Robert S. Keane - Founder, Chairman of the Management Board, Chief Executive Officer and President Ernst J. Teunissen - Chief Financial Officer, Executive Vice President and Member of Management Board.

Youssef H. Squali - Cantor Fitzgerald & Co., Research Division Kevin M. Steinke - Barrington Research Associates, Inc., Research Division.

Ladies and gentlemen, welcome to the Vistaprint Fiscal Year 2014 First Quarter Q&A Earnings Conference Call. My name is Bri, and I will be your operator for today. This call is being hosted by Robert Keane, President and CEO; and Ernst Teunissen, Executive Vice President and CFO.

Before we take the first call, as noted in the Safe Harbor statement at the beginning of the earnings presentation, comments may include forward-looking statements, including statements regarding revenue and earnings guidance, and actual results may differ materially.

Risks that could impact those statements are described in the documents that are periodically filed with the Securities and Exchange Commission. Now we'll proceed with the first call. [Operator Instructions].

And our first question comes from the line of Youssef Squali with Cantor Fitzgerald..

Just a couple of questions. First, maybe starting with the North American business. If I'm reading this correctly, it shows that North American revenue growth was up about 15% in the quarter just reported. That's versus high teens in the prior quarters.

And I was just wondering, why deceleration? Are you seeing anything that's causing that or is it just again some tough comps? I guess inversely with international, it was positive, too.

Do you feel that the worst is behind you outside of the U.S., particularly in Europe? And how is the -- and how is that progressing?.

Ernst, do you want to take the North America and I'll take the Europe question?.

Sure. Yes, our growth in North America is fluctuating around this mid-teens level. It was 15% year-on-year this quarter. We don't see any particular meaningful trend in that versus the past quarters, and we continue to have this outlook of it being in the sort of mid-teens type of growth for the rest of the year as well..

Wasn't it 18% or 19% last quarter?.

It was higher the last quarter. It was lower or about the same in the quarter before in our third quarter. So it's been bouncing up and down around that mid- to high-teens level for some time..

But to be clear, for the year, we guided to mid-teens growth for North America this year..

Okay. Youssef, as to your second question as regard to Europe, we definitely delivered in line with our expectations.If I step way back, we've had challenges, as everyone knows, in Europe, and we've discussed a lot. We wanted to use this year to rebuild, and we are improving the core customer value proposition, as well as the customer economics.

And we expect to see a lot of those changes really continuing over the next 6 months. There are many things we're doing in the value proposition, the pricing, advertising and the product quality, how we communicate with customers. And so we do believe it's going to continue -- we continue to believe this is going to take a little time to show results.

But as I said, we delivered in line with our expectations, and we're stabilizing the business, and we're looking forward to doing that for the rest of the year..

And can you just discuss your hedging practices? When did you start them? And how actually are they supposed to work? Are you hedging the revenue or are you hedging the profits?.

We've been hedging since last year, and we're hedging the profits. We're hedging very specifically to protect our net income for the year. We're not hedging revenues as such, which means in practice that we're particularly hedging the larger exposures on our profit line, which are the pound, which is the Swiss franc, which is the Canadian dollar.

The euro, although very impactful to our revenues, is a little less impactful to our bottom line because we're recently hedged on the euro. So it's those currencies in particular that we're hedging. It's profit-focused, not top line-focused..

[Operator Instructions] And your next question comes from the line of Kevin Steinke with Barrington..

So in terms of the operational metrics, I know you always give the caveat not to view the -- view them separately, but you did call out average order value specifically in your prepared remarks and that you saw an improvement there perhaps based on some of the changes you're making to the customer value proposition.

So do you view that as kind of a material improvement from what you've seen in the last few quarters? Or is it just a continuation of a gradual upward trend? Any color or commentary there would be helpful..

Sure. We saw 10% year-on-year improvement of our AOV. And we've had a continuing trend for quite a few quarters now of North American AOV growth. Part of the issue that we had in Europe in fiscal year '13 was that European AOV was coming down.

Because of all the changes that we're making in Europe, we saw this quarter, as in last quarter, very meaningful AOV growth in Europe. AOV growth in Europe is now faster than in North America. Obviously, we're doing a lot of catch-up.

But a lot of the changes we're making in Europe and the reason why we are projecting flattish to no growth in Europe -- or slow growth in Europe this year is because we are making significant changes to our pricing strategies in Europe in particular.

And so we're seeing that pay off in higher AOV in those regions in Europe, and we see lower order growth. We see actually negative order growth. We had stable order growth for the whole company year-on-year. But that was positive order growth in North America and negative order growth in Europe. So we're seeing stable revenues.

We grew 2% through declining number of orders but significantly increasing average order value, which was what we intended to do in this quarter and is definitely working out the way we want to..

Okay. And then you mentioned that you rolled out the new pricing approach in the U.K. this quarter and that you expect to launch it in several other markets this fiscal year.

Can we assume that's the other major markets in Europe that you're going to address? Or what's the plan there?.

Yes, we have gone -- we were the earliest, and we've gone the furthest in many ways of our overhaul of how we go to market in Canada, which we did last year. And we've seen very good results from that, and it's paying off. Actually, today in this quarter, we saw very healthy growth in Canada, very healthy repeat growth, for instance, in Canada.

And so what we're doing in Europe and then in other markets -- I'm not going to go into the details of which markets, but they are the larger markets. But we started in the U.K.

implementing more or less, but adapted what we have been implementing in Canada a year ago, which is, in summary, a lot more price transparency but also lower -- much lowered discounting, for instance, flat shipping fees, much more unified way to go to markets across channels, much more consistency across channels.

And we've been implementing that in Europe. It's a very different look and feel in the U.K. than we've had. And that's gone well. It's gone according to what we thought it would do in the U.K., and so we're very pleased with that and hopeful for the continuing positive impacts that we will get for the U.K.

And we have some other markets on the list as well, which we'll start implementing a later in the year..

I do want to clarify or add something that Ernst just said, is we are significantly reducing discounts in these markets, but we're also reducing list prices. So we do not see this as an effective price increase to the customer, rather it's a real clarity where they don't have to go through a high list price, deeply discounted and cross sold back up..

And in fact, part of the AOV increase that we've seen both in North America and Europe is not just a straight price increase. It is actually attracting customers that take the upgrade or just buy a little bit more in one order or buy the more expensive version of -- a product or a higher quality version of a product.

So it doesn't just translate only in price positive impact, although it does as well. But it also translates in just a higher-quality order product from our customers..

And Kevin, I would just add one more piece that's probably helpful information for the whole picture. This is not just in Europe that we're making these changes. They will be global changes. And the U.S. market is a market where we have not fully implemented the changes yet.

We've done some types of testing and types of implementation around the edges, but that is one of the markets that we'll be rolling out more fully in this current fiscal year..

Okay. That's helpful. And on the digital side of the business, you saw 5% growth year-over-year and commented that you finished the integration of the Webs technology into the website offering of Vistaprint.

So is that something that you feel can accelerate growth in the digital business going forward?.

Yes, we've implemented it in North America, and we still have on the roadmap to go to other language sites with it. But we are seeing some early positive signs. We're seeing more engagement from our customers.

It's a little bit early days to give you any statements of what it's doing for conversion rates going forward, but we see very positive feedback from our customers so far. So, so far so good. And most of these changes happened really in the July, August timeframe.

So it's a little early days to say how that will impact our growth rates in the business..

And to be clear on why it's a little early days, we have what is, in fact, a very large installed base of customers in the old technology. We have new customers.

We still often even predominantly come in on a free trial that they have for 3 months, then go to pay, then start churning at it, hopefully, at what we expect to be a differentially improved rate. But for that to work through the entire revenue line of the digital business takes time..

Ladies and gentlemen, this will conclude the question-and-answer session. I would now like to turn the call over to Mr. Keane for closing remarks..

Well, thank you for joining us on the call this evening. We are going to continue to be focusing on the plans that we talked about this summer in New York while also working towards our long-term strategy that we spoke about for many years.

We believe this is going to position us very well for the future, and we look forward to speaking to you in our next update. Have a good afternoon or evening..

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day..