 2023 June 30, 2022 7.0% Senior Notes due 2026 $ 600,000 $ 600,000 Senior secured credit facility 1,102,509 1,097,302 Other 7,678 8,063 Debt issuance costs and debt premiums (discounts) ( 16,833 ) ( 19,417 ) Total debt outstanding, net 1,693,354 1,685,948 Less: short-term debt (1) 10,696 10,386 Long-term debt $ 1,682,658 $ 1,675,562 _____________________ (1) Balances as of March 31, 2023 and June 30, 2022 are inclusive of short-term debt issuance costs, debt premiums and discounts of $ 3,503 and $ 3,498 , respectively. Our various debt arrangements described below contain customary representations, warranties and events of default. As of March 31, 2023, 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. LIBOR is expected to sunset on June 30, 2023, and under the terms of our Restated Credit Agreement our benchmark rate will automatically transition to Term SOFR. 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 March 31, 2023, we have borrowings under the Restated Credit Agreement of $ 1,102,509 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 March 31, 2023. As of March 31, 2023, the weighted-average interest rate on outstanding borrowings under the Restated Credit Agreement was 6.94 %, 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 March 31, 2023. 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 March 31, 2023, we have not redeemed any of the 2026 Notes. 20 Other Debt Other debt consists primarily of term loans acquired through our various acquisitions or used to fund certain capital investments. As of March 31, 2023 and June 30, 2022, we had $ 7,678 and $ 8,063 , respectively, outstanding for those obligations that are payable through March 2027. 9. Income Taxes Our income tax expense was $ 8,475 and $ 143,969 for the three and nine months ended March 31, 2023, respectively, as compared to $ 29,529 and $ 56,208 for the three and nine months ended March 31, 2022, respectively. Tax expense decreased for the three months ended March 31, 2023 versus the prior comparable period due to the partial valuation allowance on Swiss deferred tax assets of $29,600 recorded during the three months ended March 31, 2022. Tax expense increased for the nine months ended March 31, 2023 versus the prior comparable period due to the full valuation allowance on Swiss deferred tax assets of $116,694 recorded during the second quarter of fiscal 2023 primarily related to Swiss tax reform benefits recognized in fiscal year 2020 and tax loss carryforwards. Management concluded that based on the current period results, that objective and verifiable negative evidence of recent losses in Switzerland outweighed more subjective positive evidence of anticipated future income. Excluding the effect of discrete tax adjustments, our estimated annual effective tax rate is lower for fiscal year 2023 as compared to fiscal year 2022 primarily due to a forecasted pre-tax loss. 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 March 31, 2023 we had unrecognized tax benefits of $ 16,759 , including accrued interest and penalties of $ 1,803 . We recognize interest and, if applicable, penalties related to unrecognized tax benefits in the provision for income taxes. If recognized, $ 7,777 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 $ 370 to $ 420 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 2014 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. 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 own a minority portion of the equity. The put options for several of our noncontrolling interests were exercised during the second quarter of fiscal year 2023 as summarized below. In addition to the noncontrolling interests described below, we also have several less significant minority interests that span multiple businesses and reportable segments. PrintBrothers Members of the PrintBrothers management team hold minority equity interests in several businesses within the reportable segment. During the second quarter of fiscal year 2023, put options were exercised by the minority interest holders for a portion of their equity interests that required us to purchase 10 % to 11 % in three of the respective businesses for a total of $ 90,841 . The exercise of the put options triggered a mandatory redemption feature for the remaining minority equity interests, which requires the purchase of the remaining 1% equity interests on the third anniversary of the put option exercise, absent the earlier exercise of a call option on the first and second anniversaries by Cimpress. The remaining noncontrolling interests are mandatorily redeemable, which required the reclassification of the remaining equity interests to a liability, which has been presented in other liabilities within our consolidated balance sheet. 21 The following table presents the reconciliation of changes in our noncontrolling interests: Redeemable Noncontrolling Interest Noncontrolling Interest Balance as of June 30, 2022 $ 131,483 $ — Acquisition of noncontrolling interest (1) — 365 Net income attributable to noncontrolling interests 1,513 163 Distribution to noncontrolling interests (2) ( 3,652 ) — Purchase of noncontrolling interest (3) ( 95,567 ) — Accretion to redemption value (4) ( 7,455 ) — Reclassification to mandatorily redeemable noncontrolling interest (5) ( 9,582 ) — Foreign currency translation ( 4,766 ) 14 Balance as of March 31, 2023 $ 11,974 $ 542 _________________ (1) During the second quarter of fiscal year 2023, we acquired a majority equity interest in an immaterial business within our PrintBrothers reportable segment. (2) Distributions to noncontrolling interests include contractually required profit sharing payments made annually to the minority interest holders in one of the PrintBrothers businesses. (3) As discussed above, we purchased an additional 10% to 11% of the equity interests in three PrintBrothers businesses during the second quarter of fiscal year 2023, as well as the 1% minority interest in our BuildASign business. (4) Accretion of redeemable noncontrolling interests to redemption value recognized in retained earnings is the result of changes in the estimated redemption amount to the extent increases do not exceed the estimated fair value. (5) During the second quarter of fiscal year 2023, the minority equity interest holders of three PrintBrothers businesses exercised a put option that triggered a mandatory redemption feature for the remaining minority equity interests. The remaining minority equity interests were reclassified to mandatorily redeemable noncontrolling interests, as part of other liabilities within the consolidated balance sheets. Refer above for additional information regarding the transaction and Note 7 for additional details about the reclassified liability balance. 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 March 31, 2023, 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, Vista Corporate Solutions, and Depositphotos, which together represent a full-service design, digital and print solution. • 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, as well as our YSD business through its divestiture that was completed during the third quarter of fiscal 2023. ◦ BuildASign, a larger and profitable business, is an internet-based provider of canvas-print wall décor, business signage and other large-format printed products. ◦ Printi, a smaller business that we continue to manage at a relatively modest operating loss, is an online printing leader in Brazil, which offers a superior customer experience with transparent and attractive pricing, reliable service and quality. 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 22 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 results to reflect our updated segment reporting, which decreased both Vista segment EBITDA and Central and corporate costs by $ 1,852 and $ 4,894 for the three and nine months ended March 31, 2022. 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 March 31, Nine Months Ended March 31, 2023 2022 2023 2022 Revenue: Vista $ 396,642 $ 349,216 $ 1,203,747 $ 1,146,810 PrintBrothers 139,569 119,960 420,866 383,011 The Print Group 85,504 75,361 251,663 238,311 National Pen 81,113 72,243 283,400 266,224 All Other Businesses 49,037 48,486 160,862 154,076 Total segment revenue 751,865 665,266 2,320,538 2,188,432 Inter-segment eliminations (1) ( 9,701 ) ( 7,854 ) ( 29,757 ) ( 23,705 ) Total consolidated revenue $ 742,164 $ 657,412 $ 2,290,781 $ 2,164,727 _____________________ (1) Refer to the "Revenue by Geographic Region" tables below for detail of the inter-segment revenue within each respective segment. 23 Three Months Ended March 31, 2023 Vista PrintBrothers The Print Group National Pen All Other Total Revenue by Geographic Region: North America $ 276,983 $ — $ — $ 50,938 $ 41,524 $ 369,445 Europe 88,152 139,187 83,096 23,811 — 334,246 Other 31,237 — — 1,180 6,056 38,473 Inter-segment 270 382 2,408 5,184 1,457 9,701 Total segment revenue 396,642 139,569 85,504 81,113 49,037 751,865 Less: inter-segment elimination ( 270 ) ( 382 ) ( 2,408 ) ( 5,184 ) ( 1,457 ) ( 9,701 ) Total external revenue $ 396,372 $ 139,187 $ 83,096 $ 75,929 $ 47,580 $ 742,164 Nine Months Ended March 31, 2023 Vista PrintBrothers The Print Group National Pen All Other Total Revenue by Geographic Region: North America $ 835,354 $ — $ — $ 162,593 $ 137,016 $ 1,134,963 Europe 268,791 419,658 244,378 99,555 — 1,032,382 Other 98,320 — — 5,862 19,254 123,436 Inter-segment 1,282 1,208 7,285 15,390 4,592 29,757 Total segment revenue 1,203,747 420,866 251,663 283,400 160,862 2,320,538 Less: inter-segment elimination ( 1,282 ) ( 1,208 ) ( 7,285 ) ( 15,390 ) ( 4,592 ) ( 29,757 ) Total external revenue $ 1,202,465 $ 419,658 $ 244,378 $ 268,010 $ 156,270 $ 2,290,781 Three Months Ended March 31, 2022 Vista PrintBrothers The Print Group National Pen All Other Total Revenue by Geographic Region: North America $ 236,751 $ — $ — $ 43,483 $ 42,047 $ 322,281 Europe 78,136 119,353 73,885 21,876 — 293,250 Other 32,779 — — 3,741 5,361 41,881 Inter-segment 1,550 607 1,476 3,143 1,078 7,854 Total segment revenue 349,216 119,960 75,361 72,243 48,486 665,266 Less: inter-segment elimination ( 1,550 ) ( 607 ) ( 1,476 ) ( 3,143 ) ( 1,078 ) ( 7,854 ) Total external revenue $ 347,666 $ 119,353 $ 73,885 $ 69,100 $ 47,408 $ 657,412 Nine Months Ended March 31, 2022 Vista PrintBrothers The Print Group National Pen All Other Total Revenue by Geographic Region: North America $ 770,815 $ — $ — $ 142,497 $ 134,390 $ 1,047,702 Europe 267,296 381,654 232,636 96,524 — 978,110 Other 105,342 — — 16,503 17,070 138,915 Inter-segment 3,357 1,357 5,675 10,700 2,616 23,705 Total segment revenue 1,146,810 383,011 238,311 266,224 154,076 2,188,432 Less: inter-segment elimination ( 3,357 ) ( 1,357 ) ( 5,675 ) ( 10,700 ) ( 2,616 ) ( 23,705 ) Total external revenue $ 1,143,453 $ 381,654 $ 232,636 $ 255,524 $ 151,460 $ 2,164,727 24 The following table includes segment EBITDA by reportable segment, total (loss) income from operations and total (loss) income before income taxes: Three Months Ended March 31, Nine Months Ended March 31, 2023 2022 2023 2022 Segment EBITDA: Vista $ 60,392 $ 25,534 $ 146,286 $ 183,220 PrintBrothers 15,886 12,392 50,386 47,280 The Print Group 13,589 11,923 39,490 42,670 National Pen ( 3,336 ) ( 898 ) 20,150 22,653 All Other Businesses 5,036 6,044 16,620 17,199 Total segment EBITDA 91,567 54,995 272,932 313,022 Central and corporate costs ( 34,447 ) ( 36,084 ) ( 102,827 ) ( 104,940 ) Depreciation and amortization ( 39,751 ) ( 43,651 ) ( 121,567 ) ( 133,397 ) Certain impairments and other adjustments 549 ( 277 ) ( 1,982 ) 3,216 Restructuring-related charges ( 30,115 ) ( 3,420 ) ( 43,142 ) ( 3,418 ) Total (loss) income from operations ( 12,197 ) ( 28,437 ) 3,414 74,483 Other (expense) income, net 1,377 12,321 11,382 38,330 Interest expense, net ( 30,515 ) ( 24,247 ) ( 83,918 ) ( 75,304 ) (Loss) income before income taxes $ ( 41,335 ) $ ( 40,363 ) $ ( 69,122 ) $ 37,509 Three Months Ended March 31, Nine Months Ended March 31, 2023 2022 2023 2022 Depreciation and amortization: Vista $ 14,480 $ 15,791 $ 43,343 $ 49,757 PrintBrothers 4,175 5,466 14,097 15,806 The Print Group 5,269 6,459 16,930 19,655 National Pen 4,820 5,933 16,506 18,061 All Other Businesses 4,375 4,519 13,217 13,942 Central and corporate costs 6,632 5,483 17,474 16,176 Total depreciation and amortization $ 39,751 $ 43,651 $ 121,567 $ 133,397 Three Months Ended March 31, Nine Months Ended March 31, 2023 2022 2023 2022 Purchases of property, plant and equipment: Vista $ 3,006 $ 4,132 $ 12,575 $ 14,491 PrintBrothers 2,010 665 3,771 3,381 The Print Group 3,995 7,560 14,084 14,237 National Pen 889 644 3,336 2,855 All Other Businesses 815 2,130 2,650 5,802 Central and corporate costs 281 472 1,070 1,376 Total purchases of property, plant and equipment $ 10,996 $ 15,603 $ 37,486 $ 42,142 25 Three Months Ended March 31, Nine Months Ended March 31, 2023 2022 2023 2022 Capitalization of software and website development costs: Vista $ 5,894 $ 8,235 $ 17,668 $ 24,425 PrintBrothers 104 361 1,562 829 The Print Group 866 790 2,127 1,735 National Pen 778 877 1,878 2,608 All Other Businesses 1,008 981 2,831 3,248 Central and corporate costs 6,285 6,497 18,115 17,030 Total capitalization of software and website development costs $ 14,935 $ 17,741 $ 44,181 $ 49,875 The following table sets forth long-lived assets by geographic area: March 31, 2023 June 30, 2022 Long-lived assets (1): United States (2) $ 81,110 $ 95,589 Switzerland 76,287 72,394 Netherlands 65,618 67,240 Canada 57,050 58,498 Italy 42,150 48,262 France 26,639 25,383 Australia 19,066 17,751 Jamaica 18,258 18,744 Japan (3) — 11,392 Other 112,162 90,677 Total $ 498,340 $ 505,930 ___________________ (1) Excludes goodwill of $ 787,291 and $ 766,600 , intangible assets, net of $ 119,931 and $ 154,730 , deferred tax assets of $ 10,093 and $ 113,088 , and marketable securities, non-current of $ 6,466 and zero as of March 31, 2023 and June 30, 2022, respectively. (2) The decrease of the United States long-lived assets is primarily driven by the termination of our Waltham, MA lease in August 2022 that resulted in a reduction to the operating lease asset and related leasehold improvements. (3) The decrease in Japan's long-lived assets is due to the planned sale of the land and building, which resulted in the reclassification of the carrying value to prepaid expenses and other current assets because it meets held-for-sale criteria during the current quarter. Refer to Note 13 for additional details. 12. Commitments and Contingencies Purchase Obligations At March 31, 2023, we had unrecorded commitments under contract of $ 205,973 , including third-party cloud services of $ 79,437 ; inventory, third-party fulfillment and digital service purchase commitments of $ 79,159 ; software of $ 16,870 ; advertising of $ 10,116 ; production and computer equipment purchases of $ 2,494 ; professional and consulting fees of $ 3,462 , and other unrecorded purchase commitments of $ 14,435 . Other Obligations In February 2023, we made a $ 6,785 deferred payment for our Depositphotos acquisition, resulting in no outstanding acquisition-related deferred liabilities as of March 31, 2023. 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 26 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, costs to exit loss-making operations, and other related costs including third-party professional and outplacement services. All restructuring costs are excluded from segment and adjusted EBITDA. During the three and nine months ended March 31, 2023, we recognized restructuring charges of $ 30,115 and $ 43,142 , respectively. The majority of these costs related to actions taken in our Vista business and central teams during March 2023 that were intended to reduce costs and support expanded profitability, reduced leverage, and increased speed, focus and accountability. For the three and nine months ended March 31, 2023, the previously described action combined with prior actions taken to prioritize our investments and exit the Japanese market resulted in restructuring charges in our Vista business of $ 20,406 and $ 29,128 , and in our central and corporate costs of $ 9,075 and $ 9,330 , respectively. Most of these costs related to employee termination benefits, and, to a lesser extent, share-based compensation expense for the accelerated vesting of equity awards as well as third-party consulting costs. A portion of the restructuring charge included the impairment of assets from our exit of the Japanese market of $ 6,257 . We expect additional restructuring charges in the fourth quarter of fiscal 2023 for termination benefits that included ongoing service requirements, but we do not expect those charges to be material. We also recognized restructuring charges in our National Pen business for the three and nine months ended March 31, 2023 in the amounts of $ 639 and $ 1,127 , respectively, which included employee termination benefits for previously announced actions to exit the Japanese market and to migrate our European production operations from Ireland to the Czech Republic. Additionally, we recognized restructuring costs of $ 3,556 for the nine months ended March 31, 2023 in our All Other Businesses reportable segment for our previously announced exit from the Chinese market, which included employee termination benefits and the write-off of certain assets. We do not expect any additional charges for these restructuring actions. The following table summarizes the restructuring activity during the nine months ended March 31, 2023. Severance and Related Benefits Other Restructuring Costs Accrued restructuring liability Balance as of June 30, 2022 $ 13,449 $ — $ 13,449 Restructuring charges 32,187 10,955 43,142 Cash payments ( 14,859 ) — ( 14,859 ) Non-cash charges (1) ( 2,141 ) ( 10,955 ) ( 13,096 ) Foreign currency translation 92 — 92 Balance as of March 31, 2023 $ 28,728 $ — $ 28,728 ________________ (1) During the nine months ended March 31, 2023, non-cash restructuring charges primarily includes the loss recorded on assets for our Japan and China exits as described above, and share-based compensation expense upon modification to accelerate the vesting of share-based compensation awards for the actions described above. 27