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Start Time: 17:15

End Time: 18:00

VistaPrint Ltd. (VPRT)

F2Q10 (Qtr End 12/31/09) Earnings Call

January 28, 2010, 5:15 p.m. ET


Robert Keane - President and CEO

Mike Giannetto - EVP and CFO


Youssef Squali - Jefferies

Ingrid Chung - Goldman Sachs

Shawn Milne - Janney Capital Markets

Kevin Copelman - Cowen & Company

Mark May - Needham & Company

Scott Devitt - Morgan Stanley

Mitch Bartlett - Craig-Hallum

William Morrison - ThinkEquity

Aaron Kessler - Kaufman

Kevin Steinke - Barrington Research

Ed Antoian



Ladies and gentlemen, welcome to the Vistaprint fiscal year 2010 second quarter Q&A earnings conference call. My name is Chris 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 the documents that are periodically filed with the Securities and Exchange Commission. (Operator Instructions).

Question-and-Answer Session


Our first question comes from the line of Youssef Squali. Please proceed.

Youssef Squali - Jefferies

Thank you very much. Youssef Squali, Jefferies. Hi, everybody and Robert congratulations on a very good quarter. So, couple questions, I guess, starting with the mandatory guidance question. So, if I look at your Q3 guidance, I am looking at sequential drop in revenues of roughly 13%, if I do the same math last year, it was about 8%. In prior years, it was even less. So, is that basically driven by your usual conservatism? Are you seeing something to make you more cautious, was Europe substantially above expectations and that's not sustainable, that's why you're doing it or is it something else?

And then, I guess related to that, if I look at the margins, they're substantially below where they were in prior quarters and even in same periods in prior years. How much of that is driven by Vertrue and this acquisition that you are talking about being dilutive? It was too small for me to have thought it was going to be that dilutive. So, maybe you can just help us understand those?

Mike Giannetto

Hi Youssef, it's Mike. So, in terms of the revenue growth Q2 to Q3, Q2 we just finished a pretty outstanding quarter in terms of revenue growth driven, as we would expect in this quarter, driven by the holiday and consumer related products. What we've seen in the seasonality in the business is that in Q3, obviously the holiday goes away and we see a drop in overall revenue. I would say, we're obviously seeing the same directional move as we did last year and the year before. In terms of relative to your conservatism or not in the revenue guidance, I think, we have a realistic range on the lower end at the 165, I think, it's no conservative but in terms of the overall range, we think it's a realistic range based on our forecast and expectations right now. In terms of the margins?

Youssef Squali - Jefferies

Why would it be substantially below what it was last year, I guess, is my question?

Mike Giannetto

You mean a sequential drop from…

Youssef Squali - Jefferies


Mike Giannetto


Youssef Squali - Jefferies


Mike Giannetto

Well, I think, we had an unbelievably strong Q2 that we just finished and the mix of the business changes very substantially as we now back to business. So, the out performance that was in the quarter was not in large, but a very significant part driven by the holiday products which don't exist after New Year's. So, I think, that's a major driver.

Youssef Squali - Jefferies

Okay. And on the margin?

Mike Giannetto

So, for the margins, Q2 we had a record profitable quarter in terms of dollars in margins and what we see obviously from a revenue standpoint, in our guidance, the midpoint, we were guiding to a revenue number about $25 million lower which obviously is going to negatively impact margins. As well as we announced back a couple months ago, we terminated the membership programs which is no longer part of our revenue stream and we are continuing to make investments that we first outlined, as we entered the fiscal year. In some cases we've accelerated some of those investments given the over performance in Q2 and our confidence in terms of delivering on the revenue in the second half of the year. So, there's a combination of revenue drop, which we would expect going into Q3 on the continued ramping up of investments as well over the second half of the year.

And there is some dilution which we haven't specifically called out in terms of a number, but there is some dilution associated with the Soft Sight acquisition, as we integrate into the business with really no revenue stream. We won't see any revenue coming from that product line until next fiscal year.

Youssef Squali - Jefferies

And just lastly, if I may, if I look at COCA, it's up another dollar sequentially. I think it was $21.89, up from $20.79. So, now this is a trend. How should we be thinking about COCA, is that even a derived really outcome that you don't necessarily manage to or how should we be thinking about that going forward?

Mike Giannetto

You're right. That is the calculation. Sequentially, I think this quarter, sequentially Q1 and Q2, Q2 we do normally see an increase in the COCA in general advertising expenses which is really related to the holiday period where advertising costs in general will elevate. To your point, do I manage into it, we do not manage to a COCA number or the calculation you just did which is (inaudible) for COCA.

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