Robert Keane - President, Chief Executive Officer and Chairman of the Management Board Ernst Teunissen - Chief Financial Officer, Executive Vice President Meredith Mendola - VP of Investor Relations.

Brian Fitzgerald - Jefferies Jason Mitchell - Bank of America Merrill Lynch Kevin Kopelman - Cowen and Company Clifford Sosin - CAS Investment Partners.

Ladies and gentlemen, welcome to the Vistaprint Year 2014 Third Quarter Q&A Earnings Conference Call. My name is Phillip, 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 and 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.

Risk that could impact those statements are described in the documents that are periodically filed with the Securities and Exchange Commission. Before we begin, I would like to turn the call over to Mr. Robert Keane for a brief commentary..

Welcome, everyone, and thank you for joining us. I hope, by now you had a chance to read through the release and the corresponding presentation that we posted online. We recognize that there is a lot to digest and that as a result, you may have many questions, so let's go straight into the Q&A..

All right, will now begin the question and answer session. (Operator Instructions) Our first question comes from the line of Brian Fitzgerald with Jefferies. Please proceed..

Thanks, guys. A couple of questions, maybe at a high level, any changes or nuances in the difference between the SMB market for business cards between North America and Europe, and maybe even the different segments countries within Europe.

How different are those customer bases?.

Can I ask you to clarify your question? You asked specifically about business cards.

Is that right?.

Yes..

Yes. They are really in most ways very similar. There are pragmatic tactical differences and a lot of the changes we have made to be more customer-centric over last year-and-a-half, I actually addressed some of those differences that in the past we have not done. Let me give you an example of that, the format.

The X, Y dimensions where business cards are different in Europe than they are in North America. In the past, we had the wrong size for both markets. We were smaller than American standard and we were very different from the European standards. We now have different formats in different markets, so therefore I have made an adjustment.

Likewise, there are some preferences in terms of paper thicknesses or stock. Certain markets prefers certain stock thickness than others and we now have a much broader range of stock. We today offer a broader variety of finishes whether or not the product has a raised or spot varnish finish, so one portion of our product line.

It's less than a third of our business, but for that business there are distinctive differences between the markets and then we have a product line which is much more adapted to those differences in the market whereas maybe 16 months ago there were many - some more standardization we had imposed on our customers delay in the U.S.

or Canada or in Europe..

Then maybe more kind of specifically importantly, can you contrast what you did specifically last quarter in the U.S. with what you have been doing in terms of changing the marketing message up until now. We thought you had already been changing list prices in the U.S.

and Canada as well as the free business card offers from a few years ago for example..

Sure. There have been many changes that we've been doing in the U.S. I'll put that the side. You mentioned Canada. Let me start with that.

We went through some of the Canadian price changes and merchandising changes that we did when we gave our August 2013 Investor Day, New York, and those were a wholesale series of changes which including one a reduction as a percentage discounts offered.

Two, a reduction in the list price of products, it including a coordination of marketing channels across different channel, so that if you look on to our site coming through Google or through online display versus an email, you received from us versus directly typing in the URL, you now have a very - in Canada, we started having very consistent pricing and promotional offers or descriptive information about what was being presented, so if we were at that time talking about flyers or business cards or apparel, those with consistent messages across those different channels, so Canada was a much more extreme version than what we had done in U.S.

Now, you're right that we have been shifting away from free everything, discount for quite some time, but had not done it to the extent we had in Canada.

In early January, we made a wholesale switch of our pricing and of many of the components around pricing, the list prices, the shipping prices were lowered, we reduced and we eliminated a lot of fees, like upload, backside printing, we lowered discount rates. In terms of channel coordination, we promoted differently.

In the tone, we promoted very consistent across channels and that did have a very significant negative impact. We did something similar an analogous in the German markets, but it was tailored through the German market, so based on what a customer research it was again a wholesale change on how we priced and how we coordinated cross channels..

Great. Thank you, Robert..

Thank you..

Next question comes from the line of Paul Bieber with Bank of America Merrill Lynch. Please proceed..

This is Jason Mitchell here for Paul. I got two questions. What gives you confidence that the pricing - are going to in the end be successful for the U.S., U.K. and Germany.

Then you mentioned your press release some of the levers that you can pull to optimize those markets? Could you maybe talk about which ones you may have kind of used already or what you can use in the future? Thanks..

Yes.

Of course, to start with that last point of the lever that we have to right to make changes, so especially if you look at the United States, when we made the changes, we saw a pretty significant, the most severe impact actually very early on in the quarter and that was because a lot of things that we were doing were very new and we have an ability to say what worked particularly well in one channel and not and divert attention to other channels where necessary, but most importantly make some changes that may be had the edges around the impact.

As a result, what you saw in the U.S. was quite a different story throughout the quarter, In the beginning in January, early February, we saw most of the discrepancy versus expectations and later in the quarter it started to move closer to where we thought it would go.

Into April, where we now we have seen that that trend in the United States sort of continue, so that early on and catching up later on..

That is April being a continuation of the catch-up that happen through March. We haven't restarted another cycle of that. To your broader question, what gives us confidence? I think, there are two things I would point to.

One is we are now almost two years after having done it in Canada and we measure the value of this as a cash flow per customer and what happened to cash flow per customers, so from a financial perspective we are very happy with what's happened with Canada.

From a customer value perception, the secondly way we measure this is through net promoter score and w see very material improvements in net promoter score that have been happening for quite some time, but very tightly correlated with these pricing changes, including the last month, month-and-a-half, since we have been looking, the data proceeds changes in [Germany] and the U.S.

we see a spike up in customer loyalty rates, so be it on the financial, classic DCF perspective or from the customer loyalty perspective which is a leading indicator of future customer rate. That gives us confidence, we'll go in the right direction.

Now the DCF and cash flow analysis Canadian experienced, we let that run for quite some time and we believe it is a very much worth the risk to say that although Canada has not been on a [state] Germany is not either one of those that we know enough about the markets we believe.

This is a right decision to make from just purely financial perspective..

Okay. Thank you. That's helpful..

Our next question comes from the line of Kevin Kopelman from Cowen and Company. Please proceed..

Hi. Thanks a lot. Could you give us any more color on the kind of revenue growth that you are seeing in Canada, and also what their margins look like there and how expenses has done in Canada, now that your tier is in. Thanks..

The growth in Canada was healthy. It was about 25% year-on-year. Within Canada, we have seen the metrics will move in the right way.

It's the repeat rates are going up, the lifetime value of the customers have been going up, so that the most important metrics that we over time hope to see affected in United States too and in Europe are going the right way there..

I do want to add a something we said, we are very happy with Canada. We did reignite growth rates in Canada and it's growing the mid-20 as Ernst just said, but it's a smaller market for us and it was not as penetrated the U.S. market and - for our people not to take the 25% and say this is going to drive the U.S. market back to 25%.

We think it's going to help vary materially, but we don't want to make a direct correlation to the Canadian 25% to where we expect the U.S. or Germany to be..

Okay. Thanks a lot..

Thank you..

Your next question comes from the line of Clifford Sosin from CAS Investment Partners. Please proceed..

Hi. Thanks for taking the question. I think in the release, you mentioned that the U.K. experienced six months on I guess being tweaked to and it seems to have differed somewhat off from the Canadian experience. Maybe just more generally, you know, you have been improving the business model and the number of markets for a while.

It seems like Canada is the only example of a success story. Do you mind elaborating a little bit on the other places you have tried to make these improvements and you know why is that the we can't point to examples of you getting past the initial decline in revenue and kind of reaching that rate higher revenue growth….

Certainly, I want to be clear. In Canada, it took more than nine months before we started to see our growth rate turnaround.

That was something that is a very important learning, because if you look at our repeat traditionally we have driven and those of you who followed VistaPrint for years and if you think of the pre-2011 VistaPrint, very proactive direct marketing and discounting within hours of the first order in which huge amounts of the great happened the first 24, 72 hours after the first order.

We now are relying on organic repeat rates. Again, in Canada, the higher loyalty transformed into higher turnaround of growth rates which had dipped considerably, they took more than nine months, so U.K. is following a very similar pattern.

Now is less draconian changes we have made in different markets, including the U.S., where we had very healthy rates, we have in two years made a series of changes that we can describe in a one-for-one direct relationship, but a general sense that that has been helping the market, but again we went much further this time based on the Canadian example and we do not have other markets that we have seen this turnaround, because we purposely used Canada as a test bed or resolving and addressing dozens of things at the same time which are very hard to do in a classic AD split-run test..

If we take the Canadian example and try and apply it to the markets that you are changing, now what does that say for us with regards to when we will again see double-digit growth?.

We certainly are not going to project double-digit growth anytime soon. It's certainly our aspiration to get back there and when we will in August talk about our guidance for next year, but I would rather not say when and what point we are going to get back to the 20% growth or double-digit growth..

We do believe this can remain an organic growth company, but our clear objectives right now I would put growth as a third.

We have margin expansion and customer value proposition improvements, which are ahead of that and we are maintaining our margin improvement objectives where we said we would be and very importantly we are improving our customer value proposition that we are very happy where those loyalty scores are going.

We believe that, that will come around to a very healthy business with good margins and loyal customers and that will lead to growth, but we are putting it third in that list of priorities, not because we don't want to grow, but we think that we have to have the horse in front of the cart..

That's very helpful. Then one last thing Ernst discussed, the trends at least in the United States in the quarter and it sounded that January and February were sort of worst and then better in March and better and then better still in April.

I was wondering you seem to mention it was different in Germany, and I was wondering, if Ernst, one if you could give the German and two if you could actually be more quantitative with regards to the qualitative comments you made given the sort of severity of the changes that the business has undergone even though I know that you guys don't really like to discuss monthly performance..

Yes. What's going on in Germany is slightly difference than the United States, because it has two components to it. One is the pricing changes, but at the same time we are undergoing in Germany, what we have earlier described as a general change in Europe in which we are focusing on fewer channels, less advertising spend it in a many channels.

Really going back to better profitability and better average order value in Europe and that's been going on in Germany as well as. In Germany, we are changing the price positioning as well as doing it with a more focused advertising budget compared to last year. In Germany, also we have seen a reaction versus our expectation.

That was a little more than we expected in terms of the headwinds, but it was not as pronounced as the United States was.

More broadly, just to be a little more quantitative about the statement that I made earlier is we have put out new guidance and we have split that in guidance that we gave as a reduction of the operational organic revenue outlook for the rest of the year as well as for the addition for the acquisitions.

Operationally, we have reduced at the midpoint our guidance by about $27 million and a very large portion of that was actually hit versus our expectation in the third quarter.

We have also put some carefulness and some conservatism for the fourth quarter, because we may see some further impacts from respect to third quarter also in the fourth quarter, the largest part of our adjustment for the year comes from our underperformance in the third quarter..

That's very helpful, so would it be fair to say that business trends in April are consistent with the midpoint of the guidance that you gave?.

The guidance that we have put together is reflective of where we expect the business to be up until this point in time..

Sure, but I guess you can dissect that into the portion which you have actually through experienced through April and you know the answer, the portion which you are projecting, so I guess what I am just trying to understand is given the volatility in the businesses, when you think about your guidance, is it basically - is April the year-on-year performance repeated itself for the remaining two months? Would that be consistent with the midpoint of your guidance or if April's performance has to get better or April - basically I am trying to understand how your quarter guidance compares to your actual April results, which presumably [good] sense at this point?.

The actual April results have actually factored into the guidance that we are giving there. Obviously, the guidance is based on the latest information that we have and that's really what I want to say, so that range is that is a possible range of outcomes that we see ourselves..

Okay. Thank you guys very much..

All right (Operator Instructions) Our next question comes from the line of Kevin Kopelman with Cowen and Company. Please proceed..

Hi. Thanks. Just sort of another question, so when you think about your multi-year plan for reinventing the brand, now that you have made these pricing changes in the U.S., Germany and U.K.

do you to feel like the biggest and kind of most disruptive parts of that plan are now in place or are there still a lot more changes to come that will also have a big impact?.

I think that the most disruptive changes we have seen are behind us, certainly as it relates to these pricing changes. We have no other major repositioning test going on and is anywhere near the magnitude of what we have been testing in Canada for the last two years, so we do believe that worst is behind in that regard.

We also believe that we are on a multi-year repositioning effort that we announced and started in 2011, and we've learned a lot of - there and say VistaPrint brand is very far from the free everything brand from 2011, but I still believe that it has a long way to go over the next two to three years, but I don't think that and we don't proceed or recognize activities that we are testing in routes would have this type of a very significant impact..

This is Meredith. I just would like to clarify that is for the markets that we are talking about, because we have been through these typing changes now in Canada, U.S. U.K. and Germany, but we have yet to rollout these changes in other markets, so those are to come and we would expect that those changes would have had been car to our revenues as well..

What's the timing of those and is that reflected in guidance?.

It's definitely reflected in the guidance..

The next larger market that we are going to do is France and that's going to be in the new fiscal year..

Okay. Thank you..

Ladies and gentlemen, this conclude the question-and-answer session on today's call. I would now like to turn the call back to Robert Keane for closing remarks..

Thank you, everyone, for joining us on the call this evening. We do believe that despite these near-term disruptions to our revenue growth rate, we are implementing some very key changes to our business that we are confident will make us a stronger company for the long run.

We understand the patient is required, especially when our growth rates don't reflect the story and the entire story, but we firmly believe that these improvements will unlock future opportunity.

In the meantime, we continue to focus on our profit margin improvement and the value proposition improvement to our customers to drive their loyalty, so we appreciate your time and attention and look forward to the next update. Thank you.

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