Prospectus summary
Prospectus summary This summary highlights information about CafePress Inc. and the offering contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and consolidated financial statements included elsewhere in this prospectus. Because it is a summary, it does not contain all the information you should consider before investing in our common stock. You should carefully read the entire prospectus before making an investment decision, including the information presented under the headings “Risk factors” and “Management’s discussion and analysis of financial condition and results of operations” and the consolidated financial statements and related notes included elsewhere in this prospectus. In this prospectus, except as otherwise indicated or as the context may otherwise require, all references to “CafePress”, “CafePress.com”, “we”, “us” and “our” refer to CafePress Inc. and its subsidiaries.Company overview
We are a leading e-commerce platform enabling customers worldwide to create, buy and sell a wide variety of customized and personalized products. We serve our customers, including both consumers and content owners, through our portfolio of e-commerce websites, including our flagship website, CafePress.com. Our consumers include millions of individuals, groups, businesses and organizations who leverage our innovative and proprietary print-on-demand services to express personal and shared interests, beliefs and affiliations by customizing a wide variety of products. These products include clothing and accessories, art and posters, stickers, home accents and stationery. Our content owners include individual designers as well as artists and branded content licensors who leverage our platform to reach a mass consumer base and share and monetize their content. We have developed a strong brand with a growing community that, as of March 31, 2011, had more than 13 million members and more than two million shops, and we shipped six million products in 2010 from a growing catalog of over 325 million unique products.
We believe customers recognize us for our pioneering role in the industry, as well as our continued innovation advancing the breadth and quality of expressive customized products. Our mission is to offer an unrivaled platform that is the world’s premier source for self-expression through product customization and personalization.
We operate a portfolio of branded websites, including CafePress.com, and power customization for resellers and co-branded websites that individually target specific consumers, products and use cases, and collectively expand the reach of our platform. We benefit from the network effect created when millions of customers are attracted to our growing catalog of content and are often inspired to contribute and share their own content. By enabling communities to share their interests, beliefs and affiliations through customized and personalized merchandise, we believe we drive social commerce.
Our expansive content catalog covers topics our customers are deeply passionate about, as well as relevant current events. As a result, we believe our catalog serves as a cultural barometer reflecting the latest topics, ideas, trends, moods and opinions. For the quarter ended March 31, 2011, we had more than 160,000 new images uploaded to our retail e-commerce websites on average per week. We have accumulated over 325 million unique products, allowing us to market and provide almost any expressive idea across an increasingly diverse product assortment.
We have built a state-of-the-art facility in Louisville, Kentucky with innovative technology and manufacturing processes that enable us to provide high-quality customized products that are individually built to order at mass scale. Our proprietary, vertically integrated processes enable us to produce a broad range of merchandise efficiently and cost effectively, and to ship them often within 24 hours. As a result of our acquisition of Canvas On Demand, we also have a custom canvas production facility in Raleigh, North Carolina.
Since our founding in 1999, we have seen significant growth, and in 2010 we generated net revenues of $127.9 million. In the first quarter of 2011, net revenues were $32.0 million, an increase of 46% from the first quarter of 2010.
Industry overview
Customization of consumer products is undergoing an enormous transformation which is being driven by the following trends:
Market opportunity
Online tools, e-commerce and digital production technologies are disrupting the existing fragmented, offline product print and customization markets. Our services address multiple large adjacent markets which include, but are not limited to:
Traditional printing models are not optimized to satisfy individual consumers and smaller constituencies due to long lead times, costly set-up, limited printing capabilities and minimum quantities needed to achieve efficiency.
Our strengths
We believe we are well positioned in the market because we have more than a decade of experience meeting demand for customized single unit and small quantity orders that the traditional printing industry has generally not been able to serve efficiently and economically. We believe our business model provides us with the following competitive advantages:
The CafePress platform
We have developed compelling services and production capabilities that allow us to offer users the ability to find, make, buy and sell a wide variety of expressive customized products. This has evolved into a platform consisting of the following components:
Front-end design and sales channels:
Back-end services platform:
Our back-end services form a platform consisting of the following components that can be used to create unique front-end buyer and seller experiences:
Our strategy
Our goal is to be the world’s customization platform. Key elements of our strategy to achieve this goal include the following:
Risks and challenges
Investing in our common stock involves substantial risks, including, but not limited to, the following:
Corporate information
CafePress Inc., a Delaware corporation, was incorporated as CafePress.com, Inc. in California on October 15, 1999, and reincorporated in Delaware on January 19, 2005. Our corporate headquarters are located at 1850 Gateway Drive, Suite 300, San Mateo, California 94404 and our telephone number is (650) 655-3000. We maintain numerous e-commerce websites including those found at www.cafepress.com, www.canvasondemand.com and www.imagekind.com. The information contained in or connected to our websites is not a part of, and is not incorporated into, this prospectus and should not be relied on in determining whether to make an investment decision.
CAFEPRESS, CANVAS ON DEMAND and IMAGEKIND are among the trademarks or service marks owned by CafePress. Other trademarks, service marks and trade names appearing in this prospectus are the property of their respective owners.
The offering
Proposed symbol
The number of shares of common stock to be outstanding immediately after this offering is based on 28,415,106 shares outstanding as of March 31, 2011 and excludes:
Unless otherwise stated, all information in this prospectus assumes:
As of March 31, 2011, no shares remained available for future issuance under our 1999 Stock Plan and 654,534 shares remained available for future issuance under our 2004 Stock Plan. In May 2011, the board of directors increased the number of shares authorized for the 2004 Stock Plan by 1,000,000 shares. Upon the completion of this offering, no shares of our common stock will remain available for future issuance under our 1999 Stock Plan or our 2004 Stock Plan. Upon the completion of this offering, shares originally reserved for issuance under our 1999 Stock Plan or our 2004 Stock Plan, but which are not issued or subject to outstanding grants on the effective date of our 2011 Stock Incentive Plan, shares subject to outstanding options under our 1999 Stock Plan and our 2004 Stock Plan on the effective date of our 2011 Stock Incentive Plan that are subsequently forfeited or terminated for any reason before being exercised, and shares subject to vesting restrictions under our 1999 Stock Plan and our 2004 Stock Plan on the effective date of our 2011 Stock Incentive Plan that are subsequently forfeited, up to a number of additional shares not to exceed will become available for awards under our 2011 Stock Incentive Plan.
Summary consolidated financial data
The information set forth below should be read together with “Capitalization”, “Selected consolidated financial data”, “Management’s discussion and analysis of financial condition and results of operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. The summary consolidated statements of operations data for the years ended December 31, 2008, 2009 and 2010 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated statements of operations data for the three months ended March 31, 2010 and 2011 and the consolidated balance sheet data as of March 31, 2011 are derived from our unaudited consolidated financial statements included elsewhere in this prospectus. Historical results are not necessarily indicative of the results to be expected in the future, and results of interim periods are not necessarily indicative of results for the entire year. In September 2010, we completed our acquisition of Canvas On Demand. The audited financial statements of Canvas On Demand for the year ended December 31, 2009, unaudited financial statements for the six months ended June 30, 2009 and 2010, and our unaudited pro forma combined consolidated statement of operations have been included elsewhere in this prospectus.
The table below presents a summary of our consolidated balance sheet data as of March 31, 2011:
A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, the mid-point of the range set forth on the cover of this prospectus, would increase (decrease), on a pro forma as adjusted basis, each of cash and cash equivalents, working capital, total assets and total stockholders’ equity by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.
We use Adjusted EBITDA as a key performance measure because we believe it facilitates operating performance comparisons from period to period by excluding potential differences caused by variations in capital structures (affecting net interest expense), tax positions (such as the impact on periods of changes in effective tax rates or fluctuations in permanent differences or discrete quarterly items), the impact of depreciation and amortization, amortization of intangible assets, acquisition compensation, stock-based compensation and impairment charges. Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we also use Adjusted EBITDA for business planning purposes and to incentivize and compensate our management personnel.
Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider this measure in isolation or as a substitute for analysis of our results as reported under GAAP as the excluded items may have significant effects on our operating results and financial condition. When evaluating our performance, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income (loss) and our other GAAP results.
The following table presents a reconciliation of Adjusted EBITDA to net income (loss), the most comparable GAAP measure, for each of the periods indicated: