CIMPRESS plc 10-Q

Item 1. Financial Statements CIMPRESS PLC CONSOLIDATED BALANCE SHEETS (unaudited in thousands, except share and per share data) March 31, 2024 June 30, 2023 Assets Current assets: Cash and cash equivalents $ 154,338 $ 130,313 Marketable securities 6,499 38,540 Accounts receivable, net of allowances of $8,068 and $6,630, respectively 71,070 67,353 Inventory 96,319 107,835 Prepaid expenses and other current assets 113,952 96,986 Total current assets 442,178 441,027 Property, plant and equipment, net 270,040 287,574 Operating lease assets, net 70,459 76,776 Software and website development costs, net 92,701 95,315 Deferred tax assets 9,435 12,740 Goodwill 779,263 781,541 Intangible assets, net 83,235 109,196 Marketable securities, non-current — 4,497 Other assets 37,002 46,193 Total assets $ 1,784,313 $ 1,854,859 Liabilities, noncontrolling interests and shareholders’ deficit Current liabilities: Accounts payable $ 269,108 $ 285,784 Accrued expenses 271,093 257,109 Deferred revenue 49,838 44,698 Short-term debt 10,935 10,713 Operating lease liabilities, current 19,315 22,559 Other current liabilities 15,631 24,469 Total current liabilities 635,920 645,332 Deferred tax liabilities 47,221 47,351 Long-term debt 1,590,676 1,627,243 Operating lease liabilities, non-current 54,160 56,668 Other liabilities 79,591 90,058 Total liabilities 2,407,568 2,466,652 Commitments and contingencies (Note 12) Redeemable noncontrolling interests (Note 10) 12,140 10,893 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; 43,611,795 and 44,315,855 shares issued, respectively; 25,640,548 and 26,344,608 shares outstanding, respectively 610 615 Treasury shares, at cost, 17,971,247 shares for both periods presented ( 1,363,550 ) ( 1,363,550 ) Additional paid-in capital 561,930 539,454 Retained earnings 206,295 235,396 Accumulated other comprehensive loss ( 41,303 ) ( 35,060 ) Total shareholders’ deficit attributable to Cimpress plc ( 636,018 ) ( 623,145 ) Noncontrolling interests (Note 10) 623 459 Total shareholders' deficit ( 635,395 ) ( 622,686 ) Total liabilities, noncontrolling interests and shareholders’ deficit $ 1,784,313 $ 1,854,859 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, 2024 2023 2024 2023 Revenue $ 780,588 $ 742,164 $ 2,459,245 $ 2,290,781 Cost of revenue (1) 404,668 394,908 1,266,874 1,228,036 Technology and development expense (1) 83,790 78,287 238,081 230,485 Marketing and selling expense (1) 191,591 187,234 595,622 593,312 General and administrative expense (1) 54,254 52,578 151,388 156,441 Amortization of acquired intangible assets 6,919 11,239 25,986 35,951 Restructuring expense (1) 128 30,115 277 43,142 Income (loss) from operations 39,238 ( 12,197 ) 181,017 3,414 Other (expense) income, net ( 3,651 ) 1,377 2,377 11,382 Interest expense, net ( 30,158 ) ( 30,515 ) ( 89,946 ) ( 83,918 ) Gain on early extinguishment of debt — — 1,721 — Income (loss) before income taxes 5,429 ( 41,335 ) 95,169 ( 69,122 ) Income tax expense 10,610 8,475 35,527 143,969 Net (loss) income ( 5,181 ) ( 49,810 ) 59,642 ( 213,091 ) Add: Net loss (income) attributable to noncontrolling interests 1,203 484 ( 961 ) ( 1,676 ) Net (loss) income attributable to Cimpress plc $ ( 3,978 ) $ ( 49,326 ) $ 58,681 $ ( 214,767 ) Basic net (loss) income per share attributable to Cimpress plc $ ( 0.15 ) $ ( 1.88 ) $ 2.22 $ ( 8.19 ) Diluted net (loss) income per share attributable to Cimpress plc $ ( 0.15 ) $ ( 1.88 ) $ 2.16 $ ( 8.19 ) Weighted average shares outstanding — basic 26,216,216 26,268,301 26,432,423 26,226,989 Weighted average shares outstanding — diluted 26,216,216 26,268,301 27,143,619 26,226,989 ____________________________________________ (1) Share-based compensation expense is allocated as follows: Three Months Ended March 31, Nine Months Ended March 31, 2024 2023 2024 2023 Cost of revenue $ 245 $ 42 $ 641 $ 411 Technology and development expense 5,692 2,500 15,601 9,808 Marketing and selling expense 3,318 ( 323 ) 8,625 3,888 General and administrative expense 9,142 5,023 23,632 15,157 Restructuring expense — 1,492 — 2,141 See accompanying notes. 2 CIMPRESS PLC CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited in thousands) Three Months Ended March 31, Nine Months Ended March 31, 2024 2023 2024 2023 Net (loss) income $ ( 5,181 ) $ ( 49,810 ) $ 59,642 $ ( 213,091 ) Other comprehensive income (loss), net of tax: Foreign currency translation gains (losses), net of hedges 1,394 ( 1,526 ) ( 4,446 ) 1,412 Net unrealized gains (losses) on derivative instruments designated and qualifying as cash flow hedges 7,051 ( 4,667 ) 4,459 6,444 Amounts reclassified from accumulated other comprehensive loss to net (loss) income for derivative instruments ( 2,772 ) ( 969 ) ( 6,265 ) ( 771 ) Comprehensive income (loss) 492 ( 56,972 ) 53,390 ( 206,006 ) Add: Comprehensive loss (income) attributable to noncontrolling interests 1,450 414 ( 952 ) 3,076 Total comprehensive income (loss) attributable to Cimpress plc $ 1,942 $ ( 56,558 ) $ 52,438 $ ( 202,930 ) See accompanying notes. 3 CIMPRESS PLC CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (unaudited in thousands) Ordinary Shares Treasury Shares Number of Shares Issued Amount Number of Shares Issued 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 ) 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 loss 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. 4 CIMPRESS PLC CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (CONTINUED) (unaudited in thousands) Ordinary Shares Treasury Shares Number of Shares Issued Amount Number of Shares Issued Amount Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Deficit Balance at June 30, 2023 44,316 $ 615 ( 17,971 ) $ ( 1,363,550 ) $ 539,454 $ 235,396 $ ( 35,060 ) $ ( 623,145 ) Issuance of ordinary shares due to share option exercises, net of shares withheld for taxes 2 — — — 82 — — 82 Restricted share units vested, net of shares withheld for taxes 236 — — — ( 8,403 ) — — ( 8,403 ) Share-based compensation expense — — — — 12,621 — — 12,621 Net income attributable to Cimpress plc — — — — — 4,554 — 4,554 Redeemable noncontrolling interest accretion to redemption value — — — — — ( 330 ) — ( 330 ) Net unrealized gain on derivative instruments designated and qualifying as cash flow hedges — — — — — — 4,131 4,131 Foreign currency translation, net of hedges — — — — — — ( 3,693 ) ( 3,693 ) Balance at September 30, 2023 44,554 $ 615 ( 17,971 ) $ ( 1,363,550 ) $ 543,754 $ 239,620 $ ( 34,622 ) $ ( 614,183 ) Issuance of ordinary shares due to share option exercises, net of shares withheld for taxes — — — — 6 — — 6 Restricted share units vested, net of shares withheld for taxes 50 6 — — ( 1,792 ) — — ( 1,786 ) Share-based compensation expense — — — — 18,051 — — 18,051 Net income attributable to Cimpress plc — — — — — 58,105 — 58,105 Redeemable noncontrolling interest accretion to redemption value — — — — — ( 135 ) — ( 135 ) Net unrealized loss on derivative instruments designated and qualifying as cash flow hedges — — — — — — ( 10,216 ) ( 10,216 ) Foreign currency translation, net of hedges — — — — — — ( 2,385 ) ( 2,385 ) Balance at December 31, 2023 44,604 $ 621 ( 17,971 ) $ ( 1,363,550 ) $ 560,019 $ 297,590 $ ( 47,223 ) $ ( 552,543 ) See accompanying notes. 5 CIMPRESS PLC CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (CONTINUED) (unaudited in thousands) Ordinary Shares Treasury Shares Number of Shares Issued Amount Number of Shares Issued Amount Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Deficit Balance at December 31, 2023 44,604 $ 621 ( 17,971 ) $ ( 1,363,550 ) $ 560,019 $ 297,590 $ ( 47,223 ) $ ( 552,543 ) Issuance of ordinary shares due to share option exercises, net of shares withheld for taxes 15 — — — 687 — — 687 Purchase and retirement of ordinary shares ( 1,086 ) ( 12 ) — — ( 13,659 ) ( 87,058 ) — ( 100,729 ) Restricted share units vested, net of shares withheld for taxes 79 1 — — ( 3,882 ) — — ( 3,881 ) Share-based compensation expense — — — — 18,765 — — 18,765 Net loss attributable to Cimpress plc — — — — — ( 3,978 ) — ( 3,978 ) Redeemable noncontrolling interest accretion to redemption value — — — — — ( 259 ) — ( 259 ) Net unrealized gain on derivative instruments designated and qualifying as cash flow hedges — — — — — — 4,279 4,279 Foreign currency translation, net of hedges — — — — — — 1,641 1,641 Balance at March 31, 2024 43,612 $ 610 ( 17,971 ) $ ( 1,363,550 ) $ 561,930 $ 206,295 $ ( 41,303 ) $ ( 636,018 ) See accompanying notes. 6 CIMPRESS PLC CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited in thousands) Nine Months Ended March 31, 2024 2023 Operating activities Net income (loss) $ 59,642 $ ( 213,091 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 116,103 121,567 Share-based compensation expense 48,499 31,405 Deferred taxes 1,070 115,984 Gain on early extinguishment of debt ( 1,721 ) — Unrealized (gain) loss on derivatives not designated as hedging instruments included in net income (loss) ( 4,552 ) 32,512 Effect of exchange rate changes on monetary assets and liabilities denominated in non-functional currency 378 ( 6,972 ) Other non-cash items 543 15,200 Changes in operating assets and liabilities, net of effects of businesses acquired: Accounts receivable ( 6,429 ) ( 4,840 ) Inventory 7,006 ( 2,595 ) Prepaid expenses and other assets 4,960 ( 5,071 ) Accounts payable ( 11,464 ) ( 44,994 ) Accrued expenses and other liabilities 11,592 29,369 Net cash provided by operating activities 225,627 68,474 Investing activities Purchases of property, plant and equipment ( 44,425 ) ( 37,486 ) Proceeds from the sale of subsidiaries, net of transaction costs and cash divested — ( 4,130 ) Business acquisitions, net of cash acquired — ( 498 ) Capitalization of software and website development costs ( 43,379 ) ( 44,181 ) Proceeds from the sale of assets 6,419 1,864 Purchases of marketable securities — ( 84,030 ) Proceeds from maturity of held-to-maturity investments 36,676 60,110 Net cash used in investing activities ( 44,709 ) ( 108,351 ) Financing activities Proceeds from borrowings of debt 886 48,264 Payments of debt ( 11,783 ) ( 57,947 ) Payments for purchase of 7% Senior Notes due 2026 ( 24,471 ) — Payments of debt issuance costs — ( 51 ) Payments of purchase consideration included in acquisition-date fair value — ( 7,100 ) Payments of withholding taxes in connection with equity awards ( 14,069 ) ( 3,809 ) Payments of finance lease obligations ( 7,501 ) ( 6,017 ) Purchase of noncontrolling interests ( 65 ) ( 95,567 ) Purchase of ordinary shares ( 100,729 ) — Proceeds from issuance of ordinary shares 775 — Distributions to noncontrolling interests ( 549 ) ( 3,652 ) Other financing activities — 113 Net cash used in financing activities ( 157,506 ) ( 125,766 ) Effect of exchange rate changes on cash 613 3,580 Net increase (decrease) in cash and cash equivalents 24,025 ( 162,063 ) Cash and cash equivalents at beginning of period 130,313 277,053 Cash and cash equivalents at end of period $ 154,338 $ 114,990 See accompanying notes. 7 CIMPRESS PLC CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (unaudited in thousands) Nine Months Ended March 31, 2024 2023 Supplemental disclosures of cash flow information Cash paid during the period for: Interest $ 90,556 $ 70,796 Income taxes 39,307 23,494 Cash received during the period for: Interest 11,208 8,008 Non-cash investing and financing activities Property and equipment acquired under finance leases 4,440 14,405 Amounts accrued related to property, plant and equipment 7,699 9,045 Amounts accrued related to capitalized software development costs 240 116 See accompanying notes. 8 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 collection of businesses that specialize in print mass customization, through which we deliver large volumes of individually small-sized customized orders of printed materials and related products. 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. 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, 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. 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, 2024 and 2023. 9 The following is a summary of the net carrying amount, unrealized losses, and fair value of held-to-maturity securities by type and contractual maturity as of March 31, 2024 and June 30, 2023. March 31, 2024 Amortized cost Unrealized losses Fair value Due within one year: Corporate debt securities $ 2,500 $ ( 11 ) $ 2,489 U.S. government securities 3,999 ( 18 ) 3,981 Total held-to-maturity securities $ 6,499 $ ( 29 ) $ 6,470 June 30, 2023 Amortized cost Unrealized losses Fair value Due within one year: Commercial paper $ 15,982 $ ( 10 ) $ 15,972 Corporate debt securities 16,298 ( 190 ) 16,108 U.S. government securities 6,260 ( 69 ) 6,191 Total due within one year 38,540 ( 269 ) 38,271 Due between one and two years: Corporate debt securities 1,498 ( 35 ) 1,463 U.S. government securities 2,999 ( 66 ) 2,933 Total due between one and two years 4,497 ( 101 ) 4,396 Total held-to-maturity securities $ 43,037 $ ( 370 ) $ 42,667 Ordinary Shares During the three months ended March 31, 2024, we repurchased 1,085,574 of our ordinary shares on the open market and through privately negotiated transactions for $ 100,729 . The repurchased shares were immediately retired after repurchase and therefore have been classified as authorized and unissued shares as of March 31, 2024. The retirement of ordinary shares resulted in a reduction to the nominal value of our ordinary shares outstanding and additional paid in capital in proportion to the amount of total shares outstanding, with the remaining repurchase value recognized as a reduction to retained earnings. Other (Expense) Income, Net The following table summarizes the components of other (expense) income, net: Three Months Ended March 31, Nine Months Ended March 31, 2024 2023 2024 2023 Gains (losses) on derivatives not designated as hedging instruments (1) $ 9,071 $ ( 2,428 ) $ 3,715 $ 2,021 Currency-related (losses) gains, net (2) ( 12,434 ) 4,187 ( 2,071 ) 10,217 Other (losses) gains ( 288 ) ( 382 ) 733 ( 856 ) Total other (expense) income, net $ ( 3,651 ) $ 1,377 $ 2,377 $ 11,382 _____________________ (1) Includes realized and unrealized gains and losses on derivative currency forward and option contracts not designated as hedging instruments. For contracts not designated as hedging instruments, we realized losses of $ 349 and $ 838 for the three and nine months ended March 31, 2024, respectively, and realized gains of $ 4,876 and $ 35,864 for the three and nine months ended March 31, 2023, respectively. Refer to Note 4 for additional details relating to our derivative contracts. (2) Currency-related (losses) gains, net primarily relates to significant non-functional currency intercompany financing relationships that we may change at times and are subject to currency exchange rate volatility. In addition, we have a cross-currency swap designated as a cash flow hedge which hedges the remeasurement of an intercompany loan. Refer to Note 4 for additional details relating to this cash flow hedge. 10 Net (Loss) Income Per Share Attributable to Cimpress plc Basic net (loss) income per share attributable to Cimpress plc is computed by dividing net (loss) income attributable to Cimpress plc by the weighted-average number of ordinary shares outstanding for the respective period. Diluted net (loss) income 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, 2024 2023 2024 2023 Weighted average shares outstanding, basic 26,216,216 26,268,301 26,432,423 26,226,989 Weighted average shares issuable upon exercise/vesting of outstanding share options/RSUs/warrants (1)(2) — — 711,196 — Shares used in computing diluted net (loss) income per share attributable to Cimpress plc 26,216,216 26,268,301 27,143,619 26,226,989 Weighted average anti-dilutive shares excluded from diluted net (loss) income per share attributable to Cimpress plc (1) 955,594 3,161,275 127,229 3,045,675 ___________________ (1) In the periods in which a net loss is recognized, the impact of share options, RSUs and warrants is excluded from shares used in computed diluted net (loss) income per share as it is anti-dilutive. Any equity awards that have a performance condition are not included in dilutive or anti-dilutive shares until the performance condition is met. (2) On May 1, 2020, we entered into a financing arrangement which included 7-year warrants to purchase 1,055,377 of our ordinary shares 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, 2024, the average market price of our ordinary shares was higher than the strike price of the warrants. The weighted average anti-dilutive effect of the warrants was 309,000 for the three months ended March 31, 2024 (anti-dilutive due to our net loss position), and the weighted average dilutive effect of the warrants was 184,608 for the nine months ended March 31, 2024. For the three and nine months ended March 31, 2023, the average market price of our ordinary shares was lower than the strike price of the warrants; therefore, the total 1,055,377 outstanding warrants were considered anti-dilutive. Share-based Compensation Total share-based compensation costs were $ 18,397 and $ 48,499 for the three and nine months ended March 31, 2024, respectively, as compared to $ 8,734 and $ 31,405 for the three and nine months ended March 31, 2023. During the current fiscal year, we issued PSUs (the "2024 PSUs") as part of our long-term incentive program. The 2024 PSUs include both a service and performance condition, and the related expense is recognized using an accelerated expense attribution over the requisite service period for each separately vesting portion of the award. The performance condition for these awards is based on one-year financial targets for fiscal year 2024 revenue, adjusted EBITDA, and unlevered free cash flow. Actual shares issued for each grant will range from 0% to 160% of the number of 2024 PSUs granted based on the attainment of the performance condition. Share-based compensation expense for these awards is recognized on an accelerated basis using the grant date fair value and our estimated attainment percentage of the related performance condition. Until the performance condition is measured during the first fiscal quarter following the end of fiscal year 2024, changes in the estimated attainment percentages may cause expense volatility since a cumulative expense adjustment will be recognized in the period a change occurs. Assets Held for Sale During the first quarter of fiscal year 2024, we began marketing our customer service facility located in Montego Bay, Jamaica for sale as part of the ongoing efforts to optimize our real estate footprint with many of our team members in Jamaica operating under a remote-first model. We continue to classify the facility as held for sale, which has a carrying value of $ 16,595 recognized within prepaid expenses and other current assets in the consolidated balance sheet as of March 31, 2024. We have not recognized any losses on the planned sale of these 11 assets. The sale of this facility has subsequently closed during April 2024, resulting in net cash proceeds of $ 16,785 and an immaterial gain on the sale. Recently Issued or Adopted Accounting Pronouncements Adopted Accounting Standards Supply Chain Finance Programs In September 2022, the FASB issued Accounting Standards Update No. 2022-04 "Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations" (ASU 2022-04), which provides authoritative guidance about expanded disclosure requirements for supply chain finance programs. The new standard requires disclosure of the key terms of outstanding supply chain finance programs and a rollforward of the related amounts due to suppliers participating in these programs. The adoption of the new disclosure requirements was effective during the first quarter of fiscal year 2024, except for a rollforward of activity within supply chain finance programs, which is effective as part of our annual disclosures for fiscal year 2025. The adoption of the new standard did not have an impact on our consolidated financial statements. 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 are not a party to the agreements between the participating financial institution and the suppliers in connection with the program, we do not receive financial incentives from the suppliers or the financial institution, nor do we reimburse suppliers for any costs they incur for participating in the program. There are no assets pledged as security or other forms of guarantees provided for the committed payment to the financial institution. All unpaid obligations to our supply chain finance provider are included in accounts payable in the consolidated balance sheets, and payments we make under the program are reflected as a reduction to net cash provided by operating activities in the consolidated statements of cash flows. The outstanding obligations with our supply chain finance provider that are included in accounts payable in our consolidated balance sheets as of March 31, 2024 and June 30, 2023 were $ 52,555 and $ 44,522 , respectively. Accounting Standards to be Adopted In December 2023, the FASB issued Accounting Standards Update No. 2023-09 "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" (ASU 2023-09), which provides authoritative guidance about expanded annual disclosure requirements for the income tax rate reconciliation and income taxes paid by jurisdiction. The expanded disclosure requirements will be effective starting with our annual report for the fiscal year ending June 30, 2026. Early adoption is permitted, but we do not intend to early adopt this standard. In November 2023, the FASB issued Accounting Standards Update No. 2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" (ASU 2023-07), which requires enhanced disclosures about significant segment expenses and introduces a reconciliation between segment revenue and segment profitability metrics. The expanded disclosure requirements will be effective starting with our annual report for the fiscal year ending June 30, 2025, as well as each interim period thereafter. Early adoption is permitted, but we do not intend to early adopt this standard. 3. Fair Value Measurements We use a three-level valuation hierarchy for measuring fair value and include detailed financial statement disclosures about fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: • Level 1: Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. • Level 2: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active and inputs that are 12 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, 2024 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 $ 18,645 $ — $ 18,645 $ — Currency forward contracts 4,120 — 4,120 — Currency option contracts 45 — 45 — Total assets recorded at fair value $ 22,810 $ — $ 22,810 $ — Liabilities Cross-currency swap contracts $ ( 918 ) $ — $ ( 918 ) $ — Currency forward contracts ( 497 ) — ( 497 ) — Currency option contracts ( 3,365 ) — ( 3,365 ) — Total liabilities recorded at fair value $ ( 4,780 ) $ — $ ( 4,780 ) $ — June 30, 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 $ 19,218 $ — $ 19,218 $ — Currency forward contracts 2,301 — 2,301 — Currency option contracts 990 — 990 — Total assets recorded at fair value $ 22,509 $ — $ 22,509 $ — Liabilities Cross-currency swap contracts $ ( 1,777 ) $ — $ ( 1,777 ) $ — Currency forward contracts ( 4,485 ) — ( 4,485 ) — Currency option contracts ( 3,055 ) — ( 3,055 ) — Total liabilities recorded at fair value $ ( 9,317 ) $ — $ ( 9,317 ) $ — During the nine months ended March 31, 2024 and year ended June 30, 2023, there were no significant transfers in or out of Level 1, Level 2, and Level 3 classifications. The valuations of the derivatives intended to mitigate our interest rate and currency risks 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. 13 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, 2024, 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, 2024 and June 30, 2023, 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, 2024 and June 30, 2023, the carrying value of our debt, excluding debt issuance costs and debt premiums and discounts, was $ 1,615,037 and $ 1,653,989 , respectively, and the fair value was $ 1,621,136 and $ 1,604,190 , respectively. Our debt at March 31, 2024 includes variable-rate debt instruments indexed to Term SOFR and Euribor that reset 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, 2024 and June 30, 2023, our held-to-maturity marketable securities were held at an amortized cost of $ 6,499 and $ 43,037 , respectively, while the fair value was $ 6,470 and $ 42,667 , 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 (expense) income, net. Hedges of Interest Rate Risk We enter into interest rate swap contracts to manage variability in the amount of our known or expected cash payments related to a portion of our debt. Our objective in using interest rate swaps is to add stability to interest expense and to manage our exposure to interest rate movements. We designate our interest rate swaps as cash flow hedges. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the contract agreements without exchange of the underlying notional amount. Realized gains or losses from interest rate swaps are recorded in earnings as a component of interest expense, net. Amounts reported in accumulated other comprehensive loss related to interest rate swap contracts will be reclassified to interest expense, net as interest payments are accrued or made on our variable-rate debt. As of March 31, 2024, we estimate that $ 4,671 of income will be reclassified from accumulated other comprehensive loss to interest expense, net during the twelve months ending March 31, 2025. As of March 31, 2024, we had eleven effective outstanding interest rate swap contracts that were indexed to Term or Daily SOFR. 14 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, 2024 (1) $ 245,000 Contracts with a future start date 430,000 Total $ 675,000 ________________________ (1) Based on contracts outstanding as of March 31, 2024, the notional value of our contracted interest rate swaps accruing interest will fluctuate between $215,000 and $380,000 through April 2028 based on layered start dates and maturities. 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, 2024, 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 (expense) income, net as interest payments are accrued or paid, and upon remeasuring the intercompany loan. As of March 31, 2024, we estimate that $ 399 of income will be reclassified from accumulated other comprehensive loss to interest expense, net during the twelve months ending March 31, 2025. 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, 2024, we have one intercompany loan designated as a net investment hedge with a total notional amount of $ 315,002 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, 2024 and 2023, we experienced volatility within other (expense) income, net, in our consolidated statements of operations from unrealized gains and losses on the mark-to-market of outstanding currency forward and option contracts. We expect this volatility to continue in future periods for contracts for which we do not apply hedge accounting. Additionally, since our hedging objectives may be targeted at non-GAAP financial metrics that exclude non-cash items such as depreciation and amortization, we may experience increased, not decreased, volatility in our GAAP results as a result of our currency hedging program. In most cases, we enter into these currency derivative contracts, for which we do not apply hedge accounting, in order to address the risk for certain currencies where we have a net exposure to adjusted EBITDA, a non-GAAP financial metric. Adjusted EBITDA exposures are our focus for the majority of our mark-to-market currency forward and option contracts because a similar metric is referenced within the debt covenants of our amended and restated senior secured credit agreement (refer to Note 8 for additional information about this agreement). Our most significant net currency exposures by volume are the Euro and the British Pound (GBP). Our 15 adjusted EBITDA hedging approach results in addressing nearly all of our forecasted Euro and GBP net exposures for the upcoming twelve months, with a declining hedged percentage out to twenty-four months. For certain other currencies with a smaller net impact, we hedge nearly all of our forecasted net exposures for the upcoming six months, with a declining hedge percentage out to fifteen months. As of March 31, 2024, 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, Canadian Dollar, Czech Koruna, Danish Krone, Euro, GBP, 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 $ 671,510 June 2022 through March 2024 Various dates through March 2026 642 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, 2024 and June 30, 2023. Our derivative asset and liability balances fluctuate with interest rate and currency exchange rate volatility. March 31, 2024 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 $ 18,645 $ — $ 18,645 Other current liabilities / other liabilities $ — $ — $ — Cross-currency swaps Other current assets — — — Other current liabilities ( 918 ) — ( 918 ) Total derivatives designated as hedging instruments $ 18,645 $ — $ 18,645 $ ( 918 ) $ — $ ( 918 ) Derivatives not designated as hedging instruments Currency forward contracts Other current assets / other assets $ 5,262 $ ( 1,142 ) $ 4,120 Other current liabilities / other liabilities $ ( 806 ) $ 309 $ ( 497 ) Currency option contracts Other current assets / other assets 102 ( 57 ) 45 Other current liabilities / other liabilities ( 3,431 ) 66 ( 3,365 ) Total derivatives not designated as hedging instruments $ 5,364 $ ( 1,199 ) $ 4,165 $ ( 4,237 ) $ 375 $ ( 3,862 ) 16 June 30, 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 designated as hedging instruments Interest rate swaps Other current assets / other assets $ 19,341 $ ( 123 ) $ 19,218 Other current liabilities / other liabilities $ — $ — $ — Cross-currency swaps Other current assets — — — Other current liabilities ( 1,777 ) — ( 1,777 ) Total derivatives designated as hedging instruments $ 19,341 $ ( 123 ) $ 19,218 $ ( 1,777 ) $ — $ ( 1,777 ) Derivatives not designated as hedging instruments Currency forward contracts Other current assets / other assets $ 2,873 $ ( 572 ) $ 2,301 Other current liabilities / other liabilities $ ( 6,074 ) $ 1,589 $ ( 4,485 ) Currency option contracts Other current assets / other assets 990 — 990 Other current liabilities / other liabilities ( 3,055 ) — ( 3,055 ) Total derivatives not designated as hedging instruments $ 3,863 $ ( 572 ) $ 3,291 $ ( 9,129 ) $ 1,589 $ ( 7,540 ) The following table presents the effect of our derivative financial instruments designated as hedging instruments and their classification within comprehensive loss, net of tax, for the three and nine months ended March 31, 2024 and 2023: Three Months Ended March 31, Nine Months Ended March 31, 2024 2023 2024 2023 Derivatives in cash flow hedging relationships Interest rate swaps $ 5,623 $ ( 4,007 ) $ 3,673 $ 7,681 Cross-currency swaps 1,428 ( 660 ) 786 ( 1,237 ) Derivatives in net investment hedging relationships Intercompany loan 4,985 ( 3,418 ) 1,441 ( 9,102 ) Currency forward contracts — — ( 1,080 ) — Total $ 12,036 $ ( 8,085 ) $ 4,820 $ ( 2,658 ) 17 The following table presents reclassifications out of accumulated other comprehensive loss for the three and nine months ended March 31, 2024 and 2023: 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, 2024 2023 2024 2023 Derivatives in cash flow hedging relationships Interest rate swaps $ ( 1,630 ) $ ( 1,939 ) $ ( 6,126 ) $ ( 2,632 ) Interest expense, net Cross-currency swaps ( 1,748 ) 595 ( 1,454 ) 1,459 Other (expense) income, net Total before income tax ( 3,378 ) ( 1,344 ) ( 7,580 ) ( 1,173 ) Income (loss) before income taxes Income tax 606 375 1,315 402 Income tax expense Total $ ( 2,772 ) $ ( 969 ) $ ( 6,265 ) $ ( 771 ) 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, 2024 and 2023 for derivative instruments for which we did not elect hedge accounting. Amount of Gain (Loss) Recognized in Net Income (Loss) Affected line item in the Statement of Operations Three Months Ended March 31, Nine Months Ended March 31, 2024 2023 2024 2023 Currency contracts $ 9,071 $ ( 2,428 ) $ 3,715 $ 2,021 Other (expense) income, net Total $ 9,071 $ ( 2,428 ) $ 3,715 $ 2,021 5. Accumulated Other Comprehensive Loss The following table presents a roll forward of amounts recognized in accumulated other comprehensive loss by component, net of tax of $ 2,572 for the nine months ended March 31, 2024 : Gains on cash flow hedges (1) Losses on pension benefit obligation Translation adjustments, net of hedges (2) Total Balance as of June 30, 2023 $ 12,297 $ ( 356 ) $ ( 47,001 ) $ ( 35,060 ) Other comprehensive income (loss) before reclassifications 4,459 — ( 4,437 ) 22 Amounts reclassified from accumulated other comprehensive loss to net income (loss) ( 6,265 ) — — ( 6,265 ) Net current period other comprehensive loss ( 1,806 ) — ( 4,437 ) ( 6,243 ) Balance as of March 31, 2024 $ 10,491 $ ( 356 ) $ ( 51,438 ) $ ( 41,303 ) ________________________ (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, 2024 and June 30, 2023, the translation adjustment is inclusive of both the realized and unrealized effects of our net investment hedges. Gains on currency forward and swap contracts designated as net investment hedges, net of tax, of $ 13,999 and $ 15,079 have been included in accumulated other comprehensive loss as of March 31, 2024 and June 30, 2023. Intercompany loan hedge gains, net of tax, of $ 38,184 and $ 32,516 have been included in accumulated other comprehensive loss as of March 31, 2024 and June 30, 2023, respectively. 18 6. Goodwill The carrying amount of goodwill by reportable segment as of March 31, 2024 and June 30, 2023 was as follows: Vista PrintBrothers The Print Group All Other Businesses Total Balance as of June 30, 2023 $ 295,731 $ 141,092 $ 149,797 $ 194,921 $ 781,541 Effect of currency translation adjustments (1) ( 403 ) ( 896 ) ( 979 ) — ( 2,278 ) Balance as of March 31, 2024 $ 295,328 $ 140,196 $ 148,818 $ 194,921 $ 779,263 ________________________ (1) Related to goodwill held by subsidiaries whose functional currency is not the U.S. dollar. 7. Other Balance Sheet Components Accrued expenses included the following: March 31, 2024 June 30, 2023 Compensation costs $ 74,110 $ 74,879 Income and indirect taxes 46,373 53,266 Advertising costs (1) 38,552 16,548 Third party manufacturing and digital content costs 18,911 17,380 Interest payable (2) 12,985 2,847 Shipping costs 11,468 11,146 Variable compensation incentives 8,579 9,413 Sales returns 5,774 6,441 Professional fees 2,662 2,743 Restructuring costs (3) 415 7,567 Other 51,264 54,879 Total accrued expenses $ 271,093 $ 257,109 ______________________ (1) The increase in advertising accrued expenses is due in part to the timing of invoice receipts which has resulted in higher accruals at March 31, 2024, as compared to accounts payable at June 30, 2023. (2) The increase in interest payable as of March 31, 2024, is due to the interest on our 7.0% Senior Notes Due 2026 being payable semi-annually on June 15 and December 15 of each year. Refer to Note 8 for additional detail. (3) The decrease in restructuring costs included in accrued expenses as of March 31, 2024 is primarily due to severance payments made as a result of the cost reduction actions implemented during fiscal year 2023. Refer to Note 13 for additional details. Other current liabilities included the following: March 31, 2024 June 30, 2023 Current portion of finance lease obligations $ 8,397 $ 9,938 Short-term derivative liabilities 5,639 9,865 Other 1,595 4,666 Total other current liabilities $ 15,631 $ 24,469 Other liabilities included the following: March 31, 2024 June 30, 2023 Long-term finance lease obligations $ 29,139 $ 29,822 Long-term compensation incentives 16,220 22,286 Mandatorily redeemable noncontrolling interest 9,682 12,018 Long-term derivative liabilities 715 1,737 Other 23,835 24,195 Total other liabilities $ 79,591 $ 90,058 19 8. Debt March 31, 2024 June 30, 2023 7.0% Senior Notes due 2026 $ 522,135 $ 548,300 Senior secured credit facility 1,088,140 1,098,613 Other 4,762 7,076 Debt issuance costs and discounts, net of debt premiums ( 13,426 ) ( 16,033 ) Total debt outstanding, net 1,601,611 1,637,956 Less: short-term debt (1) 10,935 10,713 Long-term debt $ 1,590,676 $ 1,627,243 _____________________ (1) Balances as of March 31, 2024 and June 30, 2023 are inclusive of short-term debt issuance costs, debt premiums and discounts of $ 3,532 and $ 3,526 , respectively. Our various debt arrangements described below contain customary representations, warranties, and events of default. As of March 31, 2024, we were in compliance with all covenants in our debt contracts, including those under our amended and restated senior secured credit agreement dated as of May 17, 2021 ("Restated Credit Agreement") and the indenture governing our 7.0% Senior Notes due 2026 ("2026 Notes"). Senior Secured Credit Facility Our Restated Credit Agreement consists of the following: • A senior secured Term Loan B with a maturity date of May 17, 2028 (the “Term Loan B”), consisting of the following outstanding borrowings at March 31, 2024: ◦ a $ 773,138 tranche that bears interest at Term SOFR plus the Term SOFR Adjustment as defined by our Restated Credit Agreement (with an Adjusted Term SOFR rate floor of 0.50 %) plus 3.50 %, and ◦ a € 291,750 (U.S. dollar equivalent of $ 315,002 ) tranche that currently 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”), with no outstanding borrowings for any periods presented. Borrowings under the Revolving Credit Facility bear interest at Term SOFR plus the Term SOFR Adjustment as defined by our Restated Credit Agreement (with an Adjusted Term SOFR rate 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. We have no outstanding borrowings under our Revolving Credit Facility as of March 31, 2024. The LIBOR sunset occurred on June 30, 2023, and under the terms of our Restated Credit Agreement, our benchmark rate transitioned 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, 2024, the weighted-average interest rate on outstanding borrowings under the Restated Credit Agreement was 7.89 %, 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. Senior Unsecured Notes As of March 31, 2024, we have $ 522,135 in aggregate principal outstanding of our 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. 20 During the nine months ended March 31, 2024, we purchased an aggregate principal amount of $ 26,165 for a purchase price of $ 24,471 , as well as the related settlement of unpaid interest, and we recognized gains on the extinguishment of debt of $ 1,721 . 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, 2024 and June 30, 2023, we had $ 4,762 and $ 7,076 , respectively, outstanding for those obligations that are payable through September 2027. 9. Income Taxes Our income tax expense was $ 10,610 and $ 35,527 for the three and nine months ended March 31, 2024, respectively, as compared to $ 8,475 and $ 143,969 for the three and nine months ended March 31, 2023, respectively. Tax expense increased for the three months as compared to the prior period primarily due to increased profits. Tax expense decreased for the nine months as compared to the prior period due to the full valuation allowance that was recorded in the second quarter of fiscal year 2023 on Swiss deferred tax assets of $116,694 primarily related to Swiss tax reform benefits recognized in fiscal year 2020 and tax loss carryforwards. This was partially offset by increased tax on increased profits. Excluding the effect of discrete tax adjustments, our estimated annual effective tax rate is higher for fiscal year 2024 than for fiscal year 2023 primarily due to forecasted pre-tax profits in fiscal year 2024 as compared to a pre-tax loss in fiscal year 2023. 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. We continuously analyze our valuation allowance positions and the weight of objective and verifiable evidence of actual results against the more subjective evidence of anticipated future income. Given our current earnings and anticipated future earnings, we believe there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion of our valuation allowance will no longer be needed. A release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense in the period the release is recorded. However, the timing and amount of the valuation allowance release, if any, are unknown as this is subject to change on the basis of the level of profitability that we are able to actually achieve in future periods. As of March 31, 2024 we had unrecognized tax benefits of $ 16,374 , including accrued interest and penalties of $ 2,087 . We recognize interest and, if applicable, penalties related to unrecognized tax benefits in the provision for income taxes. If recognized, $ 7,267 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 $ 1,300 to $ 1,400 related to the lapse of applicable statutes of limitations or settlement. 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 2023 remain open for examination by the U.S. Internal Revenue Service and the years 2015 through 2023 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. These noncontrolling interests span multiple businesses and reportable segments. 21 The following table presents the reconciliation of changes in our noncontrolling interests: Redeemable Noncontrolling Interest Noncontrolling Interest Balance as of June 30, 2023 $ 10,893 $ 459 Accretion to redemption value recognized in retained earnings (1) 724 — Accretion to redemption value recognized in net income attributable to noncontrolling interests (1) 382 — Net income attributable to noncontrolling interests 411 168 Distribution to noncontrolling interests ( 200 ) — Purchase of noncontrolling interest ( 65 ) — Foreign currency translation ( 5 ) ( 4 ) Balance as of March 31, 2024 $ 12,140 $ 623 _________________ (1) 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. Any change in the estimated redemption amount which exceeds the estimated fair value is recognized within net income attributable to noncontrolling interests. 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, 2024, 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 druck.at, Printdeal, and WIRmachenDRUCK, a group of Upload & Print businesses that serve graphic professionals throughout Europe, primarily in Austria, Belgium, Germany, the Netherlands, and Switzerland. • The Print Group - Includes the results of Easyflyer, Exaprint, Packstyle, Pixartprinting, and Tradeprint, a group of Upload & Print businesses that serve graphic professionals throughout Europe, primarily in France, Italy, Spain, and the United Kingdom. • 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. ◦ BuildASign is a 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. Central and corporate costs consist primarily of the team of software engineers that is building our mass customization platform; shared service organizations such as global procurement; technology services such as hosting and security; administrative costs of our Cimpress India offices where numerous Cimpress businesses have dedicated business-specific team members; and corporate functions including our Board of Directors, CEO, and the team members necessary for managing corporate activities, such as treasury, tax, capital allocation, financial consolidation, internal audit and legal. These costs also include certain unallocated share-based compensation costs. The expense value of our PSU awards is based on fair value 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 this amount as a result of the fair 22 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. 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, 2024 2023 2024 2023 Revenue: Vista $ 417,896 $ 396,642 $ 1,299,694 $ 1,203,747 PrintBrothers 150,304 139,569 467,673 420,866 The Print Group 88,049 85,504 261,856 251,663 National Pen 89,181 81,113 307,008 283,400 All Other Businesses 49,103 49,037 161,186 160,862 Total segment revenue 794,533 751,865 2,497,417 2,320,538 Inter-segment eliminations (1) ( 13,945 ) ( 9,701 ) ( 38,172 ) ( 29,757 ) Total consolidated revenue $ 780,588 $ 742,164 $ 2,459,245 $ 2,290,781 _____________________ (1) Refer to the "Revenue by Geographic Region" tables below for detail of the inter-segment revenue within each respective segment. Three Months Ended March 31, 2024 Vista PrintBrothers The Print Group National Pen All Other Total Revenue by Geographic Region: North America $ 296,717 $ — $ — $ 51,932 $ 39,743 $ 388,392 Europe 99,381 149,552 85,532 28,928 — 363,393 Other 21,533 — — 1,183 6,087 28,803 Inter-segment 265 752 2,517 7,138 3,273 13,945 Total segment revenue 417,896 150,304 88,049 89,181 49,103 794,533 Less: inter-segment elimination ( 265 ) ( 752 ) ( 2,517 ) ( 7,138 ) ( 3,273 ) ( 13,945 ) Total external revenue $ 417,631 $ 149,552 $ 85,532 $ 82,043 $ 45,830 $ 780,588 23 Nine Months Ended March 31, 2024 Vista PrintBrothers The Print Group National Pen All Other Total Revenue by Geographic Region: North America $ 911,465 $ — $ — $ 163,896 $ 132,527 $ 1,207,888 Europe 315,926 465,472 253,360 120,147 — 1,154,905 Other 71,303 — — 4,591 20,558 96,452 Inter-segment 1,000 2,201 8,496 18,374 8,101 38,172 Total segment revenue 1,299,694 467,673 261,856 307,008 161,186 2,497,417 Less: inter-segment elimination ( 1,000 ) ( 2,201 ) ( 8,496 ) ( 18,374 ) ( 8,101 ) ( 38,172 ) Total external revenue $ 1,298,694 $ 465,472 $ 253,360 $ 288,634 $ 153,085 $ 2,459,245 Three Months Ended March 31, 2023 Vista (1) PrintBrothers The Print Group National Pen All Other Total (1) Revenue by Geographic Region: North America $ 284,457 $ — $ — $ 50,938 $ 41,524 $ 376,919 Europe 90,332 139,187 83,096 23,811 — 336,426 Other 21,583 — — 1,180 6,056 28,819 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 (1) PrintBrothers The Print Group National Pen All Other Total (1) Revenue by Geographic Region: North America $ 856,812 $ — $ — $ 162,593 $ 137,016 $ 1,156,421 Europe 275,826 419,658 244,378 99,555 — 1,039,417 Other 69,827 — — 5,862 19,254 94,943 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 ___________________ (1) During fiscal year 2023, we identified an immaterial error in our previously disclosed revenue by geographic area for our Vista reportable segment for the three and nine months ended March 31, 2023, which understated revenue in North America and Europe, with an offsetting overstatement in the Other geographies. We have corrected the disclosed figures as included herein. 24 The following table includes segment EBITDA by reportable segment, total income (loss) from operations and total income (loss) before income taxes: Three Months Ended March 31, Nine Months Ended March 31, 2024 2023 2024 2023 Segment EBITDA: Vista $ 71,802 $ 60,392 $ 249,402 $ 146,286 PrintBrothers 16,809 15,886 64,976 50,386 The Print Group 18,190 13,589 50,240 39,490 National Pen 4,815 ( 3,336 ) 22,377 20,150 All Other Businesses 3,966 5,036 18,407 16,620 Total segment EBITDA 115,582 91,567 405,402 272,932 Central and corporate costs ( 39,472 ) ( 34,447 ) ( 107,219 ) ( 102,827 ) Depreciation and amortization ( 37,072 ) ( 39,751 ) ( 116,103 ) ( 121,567 ) Restructuring-related charges ( 128 ) ( 30,115 ) ( 277 ) ( 43,142 ) Certain impairments and other adjustments 328 549 ( 786 ) ( 1,982 ) Total income (loss) from operations 39,238 ( 12,197 ) 181,017 3,414 Other (expense) income, net ( 3,651 ) 1,377 2,377 11,382 Interest expense, net ( 30,158 ) ( 30,515 ) ( 89,946 ) ( 83,918 ) Gain on early extinguishment of debt — — 1,721 — Income (loss) before income taxes $ 5,429 $ ( 41,335 ) $ 95,169 $ ( 69,122 ) Three Months Ended March 31, Nine Months Ended March 31, 2024 2023 2024 2023 Depreciation and amortization: Vista $ 13,040 $ 14,480 $ 41,091 $ 43,343 PrintBrothers 3,789 4,175 11,702 14,097 The Print Group 6,184 5,269 18,006 16,930 National Pen 3,228 4,820 13,408 16,506 All Other Businesses 4,604 4,375 13,660 13,217 Central and corporate costs 6,227 6,632 18,236 17,474 Total depreciation and amortization $ 37,072 $ 39,751 $ 116,103 $ 121,567 Three Months Ended March 31, Nine Months Ended March 31, 2024 2023 2024 2023 Purchases of property, plant and equipment: Vista $ 6,488 $ 3,006 $ 15,958 $ 12,575 PrintBrothers ( 132 ) 2,010 5,110 3,771 The Print Group 1,933 3,995 12,976 14,084 National Pen 313 889 4,468 3,336 All Other Businesses 1,455 815 4,871 2,650 Central and corporate costs 413 281 1,042 1,070 Total purchases of property, plant and equipment $ 10,470 $ 10,996 $ 44,425 $ 37,486 25 Three Months Ended March 31, Nine Months Ended March 31, 2024 2023 2024 2023 Capitalization of software and website development costs: Vista $ 6,231 $ 5,894 $ 18,921 $ 17,668 PrintBrothers 521 104 1,434 1,562 The Print Group 891 866 2,641 2,127 National Pen 1,111 778 3,087 1,878 All Other Businesses 1,582 1,008 3,879 2,831 Central and corporate costs 4,699 6,285 13,417 18,115 Total capitalization of software and website development costs $ 15,035 $ 14,935 $ 43,379 $ 44,181 The following table sets forth long-lived assets by geographic area: March 31, 2024 June 30, 2023 Long-lived assets (1): United States (2) $ 72,754 $ 83,956 Switzerland 67,939 73,857 Netherlands 60,787 65,547 Canada 56,533 57,328 Italy 38,557 42,377 Germany 32,443 27,813 France 29,476 29,302 Australia 21,070 19,664 Jamaica (3) 1,021 17,834 Other 87,778 86,690 Total $ 468,358 $ 504,368 ___________________ (1) Excludes goodwill of $ 779,263 and $ 781,541 , intangible assets, net of $ 83,235 and $ 109,196 , deferred tax assets of $ 9,435 and $ 12,740 as of March 31, 2024 and June 30, 2023, respectively, as well as marketable securities, non-current of $ 4,497 as of June 30, 2023. (2) The decrease in the United States long-lived assets is due to the reclassification of a tax receivable from non-current to current during the current fiscal year. (3) The decrease in Jamaica's long-lived assets is due to the planned sale of an owned customer service facility as we continue to optimize our real estate footprint with many of these team members operating under a remote-first model, which resulted in the classification of the related assets as held-for-sale as of March 31, 2024. The assets are now presented as part of prepaid expenses and other current assets in the consolidated balance sheet. Refer to Note 2 for additional details. 12. Commitments and Contingencies Purchase Obligations At March 31, 2024, we had unrecorded commitments under contract of $ 184,433 , including inventory, third-party fulfillment and digital service purchase commitments of $ 85,846 ; third-party cloud services of $ 55,945 ; software of $ 14,243 ; advertising of $ 2,861 ; professional and consulting fees of $ 4,501 ; production and computer equipment purchases of $ 2,494 ; and other unrecorded purchase commitments of $ 18,543 . Legal Proceedings We are not currently party to any material legal proceedings. Although we cannot predict with certainty the results of litigation and claims to which we may be subject from time to time, we do not expect the resolution of any of our current matters to have a material adverse impact on our consolidated results of operations, cash flows or financial position. For all legal matters, at each reporting period, we evaluate whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. We expense the costs relating to our legal proceedings as those costs are incurred. 26 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, 2024, we recognized restructuring expense of $ 128 and $ 277 , respectively. The restructuring charges recognized in the current period primarily include adjustments made to the previously estimated restructuring expense for actions taken in our Vista and National Pen reportable segments. We do not expect any additional material charges for these restructuring actions. During the three and nine months ended March 31, 2023, we recognized restructuring expense of $ 30,115 and $ 43,142 , respectively. For the three and nine months ended March 31, 2023, we recognized 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. These charges were related to actions taken during March 2023 that were intended to reduce costs and support expanded profitability, reduced leverage, and increased speed, focus and accountability. 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 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 within our All Other Businesses reportable segment, which included losses related to the sale of our Chinese business. The following table summarizes the restructuring activity during the nine months ended March 31, 2024. Severance and Related Benefits Other Restructuring Costs Accrued Restructuring Liability Balance as of June 30, 2023 $ 7,567 $ — $ 7,567 Restructuring charges 240 37 277 Cash payments ( 7,397 ) — ( 7,397 ) Non-cash charges — ( 37 ) ( 37 ) Foreign currency translation 5 — 5 Balance as of March 31, 2024 $ 415 $ — $ 415 14. Related Party Transaction On March 3, 2024, we repurchased 300,000 of our outstanding ordinary shares, par value €0.01 per share, from The Spruce House Partnership LLC (“Spruce House”) in a privately negotiated transaction at a price of $ 97.50 per share, representing a discount of $ 2.14 to the closing price of our ordinary shares on March 1, 2024 (the “Transaction”). Zachary Sternberg, a Managing Member of Spruce House, serves as a member of Cimpress’ Board of Directors and Audit Committee. In light of the foregoing, the disinterested members of Cimpress’ Audit Committee reviewed the Transaction under our related person transaction policy and considered, among other things, Mr. Sternberg’s and Spruce House’s interest in the Transaction, the approximate dollar value of the Transaction, and the purpose and the potential benefits to Cimpress of entering into the Transaction. Based on these considerations, the disinterested members of the Audit Committee concluded that the Transaction was in our best interest. The Transaction was effected pursuant to the share repurchase program approved by Cimpress’ Board of Directors and announced on January 31, 2024. 27