CafePress Reports Results for First Quarter 2018
"As previously stated, our top priority is to return to profitability and begin generating positive cash flow. During the first quarter, we took actions to simplify the organization and drive business performance that served to reduce normalized, annual fixed costs and software development spend by
"Growth in the Retail Partner Channel continued within the quarter as we benefited from international expansion and the catalog build out of Walmart.com. During April, we began taking orders through our newest partner,
First Quarter 2018 Operating Highlights
- During the quarter, the Company made significant strides toward finishing work designed to grow revenue through CafePress.com and mitigate the pressure resulting from the changes in search engine algorithms in 2017; this technical work included:
-- Released search pages for the new, modern CafePress.com to the second and third of four web domains
-- Advanced development work for other portions of the new website, including the work related to product detail, cart and checkout pages
Retail Partner Channel:
- Completed integration with the
- Continued build out of the product catalog with Walmart.com, reaching approximately 600 thousand listings
- Expanded into the Australian domain through
First Quarter 2018 Financial Metrics
All comparisons are on a year over year basis unless specifically stated otherwise.
|(in thousands, except for percentages, average order size, and per unit data)||Three Months Ended
|Retail Partner Channel revenue||4,774||4,638||3||%|
|GAAP net loss||$||(3,603||)||$||(3,373||)||(7||)%|
|Cash Contribution Margin||20.6||%||23.5||%||(2.9)pts|
|Retail Partner Channel orders||223||228||(2||)%|
|CafePress.com average order size||$||40.04||$||38.78||3||%|
|Retail Partner Channel average order size||$||20.91||$||20.43||2||%|
|Total average order size||$||30.79||$||31.59||(3||)%|
|Cost of net revenue per unit||$||11.94||$||10.75||11||%|
U:> 100% unfavorable F:> 100% favorable
First Quarter 2018 Financial Summary
- Net revenue totaled
$14.6 million, down 20% from $18.3 milliondriven by lower revenue from CafePress.com, which more than offset growth from our Retail Partner Channel.
-- Revenue from CafePress.com declined
$3.9 millionand accounted for 67% of first quarter revenue. The decline was primarily attributable to lower revenue from search engine optimization. Average order size on CafePress.com increased 3% compared to the prior year, primarily due to a shift in mix toward higher-priced, new products introduced during 2017.
-- Revenue from the Retail Partner Channel increased
$0.1 millionand accounted for 33% of first quarter revenue. Although order volume and associated revenue were adversely impacted from the removal of licensed content from one partner during the fourth quarter of 2017, expansion into international domains contributed to higher revenue levels. Additionally, the Company benefited to a lesser extent from the contribution of the Walmartmarketplace.
- Visits to CafePress.com declined 38%, which was primarily driven by lower visits from organic search.
- Gross profit was
$5.4 million, a $1.6 milliondecline, and gross margin was 36.9% versus 38.1% in the prior year. Our cost reduction initiative resulted in more efficient production labor vs the prior year. However, fixed costs such as depreciation and overhead were 0.8 points higher as a percentage of revenue due to the decline in revenue.
- Total operating expense was
$9.0 million, a $1.3 millionimprovement compared to the prior year. CafePressreported $0.6 millionin restructuring expense related to severance costs to simplify its organization and improve business performance, profitability, cash flow generation and productivity.
- Fixed costs declined by
$1.6 millioncompared to a year ago primarily driven by personnel-related reductions from the restructuring initiative completed during the first quarter of 2018.
- Variable costs declined by
$0.3 millioncompared to a year ago due to lower paid search advertising costs and customer service related expenses consistent with lower revenue.
Earnings and Cash Flow Information
- GAAP net loss was
$(3.6) million, or $(0.21)per diluted share, compared to a net loss of $(3.4) million, or $(0.20)per diluted share. Actions taken in the first quarter to reduce costs mitigated the decline in revenue.
- Net cash used in operating activities of
$8.0 milliondecreased by $1.1 millionand primarily reflects an improved management of inventory levels, decreases in software license renewals and the timing of health insurance benefit payments. As a reminder, changes in working capital during the first quarter drive significant cash outflow due to the seasonality of the business.
- For the three months ended
March 31, 2018, capital spending of $0.6 millionwas primarily related to capitalization of software and website development costs, which compares to $1.0 millionin the prior year. Prior year spending included investment in plant equipment.
- At March 31, 2018, cash, cash equivalents, short-term investments and restricted cash totaled
$23.9 million, or approximately $1.41per share.
- Non-GAAP Cash Contribution margin was 20.6% of net revenue versus 23.5% in 2017, which was primarily driven by lower net revenue from search engine optimization.
- Non-GAAP Adjusted EBITDA was
$(1.7) million, an improvement of $0.2 million. Actions taken in the first quarter to reduce costs more than offset the decline in revenue.
Non-GAAP Financial Information
This press release contains certain non-GAAP financial measures. Tables are provided at the end of this press release that reconcile the non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP financial measures include Adjusted EBITDA, cash contribution margin, and free cash flow. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures, please see the information provided at the end of this press release.
To supplement the Company's consolidated financial statements presented on a GAAP basis, we believe that these non-GAAP measures provide useful information about the Company's core operating results and thus are appropriate to enhance the overall understanding of the Company's past financial performance and its prospects for the future. These adjustments to the Company's GAAP results are made with the intent of providing both management and investors a more complete understanding of the Company's underlying operational results and trends and performance. Management uses these non-GAAP measures to evaluate the Company's financial results, develop budgets, manage expenditures, and determine employee compensation. The presentation of additional information is not meant to be considered in isolation or as a substitute for or superior to net income (loss) or net income (loss) per share determined in accordance with GAAP.
First Quarter 2018 Conference Call
Management will review the first quarter 2018 financial results on a conference call on
Notice Regarding Forward Looking Statements
Information set forth in this news release contains various "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Private Securities Litigation Reform Act of 1995 (the "Act") provides certain "safe harbor" provisions for forward-looking statements. All forward-looking statements are made pursuant to the Act.
The reader is cautioned that such forward-looking statements are based on information available at the time and/or management's good faith belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. Forward-looking statements speak only as of the date the statement was made. The Company assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. Forward-looking statements are typically identified by the use of terms such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "might," "plan," "predict," "project," "seek," "should," "will," and similar words, although some forward-looking statements are expressed differently. Important factors that could cause actual results to differ materially from those discussed in the forward-looking statements include, among others, the following: changes in the Company's compensation of its directors and officers, whether the expected amount of cost savings will differ from the Company's estimates and whether the Company will be able to realize the full amount of estimated savings, the Company's ability to execute on its strategy, the effect of global economic conditions, including any disruptions in the credit markets; a decrease in consumers' discretionary income; additional taxes and fees; the loss of key personnel; the effect (including possible increases in the cost of doing business) resulting from catastrophic events, including future war and terrorist activities or political uncertainties, or the impact of natural or other disasters on the Company's operations and the Company's ability to obtain insurance recoveries in respect of such losses (including losses related to business interruption); the impact of work stoppages and other labor problems on current and future operations; the Company's ability to comply with governmental regulation and/or other legal obligations related to the privacy of personal information and other data, including the improper disclosure thereof; the impact of system failures or damage from natural disasters, power loss, telecommunications failures, cyber-attacks, or other unforeseen events; the impact of security breaches, computer viruses and hacking attacks on the Company's business and operations; the Company's ability to respond to rapid technological changes in a timely manner; the Company's ability to prevent payment related risks, such as fraudulent use of credit or debit cards; the Company's ability to maintain customer confidence in the integrity of our business; the Company's ability to operate www.cafepress.com in an evolving and highly competitive market segment; the Company's ability to secure new or ongoing content from third party partners; the Company's ability to provide a high-quality customer experience with minimal programming errors, flows and/or technical difficulties; the Company's ability to adequately protect the Company's intellectual property; the Company's ability to maintain or hire additional personnel; and the volatility of the Company's stock price. For further information regarding the risks and uncertainties associated with our business, and important factors that could cause our actual results to vary materially from those expressed or implied in its forward-looking statements, please refer to the factors listed and described under the "Risk Factors" sections of the Company's documents filed from time to time with the
Founded in 1999 and based in
Condensed Consolidated Statement of Comprehensive Loss
(In thousands, except per share amounts)
|Three Months Ended
|Cost of net revenue||9,181||11,328|
|Sales and marketing||3,580||4,410|
|Technology and development||2,478||2,976|
|General and administrative||2,402||2,957|
|Total operating expense||9,065||10,343|
|Loss from operations||(3,696||)||(3,382||)|
|Other income (expense), net||46||(26||)|
|Loss before income taxes||(3,603||)||(3,372||)|
|Provision for income taxes||—||1|
|Net loss per share of common stock:|
|Shares used in computing net loss per share of common stock:|
|Other comprehensive income:|
|Unrealized holding gains on available-for-sale securities, net of tax||5||—|
|Other comprehensive income||5||—|
Condensed Consolidated Balance Sheet
(In thousands, except par value amounts)
|Cash and cash equivalents||$||14,406||$||24,924|
|Prepaid expenses and other current assets||2,122||2,412|
|Total current assets||28,279||38,748|
|Property and equipment, net||10,003||10,679|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Accrued royalties payable||1,643||2,872|
|Total current liabilities||7,037||14,936|
|Other long-term liabilities||305||305|
|Commitments and Contingencies|
|Preferred stock, $0.0001 par value: 10,000 shares authorized as of March 31, 2018 and December 31, 2017; none issued and outstanding||—||—|
|Common stock, $0.0001 par value: 500,000 shares authorized and 16,978 and 16,932 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively||2||2|
|Additional paid-in capital||101,994||101,697|
|Accumulated other comprehensive loss||1||(4||)|
|TOTAL STOCKHOLDERS’ EQUITY||32,630||35,931|
|TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY||$||39,972||$||51,172|
Condensed Consolidated Statement of Cash Flows
|Three Months Ended
|Cash Flows from Operating Activities:|
|Adjustments to reconcile net loss to net cash used in operating activities:|
|Depreciation and amortization||1,101||1,055|
|Loss on disposal of fixed assets||88||10|
|Changes in operating assets and liabilities:|
|Prepaid expenses and other current assets||521||161|
|Accrued royalties payables||(1,229||)||(1,627||)|
|Accrued and other liabilities||(5,050||)||(6,420||)|
|Net cash used in operating activities||(8,006||)||(9,113||)|
|Cash Flows from Investing Activities:|
|Purchase of short-term investments||(1,999||)||(2,232||)|
|Proceeds from maturities of short-term investments||—||4,464|
|Purchase of property and equipment||(43||)||(454||)|
|Capitalization of software and website development costs||(553||)||(591||)|
|Proceeds from disposal of fixed assets||83||3|
|Net cash (used in) provided by investing activities||(2,512||)||1,190|
|Cash Flows from Financing Activities:|
|Principal payments on capital lease obligations||—||(147||)|
|Repurchases of common stock||—||(58||)|
|Net cash used in financing activities||—||(205||)|
|Net decrease in cash, cash equivalents and restricted cash||(10,518||)||(8,128||)|
|Cash, cash equivalents and restricted cash — beginning of period||26,437||19,980|
|Cash, cash equivalents and restricted cash — end of period||$||15,919||$||11,852|
|Supplemental Disclosures of Cash Flow Information:|
|Cash paid for interest||$||92||$||24|
|Income taxes paid during the period||4||—|
|Non-cash Investing and Financing Activities:|
|Accrued purchases of property and equipment||$||—||$||246|
Stock-based compensation is allocated as follows:
|Three Months Ended
|Cost of net revenue||$||4||$||4|
|Sales and marketing||11||25|
|Technology and development||5||9|
|General and administrative||277||381|
|Total stock-based compensation expense||$||297||$||419|
Reconciliation of GAAP Net Loss to Non-GAAP Adjusted EBITDA
|Three Months Ended
|Interest and other (income) expense||(93||)||(10||)|
|Provision (benefit) from income taxes||—||1|
|Depreciation and amortization||1,101||1,055|
|*||Adjusted EBITDA is a non-GAAP financial measure which we define as net income (loss) less interest and other (income) expense, provision for (benefit from) income taxes, depreciation and amortization, stock-based compensation, acquisition-related costs, restructuring costs and impairment charges.|
Definition of Non-GAAP Cash Contribution Margin
Cash contribution margin (a non-GAAP financial measure that we reconcile to “Gross profit” in our consolidated statements of operations) consists of gross profit plus stock-based compensation and depreciation and amortization included in cost of net revenue less variable sales and marketing expense.
|Three Months Ended
|Cost of net revenue||9,181||63.1||11,328||61.9|
|Add: Stock-based compensation||4||—||4||—|
|Add: Depreciation and amortization||407||2.8||422||2.3|
|Less: Variable sales and marketing costs||(2,780||)||(19.1||)||(3,084||)||(16.9||)|
|Cash contribution margin||$||3,000||20.6||%||$||4,303||23.5||%|
Reconciliation of GAAP Net Cash Used in Operating Activities to Non-GAAP Free Cash Flow
|Three Months Ended
|Net cash used in operating activities||$||(8,006||)||$||(9,113||)|
|Free cash flow*||$||(8,602||)||$||(10,158||)|
|*||Free cash flow is a non-GAAP financial measure which we define as cash provided by (used in) operating activities less total capital expenditures.|
Source: CafePress Inc.