Vistaprint 2008 Annual Report Download - page 48

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 small business marketing company that offers small businesses the ability to market
their business with a broad range of brand identity and promotional products, marketing services and
electronic solutions. We offer a broad spectrum of products and services ranging from business cards,
website hosting, brochures and invitations to mailing and creative services. We seek to offer
compelling value to our customers through an innovative use of technology, a broad selection of
customized printed products and services, 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. 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 near Windsor,
Ontario, Canada and in Venlo, the Netherlands, and we operate a customer design, sales and service
center in Montego Bay, Jamaica, and a European marketing office in Barcelona, Spain, and we have a
technology development facility in Winterthur, Switzerland. Our U.S. technology development,
marketing, finance and administrative offices are located in Lexington, Massachusetts, United States.
Revenue. For the fiscal years ended June 30, 2008, 2007 and 2006, our revenue was $400.7
million, $255.9 million and $152.1 million, respectively. We generate revenue 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, revenue share and other fees paid to us by
merchants for customer click-throughs, distribution of third-party promotional materials and referrals
arising from products and services of the merchants we offer to our customers on our website. Unlike
printed products that we manufacture ourselves, these third party referral offerings do not require
physical production by us and have minimal corresponding direct cost of revenue. For the fiscal years
ended June 30, 2008, 2007 and 2006, we generated approximately $27.6 million, $20.5 million and
$13.1 million, respectively, of our revenue from these third party referral fees. Over the next several
years, we expect referral fee revenue to decline as a percentage of revenue and possibly in absolute
dollars. We expect that referral fee revenue from all sources will account for between 2% and 5% of
our total revenues by the end of calendar year 2010. Of that amount, we expect that referral fee
revenue from membership discount programs will decline in absolute dollar terms over that period of
time including possibly to as low as zero. A portion of our revenue is derived from repeat purchases
from our existing customers. This recurring component of our revenue has grown to 64% of revenue
for the fiscal year ended June 30, 2008 as compared to 63% of revenue for the fiscal year ended
June 30, 2007. To understand our revenue trends, we monitor several key metrics including:
‰Website 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
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