Look At The Fine Print Behind VistaPrint (VPRT)
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VistaPrint (Nasdaq: VPRT) is a graphic design services and printing company that prints stationary, t-shirts and business cards for its clients. Today, the Wall Street Journal did a little expose on what contributes to a majority of VistaPrint's operating profit and if this major contributor will drop in the future.
It appears that VistaPrint receives a majority of its profit from referral fees from pop up rewards programs on it website for promotions for movie tickets and amusement parks, which turns out to be a $14.95 monthly fee for services.
The WSJ says one of the reasons investors have sold VPRT is because the company's most recent results raised concerns about slowing revenue and narrowing gross margins. However, after the WSJ learned that a majority of VistaPrint's profit is from referral companies, the WSJ is doubting that VistaPrint should trade for 20 times forward earnings.
In Q1 VistaPrint said 6.7% of its $106 million in revenue came from referral fees. This disclosure only came about after prodding last year from the Securities and Exchange Commission. But the SEC didn't make VistaPrint to disclose how this revenue impacted operating profit. The WSJ found a footnote, which says that referral-fee revenues "have minimal corresponding direct cost of revenue."
To sum up, the referral fees are pretty close to pure profit. Thus, the WSJ said if you use an 80% margin on these revenues, the fees would have accounted for about 50% of operating profit in the most recent quarter.
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It appears that VistaPrint receives a majority of its profit from referral fees from pop up rewards programs on it website for promotions for movie tickets and amusement parks, which turns out to be a $14.95 monthly fee for services.
The WSJ says one of the reasons investors have sold VPRT is because the company's most recent results raised concerns about slowing revenue and narrowing gross margins. However, after the WSJ learned that a majority of VistaPrint's profit is from referral companies, the WSJ is doubting that VistaPrint should trade for 20 times forward earnings.
In Q1 VistaPrint said 6.7% of its $106 million in revenue came from referral fees. This disclosure only came about after prodding last year from the Securities and Exchange Commission. But the SEC didn't make VistaPrint to disclose how this revenue impacted operating profit. The WSJ found a footnote, which says that referral-fee revenues "have minimal corresponding direct cost of revenue."
To sum up, the referral fees are pretty close to pure profit. Thus, the WSJ said if you use an 80% margin on these revenues, the fees would have accounted for about 50% of operating profit in the most recent quarter.
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