Robert Keane - President, CEO Ernst Teunissen - Executive VP, CFO Meredith Burns - IR.

Brian Fitzgerald - Jefferies Matt Thornton - SunTrust Paul Bieber - Bank of America Shawn Milne - Janney Capital Markets Chris Merwin - Barclays Kevin Kopelman - Cowen and Company Mitch Bartlett - Craig-Hallum Kevin Steinke - Barrington Research.

Ladies and gentleman, welcome to the Cimpress Fiscal Year 2015 Second Quarter Q&A Earnings Conference Call. My name is Cathy, 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 statements 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 these statements are described in the documents that are periodically filed with the Securities and Exchange Commission. [Operator Instructions] Now we'll proceed with the first call..

The first question comes from the line from the line of Brian Fitzgerald of Jefferies..

Thanks. Congratulations on a nice quarter.

A couple of questions, in terms of the holiday orders for the core Vistaprint brands, can you just give a little more clarity what regions you are offering those in? Maybe how you thought about going to market with those, and then, can you remind us again if those are more consumer-centric, or business offerings are in there also? Thanks..

Sure Brian.

The holiday products we sell are predominately consumer in orientation and we call home and family business spike in this quarter every year, so there is some business applications there but it’s predominately for home and family applications that business is very strong for us in Europe and as a percentage of our total holiday business Europe is more important than in Europe in Vistaprint brand on the overall year.

If you look at growth, the growth numbers in Europe versus North America, we didn’t breakout specifically for holiday but the general trend in year-over-year growth was similar to the overall business..

Thanks and then maybe one follow-up on the digital side of things. You highlighted that throughout 2015, we'll continue to see declining revenues there as you are focusing on and prioritizing the customer value propositions and at that same line, deemphasizing the cross-selling of products.

At what point do you think it'll make sense to start to flip that around, and start to cross market the digital offerings again?.

Yes, this is Ernst.

We will continue to monitor that as we don’t see digital with our total mix as very different from all other product offerings in the sense that we make -- in every quarter and every months and every week, we make assessments on which products we want to put front in center of our marketing campaigns and we will continue to monitor the returns we expect from digital versus other products offerings that we have and depending on that we may or may not see changes to trend in digital..

I would say that we believe having digital products is part of cross media approach, but small business marketing is important. We also don’t the marketing cost associated with the digital that many of the competitors in this space have, so it’s very good business for us.

But we view cash flows of any type from satisfied customers as being equal and at the highest level as we reduced the amount of real estate we give ourselves for cross selling things, we look for the things the customers want the most as expressed by what drives their cash flow the most and so we’re agnostic whether it’s digital or physical product -- our physical products can be very lucrative too..

Thank you. The next question comes from Matt Thornton of SunTrust..

Thanks for taking the question and congrats on the results. The first question is around, just I guess the guidance, and particularly on the EPS side of things.

I mean obviously you guys beat at least the street numbers by about $0.50, but only took a full year guide up by about $0.24 maybe you could just kind of walk us through what the delta is, is there is at all? Is that FX and Swiss franc, is there any seasonality that perhaps the street is getting wrong, any heightened investment we should be thinking about? Is there anything else out there that's keeping you conservative?.

As you have seen our guidance, there is a bit of difference in our GAAP and non-GAAP EPS guidance and the impact from our previous guidance.

So for we have seasonality in our profitability, our second quarter is a very high profitability quarter because of the higher revenues that we have and the flow through the bottom line, so our first half tends to have higher profitability than the second half.

The change in the GAAP and the non-GAAP, well I’ll start with the non-GAAP guidance first, we took up the non-GAAP guidance from our guidance at the beginning of the year and a quarter ago.

We have seen favorable trends on profitability in the first half of the year and we have extrapolated that out to the second half and this is the increase that we thought was an appropriate increase to reflect our expectations for the second half. As I said typically our second half has lower profitability than our first half.

And as we look at our expense profile for the second half. This we felt was a good increase of our expectation. On the GAAP side we actually decreased our guidance and that is because a non-cash and non-operational item which we highlighted which is currency impact on an intercompany loan that we have which is denominated in U.S.

dollars but is a loan from our Swiss principle to our parent company that loan gets mark-to-market in Swiss francs in Switzerland and it’s creating a book loss in a likelihood in the second half of the year, the sharp increase we saw in the Swiss fanc doesn’t change. It’s a book loss it’s not cash and therefore we non-GAAP’d that up. .

Perfect so I guess if I could talk about the non-GAAP EPS side of things, Ernst, it sounds like it's really just a function of seasonality. There’s nothing else for the back of the year in terms of heightened investment that we should be thinking about. The guidance is really just reflective of typical seasonality in your mind..

Typical seasonality and the way we have put our budget together. We have some heightened expense in the back of the year in certain items, but there is a lot of seasonality to our profitability. .

Okay. Perfect and then just one more, if I could, your performance has obviously been strong for a couple of quarters here, starting to see the metrics turn up, the debt markets have kind of pulled back here a little bit.

They seem to be perhaps opening up just a little bit, just wanted to get your latest thoughts on capital raising, M&A getting a little more aggressive, now that the fundamentals are certainly starting to pick up here..

Yes, in terms of capital raising, as you probably are all aware we have been looking at the senior notes at the high yield market. And in September we decided to press the pause button on that given the environment in the high yield market.

We continue to monitor that and continue to assess whether or not we will tap into that diversification of our balance sheet. In terms of M&A, we stated that we are looking at options continuously. We believe there is an attractive opportunity for M&A to support our overall strategy and vision of creating mass customization platform.

We are pleased with the acquisitions we have made recently, but we are not giving specifics on where or what we may do in the future. .

I would also say that on both the high-yield and the M&A we are very willing to be patient. We don’t need to them. So if timing is right for either, and in the case of M&A we are especially picky in getting the everything from the strategic capabilities to the right company culture.

We could move but it’s certainly something that could have fits and starts and not be a regular process, because we do want to be quite choosy..

I also want to highlight which we continuously say in our public statements, that our guidance does not assume any further financing or the interest cost associated with that nor any M&A. So our guidance is cleanly just for the business that we have today and the funding structure that we have today. .

The next question comes from Paul Bieber of Bank of America..

Thank you for taking my questions. Just a quick follow up on the pro forma EPS guidance.

I was hoping you could give some commentary on how much of the pro forma EPS increase is due to the lower tax rate, versus solid performance from acquisitions, versus improvement in the Vistaprint brand? And then secondly, I was hoping that you could give some commentary on the gross profit per customer trends in the different geographies? Thank you..

In terms of tax impact we do have in our guidance a favorable tax impact, it’s to the tune of couple of few million dollars, but the majority of our guidance increase is related to operational performances in the first half of the year. .

And Paul, just a quick note on that. The expected -- in terms of the change in guidance from last quarter the expected benefit for non-GAAP taxes is lower than it is for GAAP taxes because of this book tax rate benefit that Ernst described in relation to intercompany loan loss in the third quarter. .

Could you repeat your GM question?.

Sure.

In the presentation I think there was something about gross profit per customer improvement? So I was just hoping you could give some color on the trends in the different geographies, on gross profit per customer?.

Yes we don’t disclose the specifics on that but it’s a metric that we that we track internally it was up in all relevant geographies for us. .

Okay.

And one quick follow-up, can you just expanding your comments on the multi-year technology investment what are some of the major milestones you should look for there?.

Yes that is something that we announced as you know about three months ago and it's very consistent with the strategy we've talked about last August at our New York Investor Day.

We see this as a major multiyear investment to take the competitive advantages we have mass customization which is specifically are the operational capabilities we have in manufacturing driven by our software systems and other technology. And to be able to share and aggregate volumes across our different front end brands into a common supply chain.

And that objective there is to drive the ability to introduce products that we have one brand into other brands more easily and therefore help revenue growth it's to get scale based advantages that help us in quality systems in amortization of technology in cost reductions through scale based economics or purchasing economics.

Doing that -- those advantages are quite at least too us obvious the difficulty is that it requires a major investment in software systems and processes to take what are highly automated front end to back end integrated systems in each of our brands.

And to insert what you might imagine as a separation layer in the architecture where we can then aggregate across those brands into common production systems.

And as a very specific example I will just use two of those, today we sell in Europe wall décor these are photographs or other products that are printed on stretch canvas on wooden or other types of frames, we sell those under our Printdeal brand or FotoKnudsen brands, our Albumprinter brand and our Vistaprint brand and right now we're producing those in four different locations in Europe.

The advantages of aggregating that into a single production are quite significant. So we can't just take what is an automated vertical system from front end to back end at each of those four brands and in Oregon we have to build those platform interface.

So that's the broad objective in terms of milestones we have not set publicly specific milestones but internally we have a development schedule that we feel we're on track with we're really just ramping up it was something we committed to internally less than 12 months ago and the teams are just turning to this now.

So we will start seeing applications which fixed to 12 months out but it will be a multi-year build. .

The next question comes from Shawn Milne of Janney Capital Markets..

Thanks for taking our questions, and I've got a few and I don't mind jumping back in the queue. Ernst, maybe just on a higher level, I guess what I'm struggling with is now the organic growth rate picked up a 100 basis points sequentially, which is certainly good.

And the company doesn't give quarterly guidance, but I don't think my model is that different than the Street in terms of EBITDA expectations, and we look at -- so I'm just measuring what you reported in EBITDA your EBITDA per share upside would be about $0.13 of the earnings beat, but you beat by $0.50.

So what am I missing here? There seems to be other stuff that was lower than expected, maybe expenses are below the line that led more to the earnings upside, and also there was obviously lower tax.

Is there anything else you can help us out there with?.

Yes. It is difficult of course when you have to compare to the consensus model or your model but the possibility was very much in the second quarter was very much in line with our own expectations and our own models. What you typically see in the second quarter is a higher flow through than in other quarters.

This second quarter was slightly different I guess than the second quarters in previous years and in the sense that we had these two additional acquisitions that we've had and those together actually flowed through the profitability they have I find it difficult to compare it to your model because I don’t know your model in that much detail but that's the effective that we typically see in the second quarter.

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Let me follow up on that.

I know you break out the top line impact of the acquisitions, but you can't beat our expectations, but can you tell us of the level of accretion from those two deals?.

We don't break out the possibility specifically for those transactions but they do contribute to our EBITDA line.

You can also because we have taken a charge on our balance sheet for the because of your anticipation of paying a earn out those are doing well and we had optimistic expectations but we had conservative accounting for that and the reality is they’re doing as we hoped and so that means they’re very well..

And will you provide pro forma numbers at the end of the year and tag around that?.

What we tend to do is -- no, we won’t give pro forma per se but we will up 12 months after and our provision, we will breakout growth rates excluding of acquisition so the people have an understanding of the underlying growth of the business excluding acquisitions that have happened in the 12 months, but other than we don’t do pro forma..

We have committed in the first year of these acquisitions to in aggravate to breakout at least the revenue performance so if you look at Slide 12 of our presentation, you see that we aggregate Printdeal, pixartprinting, and FotoKnudsen, which are our recent European acquisitions.

On a revenue basis, we will qualitative commentary about profitability but we’re going to breakout individual assets or the total profitability of the business, but it’s tracking us as Robert said, it’s tracking very favorably.

We have -- since acquisition continued adjust the earn-out expectations up which is an indication that the assets are performing well..

Right. Yes. I see the revenue I was just looking for more detail on the earnings, but the earn-out comment is appropriate. Just I guess conceptually, clearly you've made strides in terms of quality, customer service, net promoter scores, again, there was a slight uptick in organic growth.

Robert, when do you believe you'll start spending more on marketing because the new customer growth continues to lag and ticks down year-over-year, as well as order volume growth?.

So make advertising the decisions in a consistent way and we have for many years which is to look at our best estimates of the future cash flows of cohort and we can acquire and given advertising channel into DCF and we may it as a cash base or cash flow base decisions.

So we are spending consistently up to what we think is logically use of capital in advertising as we would in any other part of the business.

So we don’t have opportunities that we are aware of to spend more and we wouldn’t see an uptick, unless we saw an uptick in the cash flow per customer, there is always marginal testing that we’re doing and in any test some work well and some are failures, but that’s -- I would exclude that because the marginal testing we need to do to find new channel.

So we think the general trends that we have been seeing in advertising is a percentage of revenue will be fairly consistent and COCA for instances has been going up, but we’re happy to spend a higher COCA when we have higher cash flow per customer because again it comes back to DCF models that still makes economic sense..

Okay, I don't know if I'm just thinking about this wrong, but I mean clearly your existing customers are spending more, your AOVs are up for things you talked about before, but at some point, the top of the funnel has to grow.

Am I wrong?.

Yes, but inherent in our strategy and fairly explicit in our strategy for last several years is that we are willing to move away from the least valuable customers we had which we refer to as price primary, we are not abandoning in that market but we’re changing the value proposition towards something which is much more attractive to higher expectations customers.

In doing so we take away some of the -- and I would many of the things that drove impulse purchases by people who were not as large and valuable of customers, so deep discounting or more aggressive cross selling. And we’re losing volumes of customers relative to that more aggressive approach.

But in terms of the ability to growth the business for a multiple years at strong growth rate we need to move into the much larger market for a higher expectations and so we’re not losing where feel the customer were high value customers relative to the cost of acquisition.

We can’t be precise about following things, but we do try to do differentiate. If we find a customer indicates through his or her actions, there are very price sensitive.

We can offer products that are more price oriented, but that is on the margin of what we’re doing what we’re trying to do is fundamentally shift the value propulsion up and we believe in that doing so we’ll create very valuable customers.

And the top of the funnel will be narrower but the value which comes through the funnel on a per customer basis will be significantly higher. We think that will lead to growth..

Okay. So if you're looking at the two or three year growth rate I should continue to expect this to be zero unit or volume growth and all through AOV? That's what I'm struggling with..

Yes, when you’re -- I would change your terms a little bit, so volume you should talk about numbers as opposed to number of orders.

I don’t want to project the exact numbers but we see that as being more pressure dominant pressure whereas what will increase is not -- is the AOV, but more importantly the cash flow the cash flow per customer per year, which is the number of order per year, times the AOV, times our gross margin rate.

And that cash flow per customer we see is growing and the top-lines for customer growing as well. .

The next question comes from Chris Merwin of Barclays..

Great. Thank you, and congrats on the quarter. So just to follow up with the last question, Robert, I understood your comments about the higher value customer, I think inflicted in that is that AOV growth will obviously continue.

And in this most recent quarter I think it was up about 6% on a reported basis, but I imagine FX, it was probably up much more than that.

The first question is what was that growth on an organic basis? And then secondly, how high do the AOV can go on an absolute dollar level, because it continues to rise and more than offset the order growth that we're seeing. And then just a second question on the guidance, Ernst.

The non-GAAP tax rate I guess also the GAAP tax rate on a book basis that you guided to is about 6% to 7%, and that came down from I think where it was before.

So what is the difference between the book tax rate and the cash tax rate, and at what point in time of the book and cash tax rates start to converge again? Because I think you called that out as being one of the reasons why guidance was going higher. Thanks..

So first your AOV question. If you did this for constant currency the AOV growth year-over-year will be closer to 10%. And this is obviously significantly impacted specifically by the euro and the pound. In terms of the guidance and the tax, we do have difference cash tax and the GAAP tax expense.

It is driven by various geographies where we have book losses that we can benefit from. And we will have difference in that for the next few years, our cash taxes will be higher.

And that is going to persist at least for three years or for years when you see the book and the cash tax start to converge, and then invert, where we will have benefits from these losses that we build up in certain jurisdictions on the cash side. Your AOV question and you had a second component which you said how high can go.

We don’t do projections like that but can speak qualitatively, and I would direct you to our Slide 16 and that is not an average order value slide rather an annual revenue trailing 12 month per customer revenue. And the number of orders times the AOV is what drive that. So we have seen a multi-year trend up in that.

And we certainly hope that it will continue. But very importantly if you look at our Slide 16 and you compare it to the slide before that, on Slide 15 you see the percentage of our revenues which is coming from new customers versus -- percentage of customers that are new versus repeat.

And as we are able to increase the stickiness and the loyalty of repeating customers that’s a very good thing, because it shift to the mix on page 16 from the blue line which represents new customers who ordered above $56 per year towards repeat customers who ordered about $103 per year.

Now there is some aspect that new customers come through in a different means but I would really encourage you to look more at the revenue per customers and the AOV. I may have given data point which is wrong, Meredith, just speak up if I did..

No you haven’t. .

The next question comes from Kevin Kopelman of Cowen and Company..

Hi, thanks a lot. Just had a question on an external marketing and selling costs. It looks like they grew roughly in line with the revenue, excluding acquisitions. Can you just talk about how you felt about ROIs in the quarter, and then what you are seeing so far in this quarter? Thanks..

I am sorry could you repeat the question, we had something going on here, that we are trying to catch up with the last question. I am sorry about that. .

That’s all right. Could you -- so we are talking about external marketing and selling costs, it looks like they grew in line with revenue.

Could you talk about advertising ROIs that you saw in the quarter, how you felt about those, and then what you are seeing so far this quarter?.

Sure, the advertising is a percent of revenue on a holistic basis year-over-year is -- did go down. But that is to a large extent the influence of having these new acquisitions in which have a very low advertising as a percent of revenue. If you go to more of a like for a like and look at the Vistaprint brand for instance.

Our advertising as a percent of revenue was very close to the last year slightly under, but very close to last year as a percent of revenue.

What you see on the operational metrics in our presentation is that the COCA was high in this last quarter compared to previous quarter and that is why our advertising as a percent of revenue as I just said was a little under actually a year ago.

And what is that work here is just that Robert was describing earlier these gross profits for customers continuing to go up with also the value of these customers and their life time value is growing up.

So we can't afford to increase COCA for these higher value customers and that's why you see this dual impact of a higher COCA but at the same time the same or slightly lower advertising of revenue. .

Thank you. .

Before we go forward I want to back to the prior conversion and question I gave an answer to referring to Slide 15. We realized that there is an error in the labeling of our graph there the data on the table is right but Meredith can you describe that. .

Correct. The blue and grey bars on the chart are flat, the component that's growing that grey component is labeled as new customers and repeat customers and the blue piece that's labeled as repeat is actually new and we will get that reposted to our website. But Robert's correct the chart -- the table that’s on the right side of that slide is correct.

.

Thank you. So we could go to the next question. .

The next question comes from Mitch Bartlett of Craig-Hallum..

I wonder if we could kind of go down the same path but maybe look more geographically at Europe.

I see that orders overall were down 3%, and excluding the acquired companies in Europe, maybe you could comment qualitatively about -- I think in the script, you said orders in North America were up, so obviously orders in Europe were down even more than the 3%. Maybe talk to that.

What is the trend in the marketing dollars between North America and Europe? I'm just specifically interested in if Europe is continuing to be where the marketing dollars is much less than before? And then you talked about investing in your customers, the cash flow characteristics of those customers, the DCF.

What is the trend in the European core Vistaprint customer DCF?.

Yes. So if you look at some of the trends that we're describing with the consolidation results the movement on orders and the movement on AOV, what Robert was describing as the focus on larger value customers, those trends are true in North America and in Europe but they are particularly more significant in Europe itself.

So in Europe the important changes we're making to Europe were a function of the fact that the portfolio of customers that we had in Europe and the values and profitability per customer compared unfavorably to the market in North America.

And so what you see is these trends in Europe are more pronounced so you correctly -- you could correctly summarize that if North America has slight increase to quarter numbers which is but a slight increase then Europe must have a more significant negative impact in the aggregates and that's correct.

At the same time you see average order values growing significantly too.

In terms of advertising expenditure it is actually not that the difference across the markets it is quite similar in terms of level of advertising as a percent of revenue but it is difference in Europe market to market, so we have made some choices of focusing on certain markets and driving growth in certain markets and the impact of order growth by markets is therefore different within Europe.

The value per customer in Europe is improving as a function of the changes that we're making in Europe the average order values are going up, in Europe the gross profits per customer are going up and we believe we're getting on a much healthier footing in Europe and much more comparable footing to North America every quarter as we continue with our change in Europe.

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The one piece of color that I would also add there is that particularly in Europe for new customers and repeat customers the order dynamics are already different.

The declines year-over-year are much more pronounced on the new side as and they are on the repeat side and if you look at trailing 12 months active customer base for Europe though it is not growing by leaps and bounds by any stretch of the imagination we do see a stable base to slightly growing base of active repeat customers in Europe, now that we're through the worst of these impacts through pricing and marketing changes.

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Well you said overall your marketing trends are likely to be similar as to what we've seen so far, there could be a shift of more emphasis towards Europe and away from North America in those marketing dollars? Is that possible?.

So there could be a shift, what would lead the shift is us first being successful in repositioning the brand in a given country so we like started most long along in Canada, we’ve done in multiple countries since then.

And after that work way through when we get higher value customers because of that repositioning, we then start spending more on that.

We typically have pulled back quite significantly in advertising especially in Europe where started to make those changes because of the uncertainty that the changes introduced in the cash flow characteristic for customer and because we are going from one type of value proposition to an improved second type of value proposition.

So various multiple European markets where I think we will start spending more heavily but we’ll go back that same overriding philosophy of how we spend advertising which is based on the cash flow of the cohort..

Great. Then just two quick ones, I think you mentioned at the top of the show here that the consumer business was performing basically in line with the rest of the business.

Does that mean that Albumprinter and the rest of the consumer business grew on an organic constant currency basis at about a 4% rate?.

My comment on the consumer was within the context of the Vistaprint brand and there has not been a dramatic difference of the geographic trends we’ve talked about which are predominately driven by small businesses would apply to the home and family.

The Albumprinter business we don’t breakout but especially under the brand that are the Albumprinter owned brand, the growth is much healthier than what you just described and it’s in double digits. I am also including some of the acquisitions so I’ll just say we aren’t going to breakout I don’t want to get into sub..

That's exactly where I was going to say, so just wondered if there is a growth rate that you can ascribe to the acquired businesses. We can't see that growth rate and it becomes somewhat material, as it becomes part of your overall growth in the fourth quarter..

Yes, so we don’t want to breakout the growth every quarter. We have did breakout some growth rates when we announced acquisitions and the growth rates very much in line with what we’ve described at the time..

The next question comes from Kevin Steinke of Barrington Research..

On page 6 of your presentation, you made a comment that you saw double-digit revenue growth from higher expectations customers in all major markets, so not sure what level of detail you are willing to go into, but roughly what percentage of total revenue comes from higher expectations customers now, or what percent of total customers would you categorize as higher expectations?.

We don’t break that out per se. We have proxy customer groups that we’ve built to understand and to represent how these types of customers are doing.

But I would hesitate from giving too much breakout, but that statement is somewhat of a logical outcome of some of the others conservations we’ve had this morning which are as we reposition the brand away from price primary we’re losing volume of the most price customers were gaining purchases in higher value customers and those are the higher expectation statement we’re talking about.

Ernst, I know if you want to get into more detail on the percentage..

No we’re not breaking out the percentages, it’s a meaningful -- increasing meaningful percentage of our revenues it’s obviously a much smaller percentage of the total customers.

But we want to indicate this double digit growth there to show that we’re pleased with the underlying trends there because it’s surely as an impact of the strategy and that we’re purposely trying to increase at higher expectations segment..

And there was a question before about don’t we eventually need to grow number of customer and certainly we believe that’s the case. The underlying growth trend of higher expectations customers are positive.

What we are seeing is a move away from customers that we incentivize through deep discount and those were very large numbers of customers, but we’re definitely seeing customer count growth not just average count growth but you look at the higher expectation segment..

Yes. Okay. That's helpful, so it's fair to say that even though the total number of new customers is decreasing, that you are seeing new customer growth among higher expectations customers. .

That’s correct. .

Great.

And what about -- although total order volume is down, what about -- is order volume among higher expectations customers growing? Or is it just AOV?.

The answer is yes, it is growing. .

Order growth is growing along higher expectations customers? Okay.

And I guess, what’s your overall confidence level that the positive business trends that you are seeing can be sustained?.

We are confident that we are taking the right path. It’s been a multiyear effort, it is go back to what we try to do in 2011 when we talked about increasing the value to customers, we are turning the ship and we see a lot of green shoots that you can -- start seeing through the aggregate numbers.

If you want to see the numbers that we see deeper end by type of customers in the various countries where we tried things earlier. We are very optimistic, we are on the right path.

But it is a turning of what was $800 million ship with a very distinct price driven brand, and we do see that and retrospect is having taken much longer than we would have expected but we remain confident that it’s the right choice to have made. .

And our guidance range reflects on the high side an expectation that the acceleration of growth or the increase of growth rate that we have seen every quarter on a year-over-year basis, will continue to second half. If you look at the low-end of our guidance range, it assumes that we don’t see such acceleration.

So, although we are confident and we are doing the right things, we are still being cautious in banking for the next quarter or the quarter after the continuation of certain trends. But we are very confident that we are on the right path. .

The next question comes from Paul Bieber of Bank of America..

A quick follow-up question. If I look at the revenue cadence throughout the year, in the first half of the year, you put guys have around $775 million in revenue. And in the second half, implied guidance is for below $700 million.

What accounts for the back-half decline in revenue other than FX and the seasonality? Or do those two things account for basically everything, or am I missing something?.

Yeah the seasonality accounts for a lot. The second quarter is by far a largest quarter. And so that explains lot of it. Currency, if you look at this as on a actual currency basis, currency is another reason for it, but the seasonality is mostly important.

And if you do a year-over-year comparison the first half impact is larger because we owned Vistaprint and Printdeal in the fourth quarter -- as of the fourth quarter of last year. So you will have a lapping in the second half of us owning those assets. .

The next question comes from a Shawn Milne of Janney Capital Markets..

Thanks. Just a quick follow up. Ernst, I mean you are obviously seeing a little bit a benefit from the weakening Canadian dollar. Did that show up in the numbers in the gross margin this quarter, and what’s your expectation for that in gross margins in the second half? Thanks. .

So the Canadian dollar we have both revenues in Canadian dollar but we have a larger expense in Canadian dollar, because of our manufacturing facility in Windsor. It nets out to a currency position that is negative exposure to the Canadian dollar.

So the Canadian dollar went down and that has been a positive [indiscernible] versus the dollar over the last six months and that’s been a positive for us, and it shows up on COGS in particular.

So you have -- if you look at our gross margin line you have the multiple impact from currency you have on the one hand you have the positive of that and then you have the negative impact of currencies like the pound.

So if there is movement between the pound and the euro for instance our COGS in Europe are in euros and our revenue in the UK is in pound. So you have multiple items we can switchover there. .

Can I just say specifically in the Canadian question, we have four broad categories of COGS. There is shipping cost, there is material cost, there is depreciation of the overheard and the capital and there is the labor. The shipping we buy in U.S. dollars and most of the materials we buy in U.S. dollars.

And correct me if I am wrong Ernst because of its U.S. dollar denominated subsidiary the depreciation for past assets are relatively stable in dollar.

So what it is our labor cost go up and down but that is roughly speaking quarter of our COGS and things like utilities and the likes, so it's a relatively small impact it's not like you can see the dollar to Canada dollar change multiplied by cost of goods sold as a percentage of revenues..

And that is just to be clear a portion of the COGS for North America obviously not impacting the plants in Europe or elsewhere. .

Thank you for your questions. I would now like to turn the call over to Robert Keane for closing remarks. .

Well thank you all for calling in today and listening. We're quite happy with the operational results, we feel a very solid quarter, but more importantly it's a continuation of the long-term strategy that we have been pursuing for a number of years and we’ve spoken about with you in our Investor Day last August.

And so we look forward to the next quarter call in three months. Thank you for your time..

Thank you, ladies and gentlemen that concludes today’s conference. You may now disconnect. Have a good day..