Vistaprint N.V. (VPRT) Q3 2012 Earnings Call April 26, 2012 5:15 pm ET Executives Robert S. Keane - Founder, Chairman of The Management Board, Chief Executive Officer and President Ernst J. Teunissen - Chief Financial Officer, Executive Vice President and Member of Management Board Analysts Korosh Saba - Stephens Inc., Research Division Mitchell Barlett - Craig-Hallum Capital Group LLC, Research Division Kevin Allen - Barclays Capital, Research Division Mark J. Zgutowicz - Piper Jaffray Companies, Research Division Presentation Operator
Robert S. KeaneWe do not believe it was something we can ascribe to macro conditions. We grew 18% in constant currency. That was strong given the economy there. We would have liked to see some better growth, but we certainly remain very optimistic about the opportunity there. Our new customer orders in volume grew very strong -- strongly. And I think the difference we're seeing in Europe maybe versus North America more so than the economy could be ascribed to the fact that the positive results that we're seeing -- started to see in North America from our strategy in terms of how we're going to market, how we're positioning some of the improvements to value proposition are trailing in their impact in Europe because we didn't get to them as quickly. And we are seeing some near-term drag in Europe as expected on revenues from changes we made this year to reduce cross-sell and other improvements to the user interface. Again, I do want to stress that regarding the economy, it's very difficult to ascribe any of the impact the European economy has on our business. And because there are economies there doing very well, and we don't see a big differentiation between those. Korosh Saba - Stephens Inc., Research Division And then also any update in terms of strategy around Webs and ability to get those customers to buy into your base or vice versa? Robert S. Keane Yes, we're really too early to announce success there. We worked very diligently to host acquisition planning. We had certainly done pre-acquisition planning. But we only, in Q3, have begun limited testing. We do -- and we've started to offer Vistaprint offers to the web subscribers. Likewise, we started offering Albelli photo books to Vistaprint customers, but it's very limited testing. The big impact is going to be after we've had the time to do some of the integration on our software and our technologies. If we look at all the products we sell, we have a much more -- a very material uplift in our ability to cross-sell once we have built the software to automatically match and adapt from one product format to another. That will be quite some time and into the fiscal 2013 before we start rolling that functionality out.
OperatorYour next question is from the line of Mitch Bartlett with Craig-Hallum. Mitchell Barlett - Craig-Hallum Capital Group LLC, Research Division So first question would be on gross profit margin. It seemed very strong, especially in the discussion that you provided. You backed out some of the acquisition stuff and it would have been probably one of the best gross margins in -- for the third quarter in years. And yet the AOV is down and other impacts, the investment in the substrate. So maybe you could just talk about what's going on in the gross margin and provide some commentary there. Robert S. Keane Yes, of course. Yes, indeed, our -- if you'd purely look at our organic business without the acquisitions, our gross margin was 66%. So that's quite a positive improvement versus last year. It is obviously down from the previous quarter in which we have a lot of absorption of volume. But even if you just look across a year to now, you see about a 70 basis point improvement. And that is with some headwinds like investments in substrate, as you say. So you do see that we continue with improvement in the way we operate our plans, continue with improvement in the way with what we achieve in terms of productivity in areas, but also continued absorption of volume. We are growing at 20%, and you see that in our plant as well. So it's a combination of improvements and volume year-on-year, which allows us to get to these improvements. Mitchell Barlett - Craig-Hallum Capital Group LLC, Research Division So maybe talk to that, the -- where you are in terms of the absorption of your manufacturing overhead as opposed to last year or recent years? Volume... Read the rest of this transcript for free on seekingalpha.com