This document is Vistaprint’s commentary regarding our intent to acquire Pixartprinting, which was announced on April 1, 2014. This document also includes additional information regarding our recently announced acquisition of People & Print Group. This document contains slides and accompanying comments in the “notes” section below each slide.
Vistaprint N.V. to Acquire Pixartprinting Presentation and Commentary
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Please read the above safe harbor statement.
Vistaprint N.V. to Acquire Pixartprinting Presentation and Commentary
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Today, we announced a definitive agreement to acquire Pixartprinting, a leading web‐to‐ print company based in Italy for €127 million, or approximately $174 million. We are excited about the acquisition for many reasons. Pixartprinting has strong front‐end customer service and product innovation, and specializes in serving graphically‐enabled customers via an upload and print business model. This differs from Vistaprint’s approach under our primary “Vistaprint” brand which focuses on customers who rely primarily on graphic design templates provided by Vistaprint. Pixartprinting offers a very wide and deep range of products and attributes that extend beyond our current offerings in categories such as flyers and signage. The small business market is large, and has segments with differing needs. We believe this acquisition will help us expand into the portion of the market in which customers have more sophisticated design and print needs better served by an “upload and print” offering. In addition, we think we can augment and further Pixartprinting’s success with Vistaprint’s expertise in technology and manufacturing. We believe our business is a scale game and that adding the volume of Pixartprinting onto our manufacturing operations will enhance our advantage in manufacturing and supply chain. Pixartprinting is growing rapidly with strong EBITDA. At a valuation of 9.8x CY13 EBITDA, and a lower multiple on expected CY14 EBITDA, we believe the transaction is financially attractive.
Vistaprint N.V. to Acquire Pixartprinting Presentation and Commentary
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We also recently announced our intent to purchase People & Print Group, based in the Netherlands. This transaction closed on April 1, 2014. Pixartprinting and People & Print Group are each national leaders in a growing and profitable segment of the online small business print market that serves resellers, graphic designers, small local printers, as well as small and medium businesses that have graphic design skills necessary to create press‐ready desk top publishing files. Vistaprint, Pixartprinting, and People & Print Group all use e‐commerce to sell the same type of high level product categories (business cards, flyers, brochures, signage). As we have said throughout our history as a public company, scale matters to our manufacturing operations and supply chain. We believe that over the long term we can benefit from the product capabilities of Pixartprinting and People & Print Group, and they should be able to take advantage of our expertise and scale in manufacturing and supply chain to optimize processes and costs. Despite the many similarities in our business models, from a pricing and advertising perspective Pixartprinting and People & Print Group employ marketing approaches which vary from those in the market that Vistaprint has traditionally served, and as such our financial models exhibit the following differences: Vistaprint has relatively high gross margins, whereas due to lower price levels that are targeted to wholesale trade with graphic professionals, Pixartprinting and People & Print Group have lower gross margins. Vistaprint has relatively high advertising cost as a percentage of revenue. Because customers of Pixartprinting and People & Print Group have higher annual purchase levels and exhibit higher multi‐year customer retention rates, advertising costs are lower as a percentage of revenue.
Vistaprint N.V. to Acquire Pixartprinting Presentation and Commentary
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At our investor day in August, 2013, we shared an illustrative view of the three major segments in the large market for marketing products and services used by small businesses with fewer than 10 employees. Vistaprint has gained strong market share in the part of the market with the highest number of small businesses but the lowest per‐customer annual spend. In fact, we believe that we created much of this “Price Primary” market in which we have historically excelled at optimizing the transaction value and profit. These are customers for whom price is the primary driver of a purchase decision and for whom our historic approach via free offers and heavy discounting was attractive. Over the past three years, we have been investing in changes to our customer value proposition in order to help us broaden our appeal into the second segment on this chart, the “Higher Expectations” customers. These are customers who choose their marketing providers not solely on price, but on a blend of value, product quality, customer service and overall experience. We believe the changes we have been making in our business to become more customer‐centric and drive customer loyalty across a spectrum of brand attributes will help us penetrate this Higher Expectations segment. Our customer base is made up of customers from both of these segments today, but we believe our market penetration within the Higher Expectations segment is much lower than in the Price Primary segment. While we believe the Vistaprint brand is extensible to the Higher Expectations customers, we believe the right approach to the “Locally Focused” customers who choose to work with local graphic designers, agencies, resellers and print shops, is through differentiated brands like Pixartprinting and People &Print Group. Though this segment is largely composed of offline spend, online companies like Pixartprinting and People & Print Group have been successful penetrating this space in their respective geographic markets. We intend to invest in these companies as distinct brands from Vistaprint, much like we do with the Albumprinter brands today.
Vistaprint N.V. to Acquire Pixartprinting Presentation and Commentary
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The slide above contains some basic information about Pixartprinting.
Vistaprint N.V. to Acquire Pixartprinting Presentation and Commentary
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Pixartprinting and People & Print Group have similar high‐level product categories as Vistaprint, but both of these companies have more breadth and depth within their offering in order to be relevant to a customer base with more sophisticated marketing needs and professional desktop publishing and graphic arts skills. The leading example of this is in the leaflets and flyers category, where both Pixartprinting and People & Print Group offer a wide range of products including many different paper types and folding patterns. You can see this product breadth and depth by visiting the websites of Pixartprinting and one of People & Print Group’s brands, Drukwerkdeal: http://www.pixartprinting.it/ http://www.drukwerkdeal.nl/
Vistaprint N.V. to Acquire Pixartprinting Presentation and Commentary
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While Pixartprinting and People & Print Group play in the same market segment as each other with a similar approach and product offering, each brand has a distinct geographic focus: Pixartprinting in Italy, France and Spain; and People & Print Group in the Netherlands and Belgium.
Vistaprint N.V. to Acquire Pixartprinting Presentation and Commentary
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The combined revenue and EBITDA growth of Pixartprinting and People & Print Group are attractive: in the aggregate greater than 30 percent revenue growth and 37 percent EBITDA growth in calendar 2013. Additionally, the customer bases for these companies are different than Vistaprint’s base. Our base is made up of millions of customers that spend on average about $70 per year with us. Pixartprinting and People & Print Group have fewer customers with much higher annual spend per customer. Both of these companies also have very strong customer retention.
Vistaprint N.V. to Acquire Pixartprinting Presentation and Commentary
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We expect the Pixartprinting transaction to close within the month of April. We are not updating our guidance today to reflect the Pixartprinting or People & Print Group transactions, but will provide some high‐level thoughts about accretion/dilution for the remainder of FY14 and FY15. We expect the transactions to be dilutive to our GAAP EPS through at least FY15, primarily due to acquisition‐related intangibles amortization. On a non‐GAAP basis, which will exclude amortization of intangibles and certain other acquisition‐related expenses, we expect the transactions will be accretive to EPS nearly immediately (once transaction costs are paid in Q3 and Q4 2014). We expect the transactions will be modestly accretive to EBITDA and operating cash flow in FY14.
Vistaprint N.V. to Acquire Pixartprinting Presentation and Commentary
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In summary, we are excited about these transactions as we believe they can help us enter into new customer segments while adding scale to our business. We also believe that we can learn from each other’s strengths to further optimize our distinct brands. We believe transactions like these, which complement our offering while still taking advantage of one of our key strengths – manufacturing and supply chain– will help us drive competitive advantage and long‐term shareholder value.
Vistaprint N.V. to Acquire Pixartprinting Presentation and Commentary
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This is the end of our presentation. Please join us for a public Q&A call with President and CEO Robert Keane and EVP and CFO Ernst Teunissen on Wednesday, April 2, 2014 at 8:15am EDT.
Vistaprint N.V. to Acquire Pixartprinting Presentation and Commentary
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