Vistaprint, the listed maker of professional marketing products and services, said Friday that it had completed its $117.5 million acquisition of Webs Inc. Silver Spring, Maryland-based Webs had raised venture capital from Novak Biddle Venture Partners and Columbia Capital.
Vistaprint N.V. (Nasdaq: VPRT), a leading online provider of professional marketing products and services to micro businesses today announced it has completed its acquisition of Webs, Inc., the popular, do-it-yourself suite of websites, Facebook Pages and mobile presence solutions for small businesses. The purchase price was $117.5 million, including $101.3 million in cash and $16.2 million in restricted shares subject to continued employment of the founding shareholders. The final purchase price is subject to customary, post-closing balance sheet adjustments.
Vistaprint expects the acquisition to increase customer value via the integration of physical and digital small business identity and marketing, to augment the Vistaprint team with talented Webs employees who have an innovative and customer-centric approach to product development, to add a scalable and successful customer acquisition mechanism and, over the long-term to improve the monetization of the two companies’ customer bases via cross-selling of an industry-leading range of small business marketing products and services.
Ernst Teunissen, executive vice president and chief financial officer, said, “We are very excited about the longer-term value we expect this acquisition will create for Vistaprint, our customers and our shareholders. Nearer-term, as described in our acquisition announcement last week, we expect this transaction to be dilutive to GAAP earnings per share through fiscal 2014, and dilutive to non-GAAP earnings per share in fiscal 2012 and 2013, excluding share-based compensation, amortization of acquisition-related intangibles, and tax charges related to the alignment of intellectual property with global operations.” Vistaprint’s expectation for the fiscal 2012 financial impact of this transaction, plus the recent share repurchases the company has executed, are provided below. Vistaprint will provide updated detailed guidance for the combined businesses with its second quarter fiscal 2012 earnings announcement in late January.
Combined Financial Impact of Webs Acquisition and Recent Share Repurchases:
Vistaprint has repurchased 2.1 million shares since our last guidance update in October 2011. These repurchases are accretive to our fiscal 2012 GAAP and Non-GAAP earnings per share estimates by $0.03 to $0.04 and $0.05 to $0.06, respectively. These share repurchases help to offset some of the near-term dilution of the Webs acquisition. The accretion from recent share repurchases is included in the earnings per share expectations below. The earnings impact below does not constitute an update to Vistaprint’s previously announced financial guidance for either the second quarter or full fiscal year 2012.
For the remainder of the fiscal year ending June 30, 2012, the company expects Webs to add approximately $5 million to $6 million of revenue, excluding the negative revenue impact of any fair value adjustments to acquired deferred revenue, which we currently expect to be approximately $1 million.
GAAP Diluted Earnings Per Share Impact
For the remainder of the fiscal year ending June 30, 2012, the company expects the combined effect of the acquisition and recent repurchase activity to reduce GAAP diluted earnings per share by approximately $0.27 to $0.31. Vistaprint expects its diluted weighted average share count to be approximately 39.5 million shares. This range excludes the negative earnings impact of any fair value adjustments to acquired deferred revenue, which we currently expect to be approximately $0.03.
Non-GAAP Adjusted Net Income Per Diluted Share Impact
For the remainder of the fiscal year ending June 30, 2012, the company expects the combined effect of the acquisition and recent repurchase activity to reduce non-GAAP adjusted net income per diluted share by approximately $0.10 to $0.14, which excludes expected acquisition-related amortization of intangible assets of approximately $1 million or approximately $0.03 per diluted share, share-based compensation expense and its related tax effect of approximately $4 million or approximately $0.10 per diluted share, and tax charges related to the alignment of acquisition-related intellectual property with global operations of approximately $1.5 million, or $0.04 per diluted share. The company expects non-GAAP diluted weighted average share count to be approximately 39.9 million shares. This range excludes the negative earnings impact of any fair value adjustments to acquired deferred revenue, which we currently expect to be approximately $0.03.
Our estimates are preliminary and subject to change based on the completion of purchase accounting during the third quarter ending March 31, 2012.
Restricted Share Awards:
As part of the purchase price for the Webs acquisition, Vistaprint awarded to Webs’ three founders (Haroon, Zeki and Idris Mokhtarzada) restricted ordinary shares having an aggregate value of approximately $16.2 million, which constitute inducement awards in compliance with NASDAQ Marketplace Rule 5635: Haroon Mokhtarzada received 172,972 restricted shares, Zeki Mokhtarzada received 182,509 restricted shares, and Idris Mokhtarzada received 150,862 restricted shares. Vistaprint issued the restricted shares to the recipients without payment of any additional consideration by the recipients other than their shares of Webs common stock. These restricted share awards vest as to 50% of the shares on the first anniversary of the closing of the acquisition and as to the remaining shares on the second anniversary, as long as each recipient continues to be an employee of Vistaprint or one of its subsidiaries on each vesting date, subject to possible accelerated vesting under certain circumstances. In addition, if at any time the unvested restricted shares held by either Haroon Mokhtarzada or Zeki Mokhtarzada are forfeited as a result of a failure to satisfy a vesting condition, then the unvested restricted shares held by the other two recipients will also be forfeited. Pursuant to the acquisition agreement, $12.75 million of the consideration to be paid at closing, including cash payable to the Webs security holders and 5% of the restricted shares held by each recipient, has been deposited into an escrow fund to secure certain obligations of the former security holders of Webs to indemnify Vistaprint and to pay Vistaprint the amount of any shortfall in Webs’ working capital as of the closing date.
About non-GAAP financial measures
To supplement Vistaprint’s financial measures presented in accordance with U.S. generally accepted accounting principles, or GAAP, this press release contains non-GAAP adjusted net income per share, which is defined as a non-GAAP financial measure by the Securities and Exchange Commission, or SEC, rules. The items excluded from non-GAAP adjusted net income per share are share-based compensation expense and its related tax effect, amortization of acquisition-related intangibles, and tax charges related to the alignment of acquisition-related intellectual property with global operations.
The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. However, Vistaprint’s management believes that these non-GAAP financial measures provide meaningful supplemental information in assessing our performance and when forecasting and analyzing future periods. These non-GAAP financial measures also have facilitated management’s internal comparisons to Vistaprint’s historical performance and our competitors’ operating results.
Management provides these non-GAAP financial measures as a courtesy to investors. However, to gain a more complete understanding of the company’s financial performance, management does (and investors should) rely upon GAAP statements of operations and cash flow.
Vistaprint N.V. (Nasdaq:VPRT) empowers more than 11 million micro businesses and consumers annually with affordable, professional options to make an impression. With a unique business model supported by proprietary technologies, high-volume production facilities, and direct marketing expertise, Vistaprint offers a wide variety of products and services that micro businesses can use to expand their business. A global company, Vistaprint employs over 3,100 people, operates 25 localized websites globally and ships to more than 130 countries around the world. Vistaprint’s broad range of products and services are easy to access online, 24 hours a day at www.vistaprint.com.
Vistaprint and the Vistaprint logo are trademarks of Vistaprint N.V. or its subsidiaries. All other brand and product names appearing on this announcement may be trademarks or registered trademarks of their respective holders.
This press release contains statements about our future expectations, plans and prospects of our business that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995, including but not limited to the effect of Vistaprint’s acquisition of Webs on Vistaprint’s financial results and both companies’ businesses. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including but not limited to the companies’ failure to retain their current customers and attract new customers, cross-sell their products and services to each other’s customers or develop new and enhanced products and services; the failure of the market for digital marketing services to grow and develop; unanticipated changes in the technologies or social media platforms on which the companies’ products and services depend; the companies’ failure to retain key employees of Vistaprint or Webs; Vistaprint’s failure to make planned investments in its or Webs’ business or the failure of those investments to have the anticipated effects on Vistaprint’s or Webs’ business; competitive pressures; difficulties or higher than anticipated costs in integrating Webs’ systems and operations; Vistaprint’s failure to execute its strategy; currency fluctuations that affect the companies’ revenues and costs; and general economic conditions. You can find additional factors described in our Form 10-Q for the fiscal quarter ended September 30, 2011 and the other documents we periodically file with the U.S. Securities and Exchange Commission.
In addition, the statements and projections in this press release represent our expectations and beliefs as of the date of this press release. We anticipate that subsequent events and developments may cause these expectations, beliefs and projections to change. We specifically disclaim any obligation to update any forward-looking statements. These forward-looking statements should not be relied upon as representing our expectations or beliefs as of any date subsequent to the date of this press release.