Vistaprint Beats Estimates

Vistaprint N.V. ( VPRT - Analyst Report ) reported net income of $23.0 million or 66 cents per share in the second quarter of fiscal 2013 (ended Dec 31, 2012) compared with $31.7 million or 82 cents in the year-earlier quarter. Although earnings decreased on a year-over-year basis, it was well above the Zacks Consensus Estimate of 49 cents.

Excluding one-time items, non-GAAP adjusted earnings were $35.9 million or $1.02 per share compared with $37.9 million or 97 cents in the year-ago quarter. Total revenue increased 16% year over year to $348.3 million. The healthy top-line growth was largely attributable to strong performances in the consumer and holiday business around the world and the superior execution of operational plans in North America.

Behind the Headline Numbers

In the reported quarter, gross margin rose to 67.2% compared with 66.8% in the year-ago quarter. Operating income increased marginally to $33.0 million from $32.5 million in the prior-year quarter. However, operating margin dipped to 9.5% in the quarter from 10.9% in the corresponding period in the previous year.

Balance Sheet & Cash Flow

The company exited the quarter with $64.7 million in cash and cash equivalents. Long-term debt stood at $230.5 million, with $157.0 million available under its credit facility. Vistaprint purchased 827,346 shares for $24.8 million in the quarter, as part of the share repurchase program.

The company generated $88.5 million of cash from operations and $58.7 million in free cash flow, which is defined as cash from operations less purchases of property, plant and equipment, purchases of intangible assets not related to acquisitions, and capitalization of software and website development costs.

Guidance

Although the European operations remain a cause of concern, Vistaprint expects to benefit from a solid execution of its strategy in North America and strong manufacturing results around the world. For fiscal 2013, the company expects earnings in the range of 50 cents – 70 cents per share. Adjusted earnings are expected in the range of $1.79–$1.99 per share. Revenues are expected in the range of $1,145.0 million – $1,175.0 million.

For the third quarter of fiscal 2013, revenues are expected in the range of $275 million –$290 million.

Our Take

Vistaprint’s solid long-term prospects along with the focus on inorganic growth and international expansion make us optimistic on the stock. The company’s Asian and North American operations are delivering strongly.

However, 2013 could prove to be a challenging year for Vistaprint as there are a few planned investments, which are likely to weigh on its bottom line. Moreover, the lackluster business environment in Europe remains a concern given Vistaprint’s huge exposure to the European region.

In addition, the company needs to be wary of the other players in the industry such as CBIZ, Inc. ( CBZ - Snapshot Report ) , Portfolio Recovery Associates Inc. ( PRAA - Analyst Report ) and Fidelity National Information Services, Inc. ( FIS - Analyst Report ) , each carrying a Zacks Rank #2 (Buy). Vistaprint currently retains a Zacks Rank #3 (Hold).