Sean Quinn - CFO Meredith Burns - IR Robert Keane - CEO.

Brian Fitzgerald - Jefferies & Company Naved Khan - Cantor Fitzgerald Kevin Steinke - Barrington Research Matthew Thornton - SunTrust Robinson Humphrey Victor Anthony - Aegis Capital Clifford Sosin - CAS Investment Partners.

Ladies and gentlemen, welcome to the Cimpress Fiscal Year 2017 Third Quarter Q&A Earnings Conference Call. My name is Nova, and I'll be your operator for today. This call is being hosted by Robert Keane, President and CEO; and Sean Quinn, Executive Vice President and CFO.

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. We turn now to Sean Quinn for opening remarks. .

Thank you. Hello, everyone, and thanks for joining us this morning. Before we take your questions, I'd like to make just a few brief comments about our announcement yesterday. We've seen many positive developments over the past three months. The organizational changes we described on our call in January have been implemented.

And we see early indications that this reorganization is helping us move faster and free up capital. We anticipate annualized cash savings of $45 million to $50 million and we expect the reorganization to increase our estimated range of steady-state free cash flow. Our revenue growth accelerated slightly versus the front half of the year.

Part of this year-over-year impact is from the Easter timing but many of our business units are executing well against their ambitious goals. We are pleased to see the Vistaprint business continue to rapidly launch new products and expand design services even though this comes with some startup costs and lower margin at first.

Over time, we see opportunities to optimize the cost and pricing of these new offerings in ways that we believe will benefit our customers and shareholders. We did record an impairment charge of $9.6 million related to one of our Upload and Print business units this quarter.

To-date the aggregate free cash flow of the full portfolio of Upload and Print businesses has exceeded our aggregate yield [ph] model plans and we expect it to continue to do so in the future. For competitive reasons, we do not plan to discuss in this call which business we impaired.

We do recognize that our results are noisy between the reorganization, the new acquisitions, the loss of certain partner profits and we know it can take time to understand the dynamics in the underlying business. We continue to believe that the capital we are allocating across our business has a weighted average portfolio.

It's solidifying our leadership and mass customization and continuing to drive our objective of maximizing our intrinsic value per share. Finally, we are currently in the midst of our planning for our next fiscal year. We will of course share detailed plans with you at our Annual Investor Day in August.

But we can mention a few things we see as emerging characteristics of what we expect for next fiscal year. First, fiscal 2017 has been a heavy investment year, both on the organic front and M&A. We have a lot of new capabilities, products and operational advantages at our disposal.

Looking to our next fiscal year, we envision shifting more towards optimizing what we have versus seeking incremental investment opportunities.

Second, as we mentioned last quarter, we expect to delever back to approximately three times trailing 12 months EBITDA by the end of the calendar year through a combination of debt repayment and EBITDA expansion. And now we'll take your questions. .

[Operator Instructions] And our first question comes from the line of Brian Fitzgerald of Jefferies. Your line is open. .

Hey, thank you. I was looking at the National Pen business; the revenue is down 6% pro forma.

Is that in line with expectations you had as you did that acquisition, as you headed into the quarter? And then maybe what do you think the quarterly growth cadence will look like over the next four quarters to kind of hit your 10% bogey?.

Yeah, Brian, thanks for the question. So yeah, with regard to the first part of it, which is -- was it consistent with our expectations, it is. Let me just do a quick walk there. There's a few moving pieces. Of course, this is a first quarter we have National Pen in the results. The reported growth was a decline of 6%.

With constant currency, that becomes 4%. And then they actually discontinued some lines of business. So if you take them out, it's about a 1% decline. Now that's -- it is a little bit lower than we had expected.

That said, it's very consistent with a recommendation that we got from the management team there to forego some of the marketing activities that they had previously performed to generate some of that revenue growth, which we do not feel was producing the right amount of incremental profit.

So we're very much aligned with the team there, the decision that they took. And the result is lower revenue. But we think in terms of value creation that, that was the right approach to take. As we look forward, of course, as we mentioned last quarter, after the acquisition, their growth last year was 10%.

We don't provide specific revenue guidance for any of our businesses, including National Pen. But I would expect that some of what we've seen this quarter would continue into the future quarters as they execute on their plan. .

Great. Thank you. .

Thank you. .

Thanks, Brian. .

And our next question comes from the line of Naved Khan of Cantor Fitzgerald. Your line is open. Our next question comes from the line of Naved Khan of Cantor Fitzgerald. .

Yeah, can you hear me?.

Hi, Naved. .

Hi, Naved. .

Thank you. Yeah, I had a two part question on the Vistaprint unit.

So I guess you saw some acceleration in growth in the last quarter, and the fact that you continue to introduce new SKUs, so do we then kind of estimate -- or at least would it be fair to assume that the growth in this segment might continue to improve or at least sustain in double digits near term? And then I had a follow-up on shipping. .

Yeah, Sean, do you want to take that?.

Yeah. Thanks for your question, Naved. So there continues to be a lot of good things happening in the Vistaprint business. And as you mentioned, Naved, our top line growth did accelerate sequentially and year-over-year. We've very consistently talked about getting the Vistaprint business to consistent double-digit growth.

And while we have achieved that this quarter, as we've always said, we do expect revenue growth to fluctuate quarter-to-quarter and overtime. One of the things that contributed to -- slightly to the revenue growth is the timing of the Easter holiday. So that's a little bit of a tailwind here.

But underneath that, we see a continuation of the good results that the Vistaprint business that was able to produce. So let me just go through a couple of reasons for that. Your new customer count has grown now for the fourth quarter in a row. The growth from new customers, still in the single digits, but progressing nicely.

Repeat continues to be an area of strength. The repeat rate for our active and new cohorts was the highest this quarter that it's been in five years. So we continue to see good progress in the trends there.

As you referred to in your question, Naved, one of the objectives and area of focus for the Vistaprint business this year is the introduction of new products and they were able to introduce over 1,000 new SKUs, which is about 3 times the SKUs that were launched over the past year. So a significant expansion there.

The design services that the Vistaprint team is working on is also progressing nicely. So back to your question of, can we expect that this would continue in this direction, I would refer back to the beginning of my answer, which is growth rates will fluctuate overtime, and what we're looking to do is get to consistent double-digit growth. .

Okay, that's helpful. And then just to kind of drill into your answer a little bit more.

So can you just remind us what the roadmap is for SKU expansion and where you are currently?.

For SKU expansion? Yes, so as I mentioned, Naved, this past quarter we saw significant SKU expansion, more than we've seen -- significantly more than we've seen over the last year or so. So we are on track with our objectives there. .

What we've been doing, if you go to the site, you can see, for example, that the Vistaprint team has been hard at work pulling some of the Columbus products from that separate shopping experience that we have on that promotional products tab directly into the flow of the Vistaprint website.

And so this quarter, the expansion from Columbus really came in the area of T-shirts. And we also had non-Columbus oriented product expansion as well in the area of flyers. And post the end of the quarter actually, you can even see a couple of National Pen products on the site as well. .

Got it, okay, that's helpful. And then the second part of my question was around the shipping reduction. So I guess in your presentation, you kind of indicated that the impact on profits is expected to be slightly less than $20 million for the full year.

So should we then take that to assume that this reduction is actually having more success than you had anticipated and is paying back at a faster rate? What's the right way to think about this?.

Yes, so the way I would frame it, Naved, is we continue to see the data feedback that we want, which gives us confidence that we should continue and that we've made the right decision here. I don't think that there's anything materially better. Of course, it's the beginning of the year. We had an estimate of $20 million. That was indeed an estimate.

We were still very much testing in many jurisdictions. We've been through that testing and we are now fully rolled out, including in the U.S. and the Netherlands in Q3. So I would say, we're happy with how this is going and no material changes. .

Thank you. .

Thank you. .

I would add additional bit of color, is that the estimate of 20 million or the revised estimate of 17 million is not an amount of shipping price reduction, it's a net amount.

So there are -- when you actually realize that the price changes are quite a bit larger before taking into account the positive impact of that, the $20 million versus $17 million net is not that different, as an estimate. It's what Sean said. It's really going down, pretty much the type of experience and testing we expected. .

Understood. Thank you. .

Thanks, Naved. .

Our next question comes from the line of Kevin Steinke of Barrington Research. Your line is open. .

Good morning. So you mentioned in your comments that some of the products you're launching in Vistaprint are lower gross margin.

So I just wondering how we should think about how that impacts overall gross margin going forward, as well as what are the contribution margins of those products relative to others?.

Hey, Kevin. It's Robert. I'll just jump in on that. One, I'll come to the gross margin, which is a percentage in a moment. But the way we seek to make money is to have an increase in cash flow per customer relative to the cost of acquiring those customers. And even -- the cash flow is driven by having more gross profit.

So if we have larger amount of revenues, even at a lower gross margin percentage, the absolute gross profits can flow through well to the bottom line. And secondly, if we can leverage the substantial amount of marketing we do, the contribution which you referred to, can look even better.

That being said, we do see lower gross margins in percentage terms. But that is not atypical of prior products we've introduced in the past. We see that until we get to scale, we usually are not as optimized as we can be.

And secondly, we do recognize that some of the new products are going to have long-term gross margin percentages, which are lower than our traditional business, or at least for the foreseeable future because of the relative scale and possibly forever. But we still believe that from a cash flow perspective, they make sense.

And so the ROI of those investments is quite attractive. .

Yes. And I'll just add just a few other housekeeping things, Kevin, to round that out. So there are some other things you should think about in terms of gross margin, especially for this quarter. As Robert said, you do have lower margin for some of these new products, some of that mix has an impact.

There's other things that we're doing in the Vistaprint business like the shipping investments that we were just discussing in an answer to the prior question. So that's had an impact on gross margin as well. Now if you look at it on a consolidated basis, of course, the weighting of the Upload and Print businesses also has an impact.

This is the first full quarter of the WIRmachenDRUCK results because we did that acquisition February 1 of last year. The only other thing that I would mention that is -- it definitely plays in the gross margin, overall this quarter is currency, which did weigh unfavorably, which was the same as last quarter as well. .

Okay. That's all very helpful.

Can you just talk a little bit more about the impairment in the Upload and Print business? And I don't know if you care to specify which acquisition that was related to?.

Sure, Kevin. Robert here. We're not disclosing on this call where we specifically took it, because we are in a competitive market. And so I'd rather speak about it more generally. If I start at the top, we definitely see the acquisitions we've made over the past multiple years in the area of Upload and Print as a portfolio.

We've had wins and we've had losses.

But when we look at the overall success of the portfolio, we've clearly [Technical Difficulty], but we'll reiterate it today in some of the pre-call documents that the results -- specifically, I'm speaking about the cash flow results or the expected ROI we have as a portfolio, not only comfortably exceed our weighted average cost of capital, they additionally exceed the aggregate cash flow expectations we had for the portfolio.

Now that being said, again, we wish we would only hit homeruns and we won't ever strike out on deals. But we do have a mix of that. And so in this case, we think the business in question is healthy. It's a business which we still obviously have an interest in growing.

But we are investing in it and the investments we're making are lowering the cash flows relative to what our model was for that particular business unit when we acquired it. And so the accounting rules require us to write down that amount. Now inversely, the accounting rules do not require us or ask us or even allow us to write-off the successes.

So we've had these two hits to our impairment line. But again we're happy overall. .

Okay. That's helpful, makes sense.

So now that you've rolled out shipping reductions, I think, in most of your major markets, should we think that the worst of the headwinds from shipping price reductions are behind you? Or is it just kind of too hard to tell where that's going to go?.

Yeah, Kevin, I think we'll comment more specifically when we get to next quarter and discuss our investments for next year. We'll definitely be continuing to invest in shipping price [ph] reduction. So there's still will be a net impact, exactly what that is, yes, we'll be able to share more.

I would not expect any step function change here in the upward direction. But the precise number, we're still rolling off in our plans for fiscal 2018. .

It is fair to add color though that we have now rolled out shipping price reductions in our largest markets for the Vistaprint business unit. So new roll outs to go from former state which was shipping pricing was too high to the new place is really just left in smaller markets in Europe at this point. .

Okay, thanks. And then lastly, you mentioned seeing some early positive benefits from the decentralization.

I don't know if there's any way you can expand on what you're seeing or kind of early indications that that's working?.

Sure.

I would start by saying that despite the emotional difficulty of making decision to reduce our workforce, as we did, and see a lot of highly qualified and well liked colleagues leave the company; the fact remains when we look at the operations of the business post those changes, we feel we are moving at a minimum, as fast as we were before and often faster because we have reunited the business units into what is an organizational structure much more akin to what they were prior to the acquisitions or to what the Vistaprint was multiple years ago with a full delegation of accountability to the Managing Director or to the CEO of each of those business units of the full value chain, ranging from production and engineering and supply chain through to marketing and customer service.

And that allows for much more speed of reaction and customer focus and then, when we step back and say -- when we see the numbers that we've taken out of our cost structure, which we estimate is roughly $45 million to $50 million in free cash flow going forward that we are able to work.

When we are able to work as fast and as well or potentially faster and better than we were prior to spending that amount of money, we see that as a very good sign that we are on the right path. .

Right, and maybe just to add on to that just -- it was mentioned in our documents last night, but just to reiterate, the charges attached to the restructuring are, from a cash perspective, on the low end of the range we provided last quarter and overall, including the non-cash, just a little -- slightly under, just with changes in assumptions and things.

But we are kind of on track there. And then as Robert just mentioned, the cash savings that we had estimated and disclosed last quarter, we remain on track to have those for fiscal 2018. .

Great. Thanks for taking the questions. .

Thanks you Kevin. .

Thanks Kevin. .

Our next question comes from the line of Matthew Thornton of SunTrust. Your line is open. .

Yeah, hey, good morning, guys. A couple of questions if I could. Maybe just coming back to VBU again for a second, really nice uptick there in the organic growth, I know you called out Easter as one of the drivers there. We've talked about SKU expansion, that's perhaps a modest driver as well.

I think the uptick was probably the biggest we've seen since the March quarter of 2015.

Is there anything else there that we might be missing? Is it more effective marketing or a changing seasonality or anything else that you would kind of call out there?.

So the -- thanks, Matt, for your question. I'm not sure if there's anything specifically other than we've been at these changes for quite some time. The team's been working hard on all the things that we've talked about over the last couple of quarters, be it new product introduction, shipping and many other things.

And Trynka, talked at our Investor Day back in August about building momentum in the Vistaprint business and I think it is just a reflection of that. So I don't think there's anything else specifically to call out. The acceleration this quarter is helped a little bit by the Easter timing. Exactly how much is tough to estimate.

But it does help a little bit. So we do expect -- we'll get some fluctuation quarter-to-quarter. But I would say, it's largely a continuation of the story that we've been talking about over the last few quarters and years. .

All right, that's helpful. And then secondly, the -- a couple of housekeeping questions if I could, here.

The savings from the reorganization that kind of flowed through the P&L this quarter, did you quantify that anywhere?.

We did not quantify it. I think we did quantify the savings expectation for fiscal 2017, which is spread across Q3 and Q4. On the cash side -- and we split it out between cash and non-cash. On the cash side, the cash savings will be a bit heavier, excluding the charges, a bit heavier in Q4. And we are on track to hit those numbers for the full year. .

Got you. And I know you gave the numbers for next year as well, both cash and non-cash.

Is it fair to assume that by 4Q, we're basically on the same kind of quarterly run rate that you expect for next year? Are we kind of at steady state at by that point?.

From a savings perspective, directionally, yes, there's some of the non-comp stuff that we will get the full benefit of until we get into Q1 where we'll be at a full run rate. But we'll be almost there in Q4. .

All right, perfect. And then just jumping over, I know you talked a little bit about the new Reno shipping facility and that's a little bit of a drag on margin here.

Any way you can kind of quantify what that headwind is? And maybe just talk through the timeline as to when you think that will be at a better run rate, I guess?.

Yeah, Matt. We're not going to quantify it. Now that said, the scope of that facility is far smaller than -- I mean, you've been to some of our facilities, far smaller than for example, our Windsor, Ontario facility or Venlo, Netherlands. We also, just in terms of how that impacts our financial, this is a facility that we've leased.

And so the capital that we put in is really, some of the insights fit out as well as the initial equipment that we put in. So it is not anywhere near as material as what we've experienced in the past for some of our facilities.

That said, it does weigh, and of course, until you get enough volume where you can amortize some of those fixed cost over that volume, we'll of course continue to experience those startup costs. I would expect that to be over the next few quarters here as we get ramped up.

I mean we've really just started, just at the beginning of producing from there. .

Maybe from a longer-term perspective, I know that you mentioned at the beginning of your question, Matt, the shipping. The intention of this facility or one of the intentions of this facility is to help us ship product to customers on the West Coast, heavy products, bulky products like signage, more efficiently.

And so there should be -- once that kicks in, some offsets within COGS, actually, between shipping, pricing and the startup costs of that facility. .

All right, perfect, very helpful. Maybe one more for me and I'll jump back in the queue. I know the partner profits, I think that's been about a $5 million impact for the last several quarters. I think, it has been pretty steady there. Can you remind us what the -- I think you've talked about that, the partner profit being very high margin in the past.

Is that still the right way to think about that? I would've thought that that was a high margin business, probably a low gross profit, but a high margin revenue bucket.

Is that fair?.

Well, it depends on... .

Yeah. It depends on the margin. Okay, go ahead, Sean. .

Yeah, Robert, I just said the same thing, which shows that we are on the same page here, that it depends on your definition of margin and high margin. I think, of course, the margin of that in isolation, a little bit higher because it's not weighed by many of the fixed cost of the businesses that were running those partnerships.

And -- but you're right, Matt. The profitability impact is about $5 million this quarter, slightly higher than that last quarter. We do start to see that trail off now because we are lapping the termination of these partnerships. So the headwind there would go down in Q4 and then really be gone as we enter into the New Year here.

So that will be behind us. .

Perfect. Okay. And maybe I'll sneak one last one in if I could. I just want to paraphrase a prior answer. When you were talking about National Pen, obviously, we've rebased that a little bit here in 1Q and they've pruned a business there.

Is that now right sized? And as we go forward, we'll kind of grow sequentially or whatever that growth rate is, but we're kind of right sized now going forward? Or is there still more pruning or rightsizing to be done there?.

Well, I would avoid going into details on -- what we expect the future to be in terms of revenue growth, other than to say that when we look at it, we are very much supporting, as Sean said, the management efforts to go through and look at the ROI of individual expenditures. And we have seen it in the past.

They were encouraged or under some prior leadership that's no longer with the company, to spend money to drive the top-line growth which when you look at the cash flow, it's relative to the cost required to acquire new customers, didn't make sense. So we have not worked our way through that enough.

We're in the final stages of our budgeting internally for the fiscal year 2018. I think we'll obviously wrap up before we get to the end of June, and so I would not want to comment on that. We certainly will expect to speak more about all of our businesses, including National Pen, in our August Investor Day.

And I would expect we'll go in a little more detail. We -- that -- if I give some broad context, we still feel very comfortable with the deal model we put together. And we see this as a business which will grow over time.

I just don't want to get into specifics of how that curve is, as we prioritize good investment choices, including advertising choices over revenue growth. .

Perfect. Fair enough. .

I'll just add, one thing, Matt, which is yeah, you had asked about are we at a new baseline. In terms of the business line that was discontinued, yes, that is done. It's more, as Robert said, the optimization of advertising spend that the team is focused on. And we do -- we don't equate the returns in this business with the revenue growth specifically.

Of course, that needs to be there over time. .

Great. Thanks for the color guys. .

Thank you. .

Thanks. (Operator Instructions) Our next question comes from the line of Victor Anthony of Aegis Capital. Your line is open, sir. .

Yes. Thanks. I'll break with the cycle and just ask one, there's possibly two questions at the same time. So I'll just focus on all other business units because it's smaller, doesn't really get as much attention. In the write-up you said that you are lapping the loss of a department, I guess, in fiscal 2018.

So maybe you could just talk about the normalized growth rates for that collection of businesses that you expect in fiscal 2018. And for the Upload and Print business, you mentioned, in response to previous question about the competitive level in that market.

So maybe you could just talk about the competition and how you plan to address it and what is the level of marketing spend that you expect against that business unit?.

Okay. As to your first question, I mean any other -- or all other business units, when you strip out the loss of the one partner that we've spoken about, this is a very, very solidly double-digit growth business. It's above 20%. We don't go below 100, and we don't go into more details of that.

But these are small businesses that we're investing in foundations and we expect and hope that these will remain high growth for quite some time to come. But we don't get into more specific looking forward to FY18 on any forward-looking revenue guidance.

The second question, in terms of the Upload and Print market and the competitive environment there, like all of our businesses, this is a competitive environment. But we have acquired national leaders across Europe. And in aggregate, we are a very strong player.

And we have confidence that this will continue to grow in the double-digit range going forward, as we -- in line with what we've spoken about in the past. The competitive environment has not changed over the past one, two or three years relative to where it was before.

That being said, we do have a lot of competition and we have some very good, specific competitors in each of the markets. We think that our benefits come from being able to focus on given specific parts of the market either country focused or product focused with our different business units in that portfolio.

But secondly, as the platform, the mass customization platform comes online, when you look at that in the context of the Upload and Print businesses, what that will do is it will unify or make available all the different component of the supply chain of our multiple different business units, still managed individually by each business unit but exposed to each other so that the management teams of each business unit can take advantage of more competitive suppliers or production operations, be that in terms of speed or quality or cost or shipping due to proximity to a customer.

And so we see that that will help us as we grow into this business. And as we talked about for the last several years, including at the last August at the Investor Day, this fiscal year 2017, in terms of the platform, has been a continuation of foundation building. And we see fiscal '18 as the beginning of optimization, using what we have.

And so the Upload and Print business will be, we hope, a beneficiary of that optimization which will help us, with within the context of the competitive environment in which we compete. .

Okay. Thank you very much. .

So I received a question over email. And the question is specifically for Robert.

I think the person want to take advantage of having Robert on the call, to ask you if you could articulate why you're comfortable with three times of leverage and why something closer to two times is not more appropriate for Cimpress after considering the nature of your business and the much needed flexibility of -- that a stronger balance sheet would give you in darker hours?.

Okay, well, that's a good question. A few reasons give me comfort with 3x leverage as we talked about. First, we as a business generate very strong underlying free cash flows. Of course, we often choose to reinvest that cash flow into organic investment or to M&A or to share repurchases.

But that brings me to the second thing that comes to mind, which is, because so much of our cash outflow is discretionary, we do have the ability to dial it down on a relatively rapid basis if we need to or if we were to need to in the future. Hopefully, we won't get to those darker hours.

But if we do, if we -- assuming we don't, I would may be third point out that even when we are investing materially, like we are currently investing materially, we are able to delever.

And I think you'll see that over the coming nine months or so over which we believe we are going to move from the current 3.6 to plus or minus 3 as we've disclosed or talked about in other documents. And fourth, 3 times leverage is significantly below our technical maximum leverage for our debt covenants, which gives us some buffer.

Now I think your question, that you read, Meredith, also referred to something with the nature of our business. And personally, the nature of our business is a key reason for me feeling comfortable with relative stability of our underlying cash flows, because, first of all, we are not reliant on any large customers.

We have literally tens and tens of millions of individual customers. And secondly, we are a low-cost alternative to traditional suppliers.

And that means that in tough economic times, we've seen, over the last several decades, our customer value proposition of low cost becomes even more relevant because our customers look to save money any way they can.

So if I step back and try to summarize it, not only as a CEO but as a major shareholder with a very long-term time horizon, I look at the question of debt two ways. First, we are very cognizant and, I think appropriately wary of the potential negative impacts that equity holders would see if we get over leveraged and times get tough.

But we feel comfortable that plus or minus three times is appropriate for our business. Now that being said, the companies, certainly our own included, build value by raising capital and deploying it above the cost of capital and that helps us both raise more capital and lower our cost of capital.

So because we stay on a leverage range we feel comfortable with, that helps us maximize our intrinsic value per share, which is our top financial objective. .

Thank you, Robert. .

Thank you. And we have our next question from the line of Clifford Sosin of CAS Investment Partners. Your line is open. .

Thanks, guys. I just wanted to ask if there's been -- as you guys -- you don't have to share what your internal planned expectations were.

But as you compare what you see in MCP now versus how you were planning for it when the projects really got going, say, 1.5 year ago, is there any -- how would you say that your expectations are evolving? Do you [Technical Difficulty] things are going to likely be -- is what your [ph] learning making you think that you think things will be better than your original plan or worse? Thank you very much.

.

Sure, Cliff. I would say that, the highest level in line with original plans. But as you get the next level down, the question, you quickly get into the answer being they will be different.

And if I go back, it's almost three years since we had this concept of leveraging the fact that we could have multiple business units across the mass customization space that would share the supply chain, and in doing so, increase selection of products, lower cost, et cetera.

Now back then, we saw this as much more of a very large integrated supply chain that included a common manufacturing and fulfillment team and a layer of software on top of that, which would interface with different business units. We've gone through multiple steps in the learning and the evolution over the last three years.

But most recently, what we've seen in the reorganization we announced three months ago is we decentralized many, many parts of the business, in finance, in human resources, in other parts of the business.

But when you get to MCP, we also decentralized a large portion, almost a majority of the people that would have been in the MCP organization and the entirety or the near entirety of it in procurement of the manufacturing and supply chain.

So today's mass customization platform is focused on the software components, which operate for the benefit of integrated business units. And that is an execution change that is important on how we are going about it. But the overall objectives of increasing selection and reducing cost and sharing technology and investment remain the same.

And the other thing I'd say that has changed over time is the amount that we will be spending on the platform as an investment, will be coming down by definition, because if you think, of the platform as just being a component, a software component versus what we were doing before and we will be able to make that profitable more easily.

Now there's many other investments that we're making in manufacturing and supply-chain when that was originally part of the platform or other parts of the teams that were in MCP more recently that we still have in the business. They just been shifted to the business units. So this is not a wholesale change.

It's really -- but if you -- it is more of a refocusing or a continued focusing of the effort of what we're doing in MCP. Net-net, we think it will make our investment from the center being smaller over time and more focused and will increase the flexibility and speed with which our business units can deploy that technology. .

Thank you.

And just in terms of your expectations for the overall financial impact once the system is built and deployed, how have those evolved as you had initial learnings as the systems start to come together?.

They're not that different. I think the -- at a high level, we didn't have -- or at any level, we didn't have very precise expectations of x% COGS or y% revenue increase. We had ranges of outcomes. And likewise, on the investment stage, we had ranges of outcomes. So it's more of a scenario-based investment plan.

And when we look at the net returns on invested capital, I would say today, I feel equally or more comfortable that the ROIC from this investment will be good and or better than we originally thought. That being said, as I mentioned, we've had a continued -- over the last two or three years, a reduction in the scope of what we're trying to do.

So we're more focused and we -- I think that's leading to some of that comfort. .

Thank you. .

Thanks, Cliff. .

Thanks, Cliff. .

Thank you. And our next question is a follow-up from the line of Naved Khan of Cantor Fitzgerald. Your line is open. .

Yes, thank you very much. Robert, I -- so at the time of acquisition of National Pen and even on the last update you gave on that business, you guys had sort of called out the e-commerce opportunity and the potential to drive growth there.

Can you sort of talk about what the plans are in terms of leveraging e-commerce to drive growth in National Pen and then I had another question?.

Sure, Naved.

The first question -- answer I'd say is that we see the most near-term opportunity in the e-commerce being with our other business units and Meredith mentioned a few, which is the handful of products have already been introduced into the Vistaprint website from National Pen that will accelerate quite a bit over the coming one, two and three quarters.

So we will take a product line and production capability of National Pen, expose it to both Vistaprint, as well as for Upload and Print, and as well as some of our other business units, the smaller business units.

And we believe each of those being very strong e-commerce businesses with customers who value small volume orders of customized products they can use for marketing the business will value the National Pen product line. So that's the near-term focus.

Mid and long term, we definitely believe that National Pen has an opportunity to accelerate the rate of growth that they have in e-commerce within the brand of National Pen. And National Pen is already growing quite nicely in the e-commerce area and the business is not immaterial that comes through e-commerce. We don't break it out.

But we believe that with the know-how we have inside Cimpress, both technologically but also from a marketing perspective, we can, over a multi-year period, see that second leg of e-commerce growth being e-commerce within National Pen itself. .

Okay, that's helpful. And then the second question I have was on MCP. In your presentation, you kind of talked about how you're starting to see some of the cost synergies.

Can you give us some examples of where these cost synergies might come from over the medium and longer term?.

Sure. First, I'm going to go back, to, talking -- referring to a question that Cliff asked a few moments ago regarding the evolution of what we see as MCP. In the original incarnation of MCP, we included not only the manufacturing and fulfillment partnerships but also the procurement for things like paper and plates and shipping.

That, today, we do not consider as part of the MCP itself because of our refocusing of the software component. But we have maintained procurement centrally. So your question was about MCP, I realize.

But if you take the broader sense of what we're trying to do, one place we're already seeing material changes is in central procurement where we have a small team but a global team that works with our business units. And we mentioned we saw some very material, immediate ability to reduce our shipping cost post National Pen acquisition.

And we've seen similar things in our European and Vistaprint units as they share a supply-chain. Secondly as a comment on MCP, we do see the areas of savings or the areas of synergies being very similar.

And those fall into increasing the product line, the breadth and depth of the product line that any individual business unit has by letting them have access to the other business units capabilities. And secondly, COGS reduction. COGS reductions can come from several places.

It can be -- it can come from ability to shift production to a more specialized supplier. It could come from more volume coming from our own plants.

It could come from shifting production to outside third-party fulfillers who are geographically more approximate to our end customer and therefore, we can save in shipping by using third parties just like we are doing in for example the Reno production facility where we hope to produce closer to our West Coast customers.

But in the case of the platform, through a third-party fulfiller, we could do similar things without expanding our own capital to achieve that production. .

Thank you. .

And our next question is another follow-up from the line of Kevin Steinke of Barrington research. Your line is open. .

Hi. My question has essentially been answered in response to a prior one about MCP. I was just going to ask about the level of investment in fiscal 2018 and beyond as you shift focus to National Pen and Upload and Print. But it sounds like overall investment likely could trend down a bit.

Is that a fair way to think about it?.

Yes. But I would reiterate my comment about a lot of that being driven by the refocusing of what we categorized as MCP. We actually will be accelerating the amount of software spend that we have, which is highly consistent with plans we've had for the last several years for that component, which remains within MCP. .

Okay. Thank you. .

Thank you. .

Great. So I think that was the last question that we had.

Robert, I don't know if you have any parting comments for everyone?.

Thanks, Meredith. And thank you to everyone for having joined us today. We look forward to the next two months. We'll be finishing up a productive 2017 fiscal year in which we -- as you can see, have significantly reshaped our company in function of well-established and hopefully, well-articulated strategic and financial objectives.

And as we finish up FY17, we are of course in the midst of planning for FY18. So as we look forward to that year, we certainly also look forward to highlighting our plans with you in our Q4 earnings announcement in July and even more so to discussing those plans with you in more detail at our August 2017 Investor Day. So have a great day. .

Ladies and gentlemen, thank you for participating in this conference. This concludes the call. You may now disconnect. Everyone, have a wonderful day..