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Cimpress Overstates Profit 221%, Books $3.3M Gain on Facility It Sold for a Loss

Custom printer also has revenue recognition problems but calls its accounting errors immaterial.

January 28, 2022

Cimpress (CMPR), a custom printer serving small businesses, says it recently discovered multiple accounting errors impacting at least three reporting periods. In its latest 10-Q, Cimpress acknowledged it failed to accurately account for a foeign currency hedge that resulted in net income being significantly overstated:

“For the year ended June 30, 2021 and three months ended September 30, 2021, we incorrectly recognized $7,518 and $9,027, respectively, of gains in other income (expense), net.”

Instead of net income of $4.06 million in the three months ending in September, Cimpress actually lost $4.96 million, an overstatement of 221%. For the year ending in June 2021, Cimpress lost $82.45 million, not $74.93 as initially reported, an overstatement of approximately 10%.

The company also disclosed what it calls an immaterial revenue recognition issue. In the three months ending December 30, 2020, Cimpress overstated sales by $5.24 million, or 0.67%.

Neither of these errors, according to Cimpress, impacted cash flow.

But a separate accounting issue did.

The company recognized a $3.32 million gain on the sale of a facility it sold for a $4.65 million loss. Cimpress explains the accounting is due to an impairment charge it took on the facility in a prior period. In what it calls a non-cash adjustment to operating cash flows, Cimpress describes the impact on its cash flow statement as such:

“For the six months ended December 31, 2021, our consolidated statement of cash flows includes a $3,324 noncash adjustment within cash provided by operating activities to eliminate the gain described above, a $23,226 cash inflow for the sale of the facility presented as an investing activity, and a $27,885 cash outflow for the exercise of the purchase option presented as a financing activity.”

Related: SSTK, WIX, FVRR

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