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VistaPrint Ltd. (VPRT)

F3Q09 (Qtr End 3/31/09) Earnings Call

April 30, 2009 05:00 PM ET


Mike Giannetto - Executive Vice President and Chief Financial Officer

Robert Keane - President and Chief Executive Officer


Mark Mahaney - Citi Investment Research

Youssef Squali - Jefferies & Company

Jennifer Watson - Goldman Sachs

James Friedland - Cowen and Company

Franco Turrinelli - William Blair & Co.

Mark May - Needham & Company

Mitch Bartlett - Craig-Hallum Capital



Ladies and gentlemen, welcome to the VistaPrint Fiscal Year 2009 Third Quarter Q&A Earnings Conference Call. My name is Leticia (ph), 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. Risk that could impact those statements are described in the documents that are periodically filed with the Securities and Exchange Commission.

Now, we'll proceed with first call.

Question-and-Answer Session


And our first question will come from the line of Mr. Mark Mahaney. Please proceed.

Mark Mahaney - Citi Investment Research

Thank you. I wanted to ask a couple of questions please. Could you talk about the materiality if any of the FedEx deal. Second, could you talk about the gross margin trends seem to have nicely continue days to stabilization trend from last quarter, how sustainable is that going forward. Those I guess, this question is for Mike?

And Robert, I want to ask you a broad question which is just you have a visibility in the both consumer and in the small business span. I understand more in the small business, but is there something you see that indicates the consumer has come back little bit more quickly than the small business demand just abroad -- across the broad markets that you look at? Thank you very much.

Mike Giannetto

Thank you. Mark, this is Mike. So, in terms of the FedEx announcement, obviously we're very pleased to be striking this partnership with FedEx. In terms of materiality, we don't comment specifically on any strategic partnership relationships as we didn't when we signed with OfficeMax and other.

So, I won't get into specifics about materiality other than to say what we did say in our release. It is a partnership that will cover all of the U.S. There are 1,600 stores within FedEx, Office, then we'll also be online with them partnering as well.

In terms of your second question on gross margin. Gross margin for Q3 came in at 63.5%, which was flat with our Q2 results the December quarter. So, we were pleased with that.

In terms of the dynamics within, basically the flatness on the gross margin quarter-to-quarter. We did have less volume, but we did in terms of cognizant absorption. But last quarter we did have a one-time charge which we did not repeat in Q3. And we saw a continued labor productivity improvements in both our plans. So it was a very strong quarter for gross margin.

Year-over-year when you look at gross margin, it did improve quite a bit 220 basis points over our Q3 '08 about 110 basis points of that was foreign exchange related with the Canadian dollar and the U.S. dollar movement, which last year returned us and this year is -- has been a positive.

In addition to that, again we've seen some nice labor productivity improvements in the plants as well some material pricing reductions.

Robert Keane

And Mark, in terms of your question regarding our inside its consumer versus small business. One I would say that clearly there is a very tough economy out there and the economic conditions are also exacerbated for VistaPrint pipe, the currency headwinds. We -- I wouldn't want to say what, that we can see a great difference in the bounce back of one segment consumer versus another small business.

As you can see the numbers is and its the case every year, there is a great seasonal shift, the December quarter is our best quarter by far for the consumer business and holiday related business products and it really shifts a back to a small business focus in the March quarters that we just completed. So, we believe the market is tough out there because of the economic conditions but we believe that VistaPrint is very well-positioned relatively and we're very pleased with the constant currency 30% growth we had but that was a consistent comment across both the consumer and the small businesses market.

Mark Mahaney - Citi Investment Research

Thank you Robert. Thank you Mike.


And our next question comes from the line of Youssef Squali with Jefferies & Company. Please proceed.

Youssef Squali - Jefferies & Company

Thank you very much. And I guess, congrats on a very good quarter. (Foreign Language). So with that couple of questions for you first Robert. Could you delineate or could you help us just parse out growth in consumer revenue in the quarter versus growth in small business there was a fear coming out of the December quarter that we're going to see that the small business wouldn't necessarily comeback. So if you can maybe just -- I know you don't breakout the exact numbers, but at least help us kind of gage the growth in small business. And secondarily, Mike on the gross margin issue. What was the FX impact sequentially on gross margins and I have a follow-up?

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