VPRT

Vistaprint N.V. (VPRT)

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VistaPrint Ltd. (VPRT)

F2Q09 (Qtr End 12/31/08) Earnings Call

January 27, 2009 5:00 p.m. ET

Executives

Robert Keane – President and CEO

Mike Giannetto – Executive Vice President and CFO

Analysts

Mark May – Needham & Company

Scott Berg – ThinkPanmure

Mitch Bartlett – Craig-Hallum

Michael Weisberg – ING

Franco Turrinelli – William & Blair Company

[Mark Mahaney]

Jennifer Watson – Goldman Sachs

[Novak]-Jeffries & Co.

Jim Friedland – Cowen and Company

Franco Turrinelli – William Blair & Company

Scott Devitt – Stifel Nicolaus

Presentation

Operator

Ladies and gentlemen welcome to the VistaPrint fiscal year 2009 second quarter Q&A earnings conference call. My name is Lemmanuel and I will be your operator for today. This call is being hosted by Robert Keane, President and CEO and Mike Giannetto, Executive Vice President and CFO.

Before we take the first call, as noted in the Safe Harbor statement at the beginning of the earnings presentation, comments may include forward-looking statements, including statements regarding revenue and earnings guidance and actual results may differ materially. Risks that could impact those statements are described in documents that are periodically filed with the Securities and Exchange Commission.

Now we’ll proceed to the first call.

Question-and-Answer Session

(Operator instructions) And our first question will come from the line of Mark Mahaney (ph). Please proceed.

[Mark Mahaney]

Great, thanks. Two quick questions please. Comment on the sustainability of what was very impressive gross margin expansion, so going forwards. And then secondly any new reads into the back half of the fiscal year? You had very significant upside to your revenue guidance this quarter. You did not seem to filter it into H2 guidance. Is that just being cautious or is there something that you saw just recently this quarter that makes you want to get even more cautious about the second half of the fiscal year? Thank you.

Robert Keane

Thank you, Mark. So why don’t you do that Mike.

Mike Giannetto

Mark, this is Mike. In terms of the gross margin performance for Q2 December quarter we were quite pleased with it at 63.5%. And just to answer your question by talking a little bit about the positive movement we saw in the quarter. You know FX did help gross margin a bit, but we also saw an increase in volumes during the quarter, which definitely helped gross margin as well as a shift in product mix. The holiday seasonal products performed quite well and the gross margins were very good and really a lot of leader (ph) efficiencies were realized during the quarter as well.

In terms of how we see that progressing, although we don’t guide to gross margin, we are expecting it to decline in the second half of the year from what we saw in Q2. A lot of this will be volume related. As you can see from our revenue guidance we are expecting a sequential decline in the Q3 from Q2. So I think we will see a decline in the gross margin due to volume as well as a shift in product mix. I mentioned the favorable mix in the December quarter. We sold quite a bit in the seasonal products, which obviously will be decreasing to nearly nothing in Q3, so we won’t see that favorability.

Robert Keane

Your second part of the question, I think, talked about the ability to continue in the second half in terms of revenue. And the key issue we have is that we, of course, are very pleased with performance in Q2, but a lot of that revenue was driven by products which are explicitly tied to the end of the year holidays. As those go away we need to backfill with the small business products and services, which we certainly expect to grow very strongly for our guidance into the March quarter and into the June quarter. But given the macroeconomic and exchange rate environment we think that the range we’ve given is a realistic range.

[Mark Mahaney]

Thank you, Robert. Thank you, Mike.

Mike Giannetto

You’re welcome.

Operator

And our next question will come from the line of Jennifer Watson with Goldman Sachs. Please proceed.

Jennifer Watson – Goldman Sachs

Great, thank you. Can you talk a little bit about the strength that you saw internationally? It seems like the FX headwinds were about in line to maybe slightly worse than expected, but yet international really outperformed. So we saw an acceleration excluding the FX. Can you talk to what really drove the strength there?

Robert Keane

Sure. Our regional performances, of course, fluctuate over time and I agree with you our European economies and the currencies were weak as well as the economy that were week. That being said we had 65% constant currency growth rate outside of the United States when you don’t include the currency headwinds year-over-year. And clearly we had a lot of hard work and creativity on the part of many dedicated people in the team we’ve built up there over the last two years or so. But there is also just some seasonal differences that we see. We had a very strong holiday period and that was if you look at last year’s performance, holiday was also strong in Europe.

So it was a combination of natural fluctuation of the business, some great results driven by the team we built up there, and then some natural sequentiality of the business that favors Europe in that quarter.

Jennifer Watson – Goldman Sachs

Okay, and then just one other question on the Cap Ex. It looks like that came in a little bit lighter than you had anticipated. Did you push back any investments or were you just more efficient with your spend than you had anticipated?

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