VistaPrint N.V.’s (VPRT) third quarter results were ahead of the Zacks Consensus Estimate. However, the shares tumbled on the company’s weak outlook for the fourth quarter and full fiscal year 2010.
VistaPrint’s third quarter fiscal 2010 (ending March 31) earnings came in at 35 cents per share. The company had earned 33 cents in the year-ago quarter. Excluding share-based compensation expense and its related tax impact, the company would have earned 46 cents versus 44 cents in the prior-year quarter.
Earnings came in ahead of the Zacks Consensus Estimate of 31 cents. The results were driven primarily by higher-than-expected revenue increases. Key operating metrics also remained strong. However, the market has responded negatively to its fourth quarter and full fiscal year outlook, both of which were below the Zacks Consensus Estimates.
Guidance
For the fourth quarter, VistaPrint expects earnings to range from 35 cents to 38 cents excluding expected share-based compensation expense and its related tax effect. On a GAAP basis, the company expects earnings in the range of 24 cents to 27 cents per share, based on revenues in the range of approximately $169 million to $174 million. The Zacks Consensus Estimate prior to the earnings release was 31 cents for the fourth quarter.
For the full fiscal year 2010, the company expects earnings to range from $1.95 to $1.98 per share, excluding stock compensation costs. On GAAP basis earnings are projected to range between $1.47 and $1.50 per share, based on revenues in the range of approximately $675 million to $680 million. The Zacks Consensus Estimate prior to the earnings release was $1.50 for the full fiscal year 2010.
Behind the Headline Numbers
In the reported quarter, VistaPrint reported a 30% year-over-year increase in revenues to $166.0 million. Excluding the impact of foreign exchange fluctuations, the company reported a 25% year-over-year growth in revenues.
Gross margin improved 60 basis points (bps) from the year-ago quarter to 64.1%. Operating income was $17.8 million, reflecting an increase of 11% from the prior-year period. However, operating margin was down 180 bps to 10.7%.
Turning to key metrics, we note that website sessions were 81.9 million, representing a 24% increase from the prior-year quarter. Average daily order volume increased nearly 23% from the prior-year period to 54,000 orders per day. Approximately 1.6 million new customers were acquired by VistaPrint in the quarter. Around 67% of bookings came from repeat customers versus 66% in the year-ago quarter.
Going forward, we believe VistaPrint’s focus on small business markets provides it with ample opportunities for growth as the company expects to serve approximately 50 million small businesses. Additionally, its scale of operation aids in a significant margin expansion.
However, we think that the current stress in the economy will restrict any significant improvement in its top line. The company faces strong competition in its markets. Moreover, substantial exposure to international markets also makes the company vulnerable to currency fluctuation risks. As such, we have a Neutral stance on the shares.
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