What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-10-26 compared with 2023-04-27 · 180 added, 231 removed, 206 unchanged (67% of the section changed)

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This Report contains forward-looking statements that involve risks and uncertainties.

The statements contained in this Report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including but not limited to our statements about the anticipated growth and development of our businesses and financial results, including profitability, cash flows, liquidity, and capital allocation;

the expected effects of our cost reductions and recent restructuring, including future cost savings and restructuring charges;

the expected impacts of our mass customization platform;

the expected effects of mid- and upper-funnel advertising in Vista;

sufficiency of our liquidity position;

The statements contained in this Report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including but not limited to our statements about the anticipated growth and development of our businesses and financial results, including revenue, profitability, liquidity, and net leverage;

future impacts of our March 2023 restructuring;

our expectations for the sale of our Jamaica facility;

legal proceedings;

and sufficiency of our tax reserves and expectation pf a reduction in unrecognized tax benefits.

and sufficiency of our tax reserves.

Without limiting the foregoing, the words “may,” “should,” “could,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “designed,” “potential,” “continue,” “target,” “seek” and similar expressions are intended to identify forward-looking statements.

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Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various important factors, including but not limited to flaws in the assumptions and judgments upon which our forecasts and estimates are based;

the development, severity, and duration of supply chain constraints, inflation, and the lingering effects of the COVID-19 pandemic;

the failure of our cost reductions to affect our financial results as expected;

our inability to make the investments that we plan to make or the failure of those investments to achieve the results we expect;

the development, severity, and duration of supply chain constraints and inflation;

our inability to make the investments in our business that we plan to make or the failure of those investments to achieve the results we expect;

our failure to execute on the transformation of the Vista business;

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unanticipated changes in our markets, customers, or businesses;

disruptions caused by political instability and war in Ukraine, Israel, or elsewhere;

changes in the laws and regulations, or in the interpretation of laws and regulations, that affect our businesses;

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general economic conditions, including the possibility of an economic downturn in some or all of our markets;

and other factors described in this Report and the documents that we periodically file with the SEC.

and other factors described in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 and the documents that we periodically file with the SEC.

Executive Overview

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.

Cimpress is a strategically focused collection of 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 and services 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, design and digital marketing services, 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.

As of March 31, 2023, we have numerous operating segments under our management reporting structure that are reported in the following five reportable segments:

As of September 30, 2023, we have numerous operating segments under our management reporting structure that are reported in the following five reportable segments:

Vista, PrintBrothers, The Print Group, National Pen, and All Other Businesses.

Refer to Note 11 in our accompanying consolidated financial statements for additional information relating to our reportable segments and our segment financial measures.

We announced plans on March 23, 2023 to reduce costs within our Vista business and our central teams and implement organizational changes to support expanded profitability, reduced leverage and increased speed, focus, and accountability.

These plans resulted in a restructuring charge of $30.1 million during the current quarter, with additional immaterial charges expected to be recognized during the fourth quarter of fiscal 2023.

This restructuring action provided a small cost savings benefit during the current quarter due to the timing of the action, but we expect this action to deliver approximately $100 million of annualized pre-tax cost savings.

During the current quarter, we revised our adjusted free cash flow definition to include proceeds from the sale of assets, which we believe provides useful information regarding the net cash deployed for the purchase of capital assets by incorporating any cash that is recovered from the subsequent sale of any assets.

We have revised all periods presented to incorporate this change.

Financial Summary

The primary financial metric by which we set quarterly and annual budgets both for individual businesses and Cimpress wide is our adjusted free cash flow before cash interest expense;

The primary financial metric by which we set quarterly and annual budgets both for individual businesses and Cimpress wide is our adjusted free cash flow before net cash interest payments;

however, in evaluating the financial condition and operating performance of our business, management considers a number of metrics including revenue growth, organic constant-currency revenue growth, operating income, adjusted EBITDA, cash flow from operations, and adjusted free cash flow.

Reconciliations of our non-GAAP financial measures are included within the

"Consolidated Results of Operations" and "Additional Non-GAAP Financial Measures" sections of Management's Discussion and Analysis.

A summary of these key financial metrics for the three and nine months ended March 31, 2023 as compared to the three and nine months ended March 31, 2022 follows:

Third Quarter Fiscal Year 2023

Reconciliations of our non-GAAP financial measures are included within the "Consolidated Results of Operations" and "Additional Non-GAAP Financial Measures" sections of Management's Discussion and Analysis.

A summary of these key financial metrics for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 follows:

• Revenue increased by 8% to $757.3 million.

• Constant-currency revenue increased 16% when excluding the revenue of acquired companies for the first twelve months after acquisition (a non-GAAP financial measure).

• Operating income increased by $16.2 million to a loss of $12.2 million.

• Organic constant-currency revenue increased 4% (a non-GAAP financial measure).

• Operating income increased by $52.1 million to $34.1 million.

• Adjusted EBITDA (a non-GAAP financial measure) increased by $43.1 million to $88.7 million.

• Diluted net loss per share attributable to Cimpress plc increased to a loss of $1.88 from a loss of $2.75 in the comparative period.

Year to Date Fiscal Year 2023

• Revenue increased by 6% to $2,290.8 million.

• Constant-currency revenue increased by 12% and 11% when excluding the revenue of acquired companies for the first twelve months after acquisition (both non-GAAP financial measures).

• Operating income decreased by $71.1 million to $3.4 million.

• Adjusted EBITDA (a non-GAAP financial measure) decreased by $17.4 million to $225.9 million.

• Diluted net loss per share attributable to Cimpress plc decreased to a loss of $8.19 from a loss of $0.91 in the comparative period.

• Cash provided by operating activities decreased by $63.2 million to $68.5 million.

• Adjusted free cash flow (a non-GAAP financial measure) decreased by $52.9 million to an outflow of $13.2 million.

For the three months ended March 31, 2023, reported revenue growth accelerated, mainly in our Vista business as product mix shifted back toward faster-growing small business products and we are comparing to a weaker period in the prior-year quarter that included the migration of Vista's U.S.

website onto the new technology platform.

Our Vista business experienced growth in new customer count and new customer bookings across all major markets.

Promotional products, apparel, and gifts (PPAG) was our fastest-growing product category, with business cards, marketing materials, packaging and labels, and signage all showing strong year-over-year growth as well.

Revenue growth in most Cimpress businesses continued to benefit from year-over-year increases in pricing, which has been one tool used to mitigate inflationary cost pressures.

Currency exchange fluctuations had a negative effect during the current quarter.

For the three months ended March 31, 2023, the increase in operating income was primarily due to the incremental profit from the revenue growth described above.

Gross profit growth benefited from higher volumes and the reduced net impact of cost inflation.

We also realized cost efficiencies in advertising spend, and lower compensation and consulting-related operating expenses.

These items were partially offset by an increase in restructuring charges primarily related to actions taken during the current quarter to reduce costs in the Vista business and in our central teams.

Adjusted EBITDA increased year over year for the three months ended March 31, 2023, primarily for the same reasons operating income increased.

Adjusted EBITDA excludes restructuring charges, share-based compensation expense, certain impairments, and non-cash gains on the sale of assets, and includes the realized gains or losses on our currency derivatives intended to hedge adjusted EBITDA.

The net year-over-year impact of currency on consolidated adjusted EBITDA was a benefit of approximately $1.6 million for the three months ended March 31, 2023.

Diluted net loss per share attributable to Cimpress plc increased for the three months ended March 31, 2023 primarily due to the improved operating loss described above, as well as significantly lower income tax expense year over year.

These improvements were partially offset by increased interest expense and year-over-

year impact from the net effect of unrealized currency losses caused by exchange rate volatility that more than offset realized gains recognized in the current quarter.

During the nine months ended March 31, 2023, cash from operations decreased $63.2 million year over year due primarily to less favorable working capital inflows of $22.0 million, largely driven by less favorable benefits from accounts payable due in part to timing, as well as negative working capital impacts from higher inventory levels that were intended to mitigate supply chain issues.

Cash from operations was also negatively impacted year over year by higher cash interest costs and restructuring payments due to actions taken to reduce costs over the past year.

Adjusted free cash flow decreased year over year by $52.9 million for the nine months ended March 31, 2023, due to the operating cash flow decrease described above, partially offset by lower capitalized software and capitalized expenditures.

• Diluted net income (loss) per share attributable to Cimpress plc increased to income of $0.17 from a loss of $(0.97) in the prior fiscal year.

• Cash provided by operating activities increased by $67.5 million to $42.3 million.

• Adjusted free cash flow (a non-GAAP financial measure) increased by $63.1 million to $10.9 million.

For the three months ended September 30, 2023, the increase in reported revenue was primarily due to growth across our Vista, PrintBrothers and National Pen reportable segments.

Revenue growth in our Vista business was driven by order growth, in particular from new customers, and higher average order values driven by both product mix and pricing.

Revenue in our Vista business grew year over year across all product categories, with the fastest growth coming from promotional products, apparel, and gifts (PPAG) while marketing materials, packaging and labels, and signage also showed strong year-over-year growth.

Currency exchange fluctuations had a positive effect on revenue growth during the current quarter.

The increase to operating income during the three months ended September 30, 2023 was driven by higher gross profit that benefited from the revenue growth described above, as well as gross margin expansion.

The operating income increase also benefited from improved leverage of advertising spend as a percentage of revenue and reduced operating expenses driven by the prior-year cost reduction actions, as well as lower restructuring costs by $2.2 million as a result of actions that were completed during the prior year.

Adjusted EBITDA increased year over year, primarily driven by the operating income growth described above, but the increase was partially offset by a $3.5 million year-over-year net unfavorable currency impact.

Adjusted EBITDA excludes restructuring charges, share-based compensation expense, certain impairments, and gains on the sale of assets, and includes the realized gains or losses on our currency derivatives intended to hedge adjusted EBITDA.

Diluted net income (loss) per share attributable to Cimpress plc increased year over year for the three months ended September 30, 2023, primarily due to the operating income increase as described above and a $1.4 million gain on the purchase of a portion of our 2026 Notes during the current quarter, but the increase was partially offset by lower realized and unrealized currency gains caused by exchange rate volatility, as well as higher interest expense driven by an increased weighted-average interest rate.

During the three months ended September 30, 2023, cash from operations increased $67.5 million year over year due primarily to the increase in net income as described above, as well as a favorable shift in working capital outflows of $31.8 million, which was largely driven by the prior-year increases in inventory levels that were intended to minimize availability risk due to supply chain disruptions, which has reversed in the current quarter.

This favorable impact was partially offset by higher cash taxes of $11.5 million, due in part to increased prior year assessments in one jurisdiction driven by profitability growth, as well as higher net cash interest payments of $7.9 million.

Adjusted free cash flow increased by $63.1 million for the three months ended September 30, 2023, due to the operating cash flow increase described above, as well as higher proceeds from the sale of assets, primarily driven by the sale of our previously owned manufacturing facility in Japan.

These increases were partially offset by higher capitalized expenditures.

Consolidated Results of Operations

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

We also generate revenue, to a much lesser extent (and primarily in our Vista business), from digital services, graphic design services, website design and hosting, and email marketing services, as well as a small percentage of revenue from order referral fees and other third-party offerings.

We also generate revenue, to a much lesser extent (and primarily in our Vista business), from digital services, graphic design services, website design and hosting, and social media marketing services, as well as a small percentage of revenue from order referral fees and other third-party offerings.

For additional discussion relating to segment revenue results, refer to the "Reportable Segment Results" section included below.

Total revenue and revenue growth by reportable segment for the three and nine months ended March 31, 2023 and 2022 are shown in the following table:

In thousands Three Months Ended March 31, Currency

Currency Impact of Acquisitions/Divestitures:

Constant- Currency Revenue Growth

Change (Favorable)/Unfavorable Revenue Growth (1) (Favorable)/Unfavorable Excluding Acquisitions/Divestitures (2)

Vista $ 396,642 $ 349,216 14% 2% 16% —% 16%

PrintBrothers 139,569 119,960 16% 5% 21% 1% 22%

The Print Group 85,504 75,361 13% 6% 19% —% 19%

National Pen 81,113 72,243 12% 3% 15% —% 15%

All Other Businesses 49,037 48,486 1% —% 1% —% 1%

Inter-segment eliminations (9,701) (7,854)

Total revenue $ 742,164 $ 657,412 13% 3% 16% —% 16%

In thousands Nine Months Ended March 31, Currency

Total revenue and revenue growth by reportable segment for the three months ended September 30, 2023 and 2022 are shown in the following table:

In thousands Three Months Ended September 30, Currency

Currency Impact of Acquisitions/Divestitures:

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

Three Months Ended March 31, Nine Months Ended March 31,

2023 2022 2023 2022

Three Months Ended September 30,

Cost of revenue $ 398,783 $ 377,735

% of revenue 52.7 % 53.7 %

For the three and nine months ended March 31, 2023, cost of revenue increased by $47.5 million and $117.7 million, respectively, as compared to the prior year periods, primarily due to the continued effects of global supply chain challenges that resulted in increased costs for product substrates like paper, production materials like aluminum plates, freight and shipping charges, and energy costs, as well as additional variable cost increases driven by the constant-currency revenue growth described above.

Although input costs were higher year over year during the third quarter of fiscal 2023, we started to see some easing across many product substrates, and we began to pass the anniversary of input cost increases, so the year-over-year impact lessened.

Compensation costs were also higher due to the combination of a more competitive labor market and the inflationary environment in many jurisdictions where we operate.

The overall impact of increased costs, net of pricing increases and manufacturing efficiencies, was minimal in the current quarter, though still a negative year-over-year impact for the nine months ended March 31, 2023.

For the three months ended September 30, 2023, cost of revenue increased by $21.0 million as compared to the prior year, primarily driven by fluctuations in currency exchange rates of $15.5 million, as well as increased shipping costs year over year due to both volume increases and higher fuel surcharges.

Production costs increased year over year due to volume growth and product mix shifts in some of our businesses as well as higher labor costs from the combination of a more competitive labor market and the inflationary environment in many jurisdictions where we operate.

These cost increases were partially offset by lower input costs for some key substrates like paper, and savings that resulted from the March 2023 cost reduction actions.

Consolidated Operating Expenses

The following table summarizes our comparative operating expenses for the following periods:

Three Months Ended March 31, Nine Months Ended March 31,

2023 2022 2023 vs.

2022 2023 2022 2023 vs.

Three Months Ended September 30,

Technology and development expense $ 74,330 $ 74,475

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Amortization of acquired intangible assets

$ 9,886 $ 12,350

% of revenue 1.3 % 1.8 %

Restructuring expense (1)

$ (334) $ 1,820

% of revenue 0.0 % 0.3 %

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(1) As a result of the March 2023 cost reduction action described above, we expect to realize cost savings in future periods.

The cost savings benefit during the current period was not material.

(1) Refer to Note 13 in our accompanying consolidated financial statements for additional details relating to restructuring expense.

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

Technology and development expenses increased by $3.0 million and $17.7 million for the three and nine months ended March 31, 2023, respectively, as compared to the prior-year periods.

This increase is primarily driven by increased volume-related third-party technology costs due in part to higher customer demand.

In addition, compensation costs increased year-over-year by $0.5 million and $4.4 million for the three and nine months ended March 31, 2023, respectively, due to increases from our inflation-adjusted annual merit cycle and market adjustments.

Other operating costs increased due to higher travel and training costs.

These increases were partially offset by cost savings resulting from recent restructuring actions that reduced headcount.

Technology and development expenses decreased by $0.1 million for the three months ended September 30, 2023 as compared to the prior year.

The decrease is largely attributable to lower cash compensation costs of $2.0 million, due primarily to cost savings resulting from the March 2023 restructuring actions that reduced headcount, which were partially offset by the effect of our annual merit cycle and market adjustments.

This net compensation decrease was partially offset by higher volume-related third-party technology costs due in part to increased customer demand, as well as the increased adoption of customer-facing technologies that are part of the mass customization platform.

In addition, amortization expense from capitalized software increased $2.0 million, driven by the higher capitalized asset base.

Marketing and selling expense

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Our Vista, National Pen, and BuildASign businesses have higher marketing and selling costs as a percentage of revenue as compared to our PrintBrothers and The Print Group businesses due to differences in the customers that they serve.

For the three and nine months ended March 31, 2023, marketing and selling expenses decreased by $7.4 million and increased by $15.4 million, respectively, as compared to the prior-year periods.

The decrease for the three months ended March 31, 2023 was primarily driven by lower costs in our Vista business of $11.7 million, due in part to lower advertising spend.

These decreases were partially offset by increased advertising spend collectively across all our other businesses of $4.9 million.

The increased spend for the nine months ended March 31, 2023 was due to higher advertising spend of $26.6 million across Cimpress (including increases in mid- and upper-funnel spend, partially offset by lower performance advertising in Vista during the first half of the current fiscal year), partially offset by lower compensation costs in Vista year over year.

For the three months ended September 30, 2023, marketing and selling expenses decreased by $8.7 million as compared to the prior year.

The expense decrease was due to lower compensation costs of $3.2 million due in part to the March 2023 cost reduction actions.

Other cost decreases include lower third-party consulting spend, mainly in our Vista business, and lower building costs driven by actions taken over the past year to further optimize our real estate footprint for many of our team members operating under a remote-first model.

Advertising spend was also lower by $1.0 million across Cimpress, due to the decrease of advertising spend in our Vista business of $10.2 million driven by lower mid- and upper-funnel spend, which was largely offset by advertising spend increases across our other businesses, most notably driven by an increase in our National Pen business due in part to timing effects of direct mail campaigns.

General and administrative expense

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

For the three and nine months ended March 31, 2023, general and administrative expenses increased by $1.7 million and $12.3 million, respectively, as compared to the prior-year periods.

Compensation costs increased year over year from higher headcount and the impacts of our inflation-adjusted annual merit cycle.

Other cost increases included higher travel and training costs and consulting spend.

For the nine months ended March 31, 2023, we recognized an additional $2.2 million of expense related to the termination of one of our leased office locations as we continue to optimize our office footprint with many of our team members operating under a remote-first model.

These increases were partially offset by lower share-based compensation expense due to forfeitures from our recent restructuring actions, as well as favorability due to different timing of expense from our granting of RSUs and options for most employees during the current year, as compared to PSUs in prior years.

Restructuring expense

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.

For the three and nine months ended March 31, 2023, restructuring expenses increased by $26.7 million and $39.7 million, respectively, as compared to the prior-year periods.

This increase is largely driven by $29.5 million of costs recognized in the current quarter related to the previously described action 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.

The remaining increase relates to other actions announced earlier in the year to prioritize our investments and exit the Japanese and Chinese markets.

Refer to Note 13 in the accompanying consolidated financial statements for additional details.

For the three months ended September 30, 2023, general and administrative expenses decreased by $5.7 million as compared to the prior year.

The decrease was driven by the nonrecurrence of $2.4 million of expense related to the prior-year termination of one of our leased office locations as we've continued to optimize our real estate footprint with many of our team members operating under a remote-first model, as well as the reduction of third-party consulting spend.

The exit of our business in China during fiscal year 2023 also decreased our general and administrative expenses by $0.7 million versus the prior year.

Other Consolidated Results

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

Three Months Ended March 31, Nine Months Ended March 31,

Three Months Ended September 30,

Gains on derivatives not designated as hedging instruments

$ 8,312 $ 28,645

(Losses) gains on derivatives not designated as hedging instruments $ (2,428) $ 11,210 $ 2,021 $ 31,017

Currency-related gains (losses), net 4,187 (672) 10,217 5,202

Other (losses) gains (382) 1,783 (856) 2,111

Currency-related losses, net

(2,699) (197)

Other gains (losses)

Total other income, net

$ 6,419 $ 27,397

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

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

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

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

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

Gains on the revaluation of non-functional currency debt and on a cross-currency swap contract designated as a cash flow hedge are included in our currency-related losses, net, offsetting the impact of certain non-functional currency intercompany relationships.

Interest expense, net

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

In addition, accretion adjustments related to our mandatorily redeemable noncontrolling interests are recognized in interest expense, net.

Refer to Note 7 in the accompanying consolidated financial statements for additional details.

Interest expense, net increased by $6.3 million and $8.6 million during the three and nine months ended March 31, 2023, respectively, as compared to the prior-year periods, primarily due to a higher weighted-average interest rate (net of interest rate swaps) driving the majority of the interest expense increases, partially offset by an increase in interest income earned on our cash and marketable securities of $2.2 million and $5.8 million, respectively.

In addition, we recognized accretion adjustments of $1.2 million and $3.3 million during the three and

nine months ended March 31, 2023, respectively, for our mandatorily redeemable noncontrolling interests, which did not occur in the prior periods.

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

Interest expense, net increased by $4.4 million during the three months ended September 30, 2023 as compared to the prior year, primarily due to a higher weighted-average interest rate (net of interest rate swaps) and partially offset by an increase in interest income earned on our cash and marketable securities of $1.2 million.

Income tax expense

Three Months Ended March 31, Nine Months Ended March 31,

2023 2022 2023 2022

In thousands Three Months Ended September 30,

Income tax expense $ 8,122 $ 9,365

Effective tax rate 64.0 % (60.9) %

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 $29.6 million 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 $116.7 million recorded during the nine months ended March 31, 2023.

Income tax expense for the three months ended September 30, 2023 decreased versus the prior comparative period due to various immaterial discrete items in both periods, offset by increased tax on increased profits as we reported pre-tax income for the three months ended September 30, 2023 and a pre-tax loss in the prior comparative period.

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

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less gain on purchase or sale of subsidiaries.

During the fourth quarter of fiscal year 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 all prior periods presented to reflect our updated segment reporting, which decreased both Vista segment EBITDA and Central and corporate costs by $1.9 million and $4.9 million, respectively, for the three and nine months ended March 31, 2023.

Three Months Ended March 31, Nine Months Ended March 31,

2023 2022 2023 vs.

The effects of currency exchange rate fluctuations impact segment EBITDA and we do not allocate to segment EBITDA any gains or losses that are realized by our currency hedging program.

Three Months Ended September 30,

2023 2022 2023 vs.

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Segment Revenue

Vista's reported revenue growth for the three and nine months ended March 31, 2023 was negatively affected by a currency impact of 2% and 4%, respectively.

Vista's organic constant-currency revenue growth was 16% and 8%, respectively, for the three and nine months ended March 31, 2023.

Constant-currency revenue growth was driven by new customer count and new customer bookings growth across all major markets, as well as increased repeat customer bookings.

From a product perspective, the strongest growth was in the promotional products, apparel and gifts (PPAG) category, as well as business cards, marketing materials, packaging and signage.

For the three and nine months ended March 31, 2023, holiday cards and invitations and announcements declined, particularly in the U.S.

market, which had a more pronounced impact during our seasonally significant second quarter.

For the three and nine months ended March 31, 2023, revenue growth was negatively impacted year over year by a decline in face mask sales of $1.7 million and $10.2 million, respectively, as well as lower revenue year over year of $2.1 million and $5.4 million, respectively, due to our planned exit from the Japanese market.

Vista's reported revenue growth for the three months ended September 30, 2023 was positively affected by a currency impact of 1%, and constant-currency revenue growth was 6%.

The constant-currency growth was reduced by higher backlog versus the prior year of approximately $4.3 million that we expect to benefit revenue throughout the remainder of the fiscal year.

Overall revenue growth was driven by approximately even contribution from order growth and higher average order values from both product mix and pricing.

Revenue grew across product categories with the fastest growth continuing in the promotional products, apparel, and gifts (PPAG) category, while marketing materials, packaging and labels, and signage all grew strongly year over year.

Segment Profitability

For the three months ended March 31, 2023, segment EBITDA increased by $34.9 million, through a combination of factors including revenue growth described above.

Gross margins were flat year over year as inflationary cost pressures began to lessen and further price increases were implemented.

In addition, advertising spend decreased $4.1 million year over year, as a result of increased efficiency and a reduction in spend in non-core categories.

We also continue to test a higher mix of mid- and upper-funnel advertising spend compared to lower-funnel spend, which we believe should help us improve awareness and consideration with customers and prospects with less reliance on paid search advertising.

We delivered some operating expense efficiencies this quarter, although the cost reduction implemented and announced in March did not materially benefit the quarter.

For the nine months ended March 31, 2023, segment EBITDA decreased by $36.9 million, due in part to cost inflation that had a larger net impact on our results during the first half of fiscal 2023.

Product mix weighed on Vista's gross margins during the first half of fiscal year 2023, when we experienced the fastest growth in product categories like PPAG that have lower gross margins although higher average order values.

Changes in currency exchange rates had a negative impact during the nine months ended March 31, 2023.

Vista's advertising expense increased by $19.4 million year over year, driven by higher mid- and upper funnel advertising spend, mainly during the first half of fiscal 2023.

Operating expenses also increased $3.0 million due to increased growth investments made last year, which we've fully lapped during the current quarter and were starting to be offset by cost reductions implemented in March 2023.

For the three months ended September 30, 2023, segment EBITDA increased by $43.7 million, due in part to gross profit growth as a result of the revenue growth described above, diminishing effects of inflationary pressure on key input costs and the benefit of cost reduction actions implemented in March 2023.

These collective benefits also resulted in stronger gross margins versus the prior year that was offset in part by unfavorable product mix changes from a gross margin perspective, since the fastest growth was in product categories like PPAG that have lower gross margins despite higher average order values.

Vista benefited from $10.2 million of lower advertising costs as compared to the prior-year period, a result of improved advertising efficiencies and lower spend in mid- and upper- funnel channels in which we were conducting heavy testing last year.

Operating expenses, excluding the effect of restructuring costs which do not impact segment EBITDA, decreased $15.1 million primarily due to savings

resulting from cost reduction actions implemented in March 2023, partially offset by the effect of merit increases.

Changes in currency exchange rates had a slightly positive impact year over year.

PrintBrothers

Three Months Ended March 31, Nine Months Ended March 31,

2023 2022 2023 vs.

Three Months Ended September 30,

2023 2022 2023 vs.

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Segment Revenue

PrintBrothers' reported revenue growth for the three and nine months ended March 31, 2023 was negatively affected by currency impacts of 5% and 12%, respectively.

When excluding the benefit from a small recent acquisition, organic constant-currency revenue growth was 22% and 21%, respectively.

This strong performance was driven by growth in order volumes and price increases implemented to address inflationary cost increases.

PrintBrothers' reported revenue growth for the three months ended September 30, 2023 was positively affected by currency impacts of 9%, resulting in an increase to revenue on a constant-currency basis of 6%.

Constant currency growth was driven primarily by continued order volume growth in the segment's largest business, and to a lesser extent from pricing improvements.

Segment Profitability

Despite a challenging supply chain and inflationary environment, PrintBrothers' segment EBITDA for the three and nine months ended March 31, 2023 grew year over year, driven by the constant-currency revenue growth described above, as well as profit contribution from a business acquired in the last twelve months.

Currency exchange fluctuations negatively impacted segment EBITDA year over year by $0.5 million and $4.4 million, for the three and nine months ended March 31, 2023, respectively.

We continue to focus on key areas within these businesses to exploit scale advantages and improve their cost competitiveness.

These businesses also continue to adopt technologies that are part of our mass customization platform, which we believe will further improve customer value and the efficiency of each business over the long term.

PrintBrothers' segment EBITDA for the three months ended September 30, 2023 grew year over year, driven by the constant-currency revenue growth described above, as well as gross margin expansion which benefited from favorable product mix shifts, as well as operating expense efficiencies.

Currency exchange fluctuations positively impacted segment EBITDA year over year by $1.5 million.

The Print Group

Three Months Ended March 31, Nine Months Ended March 31,

2023 2022 2023 vs.

Three Months Ended September 30,

2023 2022 2023 vs.

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Segment Revenue

The Print Group's reported revenue for the three and nine months ended March 31, 2023 was negatively affected by a currency impact of 6% and 11%, respectively, resulting in an increase to revenue on a constant-currency basis of 19% and 17%, respectively.

Constant-currency revenue growth was largely driven by price increases that have been implemented over the past year to address inflationary cost increases, as well as volume growth and increased order fulfillment for other Cimpress businesses.

The Print Group's reported revenue for the three months ended September 30, 2023 was positively affected by a currency impact of 8%, resulting in a decrease to revenue on a constant-currency basis of 3%.

Constant-currency revenue decline was negatively impacted by the non-recurrence of a prior-year revenue benefit of $2.0 million from a change in commercial terms.

Excluding this item, constant-currency revenue growth would have been flat.

Revenue from reseller customer channels declined and this was offset by growth in direct customer channels and favorable product mix shifts.

Segment Profitability

The increase in The Print Group's segment EBITDA during the three months ended March 31, 2023, as compared to the prior year, was driven by the revenue growth described above, as well as gross margin improvements due to lower shipping costs and benefits from a higher mix of insourced order production.

The decrease in The Print Group's segment EBITDA during the nine months ended March 31, 2023 as compared to the prior year was largely due to higher input costs that are impacted by supply chain disruptions and higher shipping and energy costs, which had a larger impact during the first half of fiscal 2023.

For the three and nine months ended March 31, 2023, currency exchange fluctuations negatively impacted segment EBITDA year over year by $0.6 million and $4.4 million, respectively.

In thousands Three Months Ended March 31, Nine Months Ended March 31,

2023 2022 2023 vs.

The increase in The Print Group's segment EBITDA during the three months ended September 30, 2023 as compared to the prior year was largely driven by gross profit growth as gross margins expanded materially, benefiting from a reduction in key input costs such as materials, shipping, and utilities, as well as improved manufacturing efficiencies.

Currency exchange fluctuations positively impacted segment EBITDA year over year by $1.0 million.

In thousands Three Months Ended September 30,

2023 2022 2023 vs.

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Segment Revenue

For the three and nine months ended March 31, 2023, National Pen's revenue growth was negatively affected by currency impacts of 3% and 6%, respectively, resulting in constant-currency revenue growth of 15% and 12%, respectively.

Constant-currency revenue growth was driven by price increases that have been implemented over the past year to address inflationary cost increases, as well as volume growth in new product categories that include bags and drinkware.

Year-over-year revenue growth was negatively impacted by our planned exit from the Japanese market by approximately $2.6 million and $9.9 million for the three and nine months ended March 31, 2023, respectively, as well as the decline in face mask sales by approximately $1.2 million and $8.5 million, respectively.

For the three months ended September 30, 2023, National Pen's revenue growth was positively affected by currency impacts of 2%, resulting in constant-currency revenue growth of 5%.

Constant-currency revenue growth was dampened by a prior-year revenue benefit of $2.2 million due to a change in customer terms that impacted the timing of revenue recognition, as well as revenue growth headwinds from the prior-year exit from the Japanese market of $1.7 million.

National Pen continued to deliver strong growth in its e-commerce channel and from fulfillment for other Cimpress businesses.

Segment Profitability

The decrease in National Pen's segment EBITDA for the three and nine months ended March 31, 2023 was driven by negative currency impacts of $1.1 million and $6.5 million, respectively.

During the third quarter of fiscal 2023, segment EBITDA was negatively impacted by contribution margin compression due to increased ad spend across direct mail and web channels, as well as unfavorable product mix shifts to newer product introductions.

In addition, operating expenses increased due to higher tech spend and customer service costs driven by higher sales volumes.

For the nine months ended March 31, 2023, segment EBITDA benefited from lower advertising spend during the first half of the year, as well as less pronounced impacts from product mix shifts during that same period.

The decrease in National Pen's segment EBITDA for the three months ended September 30, 2023 was driven by the aforementioned revenue impacts, higher external marketing spend and the impact of currency changes.

National Pen's direct mail advertising is expensed earlier than the related revenue, and therefore we expect a portion of the higher spend to benefit revenue during the second quarter of the current fiscal year.

Currency exchange fluctuations negatively impacted segment EBITDA year over year by $1.8 million.

All Other Businesses

Three Months Ended March 31, Nine Months Ended March 31,

2023 2022 2023 vs.

Three Months Ended September 30,

2023 2022 2023 vs.

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% of revenue 12 % 12 %

This segment consists of BuildASign, which is a larger and profitable business, and Printi, an early-stage business that we have managed at a relatively modest operating loss as previously described and planned.

This segment also included results from our recently divested YSD business that was completed during the third quarter of fiscal 2023.

This segment includes BuildASign, which is a larger and profitable business, and Printi, an early-stage business that we have managed at a relatively modest operating loss as previously described and planned.

Segment Revenue

All Other Businesses' constant-currency revenue growth was 1% and 4% during the three and nine months ended March 31, 2023, respectively.

BuildASign generates the majority of revenue in this segment, and for the three months ended March 31, 2023 revenue was flat year over year and grew for the nine months ended March 31, 2023, with mixed performance by product line.

Printi delivered solid revenue growth across product lines and channels due to price increases implemented over the past year.

All Other Businesses' constant-currency revenue decreased by 1% during the three months ended September 30, 2023.

BuildASign generates the majority of revenue in this segment, and revenue declined slightly year over year as real estate signage product sales were down, driven by exposure to trends in the U.S.

real estate market.

Other signage products grew in this business.

Printi delivered revenue growth across product lines and channels supported by price increases implemented over the past year.

Segment Profitability

The decrease in segment EBITDA for the three and nine months ended March 31, 2023 as compared to the prior comparative periods, was primarily due to lower gross margins driven by higher input costs that had a larger impact on BuildASign's home decor products, including increased labor and marketing costs.

During the fourth quarter of fiscal year 2022, we decided to divest our small, loss-making business in China (YSD), which is reported as part of this segment.

Our loss was lower this quarter due to the decreased operating expenses as we prepared to divest the business, which was completed in early January 2023.

The increase in segment EBITDA for the three months ended September 30, 2023, as compared to the prior year, was primarily due to the fiscal year 2023 exit of our business in China, which drove a small loss in the year-ago period.

Central and Corporate Costs

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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 teams managing corporate activities, such as treasury, tax, capital allocation, financial consolidation, internal audit and legal.

and corporate functions including our tax, treasury, internal audit, legal, sustainability, corporate communications, remote first enablement, consolidated reporting and compliance, investor

relations, and the functions of our CEO and CFO.

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

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

Refer to Note 11 in our accompanying consolidated financial statements for additional details.

Central and corporate costs decreased by $1.6 million and $2.1 million during the three and nine months ended March 31, 2023, respectively, as compared to the prior periods, driven by favorability from unallocated share-based compensation due to changes in the mix of equity instruments and forfeitures from recent cost reduction actions.

These decreases were partially offset by compensation increases as a result of our inflation-adjusted annual merit cycle and volume-related technology costs.

Central and corporate costs decreased by $2.8 million during the three months ended September 30, 2023 as compared to the prior year's first quarter, driven by lower compensation costs due to savings from the March 2023 cost reduction actions, as well as lower third-party consulting spend.

Liquidity and Capital Resources

Consolidated Statements of Cash Flows Data

Nine Months Ended March 31,

Net cash provided by operating activities $ 68,474 $ 131,716

Three Months Ended September 30,

Net cash provided by (used in) operating activities $ 42,254 $ (25,251)

Net cash used in investing activities (10,826) (101,043)

Net cash used in financing activities

The cash flows during the nine months ended March 31, 2023 related primarily to the following items:

(35,065) (11,780)

The cash flows during the three months ended September 30, 2023 related primarily to the following items:

Cash inflows:

• Adjustments for non-cash items of $309.7 million primarily related to adjustments for depreciation and amortization of $121.6 million, deferred taxes of $116.0 million, share-based compensation costs of $31.4 million, and unrealized currency-related losses of $25.5 million.

• Net income of $4.6 million

• Adjustments for non-cash items of $44.3 million primarily related to adjustments for depreciation and amortization of $39.9 million, share-based compensation costs of $12.5 million, partially offset by unrealized currency-related gains of $4.4 million and deferred taxes of $1.1 million

• Proceeds from the maturity of held-to-maturity securities of $20.5 million

• Proceeds from the sale of assets of $5.6 million, which primarily included proceeds from the sale of our Japanese manufacturing facility following our prior year exit from the Japanese market.

Cash outflows:

• Net loss of $213.1 million

• Exercise of PrintBrothers' and BuildASign minority equity interest holders' put options for $95.6 million;

refer to Note 10 in the accompanying consolidated financial statements for additional details

• Total net working capital impacts of $28.1 million were a use of cash, primarily due to timing impacts from unfavorable changes to accounts payable, partially offset by an inflow from accrued expenses driven by an increase in restructuring-related accruals of $15.3 million.

Refer to Note 13 in the accompanying consolidated financial statements for additional details.

• Internal and external costs of $44.2 million for software and website development that we have capitalized

• Capital expenditures of $22.6 million, of which the majority related to the purchase of manufacturing and automation equipment for our production facilities

• Purchase of held-to-maturity securities for $23.9 million, net of maturities

• Repayments of debt, net of proceeds from debt, for $9.7 million

• Internal and external costs of $14.4 million for software and website development that we have capitalized

• Total outflow from net working capital of $6.6 million, primarily due to timing impacts from unfavorable changes to accounts payable

• Purchases of a portion of our 2026 Notes of $19.8 million.

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

• Payment of withholding taxes in connection with share awards of $8.4 million, primarily driven by the annual vesting of share grants during August 2023

• Repayments of debt, net of proceeds from borrowings, of $3.6 million

• Payments for finance lease arrangements of $2.8 million

• Payment of withholding taxes in connection with share awards of $3.8 million

• $3.7 million of distributions to noncontrolling interest holders

Additional Liquidity and Capital Resources Information.

At March 31, 2023, we had $115.0 million of cash and cash equivalents, $74.8 million of marketable securities and $1,710.2 million of debt, excluding debt issuance costs and debt premiums and discounts.

During the nine months ended March 31, 2023, we financed our operations and strategic investments through internally generated cash flows from operations and cash on hand.

At September 30, 2023, we had $125.2 million of cash and cash equivalents, $22.6 million of marketable securities, and $1,621.0 million of debt, excluding debt issuance costs and debt premiums and discounts.

During the three months ended September 30, 2023, we financed our operations and strategic investments through internally generated cash flows from operations and cash on hand.

We expect to finance our future operations through our cash, investments, operating cash flow, and borrowings under our debt arrangements.

In light of our recently implemented cost savings measures and our expectation of continued profitability expansion and cash flow generation, we expect our liquidity to increase in the fourth quarter of fiscal year 2023 and in fiscal year 2024.

We have historically used excess cash and cash equivalents for organic investments, share repurchases, acquisitions and equity investments, and debt reduction.

We remain committed to reducing our net leverage through a combination of increased profits and lower net debt in line with the detailed plan we outlined in our investor update on March 24, 2023.

Therefore, through fiscal year 2024 we expect capital allocation beyond current levels of organic investment to favor net debt reduction, which could include repurchases of our 7.0% Senior Notes due 2026.

During the first quarter of fiscal 2024, we allocated $19.8 million of capital toward the purchase of a portion of our 2026 Notes.

We expect to continue reducing our net leverage through fiscal year 2024.

Beyond fiscal year 2024, we expect to have the flexibility to opportunistically deploy capital that enhances our intrinsic value per share even while maintaining leverage similar to or below our pre-pandemic levels.

Supply Chain Financing Program.

As part of our ongoing efforts to manage our liquidity, we work with our suppliers to optimize our terms and conditions, which include the extension of payment terms.

We facilitate a voluntary supply chain finance program through a financial intermediary, which provides certain suppliers the option to be paid by the financial intermediary earlier than the due date of the applicable invoice.

The decision to sell receivables due from us is at the sole discretion of both the suppliers and the financial institution.

Our responsibility is limited to making payment on the terms originally negotiated with each supplier, regardless of whether a supplier participates in the program.

We do not believe there is a risk that our payment terms will be shortened in the near future.

Refer to Note 2 of the accompanying consolidated financial statements for additional information.

Indefinitely Reinvested Earnings.

As of March 31, 2023, a portion of our cash and cash equivalents were held by our subsidiaries, and undistributed earnings of our subsidiaries that are considered to be indefinitely reinvested were $53.7 million.

As of September 30, 2023, a portion of our cash and cash equivalents were held by our subsidiaries, and undistributed earnings of our subsidiaries that are considered to be indefinitely reinvested were $70.0 million.

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

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Contractual Obligations

Contractual obligations at March 31, 2023 are as follows:

Contractual obligations at September 30, 2023 are as follows:

In thousands Payments Due by Period

1 unchanged sentence

Purchase commitments 285,698 218,404 43,461 12,833 11,000

Senior unsecured notes and interest payments 747,000 42,000 84,000 621,000 —

2026 Notes and interest payments 637,833 36,899 600,934 — —

Senior secured credit facility and interest payments (2) 1,466,500 96,659 188,851 1,180,990 —

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However, due to the uncertainty of the timing of future cash flows associated with our uncertain tax positions, we are unable to make reasonably reliable estimates of the period of cash settlement, if any, with the respective taxing authorities.

Accordingly, uncertain tax positions of $9.6 million as of March 31, 2023 have been excluded from the contractual obligations table above.

Accordingly, uncertain tax positions of $9.1 million as of September 30, 2023 have been excluded from the contractual obligations table above.

See Note 9 in our accompanying consolidated financial statements for further information on uncertain tax positions.

1 unchanged sentence

We rent manufacturing facilities and office space under operating leases expiring on various dates through 2037.

The terms of certain lease agreements require security deposits in the form of bank guarantees and letters of credit, with $1.5 million in the aggregate outstanding as of March 31, 2023 .

The terms of certain lease agreements require security deposits in the form of bank guarantees and letters of credit, with $1.5 million in the aggregate outstanding as of September 30, 2023.

Purchase Commitments.

At March 31, 2023, we had unrecorded commitments under contract of $206.0 million.

Purchase commitments consisted of third-party cloud services of $79.4 million;

inventory, third-party fulfillment and digital service purchase commitments of $79.2 million;

At September 30, 2023, we had unrecorded commitments under contract of $285.7 million.

Purchase commitments consisted of third-party fulfillment and digital services of $142.6 million;

third-party cloud services of $65.3 million;

software of $22.2 million;

advertising of $11.3 million;

production and computer equipment purchases of $2.5 million;

commitments for professional and consulting fees of $7.2 million;

and other unrecorded purchase commitments of $14.4 million.

production and computer equipment purchases of $3.6 million;

and other commitments of $33.5 million.

Senior Secured Credit Facility and Interest Payments.

As of March 31, 2023, we have borrowings under our Restated Credit Agreement of $1,102.5 million consisting of the Term Loan B, which amortizes over the loan period, with a final maturity date of May 17, 2028.

Our $250.0 million Revolving Credit Facility under our Restated Credit Agreement has $244.0 million unused as of March 31, 2023.

As of September 30, 2023, we have borrowings under our Restated Credit Agreement of $1,087.4 million, consisting of the Term Loan B, which amortizes over the loan period, with a final maturity date of May 17, 2028.

Our $250.0 million Revolving Credit Facility with a maturity date of May 17, 2026, under our Restated Credit Agreement, has $244.2 million unused as of September 30, 2023.

There are no drawn amounts on the Revolving Credit Facility, but our outstanding letters of credit reduce our unused balance.

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Any amounts drawn under the Revolving Credit Facility will be due on May 17, 2026.

Interest payable included in the above table is based on the interest rate as of March 31, 2023 and assumes all LIBOR-based revolving loan amounts outstanding will not be paid until maturity but that the term loan amortization payments will be made according to our defined schedule.

Senior Unsecured Notes and Interest Payments.

Our $600.0 million of 2026 Notes bear interest at a rate of 7.0% per annum and mature on June 15, 2026.

Interest payable included in the above table is based on the interest rate as of September 30, 2023 and assumes all Term SOFR-based revolving loan amounts outstanding will not be paid until maturity but that the term loan amortization payments will be made according to our defined schedule.

The LIBOR sunset occurred on June 30, 2023, and, under the terms of our Restated Credit Agreement, our benchmark rate transitioned to Term SOFR in July 2023.

2026 Notes and Interest Payments.

Our $527.1 million 2026 Notes bear interest at a rate of 7.0% per annum and mature on June 15, 2026.

Interest on the notes is payable semi-annually on June 15 and December 15 of each year.

During the three months ended September 30, 2023, we purchased an aggregate principal amount of $21,165 for a purchase price of $19,815, as well as the related settlement of unpaid interest, which resulted in the recognition of a gain on the extinguishment of debt of $1,372.

Debt Covenants.

The Restated Credit Agreement and the indenture that governs our 7.0% Senior Notes due 2026 contain covenants that restrict or limit certain activities and transactions by Cimpress and our subsidiaries.

As of March 31, 2023, we were in compliance with all covenants under our Restated Credit Agreement and the indenture governing our 2026 Notes.

The Restated Credit Agreement and the indenture that governs our 2026 Notes contain covenants that restrict or limit certain activities and transactions by Cimpress and our subsidiaries.

As of September 30, 2023, we were in compliance with all covenants under our Restated Credit Agreement and the indenture governing our 2026 Notes.

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

In addition, we have other debt which consists primarily of term loans acquired through our various acquisitions or used to fund certain capital investments.

As of March 31, 2023, we had $7.7 million outstanding for those obligations that have repayments due on various dates through March 2027.

As of September 30, 2023, we had $6.5 million outstanding for those obligations that have repayments due on various dates through November 2027.

Finance Leases.

We lease certain machinery and plant equipment under finance lease agreements that expire at various dates through 2028.

The aggregate carrying value of the leased equipment under finance leases included in property, plant and equipment, net in our consolidated balance sheet at March 31, 2023 is $28.8 million, net of accumulated depreciation of $36.9 million.

The present value of lease installments not yet due included in other current liabilities and other liabilities in our consolidated balance sheet at March 31, 2023 amounts to $37.1 million.

Other Obligations.

In February 2023, we made a $6.8 million deferred payment for our Depositphotos acquisition, resulting in no outstanding acquisition-related deferred liabilities as of March 31, 2023.

We lease certain facilities, machinery, and plant equipment under finance lease agreements that expire at various dates through 2028.

The aggregate carrying value of the leased equipment under finance leases included in property, plant and equipment, net in our consolidated balance sheet at September 30, 2023 is $28.7 million, net of accumulated depreciation of $36.2 million.

The present value of lease installments not yet due included in other current liabilities and other liabilities in our consolidated balance sheet at September 30, 2023 amounts to $37.8 million.

Additional Non-GAAP Financial Measures

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

Adjusted EBITDA is defined as GAAP operating income plus depreciation and amortization plus share-based compensation expense plus proceeds from insurance plus earn-out related charges plus certain impairments plus restructuring related charges plus realized gains or losses on currency derivatives less gain on purchase or sale of subsidiaries.

Adjusted EBITDA is defined as GAAP operating income plus depreciation and amortization plus share-based compensation expense plus proceeds from insurance not already included in operating income plus earn-out related charges plus certain impairments plus restructuring related charges plus realized gains or losses on currency derivatives less the gain or loss on purchase or sale of subsidiaries as well as the disposal of assets.

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

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

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

As another example, as we do not apply hedge accounting for certain derivative contracts, we believe inclusion of realized gains and losses on these contracts that are intended to be matched against operational currency fluctuations provides further insight into our operating performance in addition to that provided by our GAAP operating income.

We do not, nor do we suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

We do not, nor do we suggest, that investors should consider such non-GAAP financial measures in isolation from, or as a substitute for,

financial information prepared in accordance with GAAP.

Adjusted free cash flow is the primary financial metric by which we set quarterly and annual budgets both for individual businesses and Cimpress-wide.

Adjusted free cash flow is defined as net cash provided by operating activities less purchases of property, plant and equipment, purchases of intangible assets not related to acquisitions, and capitalization of software and website development costs that are included in net cash used in investing activities, plus the payment of contingent consideration in excess of acquisition-date fair value and gains on proceeds from insurance that are included in net cash provided by operating activities, if any.

We have revised all periods presented to incorporate this change.

Adjusted free cash flow is defined as net cash provided by operating activities less purchases of property, plant and equipment, purchases of intangible assets not related to acquisitions, and capitalization of software and website development costs that are included in net cash used in investing activities, plus the proceeds from sale of assets, payment of contingent consideration in excess of acquisition-date fair value, and gains on proceeds from insurance that are included in net cash provided by operating activities, if any.

We use this cash flow metric because we believe that this methodology can provide useful supplemental information to help investors better understand our ability to generate cash flow after considering certain investments required to maintain or grow our business, as well as eliminate the impact of certain cash flow items presented as operating cash flows that we do not believe reflect the cash flow generated by the underlying business.

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

The table below sets forth operating income and adjusted EBITDA for the three and nine months ended March 31, 2023 and 2022:

In thousands Three Months Ended March 31, Nine Months Ended March 31,

The table below sets forth operating income and adjusted EBITDA for the three months ended September 30, 2023 and 2022:

In thousands Three Months Ended September 30,

GAAP operating income (loss)

$ 34,100 $ (17,967)

GAAP operating (loss) income $ (12,197) $ (28,437) $ 3,414 $ 74,483

Exclude expense (benefit) impact of:

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Restructuring-related charges (334) 1,820

Realized gains (losses) on currency derivatives not included in operating (loss) income (1) 4,783 2,011 26,553 (987)

Realized gains on currency derivatives not included in operating income (loss) (1)

Adjusted EBITDA $ 88,736 $ 45,595

_________________

(1) These realized gains (losses) include only the impacts of certain currency derivative contracts that are intended to hedge our exposure to foreign currencies for which we do not apply hedge accounting.

See Note 4 in our accompanying consolidated financial statements for further information.

The table below sets forth net cash provided by operating activities and adjusted free cash flow for the nine months ended March 31, 2023 and 2022:

In thousands Nine Months Ended March 31,

Net cash provided by operating activities $ 68,474 $ 131,716

(1) These realized gains (losses) include only the impacts of certain currency derivative contracts that are intended to hedge our adjusted EBITDA exposure to foreign currencies for which we do not apply hedge accounting.

Refer to Note 4 in our accompanying consolidated financial statements for further information.

The table below sets forth net cash provided by (used in) operating activities and adjusted free cash flow for the three months ended September 30, 2023 and 2022:

In thousands Three Months Ended September 30,

Net cash provided by (used in) operating activities

$ 42,254 $ (25,251)

Purchases of property, plant and equipment (22,565) (11,758)

Capitalization of software and website development costs (14,397) (15,330)

Proceeds from the sale of assets (1) 5,636 122

Adjusted free cash flow (1)

$ 10,928 $ (52,217)

_________________

(1) During the current quarter, we revised our adjusted free cash flow definition to include proceeds from the sale of assets.

We have revised all periods presented to incorporate this change.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis