Ladies and gentlemen, welcome to the Vistaprint Fourth Quarter and Fiscal 2012 Question-and-answer Earnings Conference Call. My name is Regina and I will be your operator for today. This call is being hosted by Robert Keane, President and CEO; and Ernst Teunissen, Executive Vice President and CFO. [Operator Instructions] 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. Now we'll proceed with the first call.

Your first question today comes from the line of Carter Malloy with Stephens.

So first, just want to talk about the new investment in China and Singapore and India and what the thinking is behind that coming about now as opposed to earlier last year and if this is a good run rate for us to run this out in the out years. Or do you expect to increase it going forward?

Certainly. Robert speaking here. And when you say run rate into the future years, are you speaking about the investment?

Correct. You guys, I think, in the slides -- pretty deep in the slides called out about $12 million in incremental investment or unexpected investment this year. So just help us understand the rationale behind the incremental investment and what now.

Sure. So -- and this is something which we spoke about probably for the last 2 years as a adjacency in which we believe there was an opportunity for us to grow. If I step way back, Vistaprint has been very successful as a company going into multiple international markets. We're in well over 20 countries and we have roughly 50% of our revenues outside of the United States today. We -- when we went into the APAC region, broadly that was 3 or 4 years ago, we focused on the Australian market primarily because it was a -- albeit a smaller market, it was a -- more similar to the markets in Europe and North America where we've been successful. But we always saw that as a stepping stone towards the Asian markets. A year ago when we talked about adjacencies to our core business where we'd like to build foundations for future growth, we spoke about this. And at the time, we had reached an agreement, although we had not yet closed, on the PrintBell deal in India. That closed in November. At the same time, we were -- although we didn't talk about it publicly, we were in discussions with a number of people in China and we were in a strategic review of the Chinese market. But the reason it took so -- until now is really because we really want to just make sure we were going down the right path at the right speed rather than going there too precipitously. We also took a lot of time to recruit senior executive teams who are based in Singapore, who have deep experience with Western technology companies in the Asia Pacific markets like India and China, be it our President there, our legal teams, our high-end [ph] teams, our technology teams and the like. So referring to your question, we spent roughly $5 million in Asia last year in these types of investments, and this incremental investment you talk about is beyond that. We don't talk about the specifics of what we see the profile being in the out years beyond FY '13. That's not something we're disclosing. But we do not believe it will be accretive in the near term. This -- we view this as a -- potentially the largest market we ever will be in, long term, but it is a long-term investment. And when we talk about our 5-year aspirations from an earnings perspective, we think the aggregate of the various moves into adjacencies, be it the Webs acquisition, the Albumprinter acquisition or these Asian acquisitions, will be accretive in the 2016 time frame. But we have not gone into more detail and we're not disclosing at the time what our expectations are for the FY '14 to '16 investment in Asia specifically, other than we certainly do not expect it to be profitable at that time.

Okay. And then also can you tease apart any of the revenue outlook for us in terms of your 3 geographies? And, obviously, a lot questions around Europe and your expectations there. Importantly, even external of economic factors, when you expect the best practice implementation, user interface, cross-sell reduction, those types of things, to have a positive accelerant -- or accelerating impact on growth there?

Sure. The high-level numbers, just to put in perspective, sounds like you already have read this from the press release, but Asia Pacific grew 33% year-over-year in the quarter; the American -- or North American business, 18%; and the European business, 11%. The 11% was a major tick-down from prior rates and, at a year rate, was quite a bit stronger than that. We do see the application of those best practices that we are -- we've learned in North America. We've -- we're still developing in North America something which we can apply into Europe. But it is a different market in the sense that we have 17 different markets, and if we take our major markets, 5 or 6, that we need to apply those learnings into. And it is a -- it's not a black-and-white application, it's a balance of tone and messaging and pricing and product positioning. So we see the next year as an important time frame to address it. We were disappointed with Europe's performance but we don't see this as a 1- or 2-quarter return back to the high teens.

So given the trends that we’ve seen, we expect European revenue growth to be lower in '13 than the total for '12 that you've seen in the constant currency growth rate for the core business, and North America and Asia Pacific, sort -- around in-line of what you've seen in the last year.

Your next question is from the line of Mark May with Barclays Capital.

Couple questions. I think that your first quarter guidance revenue range is in this 13% to 18% organic constant currency. And I know in your prepared remarks, you talked about how kind of the near-term outlook will make it more challenging to hit the 20% CAGR over 5 years. I'm wondering what you think is maybe now a more reasonable expectation over that 5-, I guess, now 4-year period given kind of what you're seeing now. And then more of a technical question, maybe for Ernst: The deferral revenue impact on the Webs revenue in the quarter, if you could kind of help us think about that.

Sure. I'll start with the long-term growth, so we are still targeting the same goals that we laid out before. And we are noticing indeed, and we said this in the press release as well as in the remark notes, that Europe is weaker now than we would like it to be, and for '13, we feel it's prudent, therefore, to allow ourselves for the possibility of some continued weakness in Europe. It makes it more difficult to reach a lower target but it does not put it out of reach for us. We will need to reaccelerate growth in Europe over time. We've been doing that in North America. We've been seeing an uptick in our growth rates depending -- based on the strategy. We have been slower of seeing the positive benefits next to the tailwinds in Europe, but we're working hard on making sure that it gets done. And there's nothing that's changed in our point of view about what reduces our confidence in the end market opportunity in Europe. And the fact that we have some success in North America gives us confidence that we can do the same in Europe.

Maybe if I could jump in with a kind of a follow-up to that. I think in your prepared remarks you talked about ramping up your broadcast advertising in Europe over the next year, kind of similar to what you've done here in North America. Earlier, you talked about that we should expect Europe growth that's slower in fiscal '13 than what we saw in fiscal '12. Are you assuming any benefit from the just kind of stepped-up broadcast advertising in that expectation?

Yes, Mark, this is Robert speaking. Yes, we are, in the sense that, that will become a tailwind, but where we are in Europe's testing is much more analogous to where we were in North America 2 years or so ago when we got a lot of investor questions about the testing we were doing. We won't simply turn on a large amount of advertising in a market without going through the testing, and that is a long cycle. Now we did testing in Europe last year. We're in our second year of testing in some of those markets, but because of the cultural specificity of advertising, that learning cycle is a market-by-market learning. So we aren't able to and we're not planning on getting anywhere near the type of use of television advertising or broadcast in Europe for 2013 fiscal year that we will be seeing in North America. We do expect to be testing it and we expect to be using it successfully based on some of the tests we did last year. It will just be at a smaller level -- a lower level and, because of that, will not give the type of tailwinds we see in North America. Do you want to talk about the Webs question?

The deferred revenue, you were asking about, Mark?

Yes, if you could give us...

The deferred revenue impact from Webs is $0.5 million for Q4 and $1.1 million for the full year.

Your next question comes from the line of Shawn Milne with Janney Capital Markets.

Just a little housekeeping click on the fourth quarter. What was the delay in some of the spending that caused the over performance in the margins? And just then on -- I think people have asked a fair amount on Europe, but North America, after accelerating -- reaccelerating a bit, still decent growth rate but slowed back down. Anything to call out on that front?

I'll start with the profitability. There were quite a few different factors that contributed to the earnings outperformance. Revenue was closer to the low end of the range -- of our guidance range, as you will have seen, but we delivered better-than-expected gross margins. We spent less in external advertising. There were -- we saw higher efficiency. And also in light of some softness in Europe, we had certain campaigns that were not performing as well as we thought and we spent less on them. We had some lower consultants and some legal fees than we planned. We also paid out bonuses at a lower amount than we had originally planned due to the weaker growth in revenue. And we had some below-the-line currency benefits from -- really from balance sheet revaluations that were going on.

As to your question about the North America difference between Q3 and Q4, I, first of all, would caution you to look at any specific tweak, as opposed to a general trend and read too much into a tweak up or down in 100 basis points in a growth rate. So if you look at the slope of the growth in North America, it has trended up but a small amount can make it 19% or 17%. I would say that Q3 is a -- I mean, that -- for us, that's the March quarter, is a much more effective broadcast time and so we spend more in broadcast advertising then. And we only spend in Q3. We still spend in Q3 on broadcast but we toned it down because of our experience from prior years of testing knowing that the best returns are not in that quarter.

You meant Q4, right, you toned down?

I'm sorry, we toned down in the June Q4 quarter, that's correct.

Yes, okay. And just, I know it's less -- well, it's still relatively sizable, but just on Albumprinter, it might be somewhere in that deck, but what was the FX neutral growth there? And what do you think that growth looks like in '13?

Shawn, for the quarter, it is in the deck. It was 29% for the quarter and it was 35% for the year.

Those are FX neutral?

That’s Europe, including Albumprinter. He's asking about Albumprinter specifically.

That is Albumprinter. Albumprinter for -- just Albumprinter, right, Shawn?

Yes.

Yes, 29% for the quarter and 35% for the year.

Your next question comes from the line of Mark Zgutowicz with Piper Jaffray.

You've got John Crowther on here for Mark. First question, and I know people have hit you on it a couple times on Europe, but just wondering if you saw any sort of difference between performance of your small business versus your consumer unit in Europe. Looks like Albumprinter, at 29%, was fairly decent or maybe a little bit better than you were expecting, so wondering if there was a difference on those 2 lines of business.

Indeed, Albumprinter performed very, very much in line with our expectation. And we didn't see a disappointment in their performance. It was really in our core Vistaprint segment that we saw the weakness, and that was both in consumer and in business.

But I would not draw too much of a conclusion. Albumprinter still today is very concentrated in the Benelux and, specifically, the Netherlands so it's -- as opposed to being across all of Europe, and it's a much smaller business. So we also, as an organization in the consumer business, very much look to our second quarter in December. That will be true for Albumprinter as well, but that's really where we can see how the consumer business is doing for us.

And that's -- sort of a lead-in to my next question which is, given what you're seeing here in Europe and, obviously, long-term goals to sort of leverage your footprint across Europe with the Albumprinter sort of brand, wondering if that changes sort of how you plan to spread that brand out across Europe here in the near term.

No. The strategy that we set out when we were considering acquiring them and the reason we chose them, it was set more than a year ago and still is what we're pursuing. And just to summarize, we actually are selling those products under 3 brands. They were selling under 2 brands, so if I start with the traditional Albumprinter, they have the wholesaler relationship, somewhat like we sell via Staples or Intuit or FedEx Kinko's in North America, they sell through retailers in Europe. They also sell through our own brand name, Albelli, which is a direct business-to-consumer brand. And that, we're maintaining in the market and it's positioned somewhat differently than our core Vistaprint brand. And then finally, what we are doing is we're taking those product sets and photo books and selling them under the Vistaprint brand to our customer base across Europe. So those -- that strategy for our brand is not [indiscernible] be modified based on what we're seeing. We're in the midst of implementing it, and that will be something we'll continue to use over the coming years.

Okay. And then what -- you've touched on it briefly on pulling back some of your advertising spend in Europe given sort of the performance there, and that obviously drove some benefit to your sales and marketing line as a percent of revenue. Should we assume that given what you see as this being a couple quarters of tough operating environment in Europe, that we should see sort of a lower percent of revenue for the sales and marketing line as you kind of hold off in Europe until you see things start to improve?

We're really going to look at that into the first quarter and the second quarter, is how the different channels can perform. And we've learned, obviously, in Q3 and Q4 which channels work better and less well for us in the current trading environment, so we're shifting some investment around as well. But as said, we continue to be just prudent about our expectations about the European market and we'll also be prudent in how we invest in that period.

Your next question is from the line of Mitch Bartlett with Craig-Hallum.

The webs.com acquisition, you were -- had not integrated that across your portfolio of products for the last couple of quarters, but I believe that, that was to be the case going forward. Is there a way of us understanding what the revenue contribution from selling products to Webs' digital customers might yield you this year or how -- what that amount is incorporated in your guidance?

It's relatively small. So Webs is a small company overall. We do think that we can cross-sell to that base and especially that includes their free base. But that won’t be meaningful in terms of -- until post integration in terms of both the product -- the technology but also the content integration. And that still is probably almost 12 months off. There are certain things that we are -- you can already see on our Vistaprint site. If you're in the right split run where we're testing their products, like their Facebook products, on our site, and you can see that on our public site today. That's going the opposite direction of what you're asking about. But we're going to take a slow-but-sure approach into it as to -- as opposed to jumping in and doing aggressive cross-selling. So the summary answer to your question, then, is: It's a very small portion of our forecast -- or our guidance for this year is based on that type of cross-selling.

So what we're able to do at the moment is just use the -- use each other's customers bases and use the email addresses. But the real value that we see is on the -- really, integration of the content and being able to -- on each other's sites, be able to offer the products. And that's under development still.

Okay. And secondly, any update on the number of digital customers?

For the full year, or for the quarter?

For the end of the year, yes.

351,000.

And there are no further questions in queue at this time.

Okay, well, thank you, operator. And thank you to everyone for joining the call and spending time with us this evening. We just finished the fiscal year in which we’ve made great progress against the strategic initiatives that we outlined one year ago, and we're continuing to work towards our longer-term financial objectives. Clearly, today we're a much more customer-centric and much more competitive company because of the investments we've made to drive scale, advantage, and to lay the foundations for new growth opportunities that will serve us in the future. We certainly do feel challenged by the near-term revenue outlook, specifically in the European geography, but we believe that we have the right strategy, the processes, the people and, very importantly, the competitive position to overcome those challenges for the longer term. I look forward to seeing some of you over the quarter in face-to-face meetings and to speaking to all of you in 3 months. Thank you.

Ladies and gentlemen, thank you so much for your participation in today's conference. This does conclude our presentation, and you may now disconnect. Have a great day.