CafePress reports results for Second Quarter 2018
LOUISVILLE, Ky., July 31, 2018 (GLOBE NEWSWIRE) — CafePress Inc. (NASDAQ:PRSS) today reported financial results for the three months ended June 30, 2018.
Management Commentary
“The actions we took in the first quarter to drive business performance and return to profitability are positively impacting results. During the second quarter, we experienced higher gross margins, a reduction in net loss and positive Adjusted EBITDA. In addition, we made significant progress toward completing the modernization of CafePress.com and demolishing the old site,” commented Fred Durham, Chief Executive Officer. “Although we continue to experience lower traffic and revenue through CafePress.com, we are seeing improved crawling and indexing rates on our US domain and a slow, sequential rebound in traffic. We continue to believe the new, modern website will ultimately result in improved search engine optimization and the return of revenue lost from lower traffic. Our Board of Directors and management team consistent with its fiduciary duty continues to carefully consider all options to enhance shareholder value,” continued Durham.
“Growth in the Retail Partner Channel continued within the quarter as we benefited from both domestic and international expansion and the catalog build out of Walmart.com and eBay. We anticipate continued growth in retail partner channels as we build out existing channels and integrate new marketplaces,” concluded Durham.
Second 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 the second quarter of 2017; this technical work included:
- Released search pages for the new, modern CafePress.com to the fourth of four web domains
- Released cart and checkout pages for the new, modern CafePress.com to three of four web domains
Retail Partner Channel:
- Began taking orders through the eBay marketplace and performed work to build out the initial catalog
- Continued build out of the product catalog with Walmart.com
Second 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 June 30, |
Six Months Ended June 30, |
|||||||||
| 2018 | 2017 | % Variance | 2018 | 2017 | % Variance | ||||||
| CafePress.com revenue | $9,387 | $13,747 | (32)% | $19,163 | $27,398 | (30)% | |||||
| Retail Partner Channel revenue | $5,002 | $4,106 | 22% | $9,776 | $8,744 | 12% | |||||
| Total revenue | $14,389 | $17,853 | (19)% | $28,939 | $36,142 | (20)% | |||||
| GAAP net loss | $(1,435) | $(3,154) | 55% | $(5,038) | $(6,527) | 23% | |||||
| Adjusted EBITDA | $160 | $(1,542) | F | $(1,533) | $(3,450) | 56% | |||||
| Cash Contribution Margin | 28.4% | 21.9% | 6.5pts | 24.5% | 22.8% | 1.7pts | |||||
| CafePress.com orders | 235 | 371 | (37)% | 473 | 723 | (35)% | |||||
| Retail Partner Channel orders | 239 | 196 | 22% | 462 | 423 | 9% | |||||
| Total orders | 474 | 567 | (16)% | 935 | 1,146 | (18)% | |||||
| CafePress.com average order size | $39.92 | $37.09 | 8% | $39.98 | $37.89 | 6% | |||||
| Retail Partner Channel average order size | $20.92 | $20.91 | —% | $20.92 | $20.67 | 1% | |||||
| Total average order size | $30.34 | $31.49 | (4)% | $30.56 | $31.54 | (3)% | |||||
| Cost of net revenue per unit | $10.00 | $10.67 | (6)% | $10.95 | $10.71 | 2% | |||||
U:> 100% unfavorable F:> 100% favorable
Second Quarter 2018 Financial Summary
Net Revenue
- Net revenue totaled $14.4 million, down 19% from $17.9 million driven by lower revenue from CafePress.com, which more than offset growth from our Retail Partner Channel.
- Revenue from CafePress.com declined $4.4 million and accounted for 65% of second quarter revenue. We continue to be negatively impacted by search engine algorithm changes that went into effect during the second quarter of 2017. Additionally, late in April, we released our new search pages to our primary, US domain. The release of new search pages reset the search engine hierarchy, which we believe caused a temporary reduction in traffic and revenue. As of late June, we are seeing improved crawl and indexing rates on our US domain and a slow, sequential rebound in traffic. Average order size on CafePress.com increased 8% compared to the prior year, which primarily reflects lower, promotional shipping pricing that was in place in the prior year.
- Revenue from the Retail Partner Channel increased $0.9 million and accounted for 35% of second quarter revenue. Revenue increased from the Amazon marketplace due to improved sales in both domestic and international markets. Additionally, approximately 13% of the growth in the Retail Partner Channel is driven by the contribution of the Walmart and eBay marketplaces.
Gross Profit
- Gross profit was $6.5 million, a $0.5 million decline, and gross margin was 45.0% versus 39.1% in the prior year. The new printing platform that was put into service late last year drove more efficient material and labor usage.
Operating Expense
- Total operating expense was $8.0 million, a $2.2 million improvement compared to the prior year.
- 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 $0.7 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 $(1.4) million, or $(0.08) per diluted share, compared to a net loss of $(3.2) million, or $(0.19) per diluted share. Actions taken in the first quarter to reduce costs mitigated the decline in revenue.
- Net cash used in operating activities was $9.0 million during the six months ended June 30, 2018. However, $8.0 million of the cash usage occurred during the first quarter of 2018 due to the seasonality of the business. The $2.0 million decrease in cash used in operating activities during the six months ended June 30, 2018 primarily reflects benefits related to the restructuring initiative completed during the first quarter of 2018 as well as improved management of inventory levels and decreases in software license renewals.
- For the six months ended June 30, 2018, capital spending of $1.1 million was primarily related to capitalization of software and website development costs, which compares to $2.1 million in the prior year. Prior year spending included investment in the new printing platform.
- At June 30, 2018, cash, cash equivalents, short-term investments and restricted cash totaled $22.7 million, or approximately $1.33 per share.
Non-GAAP Information
- Non-GAAP Cash Contribution margin was 28.4% of net revenue versus 21.9% in 2017, which reflects the improved efficiency of our new printing platform.
- Non-GAAP Adjusted EBITDA was $0.2 million, an improvement of $1.7 million. Actions taken in the first quarter to reduce costs as well as the improved efficiency of our new printing platform 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.
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.