National Pen on Wednesday reported a Q1 $18 million loss, a performance that contributed to a near 50% year-over-year drop in overall profit to $5.31 million for parent company Cimpress (asi/162149) during its fiscal 2019 first quarter, which ended Sept. 30. Other factors, including losses in certain other business segments, along with rising expenses related to central and corporate costs and unallocated share-based compensation, also contributed to the adjusted net operating profit decline at the Top 40 distributor.

The owner of web-based promo and print provider Vistaprint as well, Netherlands-headquartered Cimpress recorded a $0.47-loss per diluted share during the first quarter, down from positive Q1 2018 net income of $0.72 per share. Total company Q1 revenue tallied $588.9 million – a 5% rise over last year’s first quarter that executives characterized as below expectations.

Cimpress CEO Robert S. Keane

“Our first quarter revenue performance was disappointing, with growth lower than what we should have achieved given the investments we have been making and the size of our market opportunity,” said CEO Robert S. Keane in a report to investors that noted overall loss from operations was nearly $6 million in the quarter. “We delivered growth below…expectations for our two largest reporting segments, Vistaprint and Upload and Print, and only just above the bottom of the range for National Pen. Via initiatives underway across Cimpress, we are working to resolve the underlying issues.”

A former Top 40 distributor before being acquired by Cimpress, National Pen’s loss in Q1 largely resulted from Cimpress adopting what it said was a new standard for recognizing direct mail advertising costs within the business segment. The new standard dragged profit down by $14 million compared to the prior year’s Q1.

“Direct mail advertising costs were previously capitalized and amortized over the customer response period (typically 3-4 months) and now costs are recognized when the direct mail is sent to the customers,” Cimpress said in a statement. “We did not apply the new standard to the prior comparable period.” In fiscal Q1 2018, National Pen posted an adjusted net operating profit of nearly $1.2 million.

Despite the loss for the first quarter of 2019, National Pen increased year-over-year quarterly revenue more than 10% to $65.97 million. Vistaprint revenue was also up, jumping from $319 million in Q1 2018 to nearly $337 million. Vistaprint posted a profit of $47.26 million, up from about $31 million. Revenue in Cimpress’ Upload and Print business rose a pinch under $12 million to about $172.2 million. Segment profit inched up from about $14.8 million to almost $16.2 million. Even so, revenue in all of Cimpress’ other business divisions dropped 32% to $18.9 million. Relatedly, these segments generated a net loss of $9.57 million.

Cimpress noted that Q1 2019 profits also were affected negatively by the non-recurrence of a one-time gain derived from a first quarter 2018 divesture of its then Albumprinter business.

With estimated 2017 North American promotional product revenue of $240 million, Cimpress ranks sixth on Counselor’s latest list of the largest distributors in the industry.