Vistaprint 2006 Annual Report Download - page 42

Table of Contents
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with the
consolidated financial statements and the notes to those statements included elsewhere in this Annual Report. This discussion contains
forward−looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that
could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk
Factors” included elsewhere in this Annual Report.
Overview
We are a leading online supplier of high−quality graphic design services and customized printed products to small businesses and
consumers worldwide with over 7,000,000 customers served in more than 120 countries. We offer a broad spectrum of products ranging from
business cards and brochures to invitations and holiday cards. We seek to offer compelling value to our customers through an innovative use of
technology, a broad selection of customized printed products, low pricing and personalized customer service. Through our use of proprietary
Internet−based graphic design software, localized websites, proprietary order receiving and processing technologies and advanced computer
integrated printing facilities, we offer a meaningful economic advantage relative to traditional graphic design and printing methods. We believe that
our value proposition has allowed us to successfully penetrate the large, fragmented and geographically dispersed small business and consumer
markets.
We maintain a registered office in Hamilton, Bermuda and our websites are hosted in secure co−location facilities in Devonshire, Bermuda.
We own and operate printing facilities in Windsor, Ontario, Canada and in Venlo, the Netherlands, and we operate a customer design, sales and
service center in Montego Bay, Jamaica. Our technology development, marketing, finance and administrative offices are located in Lexington,
Massachusetts, United States.
Revenue. We generate revenues primarily from the printing and shipment of customized printed products. Revenue is recorded net of a
reserve for estimated refunds. Customers place orders via our websites and pay primarily using credit cards. In addition, we receive payment for
some orders through direct bank debit, wire transfers and other payment methods. We also generate revenue from order referral fees paid to us
by merchants for customer click−throughs and orders that are placed on the merchants’ websites. For the year ended June 30, 2006, we
generated less than 10% of our revenues from these order referral fees. A portion of our revenues are derived from repeat purchases from our
existing customers. This recurring component of our revenue has grown to 62% of revenue for the fiscal year ended June 30, 2006 as compared
to 57% of revenue for the fiscal year ended June 30, 2005. To understand our revenue trends, we monitor several key metrics including:
ŸWebsite sessions. A session is measured each time a computer user visits a VistaPrint website from their Internet browser. We
measure this data to understand the volume and source of traffic to our websites. Typically, we use various advertising campaigns to
increase the number and quality of shoppers entering our websites. The number of website sessions varies from month to month
depending on variables such as product campaigns and advertising channels used.
ŸConversion rates. The conversion rate is the number of customer orders divided by the total number of sessions during a specific
period of time. Typically, we strive to increase conversion rates of customers entering our websites in order to increase the number of
customer orders generated. Conversion rates have fluctuated in the past and we anticipate that they will
fluctuate in the future due to, among other factors, the type of advertising campaigns and marketing channels used.
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