FinanceLooker

Excrept from filing document 2024-06-30

The aggregate market value of the ordinary shares held by non affiliates of the registrant was approximately 1 76 billion on December 31 2023 the last business day of the registrant s most recently completed second fiscal quarter based on the last reported sale price of the registrant s ordinary shares on the NASDAQ Global Select Market
The registrant intends to file a definitive proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended June 30 2024 Portions of such proxy statement are incorporated by reference into Items 10 11 12 13 and 14 of Part III of this Annual Report on Form 10 K
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 that seeks to produce goods and services to meet individual customer needs with near mass production efficiency We discuss mass customization in more detail further below
We have grown substantially over our history from 0 in 1995 to 0 2 billion of revenue in fiscal year 2006 the year when we became a publicly traded company then to 3 3 billion of revenue in fiscal year 2024 As we have grown we have achieved important benefits of scale Our strategy is to invest in and build customer focused entrepreneurial print mass customization businesses for the long term which we manage in a decentralized autonomous manner We drive competitive advantage across Cimpress through a select few shared strategic capabilities that have the greatest potential to create Cimpress wide value We limit all other central activities to only those which absolutely must be performed centrally
We believe this decentralized structure is beneficial in many ways as it enables our businesses to be more customer focused to make better decisions faster to manage a holistic cross functional value chain required to serve customers well to be more agile to be held more accountable for driving investment returns and to understand where we are successful and where we are not This structure delegates responsibility authority and resources to the CEOs and managing directors of our various businesses We believe this approach has provided great value enabling our businesses to respond quickly to changes in customer needs and adapt to changing market conditions while also providing our leaders an environment to share best practices and insights across the group
The select few shared strategic capabilities into which we invest include our 1 mass customization platform MCP 2 talent infrastructure in India 3 central procurement of large scale capital equipment shipping services major categories of our raw materials and other categories of spend
and 4 peer to peer knowledge sharing among our businesses We encourage each of our businesses to leverage these capabilities but each business is free to choose the extent to which they use these services This optionality we believe creates healthy pressure on the central teams who provide such services to deliver compelling value to our businesses
15 000 employees we have approximately 100 who work in central activities that fall into this category which includes tax treasury internal audit legal sustainability corporate communications consolidated reporting and compliance investor relations capital allocation and the functions of our CEO and CFO We have developed guardrails and accountability mechanisms in key areas of governance including cultural aspects such as a focus on customers and being socially responsible as well as operational aspects such as the processes by which we set strategy and financial budgets and review performance and the policies by which we ensure compliance with applicable laws
Our uppermost financial objective is to maximize our intrinsic value per share We define intrinsic value per share as a the unlevered free cash flow per diluted share that in our best judgment will occur between now and the long term future appropriately discounted to reflect our cost of capital minus b net debt per diluted share We define unlevered free cash flow as adjusted free cash flow plus cash interest payments partially offset by cash interest received on our cash and marketable securities
This financial objective is inherently long term in nature Thus an explicit outcome of this is that we accept fluctuations in our financial metrics as we make investments that we believe will deliver attractive long term returns on investment
We ask investors and potential investors in Cimpress to understand our uppermost financial objective by which we endeavor to make all financially evaluated decisions We often make decisions in service of this priority that could be considered non optimal were they to be evaluated based on other financial criteria such as but not limited to near term revenue operating income net income EPS adjusted EBITDA and cash flow
Mass customization is a business model that allows companies to deliver major improvements to customer value across a wide variety of customized product categories Companies that master mass customization can automatically direct high volumes of orders into smaller streams of homogeneous orders that are then sent to specialized production lines If done with structured data flows and the digitization of the configuration and manufacturing processes setup costs become very small and small volume orders become economically feasible
The chart illustrates this concept The horizontal axis represents the volume of production of a given product the vertical axis represents the cost of producing one unit of that product Traditionally the only way to manufacture at a low unit cost was to produce a large volume of that product mass produced products fall in the lower right hand corner of the chart Custom made products i e those produced in small volumes for a very specific purpose historically incurred very high unit costs they fall in the upper left hand side of the chart
Mass customization breaks this trade off enabling low volume low cost production of individually unique products Very importantly relative to traditional alternatives mass customization creates value in many ways not just lower cost Other advantages can include faster production greater personal relevance avoidance of obsolete stock and material finished goods inventory better design flexible shipping options more product choice and higher quality
Mass customization in print related markets delivers a breakthrough in customer value particularly in markets in which the worth of a physical product is inherently tied to a specific unique use or application For instance there is limited value to a sign that is the same as is used by many other companies the business owner needs to describe what is unique about their business Likewise customized packaging is a way for a business to add their brand identity to what is oftentimes the first physical touchpoint with a customer for online purchases Before mass customization producing a high quality custom product required high per order setup costs so it simply was not economical to produce a customized product in low quantities
There are three ingredients to mass customization applied to print applications 1 web to print or e commerce stores that offer a wide variety of customizable products a replacement of more expensive and harder to scale physical stores with limited geographic reach 2 software driven order aggregation which enables significantly reduced costs on low volume orders and 3 democratized design that combines intuitive design software with a large scale of human designers that are typically located in low cost locations to deliver high quality lower cost highly scalable alternatives to traditional graphic design services
We believe that the business cards sold by our Vista business provide a concrete example of the potential of our mass customization business model to deliver significant customer value and to develop strong profit franchises in large markets that were previously low growth and commoditized Millions of very small customers for example home based businesses rely on Vista to design and procure aesthetically pleasing high quality quickly delivered and low priced business cards The Vista production operations for a typical order of 250 standard business cards in Europe and North America require less than 14 seconds of labor for all of pre press printing cutting and packaging versus an hour or more for traditional printers Combined with advantages of scale in graphic design support services purchasing of materials our self service online ordering pre press automation auto scheduling and automated manufacturing processes we allow customers to design configure and procure business cards at a fraction of the cost of typical traditional printers with consistent quality and delivery reliability Customers have extensive easily configurable customization options such as rounded corners different shapes
specialty papers spot varnish reflective foil folded cards or different paper thicknesses Achieving this type of product variety while also being very cost efficient took us almost two decades and requires massive volume significant engineering investments and significant capital For example business cards is a mature market that at the overall market level has experienced continual declines over the past two decades Yet for Vista this is a highly profitable category that has grown over that time period despite the market declines We currently produce many other product categories such as flyers brochures signage drinkware pens apparel embroidered soft goods labels packaging stickers books catalogs magazines calendars holiday cards invitations photobooks and canvas prints via similar methods While these product categories are not as automated as business cards each is well along the spectrum of mass customization relative to traditional suppliers and thus provide great customer value and a strong profitable and growing revenue stream
Mass customization of print and related products is not a market itself but rather a business model that can be applied across global geographic markets to customers from varying businesses micro small medium and large graphic designers resellers printers teams associations groups consumers and families to which we offer products such as the following
The products geographies and customer applications listed above constitute a large market opportunity that is highly fragmented We believe that the vast majority of the print related markets to which mass customization could apply are still served by traditional business models that force customers either to produce in large quantities per order or to pay a high price per unit
We believe that these large and fragmented markets are moving away from small traditional suppliers that employ job shop business models to fulfill a relatively small number of customer orders and toward businesses such as those owned by Cimpress that aggregate a relatively large number of orders and fulfill them via a focused supply chain and production capabilities at relatively high volumes thereby achieving the benefits of mass customization We believe we are relatively early in the process of what will be a multi decade shift from job shop business models to mass customization as innovation continues to bring new product categories into this model
Cimpress current revenue represents a very small fraction of this market opportunity We believe that Cimpress and competitors who have built their businesses around a mass customization model are disruptive innovators to these large markets because we enable small volume production of personalized high quality products at an affordable price Disruptive innovation a term coined by Harvard Business School professor Clayton Christensen describes a process by which a product or service takes root initially in simple applications at the bottom of a market such as the free business cards for the most price sensitive of micro businesses or basic white t shirts that VistaPrint started with and then moves up market eventually displacing established competitors such as those in the markets mentioned above
We believe that a large opportunity exists for major markets to shift to a mass customization paradigm and even though we are largely decentralized the select few shared strategic capabilities into which we centrally invest provide significant scale based competitive advantages for Cimpress
We believe this opportunity to deliver substantially better customer value and therefore disrupt large traditional industries can translate into tremendous future opportunity for Cimpress Earlier in our history we focused primarily on a narrow set of customers highly price sensitive and discount driven micro businesses and consumers with a limited offering of relatively simple to produce products Through acquisitions and via significant investments in our Vista business we have expanded the breadth and depth of our product offerings extended our ability to serve our traditional customers and gained a capability to serve a vast range of customer types with ever more complex product formats This has been a key part of our growth over the last two decades and we expect to continue to focus on capturing growth via innovation and new product introduction in the coming decades
Our businesses conduct market research on an ongoing basis and through those studies we remain confident in the overall market opportunity however our estimates are only approximate Despite the imprecise nature of our estimates we believe that our understanding is directionally correct and that we operate in a vast aggregate market with significant opportunity for Cimpress to grow as we continue delivering a differentiated and attractive value proposition to customers Today we believe that the revenue opportunity for low to medium order quantities i e still within our focus of small sized individual orders in the four product categories below is over 100 billion annually in North America Europe and Australia and significantly higher if you include other geographies and custom consumer products These product categories are listed in order of current market penetration by mass customization models
Small format marketing materials such as business cards flyers leaflets inserts brochures and magazines Businesses of all sizes are the main end users of short and medium run lengths per order quantities below 2 500 units for business cards and below 20 000 units for other materials This opportunity is estimated to be more than 25 billion per year
Large format products such as banners signs tradeshow displays and point of sale displays Businesses of all sizes are the main end users of short and medium run lengths less than 1 000 units This opportunity is estimated to be more than 35 billion per year
Promotional products apparel and gifts including decorated apparel bags and textiles and hard goods such as pens USB sticks and drinkware The end users of short and medium runs of these products range from businesses to teams associations and groups as well as individual consumers This opportunity is estimated to be more than 25 billion per year
Packaging products such as corrugated board packaging flexible packaging printed paper bags and labels Businesses of all sizes are the primary end users for short and medium runs below 10 000 units This opportunity is estimated to be more than 15 billion per year
The market for small format marketing materials is the most mature in this penetration though there is still a significant portion served by thousands of small traditional suppliers The market for packaging products is the least mature in terms of penetration by mass customization models but this transition has begun The estimates of annual market opportunity in each of the four product categories above are based on research conducted for Cimpress by third party research firm Keypoint Intelligence in August 2022 to estimate the value of print shipments to small and medium businesses in Australia France Germany Italy the U K and the U S Cimpress extrapolated the findings of the study to estimate the market size of the remaining countries in North America and Europe in which we sell products based on the relative number of small and medium businesses in those other markets
Vista was an early pioneer of the concept of web based do it yourself design as a fundamental part of its original customer value proposition for designs for relatively simple 2D product formats We believe that there is an ongoing revolution in graphic design for small business marketing one in which a combination of technology tools artificial intelligence and machine learning and convenient access via two sided marketplace platforms to professional freelance design talent including from low cost countries will continue a multi decade democratization of design that has been central to print mass customization and is likely to continue to be a key enabler to bringing
ever more complex product formats and marketing channels into the mass customization paradigm for example packaging large format signage and catalogs Vista has continued to invest in its design capabilities both organically and through acquisition to be a leader in this market shift For example Vista previously acquired a network of 150 000 freelance designers who work with customer specific design projects and a business with more than 100 000 freelance contributors of photos videos music and other content Vista is building a design system that combines graphic templates created by thousands of freelancers with algorithmically generated variations across many different print and digital products of customers adaptation of those templates
Vista researched the design spend in two of its largest markets the U S and Germany and found that small businesses spend approximately 6 billion annually on design services in these two markets exclusive of the purchases of the print or digital products that the designs enhance Even more importantly this research found that small businesses in these markets that purchase design services represent the majority of the addressable market for print and digital marketing materials We believe that a broader complement of design services should enable Vista to retain customers longer as their needs evolve as well as both attract new customers and serve existing customers with more complex products and therefore access more of our total addressable market
Over time small businesses have complemented the physical products they use to market their businesses with digital marketing channels like websites and social media marketing Though the digital marketing channels themselves are not areas where we believe we should allocate significant capital to develop our own offerings design is a common component to both physical and digital marketing for small businesses and our small business customers look for ideas and advice when it comes to ensuring cohesive brand expression and successful campaigns across these channels In October 2021 our Vista business acquired a business to accelerate our offering for do it yourself social media design that combined with partnership opportunities with leading digital presence businesses like Wix has extended our total addressable market into an adjacency where we believe we have an opportunity to deliver integrated marketing solutions to small business customers using a best in class partnership approach The total market for digital marketing applications is massive as the amount that businesses spend annually on digital marketing solutions is roughly the same amount as is spent on design services and print products However our ambition here is focused on enhancing the customer experience of millions of Vista customers We believe investing in digital design capabilities and offering digital solutions via partnership will enable Vista to capture a portion of this opportunity by attracting new customers and increasing the lifetime value and retention of existing customers
Cimpress businesses include our organically developed Vista business plus businesses that we have either fully acquired or in which we have a majority equity stake Prior to their acquisitions most of our acquired companies pursued business models that already applied the principles of mass customization to print and related products Each provided a standardized set of products that could be configured and customized by customers ordered in relatively low volumes and produced via relatively standardized homogeneous production processes at prices lower than those charged by traditional producers
Our businesses serve markets primarily in North America Western Europe Australia and New Zealand as well as smaller businesses in India and Brazil Their websites typically offer a broad assortment of tools and features allowing customers to create a product design or upload their own complete design and place an order either on a self service basis or with varying levels of assistance The combined product assortment across our businesses is extensive including offerings in the following product categories business cards marketing materials such as flyers and postcards digital and marketing services writing instruments signage canvas print wall décor decorated apparel promotional products and gifts packaging design services textiles and magazines and catalogs
The majority of our revenue is driven by standardized processes and enabled by software We endeavor to design these processes and technologies to readily scale as the number of orders received per day increases In particular the more individual jobs we receive in a given time period the more efficiently we can sort and route jobs with homogeneous production processes to given nodes of our internal production systems or of our third party supply chain This sortation and subsequent process automation improves production efficiency We believe that our strategy of systematizing our service and production operations enables us to deliver value to customers much more effectively than traditional competitors
Our businesses operate production facilities throughout the geographies listed above with approximately 3 million square feet of production space in the aggregate across our owned and operated facilities We also work
extensively with hundreds of external fulfillers across the globe We believe that the improvements we have made and the future improvements we intend to make in software technologies that support the design sortation scheduling production and delivery processes provide us with significant competitive advantage In many cases our businesses can produce and ship an order the same day they receive it Our supply chain systems and processes seek to reduce inventory and working capital and improve delivery speeds to customers relative to traditional suppliers In certain of our company owned manufacturing facilities software schedules the near simultaneous production of different customized products that have been ordered by the same customer allowing us to produce and deliver multi part orders quickly and efficiently
We believe that the potential for scale based advantages is not limited to focused automated production lines Other advantages include the ability to systematically and automatically sort through the voluminous long tail of diverse and uncommon orders in order to group them into more homogeneous categories and to route them to production nodes that are specialized for that category of operations and or which are geographically proximate to the customer In such cases even though the daily production volume of a given production node is small in comparison to our highest volume production lines the homogeneity and volume we are able to achieve is nonetheless significant relative to traditional suppliers of the long tail product in question thus our relative efficiency gains remain substantial We acquired most of our capabilities in this area via our investments in Exaprint Printdeal Pixartprinting and WIRmachenDRUCK For instance the product assortment of each of these four businesses is measured in the tens of thousands versus Vista where product assortment is dramatically smaller on a relative basis In addition to our own production of long tail products we rely heavily on third party fulfillment partnerships which allow us to offer a diverse set of products This deep and broad product offering is important to many customers
Consists of the operations of our VistaPrint branded websites in North America Western Europe Australia New Zealand India and Singapore This business also includes our 99designs by Vista business which provides graphic design services VistaCreate for do it yourself DIY design our Vista x Wix partnership for small business websites and our Vista Corporate Solutions business which serves medium sized businesses and large corporations
Our Vista business helps more than 11 million small businesses annually to create attractive professional quality marketing products at affordable prices and low volumes With Vista small businesses are able to create and customize their marketing with easy to use digital tools and design templates or by receiving expert graphic design support In October 2020 Vista acquired 99designs to expand its design offering via a worldwide community of more than 150 000 talented designers to make it easy for designers and clients to work together to create designs they love In October 2021 Vista acquired Depositphotos to expand the content available for our customers and to introduce VistaCreate which is a versatile intuitive design software which leverages templates from freelance contributors
Several signature services including VistaPrint VistaCreate 99designs by Vista Vista Corporate Solutions and Vista x Wix operate within the Vista brand architecture This broadens our customers understanding of our value proposition to allow us to serve a larger set of their needs across a wide range of products and solutions that include design social media and web presence as well as print
VistaPrint represents the vast majority of the revenue in this segment where during fiscal year 2024 average order value was more than 86 and customers spent on average a bit more than 145 for the year gross margins were about 56
and advertising spend as a percent of revenue was about 16 Vista has had strong free cash flow conversion as its e commerce model typically leads to collections from customers prior to the production and shipment of customer orders and mass customization allows for relatively low levels of inventory relative to revenue
Our Upload Print businesses are organized in two reportable segments PrintBrothers and The Print Group both of which focus on serving graphic professionals such as local printers print resellers graphic artists advertising agencies and other customers with professional desktop publishing skill sets Average order values and annual spend per customer vary by business with AOVs on average of about 95 160 and annual spend per customer of about 300 700 in fiscal year 2024 Gross margins vary by business
but averaged about 32 in fiscal year 2024 due to wholesale like pricing and the wide variety of products produced both in owned facilities as well as via third party fulfillers Advertising spend as a percent of revenue was about 5 in fiscal year 2024 although it also varies by business
Consists of our pens com branded business and a few smaller brands operated by National Pen that are focused on customized writing instruments and promotional products apparel and gifts for small and medium sized businesses
National Pen serves more than a million small businesses annually across geographies including North America Europe and Australia The pens com branded business sells through their ecommerce site and is supported by digital marketing methods as well as direct mail and telesales National Pen focuses on customized writing instruments and promotional products apparel and gifts for small and medium sized businesses During fiscal year 2024 National Pen s average order value was about 300 350 and annual spend per customer was about 450 Gross margins were about 53 in fiscal year 2024 with highly seasonal profits driven in the December quarter Advertising spend as a percent of revenue was about 20 in fiscal year 2024 Significant inventory and customer invoicing requirements in this business drive different working capital needs compared to our other businesses
A collection of businesses combined into one reportable segment based on materiality including BuildASign a larger and profitable business with strong profitability and cash flow and Printi a small early stage business operating at a relatively modest operating loss
Given the scale of purchasing that happens across Cimpress businesses there is significant value to coordinating our negotiations and purchasing to gain the benefit of scale Our central procurement team negotiates and manages Cimpress wide contracts for large scale capital equipment shipping services and major categories of raw materials e g paper plates ink The Cimpress procurement team also supports procurement improvements tools and approaches across other aspects of our businesses purchases
While we are focused on seeking low total cost in our strategic sourcing efforts we also work to ensure quality reliability and responsible sourcing practices within our supply chain Our efforts include the procurement of high quality materials and equipment that meet our strict specifications at a low total cost across a growing number of manufacturing locations with an increasing focus on supplier compliance with our sustainable paper procurement policy as well as our Supplier Code of Conduct We also work to develop and implement logistics warehousing and outbound shipping strategies to provide a balance of low cost material availability while limiting our inventory exposure Additionally this team partners with each of our businesses and production equipment suppliers to help drive innovation and new product introduction at advantaged costs
Having this central procurement team that works together with the procurement teams in each of our businesses benefits us relative to the market and we believe it has enabled us to operate more effectively mitigating supply and cost risks relative to smaller competitors
Our businesses typically rely on proprietary technology to attract and retain our customers to enable customers to create graphic designs and place orders on our websites and to sort aggregate and produce multiple orders in standardized scalable processes Technology is core to our competitive advantage as without it our businesses would not be able to produce custom orders in small quantities while achieving the economics that are more analogous to mass produced items
We are using our Mass Customization Platform MCP which is a cloud based collection of software services APIs web applications and related technology that can be leveraged independently or together by our businesses and third parties to perform common tasks that are important to mass customization Cimpress businesses and increasingly third party fulfillers to our various businesses leverage different combinations of MCP services depending on what capabilities they need to complement their business specific technology The capabilities that are available in the MCP today include customer facing technologies such as ecommerce or those that enable customers to visualize their designs on various products as well as manufacturing supply chain and logistics technologies that automate various stages of the production and delivery of a product to a customer The benefits of the MCP include improved speed to market for new product introduction reduction in fulfillment costs improvement of product delivery or geographic expansion improved site experience automating manual tasks and avoidance of certain redundant costs which are especially impactful improvements when the platform is used to enable fulfillment between our Cimpress businesses We believe the MCP can generate significant customer and shareholder value from increased specialization of production facilities aggregated scale from multiple businesses increased product offerings and shared technology development costs
We intend to continue developing and enhancing our MCP based customer facing and manufacturing supply chain and logistics technologies and processes We develop our MCP technology centrally and we also have software and production engineering capabilities in each of our businesses Our businesses are constantly seeking to strengthen our manufacturing and supply chain capabilities through engineering improvements in areas like automation lean manufacturing choice of equipment product manufacturability materials science process control and color control
Each of our businesses uses a mix of proprietary and third party technology that supports the specific needs of that business Their technology intensity ranges depending on their specific needs Over the past few years an increasing number of our businesses have modernized and modularized their business specific technology to enable them to launch new products faster provide a better customer experience more easily connect to our MCP technologies and leverage third party technologies where we do not need to bear the cost of developing and maintaining proprietary technologies For example our businesses are increasingly using third party software for capabilities such as content management multivariate testing tools and data warehousing which are areas that specialized best in class technologies are better than the proprietary technologies they have replaced This allows our engineering and development talent to focus on artwork technologies product information management and marketplace technologies from which we derive competitive advantage
In our central Cimpress Technology team and in an increasing number of our decentralized businesses we have adopted an agile micro services based approach to technology development that enables multiple businesses or use cases to leverage this API technology regardless of where it was originally developed We believe this development approach can help our businesses serve customers and scale operations more rapidly than could have been done as an individual business outside Cimpress
Each Cimpress business is responsible for ensuring that customer company and team member information is secure and handled in ways that are fully compliant with relevant laws and regulations Because there are many aspects of this topic that apply to all of our businesses Cimpress also has a central security team that defines security policies deploys security controls provides services and embeds security into the development processes of our businesses This team works in partnership with each of our businesses and the corporate center to measure security maturity and risk and provides managed security services in a way that allows each business to address their unique challenges lower their cost and become more efficient in using their resources
We make it easy low cost and efficient for Cimpress businesses to set up and grow teams in India via a central infrastructure that provides all the local recruiting onboarding day to day administration HR and facilities management to support these teams whether for technology graphic services or other business functions Most of our businesses have established teams in India leveraging this central capability with those teams working directly for the respective Cimpress business This is another example of scale advantage albeit with talent relative to both traditional suppliers and smaller online competitors that we leverage across Cimpress
The markets for the products our businesses produce and sell are intensely competitive highly fragmented and geographically dispersed with many existing and potential competitors Though Cimpress is the largest business in our space we still represent a small fraction of the overall market and believe there is significant room for growth over the long term future Within this highly competitive context our businesses compete on the basis of breadth and depth of product offerings price convenience quality technology design content tools and assistance customer service ease of use and production and delivery speed It is our intention to offer a broad selection of high quality products as well as related services at competitive price points and in doing so offer our customers an attractive value proposition As described above in Vista in recent years we expanded both our value proposition and addressable market to include design and digital marketing services
Today s market has evolved to be more competitive This evolution which has been ongoing for over 20 years has led to major benefits for customers in terms of lower prices faster lead times and easier customer experience Cimpress and its businesses have proactively driven and benefited from this dynamic The mass customization business model first took off with small format products like business cards post cards and flyers and consumer products like holiday cards As the model has become better understood and more prevalent and online advertising approaches more common the competition has become more intense We continue to derive significant and growing profits from these small format products Additionally there are other product areas that have only more recently begun to benefit from mass customization such as books catalogs magazines textiles and packaging
We strive to achieve net zero carbon emissions by fiscal year 2040 across our entire value chain and to achieve a 53 reduction in emissions by fiscal year 2030 as compared to our fiscal year 2019 baseline The majority of these baseline emissions are from our value chain Scope 3 Through investments in energy efficient infrastructure and equipment as well as renewable energy we have achieved significant reductions in our direct emissions Scope 1 and indirect emissions from purchased electricity or other forms of energy Scope 2 and expect further reductions in the future We have begun to examine our Scope 3 emissions including substrate and logistics choices for further opportunities to reduce total emissions We are focused on engaging our suppliers to refine our Scope 3 data while enhancing our internal data management capabilities to improve our decision making and reporting capabilities Our targets have been informed by a science based approach and are in alignment with a 1 5
Our sourcing strategy seeks to minimize any contribution to deforestation forest degradation or loss of biodiversity We have converted the vast majority of the paper we print on in our Cimpress owned production facilities to materials certified by either the Forest Stewardship Council FSC or the Programme for the Endorsement of Forest Certification PEFC leading certifications of responsible forestry practices These certifications confirm that the paper we print on comes from responsibly managed forests that meet high environmental and social standards and form a part of our preparations for compliance with the upcoming European Union Deforestation Regulation EUDR that is effective in January 2025 In fiscal year 2025 we will be required to comply with the EUDR for all products produced imported or exported in Europe with similar expectations for products produced outside of Europe We are also focused on packaging where we target 95 of our cardboard and corrugate packaging to be either
FSC certified PEFC certified or contain the highest feasible amount of recycled content from post consumer sources by the end of fiscal year 2025 We have also begun to engage our third party suppliers to materially expand their use of responsibly forested paper for the products that they customize on our behalf
We are committed to improving the profile of our plastic based packaging and products in line with the targets set by the New Plastics Economy Global Commitment co sponsored by the United Nations Environment Programme and the Ellen MacArthur Foundation Our goal for both our product and packaging profile is to eliminate 100 of problematic plastic usage PVC and polystyrene transition 100 of non reusable packaging to recyclable and or compostable materials decrease virgin fossil fuel based plastic content in our packaging by 20 and increase the recycled content in our plastic products by 20 The target date we set for ourselves was to achieve this by the end of fiscal year 2025 compared to a 2020 baseline We have now fully eliminated PVC and polystyrene from our plastic packaging and are working to reduce the amount of fossil fuel derived plastic in our packaging by 20 by the end of fiscal year 2025 We continue to aim to transition our remaining plastic packaging to recyclable and or compostable materials in the coming years but expect that this target will be achieved after the initial target date due to the lack of materials that currently meet both scalability and operational requirements and challenges with the consistency of recycling infrastructure in all the jurisdictions to which we ship product For our plastic products we continue to make important progress toward our goal to eliminate PVC and polystyrene including the test and launch of multiple key alternative products We continue to aim to transition these products away from these materials in the coming years but expect this to be after the end of fiscal year 2025 as a result of limited market availability and supply chain risk For both plastic packaging and products during fiscal year 2025 we plan to incorporate our learnings over the past five years to define new ambitious targets in each category to ensure that we continue to improve the sustainability of our offering to customers beyond our initial target date
We require recruiting retention and other performance management related decisions to be made based solely on merit and organizational needs and considerations such as an individual s ability to do their job with excellence and in alignment with the company s strategic and operational objectives We do not tolerate discrimination on any basis protected by human rights laws or anti discrimination regulations and we strive to do more in this regard than the law requires We are committed to a work environment where team members are treated with respect and fairness and have invested in education and awareness programs for team members to make further improvements in this area We value individual differences unique perspectives and the distinct contributions that each one of us can make to the company
We require safe working conditions at all times to ensure our team members and other parties are protected and require legal compliance at a minimum at all times We require training on and compliance with safe work practices and procedures at all manufacturing facilities to ensure the safety of team members and visitors to our plant floors
It is important to us that our supply chain reflects our commitment to doing business with the highest standards of ethics and integrity We expect our suppliers to act in full compliance with applicable laws rules and regulations Our code of business conduct and supplier code of conduct lay out our expectations regarding human rights environmental standards and safe working conditions Each Cimpress business is responsible for closely monitoring its supply chain for unacceptable practices such as environmental crimes child labor slavery or unsafe working conditions
More information can be found at www cimpress com in our Corporate Social Responsibility section including links to reports and documents such as our environmental social and governance ESG reports supplier code of conduct and compliance with the UK Modern Slavery Act and Canada s Fighting Against Forced Labour and Child Labour in Supply Chains Act We are monitoring developments in the ESG reporting regulatory landscape and are building the necessary processes and capabilities to remain in compliance as relevant regulations evolve
We seek to protect our proprietary rights through a combination of patents copyrights trade secrets trademarks and contractual restrictions imposed on our employees and third parties and control access to and distribution of our proprietary information We have registered or applied for the registration of a number of U S and international domain names trademarks and copyrights Additionally we have filed U S and international patent applications for certain of our proprietary technology
Our profitability has historically had seasonal fluctuations Our second fiscal quarter ending December 31 includes the majority of the holiday shopping season and is our strongest quarter for sales of our consumer oriented products such as holiday cards calendars canvas prints photobooks and personalized gifts
Cimpress plc was incorporated on July 5 2017 as a private company limited by shares under the laws of Ireland and on November 18 2019 was re registered as a public limited company under the laws of Ireland On December 3 2019 Cimpress N V the former publicly traded parent company of the Cimpress group of entities merged with and into Cimpress plc with Cimpress plc surviving the merger and becoming the publicly traded parent company of the Cimpress group of entities
We make available free of charge through our investor relations website at ir cimpress com the reports proxy statements amendments and other materials we file with or furnish to the SEC as soon as reasonably practicable after we electronically file or furnish such materials with or to the SEC We are not including the information contained on our website or information that can be accessed by links contained on our website as a part of or incorporating it by reference into this Annual Report on Form 10 K
Our future results may vary materially from those contained in forward looking statements that we make in this Report and other filings with the SEC press releases communications with investors and oral statements due to the following important factors among others Our forward looking statements in this Report and in any other public statements we make may turn out to be wrong These statements can be affected by among other things inaccurate assumptions we might make or by known or unknown risks and uncertainties or risks we currently deem immaterial Consequently no forward looking statement can be guaranteed We undertake no obligation to update any forward looking statements whether as a result of new information future events or otherwise except as required by law
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 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 could cause our operating results to fluctuate from quarter to quarter or year to year include among others
Some of our expenses such as building leases depreciation related to previously acquired property and equipment and personnel costs are relatively fixed and we may be unable to or may not choose 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 may sometimes be below the expectations of public market analysts and investors in which case the price of our ordinary shares may decline
A primary component of our business strategy is to promote and strengthen our brands to attract new and repeat customers and we face significant competition from other companies in our markets who also seek to establish strong brands To promote and strengthen our brands we must incur substantial marketing expenses and establish a relationship of trust with our customers by providing a high quality customer experience which requires us to invest substantial amounts of our resources A negative incident or circumstance involving our products services advertising or corporate conduct can damage our reputation especially if the incident or circumstance is widely publicized or goes viral and cause customers to lose trust in our brands which could negatively impact our revenues
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
the challenge of complying with disparate laws in multiple countries such as 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
In addition we are exposed to fluctuations in currency exchange rates that may 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 may not mitigate the net impact of currency exchange rate fluctuations and our financial results may differ materially from expectations as a result of such fluctuations
Failure to protect our information systems and the confidential information of our customers employees and business partners against security breaches and thefts could damage our reputation and brands subject us to litigation and enforcement actions and substantially harm our business and results of operations
Our business involves the receipt storage and transmission of customers personal and payment information as well as confidential information about our business employees suppliers and business partners some of which is entrusted to third party service providers partners and vendors We and third parties with which we share information have experienced and will continue to experience cyberattacks and other malicious activity that may include physical and electronic break ins computer viruses ransomware attacks and phishing and other social engineering scams among other threats We are seeing security threats evolve and become more sophisticated and more difficult to detect and defend against including by the increased use of artificial intelligence to enhance attacks and our vulnerabilities may be heightened by our decentralized operating structure and many of our employees working remotely A hacker or thief may defeat our security measures or those of our third party service providers partners or vendors and obtain confidential or personal information and we or the third party may not discover the security breach and theft of information for a significant period of time after the breach occurs We may need to significantly increase the resources we expend to protect against security breaches and thefts of data or to address problems caused by breaches or thefts and we may not be able to anticipate cyber attacks or implement adequate preventative measures Any compromise or breach of our information systems or the information systems of third parties with which we share information could among other things
We are subject to the laws of many states countries and regions and industry guidelines and principles governing the collection use retention disclosure sharing and security of data that we receive from and about our customers and employees Any failure or perceived failure by us to comply with any of these laws guidelines or principles could result in actions against us by governmental entities or others a loss of customer confidence and damage to our brands In addition the regulatory landscape is constantly changing as various regulatory bodies throughout the world enact new laws concerning privacy data retention data transfer and data protection including possible limitations on our ability to use customer data and regulating the use of artificial intelligence and machine learning Complying with these varying and changing requirements is challenging especially for our smaller more thinly staffed businesses and could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business and operating results
Our various businesses rely on a variety of marketing methods to attract new and repeat customers These methods include promoting our products and services through paid channels such as online search display and television as well as leveraging our owned and operated channels such as email direct mail our social media accounts and telesales If the costs of these channels significantly increase or the effectiveness of these channels significantly declines then our ability to efficiently attract new and repeat customers would be reduced our revenue and net income could decline and our business and results of operations would be harmed
A key component of our strategy is the development and deployment of a mass customization platform which is a cloud based collection of software services APIs web applications and related technology offerings that can be leveraged independently or together by our businesses and third parties to perform common tasks that are important to mass customization The process of developing new technology is complex costly and uncertain and requires us to commit significant resources before knowing whether our businesses will adopt components of our mass customization platform or whether the platform will make us more effective and competitive As a result there can be no assurance that we will find new capabilities to add to the growing set of technologies that make up our platform that our diverse businesses will realize value from the platform or that we will realize expected returns on the capital expended to develop the platform
Our profitability has historically been highly seasonal Our second fiscal quarter which ends on December 31 includes the majority of the holiday shopping season and typically accounts for a disproportionately high portion of our earnings for the year primarily due to higher sales of home and family products such as holiday cards calendars photo books and personalized gifts In addition our National Pen business has historically generated nearly all of its profits during the second fiscal quarter Lower than expected sales during the second quarter have a disproportionately large impact on our operating results and financial condition for the full fiscal year In addition if our manufacturing and other operations are unable to keep up with the high volume of orders during our second fiscal quarter or we experience inefficiencies in our production or disruptions of our supply chains then our costs may be significantly higher and we and our customers can experience delays in order fulfillment and delivery and other disruptions
Our businesses production facilities websites infrastructure supply chain customer service centers and operations may be vulnerable to interruptions and we do not have redundancies or alternatives in all cases to carry on these operations in the event of an interruption In addition because our businesses are dependent in part on third parties for certain aspects of our communications and production systems we may not be able to remedy interruptions to these systems in a timely manner or at all due to factors outside of our control Some of the events that could cause interruptions in our businesses operations systems or supply chains are the following among others
Any interruptions to our systems or operations could result in lost revenue increased costs negative publicity damage to our reputations and brands and an adverse effect on our business and results of operations Building redundancies into our infrastructure systems and supply chain to mitigate these risks may require us to commit substantial financial operational and technical resources
Demand for our products and services is sensitive to price for almost all of our businesses and past changes in our pricing strategies had a significant impact on the numbers of customers and orders in some regions which in turn affected our revenue profitability and results of operations Many factors can significantly impact our pricing and marketing strategies including the costs of running our business the costs of raw materials our competitors pricing and marketing strategies and the effects of inflation We may not be able to mitigate increases in our costs by increasing the prices of our products and services If we fail to meet our customers price expectations our business and results of operations may suffer
An important way in which we pursue our strategy is to selectively acquire businesses technologies and services and make minority investments in businesses and joint ventures The time and expense associated with acquisitions and investments can be disruptive to our ongoing business and divert our management s attention In addition we have needed in the past and may need in the future to seek financing for acquisitions and investments which may not be available on terms that are favorable to us or at all and can cause dilution to our shareholders cause us to incur additional debt or subject us to covenants restricting the activities we may undertake
An acquisition minority investment or joint venture may fail to achieve our goals and expectations and may have a negative impact on our business and financial results in a number of ways including the following
Acquisitions and minority investments can be costly and can result in increased expenses including impairments of goodwill and intangible asserts if financial goals are not achieved assumptions of contingent or unanticipated liabilities amortization of certain acquired assets and increased tax costs In addition we may overpay for acquired businesses
The management of our acquired businesses minority investments and joint ventures may be more expensive or may take more resources than we expected In addition continuing to devote resources to a struggling business can take resources away from other investment areas and priorities
We may not be able to retain customers and key employees of the acquired businesses In particular it can be challenging to motivate the founders who built a business to continue to lead the business after they sell it to us
The accounting for our acquisitions and minority investments requires us to make significant estimates judgments and assumptions that can change from period to period based in part on factors outside of our control which can create volatility in our financial results For example we often pay a portion of the purchase price for our acquisitions in the form of an earn out based on performance targets for the acquired companies or enter into obligations or options to purchase noncontrolling interests in our acquired companies or minority investments which can be difficult to forecast and can lead to larger than expected payouts that can adversely impact our results of operations
Furthermore provisions for future payments to sellers based on the performance or valuation of the acquired businesses such as earn outs and options to purchase noncontrolling interests can lead to disputes with the sellers about the achievement of the performance targets or valuation or create inadvertent incentives for the acquired company s management to take short term actions designed to maximize the payments they receive instead of taking actions that benefit the business over the long term
We are subject to a variety of safety health and environmental or SHE laws and regulations in each of the jurisdictions in which we operate SHE laws and regulations frequently change and evolve including the addition of new SHE regulations especially with respect to climate change These laws and regulations govern among other things air emissions wastewater discharges the storage handling and disposal of hazardous and other regulated substances and wastes soil and groundwater contamination and employee health and safety We use regulated substances such as inks and solvents and generate air emissions and other discharges at our manufacturing facilities and some of our facilities are required to hold environmental permits If we fail to comply with existing or new SHE requirements we may be subject to monetary fines civil or criminal sanctions third party claims or the limitation or suspension of our operations In addition if we are found to be responsible for hazardous substances at any location including for example offsite waste disposal facilities or facilities at which we formerly operated we may be responsible for the cost of cleaning up contamination regardless of fault as well as for claims for harm to health or property or for natural resource damages arising out of contamination or exposure to hazardous substances
Complying with existing SHE laws and regulations is costly and we expect our costs to significantly increase as new SHE requirements are added and existing requirements become more stringent In some cases we pursue self imposed socially responsible policies that are more stringent than is typically required by laws and regulations for instance in the areas of worker safety team member social benefits and environmental protection such as carbon reduction initiatives The costs of this added SHE effort are often substantial and could grow over time
We contract with multiple suppliers fulfillers merchants and other business partners in many jurisdictions worldwide We require our business partners to operate in compliance with all applicable laws including those regarding corruption working conditions employment practices safety and health and environmental compliance but we cannot control their business practices We may not be able to adequately vet monitor and audit our many business partners or their suppliers throughout the world and our decentralized structure heightens this risk as not all of our businesses have equal resources to manage their business partners If any of them violates labor environmental or other laws or implements business practices that are regarded as unethical or inconsistent with our values our reputation could be severely damaged and our supply chain and order fulfillment process could be interrupted which could harm our sales and results of operations
If we are unable to protect our intellectual property rights our reputation and brands could be damaged and others may be able to use our technology which could substantially harm our business and financial results
We rely on a combination of patents trademarks trade secrets copyrights and contractual restrictions to protect our intellectual property but these protective measures afford only limited protection Despite our efforts to protect our proprietary rights unauthorized parties may be able to copy or use technology or information that we consider proprietary There can be no guarantee that any of our pending patent applications or continuation patent applications will be granted and from time to time we face infringement invalidity intellectual property ownership or similar claims brought by third parties with respect to our patents In addition despite our trademark registrations throughout the world our competitors or other entities may adopt names marks or domain names similar to ours thereby impeding our ability to build brand identity and possibly leading to customer confusion Enforcing our intellectual property rights can be extremely costly and a failure to protect or enforce these rights could damage our reputation and brands and substantially harm our business and financial results
From time to time we receive claims from third parties that we infringe their intellectual property rights that we are required to enter into patent licenses covering aspects of the technology we use in our business or that we improperly obtained or used their confidential or proprietary information Any litigation settlement license or other proceeding relating to intellectual property rights even if we settle it or it is resolved in our favor could be costly divert our management s efforts from managing and growing our business and create uncertainties that may make it more difficult to run our operations If any parties successfully claim that we infringe their intellectual property rights we might be forced to pay significant damages and attorney s fees and we could be restricted from using certain technologies important to the operation of our business
Because most of our businesses depend primarily on the Internet for our sales laws specifically governing the Internet e commerce and email marketing may have a greater impact on our operations than other more traditional businesses Existing and future laws such as laws covering pricing customs privacy consumer protection or commercial email may impede the growth of e commerce and our ability to compete with traditional brick and mortar retailers Existing and future laws or unfavorable changes or interpretations of these laws could substantially harm our business and financial results
We may not be successful in advancing the use of artificial intelligence and new competitors may develop new or better products using artificial intelligence that take market share which could adversely affect our
We use artificial intelligence AI including generative AI in many parts of our value chain There are significant risks involved in development and deploying AI and there can be no assurance that the usage of AI will enhance our products or services or be beneficial to our business including our efficiency or profitability For example our AI related efforts may give rise to risks related to harmful content accuracy bias discrimination intellectual property infringement or misappropriation data privacy and cybersecurity among others In addition these risks include the possibility of new or enhanced governmental or regulatory scrutiny litigation or other legal liability ethical concerns negative consumer perceptions as to automation and AI or other complications that could adversely affect our business brand perception or financial results Further we face competition from other companies that are developing their own AI products and technologies that may have a negative impact on our value chain including in the area of design which is evolving quickly can influence customer behavior and preferences may allow other companies to become more efficient than us or could allow other companies to more effectively acquire and retain customers Given the pace of innovation in artificial intelligence and its potential applications to our industry it is not possible to predict all of the risks related to the use of AI and changes in laws rules directives and regulations governing the use of AI may adversely affect our ability to develop and use AI or subject us to legal liability
Because of our focus on automation and high volumes many of our sales do not involve any human based review of content Although our websites terms of use specifically require customers to make representations about the legality and ownership of the content they upload for production there is a risk that a customer may supply an image or other content for an order we produce that is the property of another party used without permission that infringes the copyright or trademark of another party or that would be considered to be defamatory hateful obscene or otherwise objectionable or illegal under the laws of the jurisdiction s where that customer lives or where we operate If the machine learning tools we have developed to aid our content review fail to find instances of intellectual property infringement or objectionable or illegal content in customer orders we could be required to increase the amount of manual screening we perform which could significantly increase our costs and we could be required to pay substantial penalties or monetary damages for any failure in our screening process
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 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
If we are unable to recruit retain develop and motivate our employees in senior management and key roles such as technology marketing data science and production then we may not be able to execute on our strategy and grow our business as planned We have seen increased competition for talent in recent years that makes it more difficult for us to retain the employees we have and to recruit new employees and also drives up the cost of compensation and our current management and employees may cease their employment with us at any time with minimal advance notice This retention risk is heightened with respect to the leaders of certain of our businesses who have in the past or may in the future receive substantial payouts from either their redeemable non controlling interests in those businesses or long term incentive awards as it may be challenging to retain and motivate them to continue running their businesses Although we believe our remote first way of working which allows many of our team members to work remotely with no expectation that they will commute to a company facility is a competitive advantage it can be more challenging to engage motivate and develop team members in a remote work environment and our success depends on an engaged and motivated workforce and on developing the skills and talents of our workforce
The markets for our products and services are intensely competitive highly fragmented and geographically dispersed The competitive landscape for e commerce companies and the mass customization market continues to change as new e commerce businesses are introduced established e commerce businesses enter the mass customization and print markets and traditional brick and mortar businesses establish an online presence With Vista s increased focus on design services we now also face competition from companies in the design space some of which may be more established experienced or innovative than we are Competition may result in price pressure increased advertising expense reduced profit margins and loss of market share and brand recognition any of which could substantially harm our business and financial results Some of our current and potential competitors have advantages over us including longer operating histories greater brand recognition or loyalty broader customer reach more focus on a given subset of our business significantly greater financial marketing and other resources or willingness to operate at a loss while building market share
If some or all of our markets enter a recession or other sustained economic downturn demand for our products and services could be negatively impacted An economic downturn could result in potential customers not being able to afford our products and rely more on free social media channels to market themselves instead of the products and services we offer If demand for our products and services decreases our business and financial results could be harmed In addition we experienced material cost increases in recent years that caused volatility in our financial performance Although some costs have come down in the last year we cannot predict whether costs will increase in the future or by how much and if our costs rise again there could be further impacts to our financial results
We face risks arising from the increased focus by our customers investors and regulators on environmental social and governance criteria including with respect to climate change labor practices the diversity of our management and directors and the composition of our Board Meeting the ESG goals we have set
and publicly disclosed will require significant resources and expenditures and we may face pressure to make commitments establish additional goals and take actions to meet them beyond our current plans If customers and potential customers are dissatisfied with our ESG goals or our progress toward meeting them then they may choose not to buy our products and services which could lead to reduced revenue and our reputation could be harmed In addition with anti ESG sentiment gaining momentum in some of our markets we could experience reduced revenue and reputational harm if we are targeted by groups or influential individuals who disagree with our public positions on social or environmental issues
Our senior secured credit facility that governs our Term Loan B and revolving credit and the indenture that governs our 7 0 Senior Notes due 2026 which we collectively refer to as our debt documents contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit how we conduct our business execute our strategy compete effectively or take advantage of new business opportunities including restrictions on our ability to
Our failure to make scheduled payments on our debt or our breach of the covenants or restrictions under any of our debt documents could result in an event of default under the applicable indebtedness Such a default could have a material adverse effect on our business and financial condition including the following among others
requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes thereby reducing the amount of cash flows available for working capital capital expenditures acquisitions and other general corporate purposes
If our cash flows and capital resources are insufficient to fund our debt service obligations we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations seek additional debt or equity capital or restructure or refinance our indebtedness Refinancing our debt may be particularly challenging in the current environment of high interest rates We may not be able to effect any such alternative measures if necessary on commercially reasonable terms or at all and if we cannot make scheduled payments on our debt we will be in default
Borrowings under our credit facility are at variable rates of interest and expose us to interest rate risk and any interest rate swaps we enter into in order to reduce interest rate volatility may not fully mitigate our interest rate risk If interest rates continue to increase our debt service obligations on the variable rate indebtedness will increase even if the amount borrowed remains the same and our net income and cash flows including cash available for servicing our indebtedness will correspondingly decrease As of June 30 2024 a hypothetical 100 basis point increase in rates inclusive of our outstanding interest rate swaps would result in an increase of interest expense of approximately 8 8 million
We are an Irish public limited company that operates through various subsidiaries in a number of countries throughout the world Consequently we are subject to tax laws treaties and regulations in the countries in which we operate and these laws and treaties are subject to interpretation From time to time we are subject to tax audits and the tax authorities in these countries could claim that a greater portion of the income of the Cimpress plc group should be subject to income or other tax in their respective jurisdictions which could result in an increase to our effective tax rate and adversely affect our results of operations
A change 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 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 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 then we could incur substantial tax liabilities for past sales
We operate pursuant to written transfer pricing agreements among Cimpress plc and its subsidiaries which establish transfer prices for various services performed by our subsidiaries for other Cimpress group companies If two or more affiliated companies are located in different countries the tax laws or regulations of each country generally will require that transfer prices be consistent with those between unrelated companies dealing at arm s length Our transfer pricing arrangements are not binding on applicable tax authorities If tax authorities in any country were successful in challenging our transfer prices as not reflecting arm s length transactions they could require us to adjust our transfer prices and thereby reallocate our income to reflect these revised transfer prices A reallocation of taxable income from a lower tax jurisdiction to a higher tax jurisdiction would result in a higher tax liability to us In addition if the country from which the income is reallocated does not agree with the reallocation both countries could tax the same income resulting in double taxation
Because of our corporate structure our shareholders may find it difficult to enforce claims based on United States federal or state laws including securities liabilities against us or our management team
We are incorporated under the laws of Ireland There can be no assurance that the courts of Ireland would recognize or enforce judgments of U S courts obtained against us or our directors or officers based on the civil liabilities provisions of the U S federal or state securities laws or that the courts of Ireland would hear actions against us or those persons based on those laws There is currently no treaty between the U S and Ireland providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters and Irish common law rules govern the process by which a U S judgment will be enforced in Ireland Therefore a final judgment for the payment of money rendered by any U S federal or state court based on civil liability whether or not based solely on U S federal or state securities laws would not automatically or necessarily be enforceable in Ireland
In addition because most of our assets are located outside of the United States and some of our directors and management reside outside of the United States it could be difficult for investors to place a lien on our assets or those of our directors and officers in connection with a claim of liability under U S laws As a result it may be difficult for investors to enforce U S court judgments or rights predicated upon U S laws against us or our management team outside of the United States
We have entered into derivatives to manage our exposure to interest rate and currency movements If we do not accurately forecast our results of operations execute contracts that do not effectively mitigate our economic exposure to interest rates and currency rates elect to not apply hedge accounting or fail to comply with the complex accounting requirements for hedging our results of operations and cash flows could be volatile as well as negatively impacted Also our hedging objectives may be targeted at improving our non GAAP financial metrics which could result in increased volatility in our GAAP results Since some of our hedging activity addresses long term exposures such as our net investment in our subsidiaries the gains or losses on those hedges could be recognized before the offsetting exposure materializes to offset them potentially causing volatility in our cash or debt balances and therefore our leverage
If our passive income or our assets that produce passive income exceed levels provided by law for any taxable year we may be characterized as a passive foreign investment company or a PFIC for United States federal income tax purposes If we are treated as a PFIC U S holders of our ordinary shares would be subject to a disadvantageous United States federal income tax regime with respect to the distributions they receive and the gain if any they derive from the sale or other disposition of their ordinary shares
We believe that we were not a PFIC for the tax year ended June 30 2024 and we expect that we will not become a PFIC in the foreseeable future However whether we are treated as a PFIC depends on questions of fact as to our assets and revenues that can only be determined at the end of each tax year Accordingly we cannot be certain that we will not be treated as a PFIC in future years
If a United States shareholder owns 10 or more of our ordinary shares it may be subject to increased United States taxation under the controlled foreign corporation rules Additionally this may negatively impact the demand for our ordinary shares
If a United States shareholder owns 10 or more of our ordinary shares it may be subject to increased United States federal income taxation and possibly state income taxation under the controlled foreign corporation rules In general if a U S person owns or is deemed to own at least 10 of the voting power or value of a non U S corporation or 10 U S Shareholder and if such non U S corporation is a controlled foreign corporation or CFC then such 10 U S Shareholder who owns or is deemed to own shares in the CFC on the last day of the CFC s taxable year must include in its gross income for United States federal income tax and possibly state income tax purposes its pro rata share of the CFC s subpart F income even if the subpart F income is not distributed In addition a 10 U S Shareholder s pro rata share of other income of a CFC even if not distributed might also need to be included in a 10 U S Shareholder s gross income for United States federal income tax and possibly state income tax purposes under the global intangible low taxed income or GILTI provisions of the U S tax law In general a non U S corporation is considered a CFC if one or more 10 U S Shareholders together own more than 50 of the voting power or value of the corporation on any day during the taxable year of the corporation Subpart F income consists of among other things certain types of dividends interest rents royalties gains and certain types of income from services and personal property sales
The rules for determining ownership for purposes of determining 10 U S Shareholder and CFC status are complicated depend on the particular facts relating to each investor and are not necessarily the same as the rules for determining beneficial ownership for SEC reporting purposes For taxable years in which we are a CFC each of our 10 U S Shareholders will be required to include in its gross income for United States federal income tax and possibly state income tax purposes its pro rata share of our subpart F income even if the subpart F income is not distributed by us and might also be required to include its pro rata share of other income of ours even if not distributed by us under the GILTI provisions of the U S tax law We currently do not believe we are a CFC However whether we are treated as a CFC can be affected by among other things facts as to our share ownership that may change Accordingly we cannot be certain that we will not be treated as a CFC in future years
The risk of being subject to increased taxation as a CFC may deter our current shareholders from acquiring additional ordinary shares or new shareholders from establishing a position in our ordinary shares Either of these scenarios could impact the demand for and value of our ordinary shares
Approximately 70 of our ordinary shares are held by our top 10 shareholders and we may repurchase shares in the future subject to the restrictions in our debt documents which could further increase the concentration of our share ownership Because of this reduced liquidity the trading of relatively small quantities of shares by our shareholders could disproportionately influence the price of those shares in either direction The price for our shares could for example decline precipitously if a large number of our ordinary shares were sold on the market without commensurate demand as compared to a company with greater trading liquidity that could better absorb those sales without adverse impact on its share price
We have policies procedures and processes for assessing identifying and managing cybersecurity risks which are defined and managed by Cimpress central security and privacy team and are designed to help protect our information assets and operations from internal and external cyber threats and secure our networks and systems Our cybersecurity processes include procedural and technical safeguards response plans regular vulnerability and penetration tests on our systems incident simulations and routine reviews of our policies and procedures to identify risks and improve our practices Our cybersecurity incident response plan is designed to help coordinate our response to and recovery from cybersecurity incidents and includes processes to assess the severity of escalate contain investigate and remediate incidents as well as to comply with applicable legal obligations We have security policies that apply to all employees worldwide and we conduct annual employee trainings on data protection cybersecurity and incident prevention which covers timely and relevant topics including social engineering phishing password protection confidential data protection asset use and mobile security
In addition to our internal penetration testing and vulnerability management program we engage an external party to simulate attacks on our systems to test our defenses and response We also use a third party vendor risk assessment platform to score vendors cybersecurity vulnerabilities and provide suggested mitigations
The Audit Committee of our Board of Directors oversees cybersecurity risk and receives regular updates from our Vice President and Chief Security and Privacy Officer on these risks risk management activities incident response plans best practices the effectiveness of our security measures and other related matters Our Vice President and Chief Security and Privacy Officer who reports to our Chief Technology Officer leads our central security and privacy team which works in partnership with each of our businesses and the corporate center to measure security maturity and risk and provides managed security services in a way that allows each business to address their unique challenges and become more efficient in using their resources We have processes and policies for the escalation of cybersecurity incidents to the central security team evaluation of the materiality of the incidents and coordination of our response as needed across businesses and operations Our Chief Security and Privacy Officer has more than 20 years of privacy and data security experience including a series of roles in Cimpress over the last 15 years the last two and a half years of which have been spent leading the central security and privacy team
Although risks from cybersecurity threats have to date not materially affected us our business strategy results of operations or financial condition we have from time to time experienced threats to and breaches of our and our third party vendors data and systems See Part I Item 1A Risk Factors in this Annual Report for a discussion of cybersecurity risks
The information required by this item is incorporated by reference to the information set forth in Item 8 of Part II Financial Statements and Supplementary Data Note 17 Commitments and Contingencies in the accompanying notes to the consolidated financial statements included in this Report
The ordinary shares of Cimpress plc are traded on the NASDAQ Global Select Market the NASDAQ under the symbol CMPR As of July 31 2024 there were five holders of record of our ordinary shares although there is a much larger number of beneficial owners
On January 31 2024 we announced that our Board had authorized the repurchase of up to 150 0 million aggregate purchase price excluding any fees commissions or other expenses of such purchases of Cimpress issued and outstanding ordinary shares on the open market through privately negotiated transactions or in one or more self tender offers This repurchase program was completed in May 2024 because we had purchased the full amount of shares authorized under the program
On May 29 2024 we announced that our Board had authorized the repurchase of up to an additional 200 0 million aggregate purchase price excluding any fees commissions or other expenses of such purchases of Cimpress issued and outstanding ordinary shares on the open market through privately negotiated transactions or in one or more self tender offers The Board did not set an expiration date for this new repurchase program and we may suspend or discontinue our share repurchases at any time
The following graph compares the cumulative total return to shareholders of Cimpress plc ordinary shares relative to the cumulative total returns of the NASDAQ Composite index and the Research Data Group RDG Internet Composite index An investment of 100 with reinvestment of all dividends is assumed to have been made in our ordinary shares and in each of the indexes on June 30 2019 and the relative performance of each investment is tracked through June 30 2024
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 our expectations with respect to our leverage and capital allocation opportunities our competitive position future payment terms with suppliers legal proceedings 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 All forward looking statements included in this Report are based on information available to us up to and including the date of this document and we disclaim any obligation to update any such forward looking statements 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 and inflation our inability to make the investments in our business and capital allocations that we plan to make or the failure of those investments or allocations to achieve the results we expect loss of key personnel or our inability to recruit talented personnel to drive performance of our businesses costs and disruptions caused by acquisitions and minority investments the failure of businesses we acquire or invest in to perform as expected our failure to develop and deploy our mass customization platform or the failure of the platform to drive the efficiencies and competitive advantages we expect 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 our failure to manage the growth and complexity of our business our failure to maintain compliance with the covenants in our debt documents or to pay our debts when due competitive pressures general economic conditions and other factors described in Item 1A Risk Factors of this Report and the documents that we periodically file with the SEC The Business section of this Report also contains estimates and other statistical data from research we conducted in August 2022 with a third party research firm and this data involves a number of assumptions and limitations and contains projections and estimates of the sizes of the opportunities of our markets that are subject to a high degree of uncertainty and should not be given undue weight
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 We discuss mass customization further in the Business section of this Report
As of June 30 2024 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 15 in our accompanying consolidated financial statements for additional information relating to our reportable segments and our segment financial measures
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 year ended June 30 2024 as compared to the year ended June 30 2023 follows
For fiscal year 2024 the increase in reported revenue was driven by revenue growth across all of our segments Currency exchange fluctuations had a positive effect on revenue growth during the current year Revenue growth in our Vista business was driven by increases
The increase to operating income during the year ended June 30 2024 was driven by a 157 8 million increase to gross profit that benefited from the revenue growth described above as well as gross margin expansion Operating income also benefited from year over year operating expense efficiencies and lower restructuring costs of 43 3 million as a result of cost reduction actions that were completed during the prior year as well as lower amortization of acquired intangible assets of 15 4 million due to the runoff of fully amortized assets across several of our previously acquired businesses These items were partially offset by 25 9 million of higher share based compensation expense year over year which was largely driven by PSUs granted in the current year the 2024 PSUs that have a higher grant pool an accelerated expense profile and higher than target attainment of the related performance conditions Advertising spend also increased 18 6 million year over year
Adjusted EBITDA increased during the year ended June 30 2024 primarily driven by the operating income growth described above which was partially offset by 18 8 million of year over year net unfavorable currency impacts Adjusted EBITDA excludes depreciation and amortization restructuring charges share based compensation expense certain impairments and gains or losses 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 for the year ended June 30 2024 primarily due to the operating income increase described above In addition we recognized 204 9 million of lower income tax expense 49 4 million of benefit in the current year versus 155 5 million of expense last year primarily due to the partial reversal of a valuation allowance on Swiss deferred tax assets in the current year which was originally established in the prior year For the year ended June 30 2024 these increases to income were partially offset by net negative currency impacts of 16 4 million year over year primarily due to unrealized currency losses caused by exchange rate volatility and lower realized gains on our derivative contracts as well as 7 0 million of higher interest expense net driven by an increased weighted average interest rate
cash from operations increased 220 4 million year over year due primarily to the increase in operating income as described above as well as changes in operating assets and liabilities of 90 7 million which were driven in part by certain timing items This favorable impact was partially offset by higher cash taxes of 18 2 million due in part to increased prior year assessments in one jurisdiction driven by profitability growth and higher net cash interest payments of 15 6 million
Adjusted free cash flow increased by 237 7 million for the year ended June 30 2024 due to the operating cash flow increase described above as well as 18 9 million higher proceeds from the sale of assets primarily driven by the sale of our previously owned customer service facility located in Jamaica and manufacturing facility in Japan
Information pertaining to fiscal year 2022 was included in our Annual Report on Form 10 K for the year ended June 30 2022 under Part II Item 7 Management s Discussion and Analysis of Financial Position and Results of Operations which was filed with the SEC on August 8 2022
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 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
1 Constant currency revenue growth a non GAAP financial measure represents the change in total revenue between current and prior year periods at constant currency exchange rates by translating all non U S dollar denominated revenue generated in the current period using the prior year period s average exchange rate for each currency to the U S dollar Our reportable segments related growth is inclusive of inter segment revenues which are eliminated in our consolidated results
2 Constant currency revenue growth excluding acquisitions divestitures a non GAAP financial measure excludes revenue results for businesses in the period in which there is no comparable year over year revenue Our reportable segments related growth is inclusive of inter segment revenues which are eliminated in our consolidated results
We have provided these non GAAP financial measures because we believe they provide meaningful information regarding our results on a consistent and comparable basis for the periods presented Management uses these non GAAP financial measures in addition to GAAP financial measures to evaluate our operating results These non GAAP financial measures should be considered supplemental to and not a substitute for our reported financial results prepared in accordance with GAAP
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
For the year ended June 30 2024 cost of revenue increased by 54 4 million year over year partially driven by unfavorable changes in currency exchange rates of 27 3 million as well as higher production and shipping costs due to volume growth and product mix shifts in some of our businesses These cost increases were partially offset by lower input costs production efficiency gains and savings that resulted from the March 2023 cost reduction actions which also supported a reduction to cost of revenue as a percent of revenue as compared to the prior year
2 During fiscal year 2023 we recognized a goodwill impairment charge of 5 6 million which related to one of our small businesses that is a part of our All Other Businesses reportable segment Refer to Note 8 in the accompanying consolidated financial statements for additional details
Technology and development expense consists primarily of payroll and related expenses for employees engaged in software and manufacturing engineering information technology operations and content development as well as amortization of capitalized software and website development costs including hosting of our websites asset depreciation patent amortization and other technology infrastructure related costs 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 expense increased by 19 7 million for the year ended June 30 2024 as compared to the prior year The increase was driven in part by higher share based compensation costs of 7 9 million due to higher expense from our 2024 PSU grants as described above The expense increases were also impacted by higher amortization of capitalized software of 6 7 million as compared to the prior year due to the higher capitalized asset base and fluctuations in currency exchange rates Third party technology costs increased by 6 2 million
year over year driven in part by our businesses further adoption of certain products offered through our mass customization platform which has driven increased consumption of those services These increases were partially offset by lower cash compensation costs of 6 9 million
Marketing and selling expense consists primarily of advertising and promotional costs payroll and related expenses for our employees engaged in marketing sales customer support and public relations activities direct mail advertising costs and third party payment processing fees 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 year ended June 30 2024 marketing and selling expenses increased by 15 9 million primarily due to higher advertising spend of 18 6 million as compared to the prior year driven by higher volumes across businesses Share based compensation costs increased 6 0 million primarily due to our 2024 PSU grants as described above Payment processing fees also increased 4 4 million as compared to the prior year due to increased order volumes These cost increases are offset in part by lower cash compensation costs of 5 8 million during the year ended June 30 2024 due to the cost reduction actions that were implemented in March 2023 There was also lower third party consulting spend of 4 1 million as compared to the prior year 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
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
General and administrative expenses decreased by 3 5 million during the year ended June 30 2024 as compared to the prior year The decrease was driven by 2 8 million of lower cash compensation largely driven by a reduction to long term incentive compensation expense due to lower than previously estimated attainment levels in certain Cimpress businesses and cost savings from the March 2023 cost reductions which were partially offset by increased compensation costs from our annual merit cycle The cost decrease was also impacted by a 2 5 million reduction to third party consulting spend the non recurrence of 2 4 million in expense for the prior year termination of one of our leased office locations a 1 9 million indirect tax expense recognized in the prior year that did not recur in the current year and the exit of our business in China during fiscal year 2023 that reduced our general and administrative expenses by 1 8 million year over year These decreases were partially offset by increases to share based compensation costs of 11 7 million driven by the 2024 PSU grants as described above
Other income net generally consists of gains and losses from currency exchange rate fluctuations on transactions or balances denominated in currencies other than the functional currency of our subsidiaries as well as the realized and unrealized gains and losses on some of our derivative instruments In evaluating our currency hedging programs and ability to qualify for hedge accounting in light of our legal entity cash flows we considered the benefits of hedge accounting relative to the additional economic cost of trade execution and administrative burden Based on this analysis we execute certain currency derivative contracts that do not qualify for hedge accounting
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 During the year ended June 30 2024 there were
40 8 million of lower unrealized losses mostly offset by 40 2 million of lower realized gains on our derivatives not designated as hedging instruments when compared to the prior year We expect volatility to continue in future periods as we do not apply hedge accounting for most of our derivative currency contracts
We experience currency related net gains and 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 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 7 0 million during the year ended June 30 2024 primarily due to a year over year increase to our weighted average interest rate net of interest rate swaps on our senior secured Term Loan B This interest expense net increase was partially offset by lower interest expense associated with our 7 0 Senior Notes due 2026 2026 Notes driven by our purchase of a portion of those notes as well as 2 7 million higher interest income earned on our cash and marketable securities
During the year ended June 30 2024 we recognized losses on the extinguishment of debt of 0 7 million due to the write off of unamortized financing fees of 2 4 million as a result of the fourth quarter amendment to our senior secured credit facility which reduced the interest rate margin on most of our outstanding senior secured Term Loan B debt This loss was partially offset by a 1 7 million gain on the extinguishment of debt arising from the purchase of a portion of our outstanding 2026 Notes Refer to Note 10 in our accompanying consolidated financial statements for additional details
Tax expense decreased for the year ended June 30 2024 versus the prior year due to the partial release of the valuation allowance on Swiss deferred tax assets of 105 8 million in the current period as compared to tax expense of 116 7 million recorded during the year ended June 30 2023 to increase the valuation allowance in Switzerland After considering all available evidence including the recent history of strong earnings from core operations in Switzerland and the expectation of future taxable income management concluded it is more likely than not that the recognized deferred tax assets are realizable and reduced the valuation allowance accordingly
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 However the final determination of our tax return positions if audited is uncertain and therefore there is a possibility that final resolution of these matters could have a material impact on our results of operations or cash flows Refer to Note 13 in our accompanying consolidated financial statements for additional details
Our segment financial performance is measured based on segment EBITDA which is defined as operating income plus depreciation and amortization plus proceeds from insurance not already included in operating income plus share based compensation expense related to investment consideration plus earn out related charges plus certain impairments plus restructuring related charges less gain on purchase or sale of subsidiaries as well as the disposal of assets The effects of currency exchange rate fluctuations impact segment EBITDA and we do not
Vista s reported revenue growth for the year ended June 30 2024 benefited from a 1 favorable impact on currency fluctuations resulting in constant currency revenue growth of 7 The revenue growth was driven by increases in new and repeat customers as well as higher revenue per customer Revenue was higher year over year across all major markets with the most significant growth in sales of signage and promotional products apparel and gifts Vista continues to improve its customer experience resulting in higher customer satisfaction and lower credit rates
For the year ended June 30 2024 segment EBITDA increased by 104 4 million Incremental gross profit was driven by the revenue growth described above lower input costs and efficiency gains as compared to the prior year Segment EBITDA growth was also driven by lower operating expenses primarily due to savings resulting from cost reduction actions implemented in March 2023 These operating expense savings were partially offset by inflationary cost increases such as our annual merit cycle increases effect on compensation costs Advertising expenses were higher year over year largely due to increased volume Changes in currency exchange rates had a positive impact on segment EBITDA of 4 7 million
PrintBrothers reported revenue growth for the year ended June 30 2024 was positively affected by currency impacts of 3 with revenue increasing on a constant currency basis by 7 year over year Constant currency growth was driven primarily by continued order volume and customer growth partially offset by customers purchasing lower quantities in certain product categories
PrintBrothers segment EBITDA for the year ended June 30 2024 grew significantly year over year driven by the constant currency revenue growth described above gross margin improvements which benefited from lower input costs and product mix shifts and operating expense efficiencies Currency exchange fluctuations positively impacted segment EBITDA year over year by 3 2 million
The Print Group s reported revenue for the year ended June 30 2024 was positively affected by currency impacts of 3 with flat revenue on a constant currency basis year over year The Print Group revenue has benefited from order growth but revenue was dampened by customers purchasing lower quantities in certain product categories and headwinds in the reseller channel
The increase in The Print Group s segment EBITDA during the year ended June 30 2024 as compared to the prior year was largely driven by gross profit growth as The Print Group benefited from gross margin expansion due to reductions in key input costs such as raw materials energy and shipping There was also a year over year reduction in long term incentive compensation expense of 3 0 million for the year ended June 30 2024 due to changes in the estimated payouts Currency exchange fluctuations positively impacted segment EBITDA year over year by 2 0 million
For the year ended June 30 2024 currency positively impacted National Pen s revenue growth by 2 The segment s constant currency revenue growth was 5 as compared to the prior year National Pen continued to deliver strong growth within its e commerce and telesales channels as well as from fulfillment for other Cimpress businesses partially offset by lower revenue from mail order sales that was impacted by a choice to meaningfully reduce advertising spend for this channel
The increase in National Pen s segment EBITDA for the year ended June 30 2024 was driven by the revenue growth described above and 3 6 million less long term incentive compensation expense primarily due to changes in the estimated payouts These segment EBITDA growth drivers were partially offset by 1 7 million higher advertising spend primarily during the first half of the fiscal year Currency exchange fluctuations had a negative year over year impact of 1 2 million for the year ended June 30 2024
All Other Businesses revenue growth was minimally impacted by currency resulting in constant currency revenue growth of 1 during the year ended June 30 2024 BuildASign the largest business in this segment delivered growth in signage products and from fulfillment for other Cimpress businesses but that growth was offset by lower revenue for real estate related products and home decor products Our smaller Printi business continued to deliver revenue growth versus last year
For the year ended June 30 2024 segment EBITDA was flat versus last year partly driven by less efficient advertising spend that was higher versus last year and was only partially offset by increased gross profit that was supported by the revenue growth described above Operating expenses benefited year over year from 0 9 million of less long term incentive compensation expense primarily due to changes in estimated payouts Our Printi business reduced its operating losses as it continues to gain scale and deliver efficiencies Segment EBITDA also benefited from the fiscal year 2023 exit of our business in China which had 1 8 million of losses last year
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 security administrative costs of our Cimpress India offices where numerous Cimpress businesses have dedicated business specific team members 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
During the year ended June 30 2024 central and corporate costs increased by 11 8 million as compared to the prior year The increases were driven by 20 5 million of increased share based compensation expense due to a higher grant pool and the impact from our 2024 PSU grants as described above This increase was partially offset by lower cash compensation expense of 3 7 million due to savings from the March 2023 cost reductions as well as lower third party consulting spend of 4 0 million as compared to the prior year
Adjustments for non cash items of 120 2 million primarily related to adjustments for depreciation and amortization of 151 8 million share based compensation costs of 65 6 million partially offset by deferred taxes of 94 4 million and unrealized currency related gains of 4 9 million
Net working capital inflow of 52 8 million primarily due to further reductions to inventory following the prior year build up of safety stock to mitigate the risk of supply chain disruptions as well as favorable changes to accounts payable and accrued liabilities
Proceeds from the sale of assets of 23 6 million which primarily included proceeds from the sale of our customer service facility located in Jamaica and manufacturing facility in Japan during the current fiscal year
At June 30 2024 we had 203 8 million of cash and cash equivalents 4 5 million of marketable securities and 1 616 6 million of debt excluding debt issuance costs and debt premiums and discounts During the year ended June 30 2024 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
We have historically used excess cash and cash equivalents for organic investments share repurchases acquisitions and equity investments and debt reduction During the year ended June 30 2024 we purchased and retired 1 723 393 of our ordinary shares for 157 0 million We evaluate share repurchases as any other use of capital relative to our view of the impact on our intrinsic value per share compared against other opportunities
During the year ended June 30 2024 we also allocated 24 5 million of capital toward the purchase of a portion of our 2026 Notes and we will continue to consider using excess liquidity to repurchase our debt We have significantly reduced our net leverage over the last year primarily through increased profitability driven by the combination of returns from past investments the focusing of our growth investments restrained growth of operating expenses and the easing of inflationary pressure on our input costs This increased profitability and resultant cash flow generation should provide the opportunity to continue to delever our balance sheet while also opportunistically allocating capital that enhances our intrinsic value per share
As part of our ongoing efforts to manage our liquidity we work with our suppliers to optimize our terms and conditions which includes the extension of payment terms We facilitate a voluntary supply chain finance program through a financial intermediary to allow our suppliers to receive funds earlier than our contractual payment date We do not believe there is a substantial risk that our payment terms will be shortened in the near future Refer to Note 17 of the accompanying consolidated financial statements for additional information
As of June 30 2024 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 79 3 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 If there is a change in the future the repatriation of undistributed earnings from certain subsidiaries in the form of dividends or otherwise could have tax consequences that could result in material cash outflows
1 Operating and finance lease payments above include only amounts which are fixed under lease agreements Our leases may also incur variable expenses which are not reflected in the contractual obligations above
3 We may be required to make cash outlays related to our uncertain tax positions 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 3 million as of June 30 2024 have been excluded from the contractual obligations table above See Note 13 in our accompanying consolidated financial statements for additional information on uncertain tax positions
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 3 2 million in the aggregate outstanding as of June 30 2024
At June 30 2024 we had unrecorded commitments under contract of 229 9 million Purchase commitments consisted of third party fulfillment and digital services of 93 8 million third party cloud services of 48 7 million software of 39 1 million production and computer equipment purchases of 5 5 million professional and consulting fees of 3 3 million and other commitments of 39 6 million
As of June 30 2024 we have borrowings under our amended and restated senior secured credit agreement dated as of May 17 2021 as further amended from time to time the Restated Credit Agreement of 1 084 6 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 senior secured revolving credit facility with a maturity date of May 17 2026 the Revolving Credit Facility under our Restated Credit Agreement has 238 0 million unused as of June 30 2024 There are no drawn amounts on the Revolving Credit Facility but our outstanding letters of credit reduce our unused balance Our unused balance can be drawn at any time so long as we are in compliance with our debt covenants and 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 as defined in the Restated Credit Agreement calculated as of the last day of such quarter shall not exceed 3 25 to 1 00 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 June 30 2024 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
Our 522 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 year ended June 30 2024 we purchased an aggregate principal amount of 26 2 million for a purchase price of 24 5 million as well as the related settlement of unpaid interest which resulted in the recognition of a gain on the extinguishment of debt of 1 7 million
2024 we were in compliance with all covenants under our Restated Credit Agreement and the indenture governing our 2026 Notes Refer to Note 10 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 June 30 2024 we had 9 8 million outstanding for those obligations that have repayments due on various dates through September 2027
We lease certain facilities machinery and plant equipment under finance lease agreements that expire at various dates through 2037 The aggregate carrying value of the leased assets under finance leases included in property plant and equipment net in our consolidated balance sheet at June 30 2024 is 26 0 million net of accumulated depreciation of 30 3 million The present value of lease installments not yet due included in other current liabilities and other liabilities in our consolidated balance sheet at June 30 2024 amounts to 36 4 million
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 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 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
Adjusted free cash flow is the primary financial metric by which we set quarterly and annual budgets both for individual businesses and Cimpress wide During the current fiscal year 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
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
Our adjusted free cash flow measure has limitations as it may omit certain components of the overall cash flow statement and does not represent the residual cash flow available for discretionary expenditures For example adjusted free cash flow does not incorporate our cash payments to reduce the principal portion of our debt or cash payments for business acquisitions Additionally the mix of property plant and equipment purchases that we choose to finance may change over time 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
1 These realized gains 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
Our financial statements are prepared in accordance with U S generally accepted accounting principles GAAP To apply these principles we must make estimates and judgments that affect our reported amounts of assets liabilities revenues and expenses and related disclosure of contingent assets and liabilities In some instances we reasonably could have used different accounting estimates and in other instances changes in the accounting estimates are reasonably likely to occur from period to period Accordingly actual results could differ significantly from our estimates We base our estimates and judgments on historical experience and other assumptions that we believe to be reasonable at the time under the circumstances and we evaluate these estimates and judgments on an ongoing basis We refer to accounting estimates and judgments of this type as critical accounting policies and estimates which we discuss further below This section should be read in conjunction with Note 2 Summary of Significant Accounting Policies of our audited consolidated financial statements included elsewhere in this Report
We generate revenue primarily from the sale and shipment of customized manufactured products To a much lesser extent and only in our Vista business we provide digital services website design and hosting and email marketing services as well as a small percentage from order referral fees and other third party offerings Revenues are recognized when control of the promised products or services is transferred to the customer in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services
Under the terms of most of our arrangements with our customers we provide satisfaction guarantees which give our customers an option for a refund or reprint over a specified period of time if the customer is not fully satisfied As such we record a reserve for estimated sales returns and allowances as a reduction of revenue based
We have elected to recognize shipping and handling activities that occur after transfer of control of the products as fulfillment activities and not as a separate performance obligation Accordingly we recognize revenue for our single performance obligation upon the transfer of control of the fulfilled orders which generally occurs upon delivery to the shipping carrier If revenue is recognized prior to completion of the shipping and handling activities we accrue the costs of those activities We do have some arrangements whereby the transfer of control and thus revenue recognition occurs upon delivery to the customer If multiple products are ordered together each product is considered a separate performance obligation and the transaction price is allocated to each performance obligation based on the standalone selling price Revenue is recognized upon satisfaction of each performance obligation We generally determine the standalone selling prices based on the prices charged to our customers
Our products are customized for each individual customer with no alternative use except to be delivered to that specific customer however we do not have an enforceable right to payment prior to delivering the items to the customer based on the terms and conditions of our arrangements with customers and therefore we recognize revenue at a point in time
We record deferred revenue when cash payments are received in advance of our satisfaction of the related performance obligation The satisfaction of performance obligations generally occur shortly after cash payment and we expect to recognize the majority of our deferred revenue balance as revenue within three months subsequent to June 30 2024
We periodically provide marketing materials and promotional offers to new customers and existing customers that are intended to improve customer retention These incentive offers are generally available to all customers and therefore do not represent a performance obligation as customers are not required to enter into a contractual commitment to receive the offer These discounts are recognized as a reduction to the transaction price when used by the customer Costs related to free products are included within cost of revenue and sample products are included within marketing and selling expense
We have elected to apply the practical expedient under ASC 340 40 25 4 to expense incremental direct costs as incurred which primarily includes sales commissions since our contract periods generally are less than one year and the related performance obligations are satisfied within a short period of time
We measure share based compensation costs at fair value and recognize the expense over the period that the recipient is required to provide service in exchange for the award which generally is the vesting period We recognize the impact of forfeitures as they occur
We have issued PSUs that include a service condition as well as a market or performance condition and we calculate the fair value at grant which is fixed throughout the vesting period For PSUs that include a market condition the fair value is determined using a Monte Carlo simulation valuation model and the expense recognized over the requisite service period will not be reversed if the market condition is not achieved For PSUs that include a performance condition compensation cost is recorded if it is probable that the performance condition will be achieved The fair value is determined based on the quoted price of our ordinary shares on the date of the grant and our estimated attainment percentage of the related performance condition Until the performance condition is measured changes in the estimated attainment percentages may cause expense volatility since a cumulative expense adjustment will be recognized in the period a change occurs
As part of the process of preparing our consolidated financial statements we calculate our income taxes in each of the jurisdictions in which we operate This process involves estimating our current tax expense including assessing the risks associated with tax positions together with assessing temporary and permanent differences resulting from differing treatment of items for tax and financial reporting purposes We recognize deferred tax assets and liabilities for the temporary differences using the enacted tax rates and laws that will be in effect when we expect temporary differences to reverse We assess the ability to realize our deferred tax assets based upon the weight of available evidence both positive and negative To the extent we believe that it is more likely than not that some portion or all of the deferred tax assets will not be realized we establish a valuation allowance Our estimates can vary due to the profitability mix of jurisdictions foreign exchange movements changes in tax law regulations or accounting principles as well as certain discrete items In the event that actual
results differ from our estimates or we adjust our estimates in the future we may need to increase or decrease income tax expense which could have a material impact on our financial position and results of operations
We establish reserves for tax related uncertainties based on estimates of whether and the extent to which additional taxes will be due These reserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are in accordance with applicable tax laws We adjust these reserves in light of changing facts and circumstances such as the closing of a tax audit new tax legislation or the change of an estimate based on new information To the extent that the final outcome of these matters is different than the amounts recorded such differences will affect the provision for income taxes in the period in which such determination is made Interest and if applicable penalties related to unrecognized tax benefits are recorded in the provision for income taxes
We capitalize eligible salaries and payroll related costs of employees and third party consultants who devote time to the development of our websites and internal use computer software Capitalization begins when the preliminary project stage is complete management with the relevant authority authorizes and commits to the funding of the software project and it is probable that the project will be completed and the software will be used to perform the function intended These costs are amortized on a straight line basis over the estimated useful life of the software which is three years Our judgment is required in evaluating whether a project provides new or additional functionality determining the point at which various projects enter the stages at which costs may be capitalized assessing the ongoing value and impairment of the capitalized costs and determining the estimated useful lives over which the costs are amortized Historically we have not had any significant impairments of our capitalized software and website development costs
We recognize the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition The fair value of identifiable intangible assets is based on detailed cash flow valuations that use information and assumptions provided by management The valuations are dependent upon a myriad of factors including historical financial results forecasted revenue growth rates estimated customer renewal rates projected operating margins royalty rates and discount rates We estimate the fair value of any contingent consideration at the time of the acquisition using all pertinent information known to us at the time to assess the probability of payment of contingent amounts or through the use of a Monte Carlo simulation model We allocate any excess purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed to goodwill The assumptions used in the valuations for our acquisitions may differ materially from actual results depending on performance of the acquired businesses and other factors While we believe the assumptions used were appropriate different assumptions in the valuation of assets acquired and liabilities assumed could have a material impact on the timing and extent of impact on our statements of operations
Goodwill is assigned to reporting units as of the date of the related acquisition If goodwill is assigned to more than one reporting unit we utilize a method that is consistent with the manner in which the amount of goodwill in a business combination is determined Costs related to the acquisition of a business are expensed as incurred
We evaluate goodwill and indefinite lived intangible assets for impairment annually or more frequently when an event occurs or circumstances change that indicate that the carrying value may not be recoverable We have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount We consider the timing of our most recent fair value assessment and associated headroom the actual operating results as compared to the cash flow forecasts used in those fair value assessments the current long term forecasts for each reporting unit and the general market and economic environment of each reporting unit In addition to the specific factors mentioned above we assess the following individual factors on an ongoing basis such as
If the results of the qualitative analysis were to indicate that the fair value of a reporting unit is less than its carrying value the quantitative test is required Under the quantitative approach we estimate the fair values of our reporting units using a discounted cash flow methodology and in certain circumstances a market based approach This analysis requires significant judgment and is based on our strategic plans and estimation of future cash flows which is dependent on internal forecasts Our annual analysis also requires significant judgment including the identification and aggregation of reporting units as well as the determination of our discount rate and perpetual growth rate assumptions We are required to compare the fair value of the reporting unit with its carrying value and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit s fair value For the year ended June 30 2024 we recognized no impairments
We are required to evaluate the estimated useful lives and recoverability of definite lived long lived assets for example customer relationships developed technology property and equipment on an ongoing basis when indicators of impairment are present For purposes of the recoverability test long lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities The test for recoverability compares the undiscounted future cash flows of the long lived asset group to its carrying value If the carrying values of the long lived asset group exceed the undiscounted future cash flows the assets are considered to be potentially impaired The next step in the impairment measurement process is to determine the fair value of the individual net assets within the long lived asset group If the aggregate fair values of the individual net assets of the group are less than the carrying values an impairment charge is recorded equal to the excess of the aggregate carrying value of the group over the aggregate fair value The loss is allocated to each long lived asset within the group based on their relative carrying values with no asset reduced below its fair value The identification and evaluation of a potential impairment requires judgment and is subject to change if events or circumstances pertaining to our business change We evaluated our long lived assets for impairment during the year ended June 30 2024 and we recognized no impairments
As of June 30 2024 our cash and cash equivalents consisted of standard depository accounts which are held for working capital purposes money market funds and marketable securities with an original maturity of less than 90 days We do not believe we have a material exposure to interest rate fluctuations related to our cash and cash equivalents
1 084 6 million of variable rate debt As a result we have exposure to market risk for changes in interest rates related to these obligations In order to mitigate our exposure to interest rate changes related to our variable rate debt we execute interest rate swap contracts to fix the interest rate on a portion of our outstanding or forecasted long term debt with varying maturities As of June 30 2024 a hypothetical 100 basis point increase in rates inclusive of the impact of our outstanding interest rate swaps that are accruing interest as of June 30 2024 would result in a 8 8 million impact to interest expense over the next 12 months This does not include any yield from cash and marketable securities
We conduct business in multiple currencies through our worldwide operations but report our financial results in U S dollars We manage these currency risks through normal operating activities and when deemed appropriate through the use of derivative financial instruments We have policies governing the use of derivative instruments and do not enter into financial instruments for trading or speculative purposes The use of derivatives is intended to reduce but does not entirely eliminate the impact of adverse currency exchange rate movements A summary of our currency risk is as follows
Revenue and related expenses generated in currencies other than the U S dollar could result in higher or lower net loss when upon consolidation those transactions are translated to U S dollars When the value or timing of revenue and expenses in a given currency are materially different we may be exposed to significant impacts on our net loss and non GAAP financial metrics such as adjusted EBITDA
Our currency hedging objectives are targeted at reducing volatility in our forecasted U S dollar equivalent adjusted EBITDA in order to maintain stability on our incurrence based debt covenants Since adjusted EBITDA excludes non cash items such as depreciation and amortization that are included in net loss we may experience increased not decreased volatility in our GAAP results due to our hedging approach Our most significant net currency exposures by volume are in the Euro and British Pound
In addition we elect to execute currency derivatives contracts that do not qualify for hedge accounting As a result we may experience volatility in our consolidated statements of operations due to i the impact of unrealized gains and losses reported in other income net on the mark to market of outstanding contracts and ii realized gains and losses recognized in other income net whereas the offsetting economic gains and losses are reported in the line item of the underlying activity for example revenue
Each of our subsidiaries translates its assets and liabilities to U S dollars at current rates of exchange in effect at the balance sheet date The resulting gains and losses from translation are included as a component of accumulated other comprehensive loss on the consolidated balance sheet Fluctuations in exchange rates can materially impact the carrying value of our assets and liabilities We have currency exposure arising from our net investments in foreign operations We enter into currency derivatives to mitigate the impact of currency rate changes on certain net investments
Transaction gains and losses generated from remeasurement of monetary assets and liabilities denominated in currencies other than the functional currency of a subsidiary are included in other income net on the consolidated statements of operations Certain of our subsidiaries hold intercompany loans denominated in a currency other than their functional currency Due to the significance of these balances the revaluation of intercompany loans can have a material impact on other income net We expect these impacts may be volatile in the future although our largest intercompany loans do not have a U S dollar cash impact for the consolidated group because they are either 1 U S dollar loans or 2 we elect to hedge certain non U S dollar loans with cross currency swaps and forward contracts A hypothetical 10 change in currency exchange rates was applied to total net monetary assets denominated in currencies other than the functional currencies at the balance sheet dates to compute the impact these changes would have had on our loss income before income taxes in the near term The balances are inclusive of the notional value of any cross currency swaps designated as cash flow hedges A hypothetical decrease in exchange rates of 10 against the functional currency of our subsidiaries would have resulted in a change of 8 8 million on our income loss before income taxes for the year ended June 30 2024
We have audited the accompanying consolidated balance sheets of Cimpress plc and its subsidiaries the Company as of June 30 2024 and 2023 and the related consolidated statements of operations of comprehensive income loss of shareholders deficit and of cash flows for each of the three years in the period ended June 30 2024 including the related notes collectively referred to as the consolidated financial statements We also have audited the Company s internal control over financial reporting as of June 30 2024 based on criteria established in
In our opinion the consolidated financial statements referred to above present fairly in all material respects the financial position of the Company as of June 30 2024 and 2023 and the results of its operations and its cash flows for each of the three years in the period ended June 30 2024 in conformity with accounting principles generally accepted in the United States of America Also in our opinion the Company maintained in all material respects effective internal control over financial reporting as of June 30 2024 based on criteria established in
The Company s management is responsible for these consolidated financial statements for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in Management s Report on Internal Control over Financial Reporting appearing under Item 9A Our responsibility is to express opinions on the Company s consolidated financial statements and on the Company s internal control over financial reporting based on our audits We are a public accounting firm registered with the Public Company Accounting Oversight Board United States PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement whether due to error or fraud and whether effective internal control over financial reporting was maintained in all material respects
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the consolidated financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the consolidated financial statements Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk Our audits also included performing such other procedures as we considered necessary in the circumstances We believe that our audits provide a reasonable basis for our opinions
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that i pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company ii provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and iii provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that i relates to accounts or disclosures that are material to the consolidated financial statements and ii involved our especially challenging subjective or complex judgments The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements taken as a whole and we are not by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates
As described in Note 8 to the consolidated financial statements the Company s goodwill balance was 787 million as of June 30 2024 of which a portion relates to the BuildASign reporting unit the reporting unit Management performed a quantitative impairment assessment of the reporting unit as of the annual goodwill impairment test date of May 31 Management concluded that sufficient headroom between the estimated fair value of the reporting unit and the related carrying value existed and that no goodwill impairment was identified Management used the income approach specifically the discounted cash flow method to derive the fair value of the reporting unit This approach calculates fair value by estimating the after tax cash flows attributable to the reporting unit and then discounting the after tax cash flows to present value using a risk adjusted discount rate The cash flow projections in the fair value analysis are considered Level 3 inputs and consist of management s estimates of revenue growth rates and operating margins taking into consideration historical results as well as industry and market conditions The discount rate used in the fair value analysis is based on a weighted average cost of capital
The principal considerations for our determination that performing procedures relating to the goodwill quantitative impairment assessment of the BuildASign reporting unit is a critical audit matter are i the significant judgment by management when developing the fair value estimate of the reporting unit ii a high degree of auditor judgment subjectivity and effort in performing procedures and evaluating management s significant assumptions related to the revenue growth rates and operating margins and iii the audit effort involved the use of professionals with specialized skill and knowledge
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements These procedures included testing the effectiveness of controls relating to management s goodwill impairment assessment including controls over the valuation of the reporting unit These procedures also included among others i testing management s process for developing the fair value estimate of the reporting unit ii evaluating the appropriateness of the discounted cash flow method iii testing the completeness and accuracy of underlying data used in the discounted cash flow method and iv evaluating the reasonableness of the significant assumptions used by management related to the revenue growth rates and operating margins Evaluating management s assumptions related to the revenue growth rates and operating margins involved evaluating whether the assumptions used by management were reasonable considering the current and past performance of the reporting unit the consistency with external market and industry data and whether these assumptions were consistent with evidence obtained in other areas of the audit Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the discounted cash flow method
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
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
The preparation of financial statements in conformity with U S generally accepted accounting principles GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes We believe our most significant estimates are associated with the ongoing evaluation of the recoverability of our long lived assets and goodwill estimated useful lives of assets share based compensation accounting for business combinations and income taxes and related valuation allowances among others By their nature estimates are subject to an inherent degree of uncertainty Actual results could differ from those estimates
We consider all highly liquid investments purchased with an original maturity of three months or less to be the equivalent of cash for the purpose of balance sheet and statement of cash flows presentation Cash equivalents consist of depository accounts and money market funds Cash and cash equivalents restricted for use were 563
For bank accounts that are overdrawn at the end of a reporting period including any net negative balance in our notional cash pool we reclassify these overdrafts to short term debt on our consolidated balance sheets Book overdrafts that result from outstanding checks in excess of our bank balance are reclassified to other current liabilities
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 years ended June 30 2024 2023 and 2022
Accounts receivable includes amounts due from customers We offset gross trade accounts receivable with an allowance for doubtful accounts which is our best estimate of the amount of probable credit losses in existing accounts receivable Account balances are charged off against the allowance when the potential for recovery is no longer reasonably assured
Inventories consist primarily of raw materials and are recorded at the lower of cost or net realizable value using the first in first out method Costs to produce products are included in cost of revenues as incurred
Property plant and equipment are stated at cost less accumulated depreciation and amortization Additions and improvements that substantially extend the useful life of a particular asset are capitalized while repairs and maintenance costs are expensed as incurred Assets that qualify for the capitalization of interest cost during their construction period are evaluated on a per project basis and if material the costs are capitalized No interest costs associated with our construction projects were capitalized in any of the years presented as the amounts were not material Depreciation of plant and equipment is recorded on a straight line basis over the estimated useful lives of the assets
We capitalize eligible salaries and payroll related costs of employees and third party consultants who devote time to the development of websites and internal use computer software Capitalization begins when the preliminary project stage is complete management with the relevant authority authorizes and commits to the funding of the software project and it is probable that the project will be completed and the software will be used to perform the function intended These costs are amortized on a straight line basis over the estimated useful life of the software which is generally over a three year period Costs associated with preliminary stage software development repair maintenance or the development of website content are expensed as incurred
We capitalize the costs of purchasing patents from unrelated third parties and amortize these costs over the estimated useful life of the patent The costs related to patent applications pursuing others who we believe infringe on our patents and defending against patent infringement claims are expensed as incurred
We record acquired intangible assets at fair value on the date of acquisition using the income approach to value the trade names customer relationships and customer network and a replacement cost approach to value developed technology and our print network The income approach calculates fair value by discounting the forecasted after tax cash flows back to a present value using an appropriate discount rate The baseline data for this analysis is the cash flow estimates used to price the transaction We amortize such assets using the straight line method over the expected useful life of the asset unless another amortization method is deemed to be more appropriate In estimating the useful life of the acquired assets we reviewed the expected use of the assets acquired factors that may limit the useful life of an acquired asset or may enable the extension of the useful life of an acquired asset without substantial cost the effects of obsolescence demand competition and other economic factors and the level of maintenance expenditures required to obtain the expected future cash flows from the asset
We evaluate the remaining useful life of intangible assets on a periodic basis to determine whether events and circumstances warrant a revision to the remaining useful life If the estimate of an intangible asset s remaining useful life is changed we amortize the remaining carrying value of the intangible asset prospectively over the revised remaining useful life
Long lived assets with a finite life are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset a significant change in the extent or manner in which an asset is used or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable
We recognize the assets acquired and liabilities assumed in business combinations on the basis of their fair values at the date of acquisition We assess the fair value of assets including intangible assets using a variety of methods and each asset is measured at fair value from the perspective of a market participant The method used to estimate the fair values of intangible assets incorporates significant assumptions regarding the estimates a market participant would make in order to evaluate an asset including a market participant s use of the asset and the appropriate discount rates Assets acquired that are determined to not have economic use for us are expensed immediately Any excess purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill Transaction costs and restructuring costs associated with a business combination are expensed as incurred
The consideration for our acquisitions often includes future payments that are contingent upon the occurrence of a particular event For acquisitions that qualify as business combinations we record an obligation for such contingent payments at fair value on the acquisition date
The evaluation of goodwill for impairment is performed at a level referred to as a reporting unit A reporting unit is either the operating segment level or one level below which is referred to as a component The level at which the impairment test is performed requires an assessment as to whether the operations below the operating segment should be aggregated as one reporting unit due to their similarity or reviewed individually Goodwill is evaluated for impairment on an annual basis or more frequently when an event occurs or circumstances change that indicate that the carrying value may not be recoverable Goodwill is considered to be impaired when the carrying amount of a reporting unit exceeds its estimated fair value
We have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value If the results of this analysis indicate that the fair value of a reporting unit is less than its carrying value the quantitative impairment test is required otherwise no further assessment is necessary To perform the quantitative approach we estimate the fair value of our reporting units using a discounted cash flow methodology If the carrying value of a reporting unit s goodwill exceeds its implied fair value then we record an impairment loss equal to the difference
We recognized no goodwill impairment charges during the years ended June 30 2024 and 2022 For the year ended June 30 2023 we recognized a goodwill impairment charge of 5 609 The charge is a partial impairment of the goodwill for one of our reporting units within our All Other Businesses reportable segment There were no impairments identified for any other reporting units Refer to Note 8 for additional details regarding the annual goodwill impairment test
Noncontrolling interests held by third parties in consolidated subsidiaries are considered mandatorily redeemable when they are subject to an unconditional obligation to be redeemed by both parties The redeemable noncontrolling interest must be required to be repurchased on a specified date or on the occurrence of a specified event that is certain to occur and is to be redeemed via the transfer of assets Mandatorily redeemable
Costs associated with the issuance of debt instruments are capitalized and amortized over the term of the respective financing arrangement on a straight line basis through the maturity date of the related debt instrument We evaluate all changes to our debt arrangements to determine whether the changes represent a modification or extinguishment to the old debt arrangement If a debt instrument is deemed to be modified we capitalize all new lender fees and expense all third party fees If we determine that an extinguishment of one of our debt instruments has occurred the unamortized financing fees associated with the extinguished instrument are expensed For the revolving loans associated with our senior secured credit facility all lender and third party fees are capitalized and in the event an amendment reduces the committed capacity under the revolving loans we expense a portion of any unamortized fees on a pro rata basis in proportion to the decrease in the committed capacity
We record all derivatives on the consolidated balance sheet at fair value We apply hedge accounting to arrangements that qualify and are designated for hedge accounting treatment which includes cash flow and net investment hedges Hedge accounting is discontinued prospectively if the hedging relationship ceases to be effective or the hedging or hedged items cease to exist as a result of maturity sale termination or cancellation
Derivatives designated and qualifying as hedges of the exposure to variability in expected future cash flows or other types of forecasted transactions are considered cash flow hedges which could include interest rate swap contracts and cross currency swap contracts In a cash flow hedging relationship the effective and ineffective portion of the change in the fair value of the hedging derivative is initially recorded in accumulated other comprehensive loss The portion of gain or loss on the derivative instrument previously recorded in accumulated other comprehensive loss remains in accumulated other comprehensive loss until the forecasted transaction is recognized in earnings For derivatives designated as cash flow hedges we present the settlement amount of these contracts within cash from operating activities in our consolidated statement of cash flows if the hedged item continues after contract settlement
Derivatives designated and qualifying as hedges of currency exposure of a net investment in a foreign operation are considered net investment hedges which could include cross currency swap and currency forward contracts as well as intercompany loans In hedging the currency exposure of a net investment in a foreign operation the effective and ineffective portion of gains and losses on the hedging instruments is recognized in accumulated other comprehensive loss as part of currency translation adjustment The portion of gain or loss on the derivative instrument previously recorded in accumulated other comprehensive loss remains in accumulated other comprehensive loss until we reduce our investment in the hedged foreign operation through a sale or substantial liquidation
We also enter into derivative contracts that are intended to economically hedge certain of our risks even though we may not elect to apply hedge accounting or the instrument may not qualify for hedge accounting When hedge accounting is not applied the changes in the fair value of the derivatives are recorded directly in earnings as a component of other income net
In accordance with the fair value measurement guidance our accounting policy is to measure the credit risk of our derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio We execute our derivative instruments with financial institutions that we judge to be credit worthy defined as institutions that hold an investment grade credit rating
Treasury shares are accounted for using the cost method and are included as a component of shareholders equity Our various share based compensation programs entitle recipients to receive issuances of Cimpress ordinary shares upon the vesting of awards which meet applicable performance criteria Prior to fiscal year 2023 we reissued treasury shares as part of our share based compensation programs and as consideration for some of our acquisition transactions Upon issuance of treasury shares in conjunction with these programs we determined the cost using the average cost method Starting in fiscal year 2023 we issued new ordinary shares to meet the needs of our share based compensation programs
We have retired ordinary shares from time to time Upon retirement these shares become classified as authorized and unissued shares The retirement of ordinary shares are accounted for as 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
Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non owner sources Comprehensive loss is composed of net loss unrealized gains and losses on derivatives unrealized gains and losses on pension benefit obligation and cumulative foreign currency translation adjustments which are included in the accompanying consolidated statements of comprehensive loss
We bifurcate and separately account for a detachable warrant as a separate equity instrument The value assigned to the warrants was determined based on a relative fair value allocation between the warrants and related debt The fair value of the warrants was determined using a Monte Carlo valuation and applying a discount for the lack of marketability for the warrants We present the allocated value for the warrants within additional paid in capital in our consolidated balance sheet Refer to Note 11 for additional details
We generate revenue primarily from the sale and shipment of customized manufactured products We also generate revenue to a much lesser extent and primarily in our Vista business from digital services website design and hosting professional design services and email marketing services as well as a small percentage from order referral fees and other third party offerings Revenues are recognized when control of the promised products or services is transferred to the customer in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services Shipping revenues are recognized when control of the related products is transferred to the customer For design service arrangements we recognize revenue when the services are complete A portion of this revenue relates to design contests in which we have determined that we are the principal in the arrangement as we satisfy our contractual performance obligation to provide the customer with the benefit of our platform and network of designers
Under the terms of most of our arrangements with our customers we provide satisfaction guarantees which give our customers an option for a refund or reprint over a specified period of time if the customer is not fully satisfied As such we record a reserve for estimated sales returns and allowances as a reduction of revenue based on historical experience or the specific identification of an event necessitating a reserve Actual sales returns have historically not been significant
We have elected to recognize shipping and handling activities that occur after transfer of control of the products as fulfillment activities and not as a separate performance obligation Accordingly we recognize revenue for our single performance obligation upon the transfer of control of the fulfilled orders which generally occurs upon delivery to the shipping carrier If revenue is recognized prior to completion of the shipping and handling activities we accrue the costs of those activities We do have some arrangements whereby the transfer of control and thus revenue recognition occurs upon delivery to the customer If multiple products are ordered together each product is considered a separate performance obligation and the transaction price is allocated to each performance obligation
based on the standalone selling price Revenue is recognized upon satisfaction of each performance obligation We generally determine the standalone selling prices based on the prices charged to our customers We record revenue net of taxes collected from customers that are remitted to governmental authorities
Our products are customized for each individual customer with no alternative use except to be delivered to that specific customer however we do not have an enforceable right to payment prior to delivering the items to the customer based on the terms and conditions of our arrangements with customers and therefore we recognize revenue at a point in time
We record deferred revenue when cash payments are received in advance of our satisfaction of the related performance obligation The satisfaction of performance obligations generally occurs shortly after cash payment and we expect to recognize the majority of our deferred revenue balance as revenue within three months subsequent to June 30 2024
We periodically provide marketing materials and promotional offers to new customers and existing customers that are intended to improve customer retention These incentive offers are generally available to all customers and therefore do not represent a performance obligation as customers are not required to enter into a contractual commitment to receive the offer These discounts are recognized as a reduction to the transaction price when used by the customer Costs related to free products are included within cost of revenue and sample products are included within marketing and selling expense
We have elected to expense incremental direct costs as incurred which primarily includes sales commissions since our contract periods generally are less than one year and the related performance obligations are satisfied within a short period of time
Restructuring costs are recorded in connection with initiatives designed to improve efficiency or enhance competitiveness Restructuring initiatives require us to make estimates in several areas including expenses for severance and other employee separation costs and our ability to generate sublease income to enable us to terminate lease obligations at the estimated amounts
For jurisdictions in which there are statutorily required minimum benefits for involuntary terminations severance benefits are documented in an employee manual or labor contract or are consistent with prior restructuring plan benefits we evaluate these benefits as ongoing benefit arrangements We recognize the liability for these arrangements when it is probable that the employee would be entitled to the benefits and the amounts can be reasonably estimated The expense timing generally occurs when management has committed to and approved the restructuring plan
Involuntary termination benefits that are in excess of statutory minimum requirements and prior restructuring plan benefits are recognized as termination benefits and expensed at the date we notify the employee unless the employee must provide future service beyond the statutory minimum retention period in which case the benefits are expensed ratably over the future service period Liabilities for costs associated with a facility exit or disposal activity are recognized when the liability is incurred as opposed to when management commits to an exit plan and are measured at fair value Restructuring costs are presented as a separate financial statement line within our consolidated statement of operations
As part of the process of preparing our consolidated financial statements we calculate our income taxes in each of the jurisdictions in which we operate This process involves estimating our current tax expense and deferred tax expense based on assessing temporary and permanent differences resulting from differing treatment of items for tax and financial reporting purposes We recognize deferred tax assets and liabilities for the temporary differences using the enacted tax rates and laws that will be in effect when we expect temporary differences to reverse We assess the ability to realize our deferred tax assets based upon the weight of available evidence both positive and negative To the extent we believe that it is more likely than not that some portion or all of the deferred tax assets will not be realized we establish a valuation allowance In the event that actual results differ from our estimates or we adjust our estimates in the future we may need to increase or decrease income tax expense which could have a material impact on our financial position and results of operations
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the tax position The tax benefits recognized in our financial statements from such positions are measured as the largest benefit that has a greater than 50 likelihood of being realized upon ultimate resolution The unrecognized tax benefits may reduce our effective tax rate if recognized Interest and if applicable penalties related to unrecognized tax benefits are recorded in the provision for income taxes Stranded income tax effects in accumulated other comprehensive loss are released on an item by item basis based on when the applicable derivative is recognized in earnings
Our non U S dollar functional currency subsidiaries translate their assets and liabilities denominated in their functional currency to U S dollars at current rates of exchange in effect at the balance sheet date and revenues and expenses are translated at average rates prevailing throughout the period The resulting gains and losses from translation are included as a component of accumulated other comprehensive loss Transaction gains and losses and remeasurement of assets and liabilities denominated in currencies other than an entity s functional currency are included in other income net in our consolidated statements of operations
1 Includes realized and unrealized gains and losses on derivative currency forward and option contracts not designated as hedging instruments as well as the ineffective portion of certain interest rate swap contracts that have been de designated from hedge accounting For contracts not designated as hedging instruments we realized losses gains of 1 078 39 133 and 9 955 respectively for the fiscal years ended June 30 2024 2023 and 2022 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 during all fiscal years presented we had certain cross currency swaps designated as cash flow hedges which hedge the remeasurement of certain intercompany loans refer to Note 4 for additional details relating to these cash flow hedges
Basic net income loss per share attributable to Cimpress plc is computed by dividing net income loss attributable to Cimpress plc by the weighted average number of ordinary shares outstanding for the respective period Diluted net loss per share attributable to Cimpress plc gives effect to all potentially dilutive securities including share options restricted share units RSUs warrants and performance share units PSUs if the effect of the securities is dilutive using the treasury stock method Awards with performance or market conditions are included using the treasury stock method only if the conditions would have been met as of the end of the reporting period and their effect is dilutive
1 In the periods in which a net loss is recognized the impact of share options PSUs RSUs and warrants is excluded from shares used in computed diluted net income loss 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 would have been met as of the end of the reporting period
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 years ended June 30 2024 and 2022 the average market price of our ordinary shares was higher than the strike price of the warrants The weighted average dilutive effect of the warrants was 220 668 for the year ended June 30 2024 and for the year ended June 30 2022 due to our net loss position 138 088 outstanding warrants were considered anti dilutive For the year ended June 30 2023 the average share price was below the strike price for the full fiscal year therefore the total 1 055 377 outstanding warrants were considered anti dilutive
Compensation expense for all share based awards is measured at fair value on the date of grant and recognized over the requisite service period We recognize the impact of forfeitures as they occur The fair value of share options is determined using the Black Scholes valuation model The fair value of RSUs is determined based on the quoted price of our ordinary shares on the date of the grant Such value is recognized ratably as expense over the requisite service period or on an accelerated method for awards with a performance condition For awards that are ultimately settleable in cash we treat them as liability awards and mark the award to market each reporting period recognizing any gain or loss in our statements of operations
We have issued PSUs that include a service condition as well as a market or performance condition and we calculate the fair value at grant which is fixed throughout the vesting period For PSUs that include a market condition the fair value is determined using a Monte Carlo simulation valuation model and the expense recognized over the requisite service period will not be reversed if the market condition is not achieved For PSUs that include a performance condition compensation cost is recorded if it is probable that the performance condition will be achieved The fair value is determined based on the quoted price of our ordinary shares on the date of the grant and our estimated attainment percentage of the related performance condition The related expense is recognized using the accelerated expense attribution method over the requisite service period for each separately vesting portion of the award Until the performance condition is measured changes in the estimated attainment percentages may cause expense volatility since a cumulative expense adjustment will be recognized in the period a change occurs
Compensation expense associated with a sabbatical leave or other similar benefit arrangements is accrued over the requisite service period during which an employee earns the benefit net of estimated forfeitures and is included in other liabilities on our consolidated balance sheets
We monitor the creditworthiness of our customers to which we grant credit terms in the normal course of business We do not have any customers that accounted for greater than 10 of our accounts receivable as of June 30 2024 and 2023 We do not have any customers that accounted for greater than 10 of our revenue for the years ended June 30 2024 2023 and 2022
We maintain an allowance for doubtful accounts for potential credit losses based upon specific customer accounts and historical trends and such losses to date in the aggregate have not materially exceeded our expectations
We determine if an arrangement contains a lease at contract inception We consider an arrangement to be a lease if it conveys the right to control an identifiable asset for a period of time Costs for operating leases that include incentives such as payment escalations or rent abatement are recognized on a straight line basis over the term of the lease Additionally inducements received are treated as a reduction of our costs over the term of the agreement Leasehold improvements are capitalized at cost and amortized over the shorter of their expected useful life or the lease term excluding renewal periods
Lease right of use ROU assets and liabilities for operating and finance leases are recognized based on the present value of the future lease payments over the lease term at lease commencement date As most of our leases do not provide an implicit interest rate we use our incremental borrowing rate based on the information available at the lease commencement date Our incremental borrowing rate approximates the interest rate on a collateralized basis for the economic environments where our leased assets are located and is established by considering the credit spread associated with our existing debt arrangements as well as observed market rates for instruments with a similar term to that of the lease payments ROU assets also include any lease payments made at or before the lease commencement as well as any initial direct costs incurred Lease incentives received from the lessor are recognized as a reduction to the ROU asset
Our initial determination of the lease term is based on the facts and circumstances that exist at lease commencement The lease term may include the effect of options to extend or terminate the lease when it is reasonably certain that those options will be exercised We consider these options reasonably certain to be exercised based on our assessment of economic incentives including the fair market rent for equivalent properties under similar terms and conditions costs of relocating availability of comparable replacement assets and any related disruption to operations that would be experienced by not renewing the lease
Finance leases are accounted for as an acquisition of an asset and incurrence of an obligation Assets held under finance leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the leased asset at the inception of the lease and amortized over the useful life of the asset The corresponding finance lease obligation is recorded at the present value of the minimum lease payments at inception of the lease
Operating leases are included in operating lease assets and current and non current operating lease liabilities in the consolidated balance sheets Finance lease assets are included in property plant and equipment net and the related liabilities are included in other current liabilities and other liabilities in the consolidated balance sheets
Variable lease payments are excluded from the operating lease assets and liabilities and are recognized as expense in the period in which the obligation is incurred Variable lease payments primarily include index based rent escalation associated with some of our real estate leases as well as property taxes and common area maintenance payments for most real estate leases which are determined based on the costs incurred by the lessor We also make variable lease payments for certain print equipment leases that are determined based on production volumes
We have subleased a small amount of our equipment and real estate lease portfolio to third parties making us the lessor Most of these subleases meet the criteria for operating lease classification and the related sublease income is recognized on a straight line basis over the lease term within the consolidated statement of operations To a lesser extent we have leases in which we are the lessees and we classify the leases as finance leases which have been subleased under similar terms resulting in the sublease classification as direct financing leases For direct financing leases we recognize a sublease receivable within prepaid expenses and other current assets and other assets in the consolidated balance sheets
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 Refer to Note 17 for additional required disclosure
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
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
Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets quoted prices for identical or similar assets in markets that are not active and inputs that are observable for the asset or liability either directly or indirectly for substantially the full term of the financial instrument
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
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
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 June 30 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
Our held to maturity marketable securities are recognized at an amortized cost The following is a summary of the net carrying amount unrealized gains unrealized losses and fair value of held to maturity securities by type and contractual maturity as of June 30 2024 and 2023 The fair value was determined using quoted prices for identical assets in active markets which fall into Level 1 under the fair value hierarchy
As of June 30 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 June 30 2024 and June 30 2023 the carrying value of our debt excluding debt issuance costs and debt premiums and discounts was
1 616 607 and 1 653 989 respectively and the fair value was 1 617 364 and 1 604 190 respectively Our debt at June 30 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
We use derivative financial instruments such as interest rate swap contracts cross currency swap contracts and currency forward and option contracts to manage interest rate and foreign currency exposures Derivatives are recorded in the consolidated balance sheets at fair value If a derivative is designated as a cash flow hedge or net investment hedge then the change in the fair value of the derivative is recorded in accumulated other comprehensive loss and subsequently reclassified into earnings in the period the hedged forecasted transaction affects earnings We have designated one intercompany loan as a net investment hedge and any unrealized currency gains and losses on the loan are recorded in accumulated other comprehensive loss Additionally any ineffectiveness associated with an effective and designated hedge is recognized within accumulated other comprehensive loss The change in the fair value of derivatives not designated as hedges is recognized directly in earnings as a component of other income net
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 June 30 2024 we estimate that 4 394 of income will be reclassified from accumulated other comprehensive loss to interest expense net during the twelve months ending June 30 2025 As of June 30 2024 we had ten effective outstanding interest rate swap contracts that were indexed to Term or Daily SOFR Our interest rate swap contracts have varying start and maturity dates through April 2028
1 Based on contracts outstanding as of June 30 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
We execute cross currency swap contracts designated as net investment hedges or cash flow 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 net investment hedges are executed to mitigate our currency exposure of net investments in subsidiaries that have reporting currencies other than the U S Dollar As of June 30 2024 we had one outstanding cross currency swap contract designated as a net investment hedge with a total notional amount of 264 851 maturing during June 2028 We entered into the cross currency swap contract to hedge the risk of changes in the U S Dollar equivalent value of a portion of our net investment in a consolidated subsidiary that has the Euro as its functional currency Amounts reported in accumulated other comprehensive loss are recognized as a component of our cumulative translation adjustment
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 We did not have any outstanding cross currency swap contracts designated as cash flow hedges as of June 30 2024
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
We have elected to not apply hedge accounting for all other currency forward and option contracts During the years ended June 30 2024 2023 and 2022 we experienced volatility within other income net in our consolidated statements of operations from unrealized gains and losses on the mark to market of outstanding currency forward and option contracts We expect this volatility to continue in future periods for contracts for which we do not apply hedge accounting Additionally since our hedging objectives may be targeted at non GAAP 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 10 for additional information about this agreement Our most significant net currency exposures by volume are the Euro and the British Pound GBP Our 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 June 30 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
The table below presents the fair value of our derivative financial instruments as well as their classification on the balance sheet as of June 30 2024 and June 30 2023 Our derivative asset and liability balances fluctuate with interest rate and currency exchange rate volatility
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 years ended June 30 2024 2023 and 2022
1 During fiscal year 2024 we identified an immaterial error related to the previously recognized tax effect of this intercompany loan that is designated as a net investment hedge This was corrected in the current period resulting in an increase to foreign currency translation gains losses net of hedges included as part of comprehensive income loss and an offsetting decrease to the related deferred tax liability of 12 702 This adjustment was immaterial to the prior and current period financial statements
The following table presents the adjustment to fair value recorded within the consolidated statements of operations for the years ended June 30 2024 2023 and 2022 for derivative instruments for which we did not elect hedge accounting
2 As of June 30 2024 and 2023 the translation adjustment is inclusive of both realized and unrealized effects of our net investment hedges Gains on currency forward and swap contracts net of tax of 15 042 and 15 079 have been included in accumulated other comprehensive loss as of June 30 2024 and 2023 respectively Intercompany loan hedge gains of 48 270 and 44 229 net of tax have been included in accumulated other comprehensive loss as of June 30 2024 and 2023 respectively
On October 1 2021 we acquired Depositphotos Inc and its subsidiaries Depositphotos a global creative platform for digital design We acquired all outstanding shares of the company for a purchase price of 84 900 which included a post closing adjustment based on acquired cash debt and working capital as of the closing date We paid 76 119 in cash at closing and the remaining purchase consideration including the post closing adjustment but net of any indemnifiable losses recoverable against the deferred amount The deferred payments were made in two installments including the payment of 609 during fiscal year 2022 and a final deferred payment of 6 875 that was made during fiscal year 2023
We recognized the assets and liabilities on the basis of their fair values at the date of the acquisition with any excess of the purchase price paid over the fair value of the net assets recorded as goodwill which is primarily attributable to the synergies that we expect to achieve through the acquisition The goodwill balance has been attributed to the Vista reporting unit and none of the goodwill balance is deductible for tax purposes Additionally we identified and valued Depositphotos intangible assets which include its trade name customer relationships
Depositphotos has been included in our consolidated financial statements starting on its acquisition date The revenue and earnings of Depositphotos included in our consolidated financial statements for the year ended June 30 2022 are not material and therefore no proforma financial information is presented We used our cash on hand to fund the acquisition In connection with the acquisition we incurred 887
1 In fiscal years 2024 and 2023 we acquired two immaterial businesses that are included in our PrintBrothers reportable segment which resulted in the recognition of goodwill of 2 701 and 4 724 respectively
4 During fiscal year 2024 we identified an immaterial error in the initial purchase accounting related to the noncontrolling interest of a previously acquired business This was corrected in the current period resulting in an increase to goodwill and noncontrolling interest of 7 319 This adjustment was immaterial to the prior and current period financial statements Refer to Note 14 for additional information
We considered the timing of our most recent fair value assessments associated headroom actual operating results as compared to the forecasts used to assess fair value the current long term forecasts for each reporting unit and the general economic environment of each reporting unit After performing this qualitative assessment we determined that there was no indication the carrying values for six of these reporting units exceeded their respective fair values
For each of the two remaining reporting units we performed a quantitative goodwill impairment test that compared the estimated fair value to carrying value We used the income approach specifically the discounted cash flow method to derive the fair value This approach calculates fair value by estimating the after tax cash flows attributable to a reporting unit and then discounting the after tax cash flows to a present value using a risk adjusted discount rate We selected this method as being the most meaningful in preparing our goodwill assessment as we believe the income approach most appropriately measures our income producing assets We considered using the market approach but concluded it was not appropriate in valuing these particular reporting units given the lack of relevant market comparisons available The cash flow projections in the fair value analysis are considered Level 3 inputs and consist of management s estimates of revenue growth rates and operating margins taking into consideration historical results as well as industry and market conditions The discount rate used in the fair value analysis is based on a weighted average cost of capital WACC which represents the average rate a business must pay its providers of debt and equity plus a risk premium As required prior to performing the quantitative goodwill impairment test for the two reporting units mentioned above we first evaluated the recoverability of long lived assets and concluded that no impairment of long lived assets existed
The quantitative tests were performed for Exaprint which is part of The Print Group reportable segment and BuildASign which is included in the All Other Businesses reportable segment For both reporting units we concluded that sufficient headroom between the estimated fair value and carrying value existed and that no goodwill impairment was identified There were no events that caused us to update our annual impairment test
For our annual goodwill impairment test date of May 31 2023 we determined that there was no indication the carrying values for nine of our ten reporting units exceeded their respective fair values For the one remaining reporting unit which is included in our All Other Businesses reportable segment we concluded that an impairment existed driven in part by recent declines in revenue growth rates and lower near term cash flow forecasts We recognized an impairment charge of 5 609 using a WACC of 17 0 resulting in a post impairment goodwill balance of 8 824 at June 30 2023
Acquired intangible assets amortization expense for the years ended June 30 2024 2023 and 2022 was 31 443 46 854 and 54 497 respectively Estimated intangible assets amortization expense for each of the five succeeding fiscal years and thereafter is as follows
Our various debt arrangements described below contain customary representations warranties and events of default As of June 30 2024 we were in compliance with all covenants in our debt contracts including those under our Restated Credit Agreement and the indenture governing our 2026 Notes
On May 15 2024 we amended our Restated Credit Agreement to refinance our Term Loan B which consists of a tranche denominated in U S dollars USD Tranche and a tranche denominated in Euros Euro Tranche The amendment refinanced the entire USD Tranche and the majority of the Euro Tranche as follows
reduced the interest rate margin of the USD Tranche by 50 basis points from Term SOFR plus 3 50 to Term SOFR plus 3 00 and eliminated the credit spread adjustment for the USD Tranche which was previously approximately 11 basis points and
After these changes our Term Loan B consists of a USD Tranche with an aggregate principal amount of 1 037 498 and a Euro Tranche with an aggregate principal amount of 46 404 No other material changes were made to the terms of the Term Loan B or the Restated Credit Agreement and the maturity date of the Term Loan B is still May 17 2028 As a result of this refinancing transaction we recognized a loss on extinguishment of debt amounting to 2 387 which consisted of a 2 236 non cash write off of unamortized debt discount and deferred financing fees associated with prepaying the Euro Tranche as well as an immaterial amount of third party legal fees that were associated with the modification of our debt and were expensed as incurred
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
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
As of June 30 2024 the weighted average interest rate on outstanding borrowings under the Restated Credit Agreement was 7 77 inclusive of interest rate swap rates We are also required to pay a commitment fee for our Revolving Credit Facility on unused balances of 0 35 to 0 45 depending on our First Lien Leverage Ratio We have pledged the assets and or share capital of a number of our subsidiaries as collateral for our debt
As of June 30 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 During the year ended June 30 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
In conjunction with our issuance of our 12 Senior Secured Notes due 2025 in fiscal year 2020 which we subsequently redeemed in fiscal year 2021 we also issued 7 year warrants to purchase 1 055 377 ordinary shares of Cimpress representing approximately 3 875 of our outstanding diluted ordinary shares at the time of issuance The warrants which currently remain outstanding are accounted for as equity as they are redeemable only in our own shares with an exercise price of 60 per share The warrants may be exercised by cash payment or through cashless exercise by the surrender of warrant shares having a value equal to the exercise price of the portion of the warrant being exercised
The fair value used for the warrants in this allocation was calculated using the Monte Carlo valuation model The valuation of the notes and warrants resulted in a carrying value allocated to the warrants of 22 432 which in addition to be being accounted for as an equity instrument recorded in additional paid in capital was included as a discount to the 12 Senior Secured Notes
On November 25 2020 our shareholders approved our 2020 Equity Incentive Plan or the 2020 Plan Upon approval we ceased granting any new awards under any of our prior equity plans that had shares available for future grant consisting of our 2016 Performance Equity Plan 2011 Equity Incentive Plan and 2005 Non Employee Directors Share Option Plan and we now grant all equity awards under the 2020 Plan The maximum number of ordinary shares to be issued under the 2020 Plan is 5 500 000 plus an additional number of ordinary shares equal to the number of PSUs currently outstanding under the 2016 Performance Equity Plan that expire terminate or are otherwise surrendered canceled or forfeited The 2020 Plan allows us to grant share options share appreciation rights restricted shares restricted share units other share based awards and dividend equivalent rights to our employees officers non employee directors consultants and advisors
Our 2016 Performance Equity Plan previously allowed us to grant PSUs to our employees officers non employee directors consultants and advisors The 2011 Equity Incentive Plan previously allowed us to grant share options share appreciation rights restricted shares restricted share units and other awards based on our ordinary shares to our employees officers non employee directors consultants and advisors Our 2005 Non Employee Directors Share Option Plan previously allowed us to grant share options to our non employee directors upon initial appointment as a director and annually thereafter in connection with our annual general meeting of shareholders if they continued to serve as a director at such time
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 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 The final measurement of the performance condition will occur during the first quarter of fiscal year 2025
For all other outstanding PSUs these awards entitle the recipient to receive Cimpress ordinary shares between 0 and 250 of the number of units based upon service vesting requirements and the achievement of a compounded annual growth rate target based on Cimpress three year moving average share price PSU awards with a grant date prior to fiscal year 2020 and PSU awards granted before fiscal year 2024 to our Chief Executive Officer and Board of Directors are assessed annually in years 6 10 following the grant date and awards with a grant date in or after fiscal year 2020 and before fiscal year 2024 other than to the CEO and Board will be assessed annually in years 4 8 following the grant date
The weighted average fair value of PSUs granted during the fiscal years ended June 30 2024 2023 and 2022 was 70 21 17 61 and 110 28 respectively The total intrinsic value of PSUs outstanding as of June 30 2024 2023 and 2022 was 169 512 83 376 and 52 875 respectively The total intrinsic value of PSUs assumes that the performance condition is met at target however it is possible that a portion or all of these PSUs granted before fiscal year 2024 will not achieve the associated performance condition As of June 30 2024 the number of shares subject to PSUs included in the table above assumes the issuance of one share for each PSU but based on actual performance that amount delivered can range from zero shares to a maximum of 4 356 251 shares
The fair value of an RSU award is equal to the fair market value of our ordinary shares on the date of grant and the expense is recognized on a straight line basis over the requisite service period RSUs generally vest over 4 years
The weighted average fair value of RSUs granted during the fiscal years ended June 30 2024 2023 and 2022 was 71 42 44 25 and 80 26 respectively The total intrinsic value of RSUs vested during the fiscal years ended June 30 2024 2023 and 2022 was 47 661 13 544 and 10 123 respectively
We have granted options to purchase ordinary shares at prices that are at least equal to the fair market value of the shares on the date the option is granted and that generally vest over 4 years with a contractual term of ten years
The fair value of each option award subject only to service period vesting is estimated on the date of grant using the Black Scholes option pricing model Use of a valuation model requires management to make certain assumptions with respect to inputs The expected volatility assumption is based upon historical volatility of our share price The expected term assumption is based on the contractual and vesting term of the option and historical experience The risk free interest rate is based on the U S Treasury yield curve with a maturity equal to the expected life assumed at the grant date We value share options with a market condition using a lattice model with compensation expense recorded on an accelerated basis over the requisite service period
The intrinsic value in the table above represents the total pre tax amount net of exercise price which would have been received if all option holders exercised in the money options on June 30 2024 The total intrinsic value of options exercised during the fiscal years ended June 30 2024 and 2023 was 1 816 and 41 respectively while no options were exercised during the fiscal year ended June 30 2022
Total share based compensation costs were 65 584 42 122 and 49 766 for the years ended June 30 2024 2023 and 2022 respectively and we recognize the impact of forfeitures as they occur Share based compensation costs capitalized as part of software and website development costs were 3 160 1 879 and 1 221 for the years ended June 30 2024 2023 and 2022 respectively As of June 30 2024 there was 84 653 of total unrecognized compensation cost related to non vested share based compensation arrangements This cost is expected to be recognized over a weighted average period of 1 9 years
During the year ended June 30 2024 we repurchased 1 723 393 of our ordinary shares for 156 982 The shares were immediately retired after repurchase and therefore have been classified as authorized and unissued shares as of June 30 2024 The retirement of the repurchased ordinary shares resulted in the reduction in ordinary shares of 19 as well as a reduction to additional paid in capital and retained earnings of 21 890 and 135 073 respectively
We maintain certain government mandated and defined contribution plans throughout the world Our most significant defined contribution retirement plans are in the U S and comply with Section 401 k of the Internal Revenue Code We offer eligible employees in the U S the opportunity to participate in one of these plans and match most employees eligible contributions at various rates subject to service vesting as specified in each of the related plan documents
We currently have a defined benefit plan that covers substantially all of our employees in Switzerland Our Swiss plan is a government mandated retirement fund with benefits generally earned based on years of service and compensation during active employment however the level of benefits varies within the plan Eligibility is determined in accordance with local statutory requirements Under this plan both we and certain employees with annual earnings in excess of government determined amounts are required to make contributions into a fund managed by an independent investment fiduciary Employer contributions must be in an amount at least equal to the employee s contribution Minimum employee contributions are based on the respective employee s age salary and gender As of June 30 2024 and 2023 the plan had an unfunded net pension obligation of approximately 1 426 and 1 134 respectively and plan assets which totaled approximately 5 800 and 5 497 respectively For the years ended June 30 2024 2023 and 2022 we recognized expense totaling 438 282 and 537 respectively related to our Swiss plan
For the year ended June 30 2024 our effective tax rate was below our U S federal statutory tax rate primarily due to the partial release of the valuation allowance on Swiss deferred tax assets of 105 765 related to Swiss tax reform benefits recognized in fiscal year 2020 and Swiss tax loss carryforwards After considering all available evidence including the recent history of strong earnings from core operations in Switzerland and the expectation of future taxable income management concluded it is more likely than not that the recognized deferred tax assets are realizable and reduced the valuation allowance accordingly In addition we had non deductible interest expense and losses in certain jurisdictions for which we cannot recognize a tax benefit The jurisdictions that have the most significant impact to our non U S tax provision include Canada Germany India Ireland Italy the Netherlands Spain and Switzerland The applicable tax rates in these jurisdictions range from 11 to 30 The total tax rate impact from operating in non U S jurisdictions is included in the line Tax rate differential on non U S earnings in the above tax rate reconciliation table
For the year ended June 30 2024 our effective tax rate was 38 4 as compared to the prior year effective tax rate of 514 5 The increase in our effective tax rate as compared to the prior year is primarily due pre tax income for the year ended June 30 2024 as compared to a pre tax loss for the year ended June 30 2023 During the year ended June 30 2024 we recognized a tax benefit of 105 765 on the partial release of the valuation allowance in Switzerland as compared to tax expense of 116 694 in the year ended June 30 2023 to increase the valuation allowance in Switzerland Our fiscal year 2023 effective tax rate was lower than fiscal year 2022 primarily due to increasing the valuation allowance in Switzerland year over year
In assessing the realizability of deferred tax assets we consider whether it is more likely than not that some or all of the deferred tax assets will not be realized The decrease in the valuation allowance from the prior year relates primarily to the partial release of the Swiss valuation allowance offset by increased Irish foreign tax credit carryforwards of 23 939 and tax effected interest limitation carryforwards of 10 239 in various jurisdictions neither of which expire but for which management has determined it is more likely than not that these will not be utilized
We have recorded a partial valuation allowance of 46 270 against the Swiss tax amortizable goodwill deferred tax assets which we can only benefit from during calendar year 2025 through calendar year 2029 under our Swiss tax ruling In addition we have recorded valuation allowances of 52 596 28 727 5 173 and 17 053 against deferred tax assets related to net operating losses in certain jurisdictions mainly Australia Brazil Cyprus France Ireland Japan the Netherlands and the United Kingdom U S research and development credits U S capital loss carryforwards and U S share based compensation respectively for which management has determined that it is more likely than not that these will not be realized
Based on the weight of available evidence at June 30 2024 management believes that it is more likely than not that all other net deferred tax assets will be realized in the foreseeable future We will continue to assess the realization of the deferred tax assets based on operating results on a quarterly basis
2 Amount is primarily related to decreased deferred tax assets on non U S net operating losses due to currency exchange rate changes and unrealized gains on derivative financial instruments included in accumulated other comprehensive loss
that expire on various dates from fiscal year 2025 through fiscal year 2044 or with unlimited carryforward We also had gross non U S net operating loss and capital loss carryforwards of 392 314 a significant amount of which begin to expire in fiscal year 2025 with the remaining amounts expiring on various dates through fiscal year 2035 or having unlimited carryforward In addition we had 33 925 of tax credit carryforwards primarily related to U S federal and state research and development credits which expire on various dates beginning in fiscal year 2030 or having unlimited carryforward We also had 22 778 and 6 841 of U S federal and apportioned U S state capital loss carryforwards respectively that expire in fiscal years 2025 through 2027 Lastly we had 36 474 of Irish foreign tax credits with unlimited carryforward The benefits of these carryforwards are dependent upon the generation of taxable income in the jurisdictions in which they arose
We consider the following factors among others in evaluating our plans for indefinite reinvestment of our subsidiaries earnings i the forecasts budgets and financial requirements of both our parent company and its subsidiaries both for the long term and for the short term ii the ability of Cimpress plc to fund its operations and obligations with earnings from other businesses within the global group without incurring substantial tax costs and iii the tax consequences of any decision to reinvest earnings of any subsidiary As of June 30 2024 no tax provision has been made for 79 252 of undistributed earnings of certain of our subsidiaries as these earnings are considered indefinitely reinvested If in the future we decide to repatriate the undistributed earnings from these subsidiaries in the form of dividends or otherwise we could be subject to withholding taxes payable in the range of 16 500 to 17 500 at that time A cumulative deferred tax liability of 7 984 has been recorded attributable to undistributed earnings that we have deemed are not indefinitely reinvested The remaining undistributed earnings of our subsidiaries are not deemed to be indefinitely reinvested and can be repatriated with no tax cost Accordingly there has been no provision for income or withholding taxes on these earnings
For the year ended June 30 2024 the amount of unrecognized tax benefits exclusive of interest that if recognized would impact the effective tax rate is 7 527 We recognize interest and if applicable penalties related to unrecognized tax benefits in income tax expense The interest and penalties recognized as of years ended June 30 2024 2023 and 2022 were 2 394 1 924 and 1 383 respectively It is reasonably possible that a further change in unrecognized tax benefits in the range of 7 500 to 8 500 may occur within the next twelve months related to the settlement of one or more audits or the lapse of applicable statutes of limitations We believe we have appropriately provided for all tax uncertainties
We conduct business in a number of tax jurisdictions and as such are required to file income tax returns in multiple jurisdictions globally The years 2016 through 2024 remain open for examination by the United States Internal Revenue Service and the years 2015 through 2024 remain open for examination in the various states and non U S tax jurisdictions in which we file tax returns
We are currently under income tax audit in certain jurisdictions globally 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 therefore there is a possibility that final resolution of these matters could have a material impact on our results of operations or cash flows
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
Members of the PrintBrothers management team hold minority equity interests in several businesses within the reportable segment During fiscal year 2023 put options were exercised by the minority interest holders for a portion of their equity interests that required us to purchase 10 to 11 in three of the respective businesses for a total of 90 841 The exercise of the put options triggered a mandatory redemption feature for the remaining minority equity interests which requires the purchase of the remaining 1 equity interests on the third anniversary of the put option exercise absent the earlier exercise of a call option on the first or second anniversaries by Cimpress The remaining noncontrolling interests are mandatorily redeemable which required the reclassification of the remaining equity interests to a liability which was presented in other liabilities within our consolidated balance sheet
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
2 Distributions to noncontrolling interests include contractually required profit sharing payments made annually to the minority interest holders in one of the PrintBrothers businesses The distributions were lower in fiscal year 2024 as compared to fiscal year 2023 due to the lower outstanding minority equity interest in our Printbrothers business
3 We purchased 10 to 11 of the equity interests in three PrintBrothers businesses during fiscal year 2023 as well as the 1 minority interest in our BuildASign business Additionally the minority equity interest holders of three PrintBrothers businesses exercised a put option that triggered a mandatory redemption feature for the remaining minority equity interests The remaining minority equity interests were reclassified to mandatorily redeemable noncontrolling interests as part of other liabilities within the consolidated balance sheets
4 During fiscal year 2024 we identified an immaterial error in the initial purchase accounting related to the noncontrolling interest of a previously acquired business This was corrected in the current period resulting in an increase to redeemable noncontrolling interests of 7 319 This adjustment was immaterial to the prior and current period financial statements
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
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
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
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
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 tax treasury internal audit legal sustainability corporate communications remote first enablement consolidated reporting and compliance investor relations capital allocation and the functions of our CEO and CFO These costs also include certain unallocated share based compensation costs
In order to ensure comparability in measuring our businesses results we allocate the straight line portion of the fixed grant value of PSU awards to our businesses The expense value for some of our PSU awards is based on a Monte Carlo fair value analysis while others include a performance condition that influence the amount and timing of expense recognized for the related PSU award The difference between the straight line portion of the fixed grant value and the expense recognized as a result of the fair value measurement the related performance condition 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
1 Excludes goodwill of 787 138 and 781 541 intangible assets net of 76 560 and 109 196 deferred tax assets of 95 059 and 12 740 and marketable securities non current of 0 and 4 497 as of June 30 2024 and June 30 2023 respectively
We lease certain machinery and plant equipment office space and production and warehouse facilities under non cancelable operating leases that expire on various dates through 2037 Our finance leases primarily relate to machinery and plant equipment Over the past three years we continually assessed our leased real estate footprint as a facet of our evolving remote first operating model for many of our employees which resulted in a decrease to our leased real estate portfolio over this period of time
During fiscal year 2022 we paid 27 885 to exercise the purchase option available for a leased facility which we had previously impaired under our long lived asset policy then immediately sold the facility to a separate third party for 23 226 The purchase option exercise was presented as a financing activity on our consolidated statement of cash flows while the sale of the facility was presented as an investing activity We recognized a 3 324 gain on the sale within general and administrative expense on our consolidated statement of operations as the sale price exceeded the prior impaired carrying value of the asset
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 June 30 2024 and 2023 were 62 848 and 44 522 respectively
At June 30 2024 we had unrecorded commitments under contract of 229 865 These commitments consist of inventory third party fulfillment and digital services of 93 774 third party cloud services of 48 687 software of 39 072 production and computer equipment purchases of 5 497 professional and consulting fees of 3 265 and other commitments of 39 570
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
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 years ended June 30 2024 2023 and 2022 we recognized restructuring charges of 423 43 757 and 13 603 respectively The restructuring charges recognized in the current period primarily include adjustments made to the previously estimated restructuring expense for prior period actions We do not expect any additional material charges for any of the restructuring actions described below
During the year ended June 30 2023 we recognized restructuring charges of 43 757 primarily due to decisions to reduce costs in our Vista business and central teams For the year ended June 30 2023 we recognized restructuring charges of 28 840 and 9 645 in our Vista business and central and corporate costs respectively The Vista restructuring charge included 5 397 for the impairment of assets related to our exit from the Japanese market We also recognized restructuring charges of 1 715 in our National Pen business for the year ended June 30 2023 which included employee termination benefits for the exit from 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 year ended June 30 2023 in our All Other Businesses reportable segment for the exit from the Chinese market which included employee termination benefits and the write off of certain assets
During the year ended June 30 2022 we recognized restructuring charges of 13 603 primarily due to decisions to reduce costs in certain areas including exiting operations in Japan and China while also taking additional headcount actions in our Vista business and in our central technology team During the year ended June 30 2022 we recognized restructuring expense related to these actions of 7 492 in our Vista reportable segment 1 093 in our All Other Businesses reportable segment and 854 in our central and corporate costs Additionally our National Pen business recognized restructuring expense of 4 178 during the year ended June 30 2022 incurred for both the decision to move its European production operations from Ireland to the Czech Republic and the decision to exit the Japan market The remaining 14 of benefit to restructuring charges was recognized by The Print Group reportable segment for adjustments to prior period actions estimated costs
1 During the fiscal year ended June 30 2023 non cash restructuring charges primarily includes the loss recorded on assets for our Japan and China exits and share based compensation expense upon modification to accelerate the vesting of share based compensation awards for the actions described above
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
Our management with the participation of our chief executive officer and chief financial officer evaluated the effectiveness of our disclosure controls and procedures as of June 30 2024 The term disclosure controls and procedures as defined in Rules 13a 15 e and 15d 15 e under the Securities Exchange Act of 1934 or the Exchange Act means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded processed summarized and reported within the time periods specified in the SEC s rules and forms Disclosure controls and procedures include without limitation controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company s management including its principal executive and principal financial officers as appropriate to allow timely decisions regarding required disclosure Management recognizes that any controls and procedures no matter how well designed and operated can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures Based on the evaluation of our disclosure controls and procedures as of June 30 2024 our chief executive officer and chief financial officer concluded that as of such date our disclosure controls and procedures were effective at the reasonable assurance level
There were no significant changes in our internal control over financial reporting as defined in Rules 13a 15 f and 15d 15 f under the Exchange Act during the three months ended June 30 2024 that materially affected or are reasonably likely to materially affect our internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company Internal control over financial reporting is defined in Rules 13a 15 f and 15d 15 f promulgated under the Exchange Act as a process designed by or under the supervision of the company s chief executive officer and chief financial officer and effected by our Board of Directors management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
Our management assessed the effectiveness of our internal control over financial reporting as of June 30 2024 In making this assessment our management used the criteria set forth in the Internal Control Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission COSO Based on our assessment management concluded that as of June 30 2024 our internal control over financial reporting is effective based on criteria in Internal Control Integrated Framework 2013 issued by the COSO
PricewaterhouseCoopers LLP our independent registered public accounting firm has audited the effectiveness of our internal control over financial reporting as of June 30 2024 as stated in their report included on page
The information required by this item is incorporated by reference to the information in the sections captioned Information about our Directors and Executive Officers Corporate Governance Insider Trading Policy and Delinquent Section 16 a Reports contained in our definitive proxy statement for our 2024 Annual General Meeting of Shareholders which we refer to as our 2024 Proxy Statement
We have adopted a written code of business conduct and ethics that applies to all of our employees including our principal executive officer and principal financial and accounting officer and is available on our website at www cimpress com We did not waive any provisions of this code during the fiscal year ended June 30 2024 If we amend or grant a waiver under our code of business conduct and ethics that applies to our principal executive financial or accounting officers or persons performing similar functions we will post information about such amendment or waiver on our website at www cimpress com
The information required by this item is incorporated by reference to the information contained in the sections of our 2024 Proxy Statement captioned Compensation Discussion and Analysis Summary Compensation Tables Compensation of our Board of Directors and Compensation Committee Interlocks and Insider Participation
The information required by this item is incorporated by reference to the information contained in the sections of our 2024 Proxy Statement captioned Security Ownership of Certain Beneficial Owners and Management and Securities Authorized for Issuance Under Equity Compensation Plans
The information required by this item is incorporated by reference to the information contained in the sections of our 2024 Proxy Statement captioned Certain Relationships and Related Transactions and Corporate Governance
The information required by this item is incorporated by reference to the information contained in the section of our 2024 Proxy Statement captioned Independent Registered Public Accounting Firm Fees and Other Matters
Senior Notes Indenture including form of 7 0 senior notes due 2026 dated as of June 15 2018 between Cimpress plc as successor to Cimpress N V certain subsidiaries of Cimpress plc as guarantors thereto and U S Bank National Association as successor trustee is incorporated by reference to our Current Report on Form 8 K filed with the SEC on June 18 2018
Second Supplemental Indenture dated as of December 3 2019 with respect to the 7 0 senior notes due 2026 between Cimpress plc certain subsidiaries of Cimpress plc as guarantors thereto and U S Bank National Association as successor trustee is incorporated by reference to our Quarterly Report on Form 10 Q for the fiscal quarter ended December 31 2019
Third Supplemental Indenture dated as of February 13 2020 with respect to the 7 0 senior notes due 2026 between Cimpress plc the guarantors party thereto and U S Bank National Association as successor trustee is incorporated by reference to our Current Report on Form 8 K filed with the SEC on February 18 2020
Form of Nonqualified Share Option Agreement under our 2005 Non Employee Directors Share Option Plan is incorporated by reference to our Quarterly Report on Form 10 Q for the fiscal quarter ended September 30 2009
Form of Performance Share Unit Agreement for employees and executives under our 2016 Performance Equity Incentive Plan is incorporated by reference to our Quarterly Report on Form 10 Q for the fiscal quarter ended December 31 2019
Form of Performance Share Unit Agreement for our Chief Executive Officer under our 2016 Performance Equity Incentive Plan is incorporated by reference to our Quarterly Report on Form 10 Q for the fiscal quarter ended December 31 2019
Form of Performance Share Unit Agreement for members of our Board of Directors under our 2016 Performance Equity Incentive Plan is incorporated by reference to our Quarterly Report on Form 10 Q for the fiscal quarter ended December 31 2019
Form of Performance Share Unit Agreement for employees and executives under our 2020 Equity Incentive Plan is incorporated by reference to our Quarterly Report on Form 10 Q for the fiscal quarter ended December 31 2020
Form of Performance Share Unit Agreement for our Chief Executive Officer under our 2020 Equity Incentive Plan is incorporated by reference to our Quarterly Report on Form 10 Q for the fiscal quarter ended December 31 2020
Form of Performance Share Unit Agreement for our Board of Directors under our 2020 Equity Incentive Plan is incorporated by reference to our Quarterly Report on Form 10 Q for the fiscal quarter ended December 31 2020
Form of Performance Based Restricted Share Unit Agreement based on fiscal year 2024 Cimpress financial performance under the 2020 Equity Incentive Plan is incorporated by reference to our Quarterly Report on Form 10 Q for the fiscal quarter ended September 30 2023
Form of Performance Based Restricted Share Unit Agreement based on fiscal year 2024 Vista financial performance under the 2020 Equity Incentive Plan is incorporated by reference to our Quarterly Report on Form 10 Q for the fiscal quarter ended September 30 2023
Form of Indemnification Agreement between Cimpress USA Incorporated and each director of Cimpress plc is incorporated by reference to our Current Report on Form 8 K filed with the SEC on January 29 2020
Second Amended and Restated Executive Retention Agreement dated as of February 20 2023 between Cimpress plc and Robert Keane is incorporated by reference to our Current Report on Form 8 K filed with the SEC on February 23 2023
Form of Amended and Restated Executive Retention Agreement between Cimpress plc and each of Sean Quinn and Maarten Wensveen is incorporated by reference to our Current Report on Form 8 K filed with the SEC on February 23 2023
Memorandum clarifying relative precedence of agreements dated May 6 2010 between Cimpress plc as successor to Cimpress N V and Robert Keane is incorporated by reference to our Annual Report on Form 10 K for the fiscal year ended June 30 2010
Employment Agreement between Cimpress Deutschland GmbH and Florian Baumgartner dated July 10 2019 is incorporated by reference to our Quarterly Report on Form 10 Q for the fiscal quarter ended March 31 2023
Amendment to Employment Agreement between Cimpress Deutschland GmbH and Florian Baumgartner dated January 1 2021 is incorporated by reference to our Quarterly Report on Form 10 Q for the fiscal quarter ended March 31 2023
Form of Invention and Non Disclosure Agreement between Cimpress and each of Robert Keane Sean Quinn and Maarten Wensveen is incorporated by reference to our Registration Statement on Form S 1 as amended
Form of Non Competition and Non Solicitation Agreement between Cimpress and each of Robert Keane Sean Quinn and Maarten Wensveen is incorporated by reference to our Registration Statement on Form S 1 as amended
Amendment and Restatement Agreement dated as of May 17 2021 among Cimpress plc Vistaprint Limited Cimpress Schweiz GmbH Vistaprint B V Vistaprint Netherlands B V and Cimpress USA Incorporated as borrowers the Borrowers the lenders named therein as lenders and JPMorgan Chase Bank N A as administrative agent for the lenders the Administrative Agent which amends and restates the Credit Agreement dated as of October 21 2011 as amended and restated as of February 8 2013 and as further amended and restated as of July 13 2017 as amended and restated by the Amendment and Restatement Agreement the Credit Agreement is incorporated by reference to our Current Report on Form 8 K filed with the SEC on May 19 2021
Amendment No 1 LIBOR Hardwire Transition Amendment dated as of June 13 2023 to the Credit Agreement is incorporated by reference to our Annual Report on Form 10 K for the fiscal year ended June 30 2023
Second Amended and Restated Guaranty dated as of July 13 2017 between Cimpress subsidiary guarantors named therein as guarantors the Subsidiary Guarantors and the Administrative Agent which amends and restates the Amended and Restated Guaranty dated as of February 8 2013 is incorporated by reference to our Current Report on Form 8 K filed with the SEC on July 14 2017
Amended and Restated Pledge and Security Agreement dated as of July 13 2017 between certain Borrowers and Subsidiary Guarantors on one hand and the Administrative Agent on the other hand which amends and restates the Pledge and Security Agreement dated as of February 8 2013 is incorporated by reference to our Current Report on Form 8 K filed with the SEC on July 14 2017
The following materials from this Annual Report on Form 10 K formatted in Inline Extensible Business Reporting Language iXBRL i Consolidated Balance Sheets ii Consolidated Statements of Operations iii Statements of Shareholder s Equity iv Consolidated Statements of Cash Flows and v Notes to Condensed Consolidated Financial Statements
Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated

Company Name	CIMPRESS plc Vist SEC web-site
Category	COMMERCIAL PRINTING
Trading Symbol	CMPR