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Segment Information

6 Months Ended

Dec. 31, 2019

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. During the first quarter of fiscal 2020, we revised our internal organizational and reporting structure leading to changes in our Vistaprint and All Other Businesses reportable segments. Our Vistaprint Corporate Solutions, Vistaprint India, and Vistaprint Japan businesses, which were previously aggregated based on materiality in our All Other Businesses, are now directly managed within the Vistaprint business. These businesses are close derivatives or adjacencies of the Vistaprint business and leverage the Vistaprint brand, customers, technology, and/or other assets. This change in reporting structure positions them closer to the Vistaprint operations, capabilities, and resources. We have revised our presentation of all prior periods presented to reflect our revised segment reporting.

As of December 31, 2019, we have numerous operating segments under our management reporting structure which are reported in the following five reportable segments:


•	Vistaprint - Includes the operations of our global Vistaprint websites and our Webs-branded business, which is managed with the Vistaprint-branded digital business. Also included is our Vistaprint Corporate Solutions business which serves medium-sized businesses and large corporations, as well as a legacy revenue stream with retail partners and franchise businesses


•	PrintBrothers - Includes the results of our druck.at, Printdeal, and WIRmachenDRUCK businesses


•	The Print Group - Includes the results of our Easyflyer, Exagroup, Pixartprinting, and Tradeprint businesses


•	National Pen - Includes the global operations of our National Pen business, which manufactures and markets custom writing instruments and promotional products, apparel and gifts


•	All Other Businesses - Includes a collection of businesses grouped together based on materiality:


◦	BuildASign is an internet-based provider of canvas-print wall décor, business signage and other large-format printed products, based in Austin, Texas.


◦	Printi is an online printing leader in Brazil, which offers a superior customer experience with transparent and attractive pricing, reliable service and quality.


◦	VIDA is an innovative startup that brings manufacturing access and an e-commerce marketplace to artists, thereby enabling artists to convert ideas into beautiful, original products for customers, ranging from custom fashion, jewelry and accessories to home accent pieces.


◦	YSD is a startup operation that provides end-to-end mass customization solutions to brands and IP owners in China, supporting multiple channels including retail stores, websites, WeChat and e-commerce platforms to enhance brand awareness and competitiveness, and develop new markets.

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 Board of Directors, CEO, and the team members necessary for managing corporate activities, such as treasury, tax, capital allocation, financial consolidation, internal audit and legal. These costs also include certain unallocated share-based compensation costs.

During the first quarter of fiscal 2020, we changed our segment profitability measure to an adjusted EBITDA metric. The financial metric that we use to hold our businesses accountable on an annual basis is unlevered free cash flow. Historically, we have reported segment profit based on adjusted net operating profit; however, this is not a direct input to unlevered free cash flow. We believe this change simplifies both our internal and external reporting, while also increasing the focus on a profitability metric that is a direct input into our internal operating measure, to our steady-state free cash flow analysis that we report annually and to our estimates of intrinsic value per share.

The primary difference between the segment profit we previously reported and the revised metric is depreciation and amortization. The prior adjusted NOP-based metric only removed amortization of acquired intangibles, and the new segment EBITDA metric removes all depreciation and amortization, except for depreciation expense related to our Waltham, Massachusetts lease, which we treat in our historical results as operating expense. The new segment EBITDA metric does include the cost of long-term incentive programs, including share-based compensation, just as the prior adjusted NOP-based metric.

For awards granted under our 2016 Performance Equity Plan, the PSU expense value is based on a Monte Carlo fair value analysis and is required to be expensed on an accelerated basis. In order to ensure comparability in measuring our businesses' results, we allocate the straight-line portion of the fixed grant value to our businesses. Any expense in excess of the amount as a result of the fair value measurement of the PSUs and the accelerated expense profile of the awards is recognized within Central and corporate costs. All expense or benefit associated with our supplemental PSUs is recognized within Central and corporate costs.

Our definition of segment EBITDA is GAAP operating income excluding certain items, such as depreciation and amortization (with the exception of depreciation expense associated with our Waltham, Massachusetts lease for periods prior to our adoption of the new leasing standard on July 1, 2019), 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. For historical periods presented, a portion of the interest expense associated with our Waltham, Massachusetts lease is included as expense in segment EBITDA and allocated based on headcount to the appropriate business or corporate and global function. The interest expense represents a portion of the cash rent payment and is considered an operating expense for purposes of measuring our segment performance. Beginning in fiscal 2020, as part of our adoption of the new leasing standard, the accounting treatment for our Waltham, Massachusetts lease has changed to an operating lease, so the expense associated with this lease is reflected in operating income and no longer requires an adjustment to segment EBITDA. We do not allocate non-operating income, including realized gains and losses on currency hedges, to our segment results.

Our All Other Businesses reportable segment includes businesses that have operating losses as they are in the early stage of investment relative to the scale of the underlying businesses, which may limit its comparability to other segments regarding segment EBITDA.

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 segments, as well as disaggregation of revenue by major geographic regions and reportable segments.



	Three Months Ended December 31,						Six Months Ended December 31,
	2019			2018			2019			2018
Revenue:
Vistaprint (1)	$	433,305		$	443,940		$	776,476		$	789,260
PrintBrothers (2)	126,617			116,314			235,907			217,703
The Print Group (3)	87,699			87,740			159,957			158,740
National Pen (4)	127,985			132,951			198,148			198,922
All Other Businesses (5)	49,774			48,256			92,050			55,971
Total segment revenue	825,380			829,201			1,462,538			1,420,596
Inter-segment eliminations	(5,047		)	(3,634		)	(8,246		)	(6,048		)
Total consolidated revenue	$	820,333		$	825,567		$	1,454,292		$	1,414,548

_____________________

(1) Vistaprint segment revenues include inter-segment revenue of $2,525 and $3,853 for the three and six months ended December 31, 2019, respectively, and $2,088 and $3,338 for the prior comparative periods, respectively.

(2) PrintBrothers segment revenues include inter-segment revenue of $329 and $572 for the three and six months ended December 31, 2019, respectively, and $353 and $711 for the prior comparative periods, respectively.

(3) The Print Group segment revenues include inter-segment revenue of $986 and $1,418 for the three and six months ended December 31, 2019, respectively, and $439 and $495 for the prior comparative periods, respectively.

(4) National Pen segment revenues include inter-segment revenue of $966 and $1,947 for the three and six months ended December 31, 2019 respectively, and $754 and $1,504 for the prior comparative periods, respectively.

(5) All Other Businesses segment revenues include inter-segment revenue of $241 and $456 for the three and six months ended December 31, 2019. There was no inter-segment revenue for the three and six months ended December 31, 2018. Our All Other Businesses segment includes the revenue from our BuildASign acquisition from October 1, 2018.



	Three Months Ended December 31, 2019
	Vistaprint			PrintBrothers			The Print Group			National Pen			All Other			Total
Revenue by Geographic Region:
North America	$	284,345		$	—		$	—		$	54,400		$	44,221		$	382,966
Europe	121,143			126,288			86,713			60,887			—			395,031
Other	25,292			—			—			11,732			5,312			42,336
Inter-segment	2,525			329			986			966			241			5,047
Total segment revenue	433,305			126,617			87,699			127,985			49,774			825,380
Less: inter-segment elimination	(2,525		)	(329		)	(986		)	(966		)	(241		)	(5,047		)
Total external revenue	$	430,780		$	126,288		$	86,713		$	127,019		$	49,533		$	820,333



	Six Months Ended December 31, 2019
	Vistaprint			PrintBrothers			The Print Group			National Pen			All Other			Total
Revenue by Geographic Region:
North America	$	531,430		$	—		$	—		$	95,942		$	79,627		$	706,999
Europe	195,601			235,335			158,539			83,200			—			672,675
Other	45,592			—			—			17,059			11,967			74,618
Inter-segment	3,853			572			1,418			1,947			456			8,246
Total segment revenue	776,476			235,907			159,957			198,148			92,050			1,462,538
Less: inter-segment elimination	(3,853		)	(572		)	(1,418		)	(1,947		)	(456		)	(8,246		)
Total external revenue	$	772,623		$	235,335		$	158,539		$	196,201		$	91,594		$	1,454,292



	Three Months Ended December 31, 2018
	Vistaprint			PrintBrothers			The Print Group			National Pen			All Other		Total
Revenue by Geographic Region:
North America	$	285,304		$	—		$	—		$	57,348		$	41,911	$	384,563
Europe	130,731			115,961			87,301			62,473			—		396,466
Other	25,817			—			—			12,376			6,345		44,538
Inter-segment	2,088			353			439			754			—		3,634
Total segment revenue	443,940			116,314			87,740			132,951			48,256		829,201
Less: inter-segment elimination	(2,088		)	(353		)	(439		)	(754		)	—		(3,634		)
Total external revenue	$	441,852		$	115,961		$	87,301		$	132,197		$	48,256	$	825,567



	Six Months Ended December 31, 2018
	Vistaprint			PrintBrothers			The Print Group			National Pen			All Other		Total
Revenue by Geographic Region:
North America	$	531,425		$	—		$	—		$	95,906		$	43,639	$	670,970
Europe	207,402			216,992			158,245			83,509			—		666,148
Other	47,095			—			—			18,003			12,332		77,430
Inter-segment	3,338			711			495			1,504			—		6,048
Total segment revenue	789,260			217,703			158,740			198,922			55,971		1,420,596
Less: inter-segment elimination	(3,338		)	(711		)	(495		)	(1,504		)	—		(6,048		)
Total external revenue	$	785,922		$	216,992		$	158,245		$	197,418		$	55,971	$	1,414,548

The following table includes segment EBITDA by reportable segment, total income from operations and total income before income taxes.



	Three Months Ended December 31,							Six Months Ended December 31,
	2019			2018				2019			2018
Segment EBITDA:
Vistaprint	$	132,160		$	96,963			$	212,740		$	156,957
PrintBrothers	16,459			11,691				27,236			22,262
The Print Group	18,105			16,368				31,739			28,214
National Pen	28,099			26,634				18,249			10,166
All Other Businesses	3,668			(2,294		)		5,385			(7,016		)
Total segment EBITDA	198,491			149,362				295,349			210,583
Central and corporate costs	(31,707		)	(13,124		)		(58,637		)	(42,411		)
Depreciation and amortization	(42,356		)	(44,502		)		(84,891		)	(85,220		)
Waltham, MA lease depreciation adjustment (1)	—			1,030				—			2,060
Share-based compensation related to investment consideration	—			(2,893		)		—			(2,893		)
Certain impairments and other adjustments	(936		)	(65		)		(760		)	22
Restructuring-related charges	(1,897		)	(1,026		)		(4,087		)	(1,196		)
Interest expense for Waltham, MA lease (1)	—			1,833				—			3,682
Total income from operations	121,595			90,615				146,974			84,627
Other (expense) income, net	(9,040		)	9,629			—	6,634			19,881
Interest expense, net	(15,701		)	(16,808		)	—	(30,788		)	(30,585		)
Income before income taxes	$	96,854		$	83,436			$	122,820		$	73,923

___________________

(1) Upon the adoption of the new leasing standard on July 1, 2019, our Waltham, MA lease, which was previously classified as build-to-suit, is now classified as an operating lease under the new standard. Therefore, the Waltham depreciation and interest expense adjustments that were made in comparative periods will no longer be made beginning in the first fiscal quarter of 2020, as any impact from the Waltham lease will be reflected in operating income. Refer to Note 2 for additional details.



	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Depreciation and amortization:
Vistaprint	$	15,781	$	17,357	$	32,056	$	34,678
PrintBrothers	5,553		5,663		10,808		12,076
The Print Group	6,609		7,687		12,842		15,418
National Pen	5,523		5,319		11,104		10,443
All Other Businesses	5,888		5,259		11,861		5,842
Central and corporate costs	3,002		3,217		6,220		6,763
Total depreciation and amortization	$	42,356	$	44,502	$	84,891	$	85,220



	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Purchases of property, plant and equipment:
Vistaprint	$	6,192	$	9,378	$	10,697	$	21,434
PrintBrothers	668		647		999		2,376
The Print Group	4,889		2,787		8,994		4,783
National Pen	761		2,308		2,777		7,035
All Other Businesses	595		2,362		2,370		2,647
Central and corporate costs	796		259		2,257		492
Total purchases of property, plant and equipment	$	13,901	$	17,741	$	28,094	$	38,767



	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Capitalization of software and website development costs:
Vistaprint	$	5,625	$	6,208	$	12,290	$	13,466
PrintBrothers	291		517		622		804
The Print Group	424		703		875		1,198
National Pen	979		576		1,815		1,476
All Other Businesses	1,116		871		2,079		961
Central and corporate costs	2,511		1,813		5,736		4,016
Total capitalization of software and website development costs	$	10,946	$	10,688	$	23,417	$	21,921

The following table sets forth long-lived assets by geographic area:



	December 31, 2019		June 30, 2019
Long-lived assets (1):
United States	$	169,989	$	57,118
Netherlands	98,624		73,601
Canada	75,055		73,447
Switzerland	62,140		57,488
Italy	50,261		43,203
Jamaica	21,218		21,267
Australia	21,273		20,749
France	25,312		18,533
Japan	16,364		17,768
Other	106,603		79,006
Total	$	646,839	$	462,180

___________________

(1) Excludes goodwill of $721,057 and $718,880, intangible assets, net of $235,031 and $262,701, and deferred tax assets of $160,058 and $59,906 as of December 31, 2019 and June 30, 2019, respectively. Build-to-suit lease assets of $124,408 are excluded for the year ended June 30, 2019, and upon our adoption of ASC 842 on July 1, 2019, our Waltham, MA and Dallas, TX build-to-suit lease asset balances were de-recognized.

As of December 31, 2019, all operating lease assets are recognized within the balances above. Refer to Note 2 for additional details.