CafePress reports results for First Quarter 2018
LOUISVILLE, Ky., May 02, 2018 (GLOBE NEWSWIRE) — CafePress Inc. (NASDAQ:PRSS) today reported financial results for the three months ended March 31, 2018.
Management Commentary
“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 $7 million. In addition, we made significant progress toward completing the modernization of CafePress.com and demolishing the old site and are pleased to announce that we achieved another critical milestone during April, has released the new search pages to our primary, US domain,” commented Fred Durham, Chief Executive Officer. “These new search pages are designed to improve the search engine optimization and regain revenue lost from lower traffic related to changes in search engine algorithms beginning in the second quarter of 2017,” continued Durham.
“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, eBay, and expect that the product catalog build out during 2018 will drive future growth,” concluded Durham.
First Quarter 2018 Operating Highlights
CafePress.com Modernization:
- 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 eBay marketplace
- Continued build-out of the product catalog with Walmart.com, reaching approximately 600 thousand listings
- Expanded into the Australian domain through Amazon
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 March 31, |
|||||||||
| 2018 | 2017 | % Variance | ||||||||
| CafePress.com revenue | $ | 9,776 | $ | 13,651 | (28 | )% | ||||
| Retail Partner Channel revenue | 4,774 | 4,638 | 3 | % | ||||||
| Total revenue | $ | 14,550 | $ | 18,289 | (20 | )% | ||||
| GAAP net loss | $ | (3,603 | ) | $ | (3,373 | ) | (7 | )% | ||
| Adjusted EBITDA | $ | (1,693 | ) | $ | (1,908 | ) | 11 | % | ||
| Cash Contribution Margin | 20.6 | % | 23.5 | % | (2.9)pts | |||||
| CafePress.com orders | 238 | 353 | (33 | )% | ||||||
| Retail Partner Channel orders | 223 | 228 | (2 | )% | ||||||
| Total orders | 461 | 581 | (21 | )% | ||||||
| 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
- Net revenue totaled $14.6 million, down 20% from $18.3 million driven by lower revenue from CafePress.com, which more than offset growth from our Retail Partner Channel.
— Revenue from CafePress.com declined $3.9 million and 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 million and 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 Walmart marketplace. - Visits to CafePress.com declined 38%, which was primarily driven by lower visits from organic search.
Gross Profit
- Gross profit was $5.4 million, a $1.6 million decline, 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.
Operating Expense
- Total operating expense was $9.0 million, a $1.3 million improvement compared to the prior year. CafePress reported $0.6 million in 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 million compared 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 million compared 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 million decreased by $1.1 million and 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 million was primarily related to capitalization of software and website development costs, which compares to $1.0 million in 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 $1.41 per share.
Non-GAAP Information
- 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.
About CafePress (PRSS):
At CafePress, our mission is to create human connection by inspiring people to express themselves. We believe a coffee mug can start a conversation and a t-shirt can ignite a movement.
Founded in 1999 and based in Louisville, Kentucky, CafePress is the recognized pioneer of customizable products. Our global online platform enables people to express themselves through engaging community generated designs and licensed and personalized one-of-a-kind products.