Vistaprint 2006 Annual Report Download - page 23

Table of Contents
July 1, 2005, we had elected to apply APB 25 and accordingly we generally did not recognize any expense with respect to employee options to
acquire our common shares in periods ended on or prior to June 30, 2005 as long as such options were granted at exercise prices equal to the fair
value of our common shares on the date of grant.
Statement 123(R) requires that the compensation cost relating to share−based payment transactions be recognized in financial statements.
This cost is measured based on the fair value of the equity instruments issued. We adopted Statement 123(R) on July 1, 2005, which is the first
day of our 2006 fiscal year. The adoption of Statement 123(R) had an adverse affect on our operating results for each of the three months and
fiscal year ended June 30, 2006. We expect that we will continue to use share based compensation awards to attract, incentivize and retain our
employees. Therefore, we expect the resulting share−based compensation expense will continue to increase, which will continue to adversely
affect our operating results in future periods as compared to periods ended on or prior to June 30, 2005.
Our quarterly financial results may fluctuate which may lead to volatility in our share price.
Our future revenues and operating results may vary significantly from quarter−to−quarter due to a number of factors, many of which are
outside of our control. Factors that could cause our quarterly operating results to fluctuate include:
Ÿdemand for our services and products;
Ÿour ability to attract visitors to our websites and convert those visitors into customers;
Ÿour ability to retain customers and encourage repeat purchases;
Ÿbusiness and consumer preferences for printed products and graphic design services;
Ÿour ability to manage our production and fulfillment operations;
Ÿcurrency fluctuations, which affect not only our revenues but also our costs;
Ÿthe costs to produce our products and to provide our services;
Ÿour pricing and marketing strategies and those of our competitors;
Ÿimprovements to the quality, cost and convenience of desktop printing;
Ÿcosts of expanding or enhancing our technology or websites;
Ÿcompensation expense and charges related to our share−based compensation practices; and
Ÿa significant increase in credits, beyond our estimated allowances, for customers who are not satisfied with our products.
We base our operating expense budgets on expected revenue trends. A portion of our expenses, such as office leases and various
personnel costs, are relatively fixed. We may be unable to adjust spending quickly enough to offset any unexpected revenue shortfall. Accordingly,
any shortfall in revenue may cause significant variation in operating results in any quarter.
Based on the factors cited above, we believe that quarter−to−quarter comparisons of our operating results are not a good indication of our
future performance. It is possible that in one or more future quarters, our operating results may be below the expectations of public market
analysts and investors. In that event, the trading price of our common shares may fall.
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