Vistaprint N.V. (VPRT) declared third quarter 2011 adjusted earnings of 63 cents per share, handily beating the Zacks Consensus Estimate of 38 cents. Earnings per share (EPS) increased 37% year over year and also surpassed the company’s guided range of 46–49 cents per share. The better-than-expected results were driven by double-digit growth in the top line, margin enhancement and deferment of some planned operational expenses.

On a GAAP basis, EPS shot up 46% to 51 cents during the quarter, outpacing the company’s guided range of 35–38 cents.

The company registered a 23% year-over-year growth in revenues to $203.7 million, including the impact of currency exchange rate fluctuations. Revenues were above management’s guidance range of $190 million to $196 million and the Zacks Consensus Estimate of $196 million. Geographically, Vistaprint derived 57%, 38% and 5% of revenue from North America, Europe and Asia-Pacific markets, respectively.

Behind the Headline Numbers

In the third quarter, gross margin expanded 120 basis points (bps) from the year-ago quarter to 65.3%. Operating income was $25.6 million in the quarter, reflecting an upside of 44% from the prior-year quarter. Operating margin surged 190 basis points from the prior-year quarter to 12.6%.

Among key metrics, Vistaprint noted 79.4 million website sessions in the quarter, representing a 3% drop from the prior-year quarter. However, total order volume increased roughly 21% from the prior-year quarter to 5.8 million.

Vistaprint acquired 1.8 million new customers in the quarter. The company noted that 68% of the bookings came from repeat customers versus 67% from the year-ago quarter.

Financial Position

At the end of the quarter, capital expenditures were $4.2 million, cash from operations was $33.7 million and free cash flow was $27.8 million.

As of March 31, 2011, the company had $208.1 million in cash, cash equivalents and short-term marketable securities. During the quarter, Vistaprint also repurchased 32,852 ordinary shares for $1.5 million.

Guidance

For the fourth quarter of 2011, Vistaprint expects EPS, excluding expected share-based compensation expense and its related tax effect, in the 38–43 cents range. On a GAAP basis, the company expects EPS in the range of 28 cents to 33 cents and revenues in the range of $202 million to $207 million. The Zacks Consensus Estimate for earnings is pegged at 40 cents per share for the same period.

For full-year 2011, the company has raised its revenue outlook and the EPS range, based on the robust third quarter results. The company now expects adjusted EPS in the range of $2.26 to $2.31 compared with its previous guidance of $2.19 to $2.17 per share. On a GAAP basis, EPS is projected between $1.78 and $1.83 versus the previous expectation of $1.72–$1.80. The company has raised its revenue guidance range to $810–$805 million from $785–$800 million. For the full year, the Zacks Consensus Estimates are $1.78 for earnings and $797 million for revenues.

Our Take

Vistaprint’s focus on small business markets provides it with ample growth opportunities. Vistaprint is also expanding to strengthen its geographical footprint. It already boasts a strong international presence in Europe and Continental Europe and is poised to tap the immense growth opportunity in the Asian market.

However, we believe that the ongoing economic uncertainty, coupled with substantial competition resulting in a slowdown in new customer additions will restrict significant improvements in the company’s top line as well as bottom line.

The company has a Zacks #3 Rank, which translates into a Hold rating on the stock over the short term. Our long-term recommendation for the stock remains Neutral.

One of Vistaprint’s competitors, Office Depot, Inc (ODP), posted break-even first-quarter 2011 results, which fell short of the Zacks Consensus Estimate of 2 cents and plunged 100.0% from the prior-year quarter.

 
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