CIMPRESS plc 10-Q

Item 1A. Risk Factors We are updating the following risk factors disclosed in our Form 10-K for the fiscal year ended June 30, 2024 (“Form 10-K”), as previously updated in our Form 10-Q for the quarter ended December 31, 2024. You should carefully consider the risks set forth in our Form 10-K and the following risks, together with all the other information in this report, including our consolidated financial statements and notes thereto. If any of the risks materialize in the future, our operating results, financial condition and liquidity could be materially and adversely affected. We manage our business for long-term results, and our quarterly and annual financial results often fluctuate, which has led, and may continue to lead, to volatility in our share price. Our revenue and operating results often vary significantly from period to period due to a number of factors, and as a result comparing our financial results on a period-to-period basis may not be meaningful. We prioritize our 45 uppermost financial objective of maximizing our intrinsic value per share even at the expense of shorter-term results. Many of the factors that lead to period-to-period fluctuations are outside of our control; however, some factors are inherent in our business strategies. Some of the specific factors that have caused, and/or could cause, our operating results to fluctuate from quarter to quarter or year to year include among others: • investments in our business in the current period intended to generate longer-term returns, where costs in the near term are not offset by revenue or cost savings until future periods, if at all • costs to produce and deliver our products and provide our services • our ability to attract and retain customers and generate purchases • shifts in revenue mix toward less profitable products and brands • supply chain challenges • our pricing and marketing strategies and those of our competitors • variations in the demand for our products and services, including potential declines from pricing changes and/or surcharges related to tariffs or other trade policies of the U.S. or other countries • currency and interest rate fluctuations, which affect our revenue, costs, and fair value of our assets and liabilities • changes in U.S. and other countries' trade policies, including the types, amounts, and durations of any tariffs imposed on our products or our supply chain materials • our hedging activity • the commencement or termination of agreements with our strategic partners, suppliers, and others • our ability to manage our production, fulfillment, and support operations • general economic conditions, including volatility or economic downturns in some or all of our markets • expenses and charges related to our compensation arrangements with our executives and employees • costs and charges resulting from litigation • changes in our effective income tax rate or tax-related benefits or costs • costs to acquire businesses or integrate our acquired businesses • financing costs • impairments of our tangible and intangible assets including goodwill • the results of our minority investments and joint ventures Some of our expenses, such as building leases, depreciation related to previously acquired property and equipment, and personnel costs, are relatively fixed. As a result, we sometimes have been, and may in the future be, unable or unwilling to adjust operating expenses to offset any revenue shortfall. Accordingly, any shortfall in revenue may cause significant variation in operating results in any period. Our operating results have, at times, fallen below the expectations of public market analysts and investors, which has led to declines in the price of our ordinary shares in the past and may do so again in the future. Our global operations and decentralized organizational structure place a significant strain on our management, employees, facilities, and other resources and subject us to additional risks. We are a global company with production facilities, offices, employees, and localized websites in many countries across six continents, and we manage our businesses and operations in a decentralized, autonomous manner. We are subject to a number of risks and challenges that relate to our global operations, decentralization, and complexity including, among others: • difficulty managing operations in, and communications among, multiple businesses, locations, and time zones • challenges of ensuring speed, nimbleness, and entrepreneurialism in a large and complex organization • difficulty complying with multiple tax laws, treaties, and regulations and limiting our exposure to onerous or unanticipated taxes, duties, tariffs, and other costs • our failure to maintain sufficient financial and operational controls and systems to manage our decentralized businesses and comply with our obligations as a public company • the challenge of complying with disparate laws in multiple countries, such as local regulations that may impair our ability to conduct our business or impact the willingness of third parties to conduct business with us, protectionist laws that favor local businesses, and restrictions imposed by local labor laws • the challenge of maintaining management's focus on our strategic and operational priorities and minimizing lower priority distractions • disruptions caused by political and social instability and war that have occurred or may occur in some countries • exposure to corrupt business practices that may be common in some countries or in some sales channels and markets, such as bribery or the willful infringement of intellectual property rights • difficulty repatriating cash from some countries 46 • changes in governmental trade policies, particularly across North America, China and Europe, difficulty importing and exporting our products and supply chain materials across country borders and difficulty complying with customs regulations in the many countries where we produce and/or sell products • increasing prices, disruptions or cessation of important components of our international supply chain • failure of local laws to provide a sufficient degree of protection against infringement of our intellectual property In addition, we are exposed to fluctuations in currency exchange rates that have impacted, and may continue to impact, items such as the translation of our revenue and expenses, remeasurement of our intercompany balances, and the value of our cash and cash equivalents and other assets and liabilities denominated in currencies other than the U.S. dollar, our reporting currency. The hedging activities we engage in sometimes have not mitigated, and may in the future not mitigate, the net impact of currency exchange rate fluctuations, and our financial results sometimes have differed, and may in the future differ, materially from expectations as a result of such fluctuations. The trade and tariff situation has been changing frequently, remains in flux and is highly unpredictable. The U.S. presidential administration has announced and/or implemented new and/or increased tariffs on goods imported into the United States, which has generated various trade and tariff-related responses from other countries. Certain of the recent tariffs were imposed pursuant to the International Emergency Economic Powers Act (50 U.S.C. § 1701 et seq.) (IEEPA), and 50 U.S.C. § 1702(b)(3) explicitly precludes the President from regulating the importation of "informational materials" under IEEPA. Any change to the statutory basis upon which the U.S. presidential administration relies for imposing tariffs could materially and adversely impact our financial results if we are unable to rely upon the "informational materials" exclusion for most of our U.S. imported printed products and such products were not otherwise exempt from tariffs under the United States-Mexico-Canada Agreement. Trade-related changes could also adversely affect the availability of the de minimis exemption from import taxes and duties codified in 19 U.S.C. § 1321(a)(2)(C), which currently benefits our business. We own manufacturing facilities throughout the world, including one in Ontario, Canada that primarily services our Vista business, and others in Mexico, the United States, Australia, Brazil and throughout Europe. If the United States imposes and enforces significant tariffs applicable to imports from Canada, Mexico, China or any of the other countries in which we manufacture our products and/or source materials for any meaningful period, we would incur increased costs in operating our business and our financial results would likely be materially and adversely impacted. In addition, if other countries impose and enforce increased or additional tariffs for any meaningful period, our business would likely be adversely affected. In addition to changes in U.S. trade policy, other changes to U.S. policy may impact, among other things, the U.S. and global economy, international trade relations, unemployment, immigration, healthcare, taxation, the U.S. regulatory environment, inflation and other areas. At this time we cannot predict the impact, if any, of any of these potential changes to our business. Until we know what policy changes are made and enforced and how those changes impact our business and the business of our competitors over the long term, we will not know if, overall, we will benefit from them or be negatively affected by them. Supply chain disruptions have impaired, and may in the future impair, our ability to source raw materials. A number of factors have impacted in the past, and could impact in the future, the availability of materials we use in our business, including rising costs and other inflationary pressures, changes in trade policies such as new or increased tariffs on materials we use in our business, rationing measures, labor shortages, civil unrest and war, and climate change. Our inability to source sufficient materials for our business in a timely manner, or at all, would significantly impair our ability to fulfill customer orders and sell our products, which would reduce our revenue and harm our financial results. Changes in tax laws, regulations and treaties have affected, and may in the future affect, our effective tax rate and our results of operations. Changes in tax laws, treaties or regulations, or their interpretation, of any country in which we operate could have a materially adverse impact on us, including increasing our tax burden, increasing costs of our tax compliance, or otherwise adversely affecting our financial condition, results of operations, and cash flows. There are currently multiple initiatives for comprehensive tax reform underway in key jurisdictions where we have operations, and we cannot predict whether any other specific legislation will be enacted or the terms of any such legislation. Furthermore, with the change in the U.S. presidential administration and composition of the U.S. Congress, the administration may make changes to U.S. tax law, regulations, treaties and policies. Although we cannot predict the impact, if any, of these changes to our business, they could adversely affect our business. In addition, the application of sales, value added, or other consumption taxes to e-commerce businesses, such as Cimpress, is a complex and evolving issue. When and if a government entity claims that we should have been collecting such taxes on the sale of our products in a jurisdiction where we have not been doing so, we have incurred, and may in the future incur, substantial tax liabilities for past sales. 47