Vistaprint Beats, Down Y/Y

Vistaprint N.V. (VPRT - Analyst Report) declared third quarter 2012 adjusted earnings (including stock based compensation expense of 20 cents per share) of 9 cents per share, comprehensively beating the Zacks Consensus Estimate of 9 cents loss per share. The better-than-expected results were driven by double-digit growth in the top line. However, adjusted earnings fell from the year-ago level of 51 cents.

Reported earnings per share (EPS) were in line with the company’s guided range of 14–29 cents. On a GAAP basis, EPS was a penny versus 51 cents in the comparable quarter of last year.

The company registered a 26.5% year-over-year growth in revenues to $257.6 million, including the $14.0 million contribution from Albumprinter and Webs. Revenues were within management’s guidance range of $246 million to $261 million. Geographically, Vistaprint derived 55%, 39% and 6% of revenues from North America, Europe and Asia-Pacific markets, respectively.

Behind the Headline Numbers

In the third quarter, gross margin rose 20 basis points (bps) from the year-ago quarter to 65.5%. Operating income came in at $7.8 million, reflecting a downside of 69% from the prior-year quarter. Operating margin plunged 960 basis points from the prior-year quarter to 3.0%.

However, total order volume increased roughly 21% year over year to 7.0 million in the third quarter of fiscal 2012. Vistaprint added 5.8 million new customers in the quarter.

Financial Position

At quarter end, the company had $52.1 million in cash, cash equivalents and short-term marketable securities. Total assets of the company were $588.0 million while total liabilities amounted to $306.0 million.

Guidance

For the fourth quarter of 2012, Vistaprint expects adjusted EPS (excluding stock-based compensation expense of 19 cents) in the 15–27 cents range. On a GAAP basis, earnings per share are expected in the range of loss of 10 cents to gain of 2 cents and revenues in the range of $248 million to $264 million.

For full-year 2012, the company reiterated its adjusted EPS guidance (excluding stock-based compensation expense of 63 cents) in the range of $1.71 to $1.83 per share. On a GAAP basis, EPS is projected between 92 cents to $1.04 (versus 86–98 as provided earlier) per share. Revenue is expected in the range of $1018–$1,034 million ($1006–$1,036 million provided earlier).

Our Take

We remain optimistic on Vistaprint’s long-term prospects and a deeper focus on inorganic growth as well as international expansion. Management expects to gain $2 billion revenue by 2016. Additionally, the company has a share repurchase program in place to boost its full-year earnings.

However, 2012 could prove to be a challenging year for Vistaprint as there are a few planned investments, which will weigh on its bottom line. Acquisitions will also be dilutive to earnings.

Vistaprint, which competes with Sykes Enterprises Inc. (SYKE - Snapshot Report) and TeleTech Holdings Inc. (TTEC - Snapshot Report), currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are maintaining our long-term Neutral recommendation on the stock.