Ladies and gentlemen, welcome to Cimpress Fiscal Year 2016 Third Quarter Q&A Earnings Conference Call. My name is Stephanie and I’ll be your operator for today. This call is being hosted by Robert Keane, President and CEO; and Sean Quinn, Senior Vice President and CFO. 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. We turn now to Sean Quinn for opening remarks.

Thanks a lot, Stephanie. Hello, everyone, and welcome to our Q3 earnings call. Before we take questions today, I’d like to just highlight a few things from our prepared commentary we posted last night. First, the Vistaprint business unit continues to strengthen as a result of the many changes and investments we’ve made over the last several years. We’re optimistic about the progress we’re making toward our aspiration of returning the Vistaprint business to double-digit revenue growth, which we achieved this quarter but expect to fluctuate as we continue to make further investments that we believe will improve the value proposition to Vistaprint customers, often at the expense of higher near-term revenue and profit. Second, our Upload and Print business units segment performed well during the third quarter, growing 25% in constant currencies excluding acquisitions completed during the last year. This growth was a little bit slower than it had been in the last couple of quarters but the revenue was in line with our expectations. As we said, the growth rates of the various Upload and Print businesses vary significantly and we also expect the growth of some of the faster growing businesses to moderate over time. Next, we booked a $31 million goodwill impairment charge related to our Exagroup acquisition, which impacted our GAAP results. Despite the partial impairment, we believe that Exagroup is a market leader with a solid future whose value is now properly reflected on our balance sheet, net of the impairment. We continue to believe that our portfolio of Upload and Print acquisitions will return above our 15% hurdle rate, even with the lower expected returns from Exagroup. Finally, we’re making good progress across the categories of investments and focus areas we described in depth back at our August 2015 Investor Day. We’ve updated our outlook for fiscal year 2016 investment spending, which includes a slightly reduced adjusted NOPAT burden of our major organic investments, diverse other investments that are now expected to grow more slowly than consolidated revenue instead of in line with it on an adjusted NOPAT basis and aggregate capital expenditures that are lower than we originally planned, which in combination with the adjusted NOPAT impact should benefit free cash flow for the year. With that, we’d like to take your question.

Thank you. [Operator Instructions] Our first question is comes from Youssef Squali with Cantor Fitzgerald. Your line is open.

I guess starting with just a numbers question, what was the contribution of your latest acquisition, where market dropped to the quarter, when did it close. We’re just trying to have an apples-to-apples comparison, what you reported and where expectations were. And then on the lower level of investment, can you maybe just help explain the reasons behind it and impacts of these lower investments on future revenue growth and returns arguably, you guys at Analyst Day had put out a series of investments that you needed to do. Which areas are you spending less on and what is that like for ROIC? And I have a follow-up. Thanks.

Yes, thanks, Youssef. So, I’ll take the first couple here. So, firstly, Youssef, on WIRmachenDRUCK, we haven’t disclosed the actual revenue in these materials, but just to give you a little bit of commentary there, the acquisition did close on February 1st, as we had expected. And so we had two full months of contribution from WIRmachenDRUCK in this fiscal quarter. To go to the next set of questions, which is really around investment spend, let me just go through the couple of categories of investment spend that we outlined back in August and explain where we’re a little bit lower and what some of the drivers are. I guess, I should start out by saying that our approach there hasn’t changed though, our approach to capital allocation, the areas that we’re focused on; there’s really been no change there. We feel good about the progress that we’re making across those investment categories and focused areas. And this is really just us not spending quite as much as we had expected. Let me go little bit deeper. In our major long-term investments, there, we said that for the full year we expect to be a little bit lower than the numbers that we outlined back at Investor Day. And there’s really nothing specific to call out, whether it’s our investments in our platform, in Columbus, in post-merger integration of our Most of World businesses. We continue to execute against our plan, and this is just a little bit lighter than we had expected. So, as far as your last question, the impact on returns, we don’t see anything there that needs to be highlighted. The second category of investments that we outlined was discrete other investments. And there, we had said back in August that we expect that they would grow in line with revenues. And there’s really two drivers to the change that we outlined in the materials last night. One is that the spend is a little bit lower than we had expected. And so, we are seeing leverage in areas like advertising, which was one of the larger spend categories within that that we outlined in August and you can see that in the results. You see advertising as a percentage of revenue a little bit lower than it has been historically. The second reason for our change in commentary there is that we have had additional revenue from things like our WIRmachenDRUCK acquisition. So, when you think about the growth of those investments relative to revenue, obviously revenue impacts the trending there.

And on Exagroup, can you provide more color on actually what happened? I think you cited competition, is this trend specific? If not, why wouldn’t that impact your other divisions in the U&P? Thanks.

Youssef, Robert here. First of all, at the aggregate level across all the different companies we’ve bought here in that space including multiple companies that operate in France, besides Exaprint, that Pixartprinting, Easyflyer and Alcione, [ph] we see often the companies that we bought, especially some of the major ones are performing above our deal model. So, revenue growth is faster than we predicted in our deal model and profitability is faster. So, when we talk about how we think the entire aggregate portfolio of those acquisitions are doing, we feel we’re doing well and above -- better than the middle of the bell curve of expectations. Now, what we are seeing is couple of things, as Sean said and as we said in our prepared remarks that were public last night, we think this company, Exaprint is an excellent company; they have a very-very strong reputation with professional graphic designers in France and to a lesser extent in a few other European countries. What we are seeing though is that frankly and we said this in the prepared remarks, we overpaid for the business. If we look back relative to what we’re doing there, can we look at other deals, we think we could have been more -- we weren’t expected to bid for that against one of our major competitors in Europe and for whatever reasons we allowed ourselves to do that. That being said, we had a deal model that supported that expectation that we can pay that higher multiple. And what we are seeing is that the very fast growth we’re seeing at brands like Pixartprinting are indicative of a market that is being pushed to go faster and faster in terms of breadth and depth of product introductions, in price reductions, in some cases not always. And the model that Exagroup had was not and is not that, what I’ll call, open pricing model that makes Pixartprinting, WIRmachenDRUCK and other brands we have still successful. So, as we said in the note, the team at Exaprint has made plans and already reacted in a number of different ways in terms of adjusting their pricing because we have the same cost structure as a business available to us in the plans we used for the other brands. We have not yet integrated those other plans into Exaprint because they are currently outsourcing a lot. But we’ve adjusted down pricing in key areas. We’ve changed some of the go-to-market areas and we believe that will solidify and fortify the competitive position of Exaprint and they have a very healthy future in front of it. But when we run the DCF or what we expect to have relative to our deal model that we based our goodwill on, we had a pretty decent curve. And Sean, do have anything you want to add to that?

Yes, maybe just a few things. I mean, Youssef, just to add on to what Robert said about to why Exagroup is different from some of the others in the portfolio, Exagroup is definitely positioned as a premium brand. And as Robert started to describe, they go to market through what we call closed networks, so it’s only open to graphic professionals and with very high levels of service. And so, they’re more premium positioned in the market. The way that I thought about is really sort at three levels, which may help you, Youssef. So, at the lowest level, at the Exagroup, and Robert described what’s going on there and why we needed to take the impairment that we did despite the fact that we think that it’s a great company, we needed to change the evaluation on our balance sheet. The next level up is France. And as Robert alluded to, we do have multiple brands that operate in France. In the aggregate we have strong growth in France. And the other brands there are growing at double digits. So, we still see the French market as a good market for us. And then, ultimately the overall Upload and Print portfolio, and again Robert alluded to this too, but we have invested over €450 million of capital over the last couple of years in that portfolio. And we still think that despite this reset of expectations for Exagroup, we’re going to achieve our 15% hurdle, which we think is doing the right thing for our uppermost financial objective, which is maximizing intrinsic value per share. So, we still feel very good about the portfolio, what we’ve done here.

Our next question is comes from Brian Fitzgerald with Jefferies. Your line is open.

Couple of questions, in your commentary you mentioned that growth in the European market continues to lag, North America and Australia. Is that an underlying trend of a more mature market or is it macro related, can you juxtapose how fragmented Europe is maybe versus other geographies? And then, you called out a write-down of $7 million during the quarter, $10 million for the year related to tech investments. As you continue to invest in the mass customization platform integrations, are there areas that mature quicker than others? And what inning are we in with respect to the mass customization platform work and the post-merger integration work and are those processes accelerating, as you kind of go through the process and learn? Thanks.

Thank you, Brian. So, to the question on Europe, I do want to be clear that Vistaprint brand is growing much less in Europe than it is in North America, which I think is the basis of your question. If you look at our growth in the Upload and Print space which are the acquired companies, both the ones which we have now lapsed and we talked about a 25% year-over-year growth and the growth that we see as an aggregate is easily in the double digits on a pro forma basis. So, we believe that the market in Europe can and continue and will continue to grow. We do believe that the Vistaprint value proposition was most quarterly positioned in Europe as compared to what it was in the U.S., UK and the Australian markets. Now, we are doing a lot to improve that, but it’s taking more time to turn the ship there, partly because of the cultural differences in Europe, across Europe and the companies we’ve acquired are domestic champions, they’re grown up even to relative companies, [ph] so they are very domestically relevant to the online space that we play in. But this is really important I think that they -- the Vistaprint growth, and we had very rapid growth five, ten years ago in Europe, was driven in Europe through a lot of heavy, heavy brief discounting, which really positioned the Vistaprint brand even more deeply in the minds of European customers as a deep discount brand. And it’s taking us longer to shift away from that base. We still remain very optimistic about the opportunity for the Vistaprint brand in Europe. So, with regard to your second question, which is what inning are we in, in terms of some of these major investments. In…

Sorry, Brian. I think that there was a third question; I think it’s a quick one. You had asked about the $7 million write-down for our technology investments. And just a comment on that and you alluded to this as well. We had about $3 million write-down last quarter as well. They actually happen to be related to the same exact things. So, this was internally developed technology and production equipment that is as a whole part of the backbone work that’s used for our Columbus product line. And overall, this is actually going well and will serve to support the Columbus products going forward, but there was an aspect to that technology that we’ve decided that we do not need to use and will not use, and so we’ve written that off. So, I wouldn’t say that this is a continuing theme that we should expect, as we invest more, although obviously these things can happen. But this write-down that we took in Q3 was for the same thing as Q2, but we decided that we were not going to use any of it. So, we had to take the rest of the write-down this quarter.

I’m just going to add a little bit more color to what you faced on, because I think it actually is illustrative of some of the strategic shifts that we’ve made over the last several years. This technology development, we started three or four years ago and it was in a world where the paradigm that we’re operating in was through very narrow set of products, in very, very large volumes in that narrow set of products being highly standardized. And as those of you who visited our traditional Vistaprint plants have seen they become very, very automated. The investment in this technology had two components, the core customization component and number two in automation for very high volume. As we progressed forward in time, both for that particular project that is now Columbus, as we have seen for a whole lot of our other products, we are doing much greater breadth and depth of products, which means much more variety of substrates. So, if you think of things like folding or skirts or parkas soft goods, that creates a variability in products but also something where standardized automation is not as appropriate for producing it as just manual labor because of that variety. It’s just as profitable to do the high variety, higher labor because the unit costs we can sell at are higher. So, we’ve written down older -- the components related to this highly standardized, highly automated component of this project. When we look-forward, we don’t believe we’ll be using that but we are using it today quite actively in the growing Columbus business as the core of that technology.

Our next question comes from Matthew Thornton with SunTrust. Your line is open.

A couple if I could. I guess, just to start on kind of the top-line growth rate across the different segments, obviously Vistaprint accelerated nicely in the quarter. Maybe on the Upload and Print, I know you talked about that number kind of being in line with your expectations, but the organic growth kind of stepped down a little bit from 31% to 25%. I guess anything else that you would kind of point us to, to kind of explain that whether it’s a tough comp, or I guess maybe on to point to there? And then similarly in the all other business, I know you had the winding down of partnerships in the corporate solutions and the Albumprinter piece. But again anything else that would kind of explain that step down in the organic growth or was it really just those two items? And within those two items, I guess, the wind down of those two partnerships, I guess, any change in the cadence that was unusual this quarter as well? Any color there would be helpful. And then I’ve got a follow-up as well.

So, yes, I think a lot of the answers you’ve actually alluded to in your comments. So, let me take the Upload and Print one first. There is really nothing else to call out for the decline in our constant currency organic growth, which as you mentioned, has come down a bit from 34% to 31% for the last few quarters and now to 25%. That is in large part what we’ve talked about over the last couple quarters, which is we do expect some of those higher growth businesses to moderate over time. I also expect that that will fluctuate. So, I’m not sure that that path will be a linear path from point A to B; I think quarter-to-quarter it will fluctuate. The two businesses that are represented in there are Pixartprinting and Printdeal, which are both growing quickly. And quarter-to-quarter, you’ll see that fluctuate as they do different things in the market. These are highly entrepreneurial businesses that are moving quickly, but there is no other trend really to point out there. The other thing that I’d be remiss if I didn’t point out is just that the growth rate of all of our Upload and Print businesses are a bit different, and over time some of those other businesses will fold into the organic growth rate, which were generally lower. For the all other businesses, again, it’s -- the drivers there are mostly the ones that you’ve pointed out, but let me just kind of go through them one by one. There is three components to that all other business units segments. One is our Most of World businesses and there, we continue to see high growth, especially in countries like Brazil, Japan is still growing a bit slower with the reset of the business there, especially since we launched the production facility in Japan and are really kind of resetting in that market. But overall, still see fast growth there. The next one is Albumprinter and FotoKnudsen, which grew in line with our expectations. Albumprinter did have the wind down of one of their partners, which we’ve talked about in the past and that relationship came to its conclusion this quarter in February in the middle of the quarter. So that definitely influences the trend that you see this quarter. And then lastly is our corporate solutions business. And one of the big impacts there is the relationship with Staples, which we’ve talked about in prior quarters as well. Just a quick update on that one, Staples was still with us this quarter. So, there was no activity. That said, there was a fairly substantial year-over-year decline this quarter, which again influences the trend there.

And if I am not mistaken, I think the three acquisitions you did last year are Exagroup, WIRmachenDRUCK, those would enter the organic comp base in the current quarter, if I am not mistaken?

Matt, it will actually happen in Q1 because those deals weren’t done at the beginning of the quarter. And so, we will only incorporate them once they have been with us for anniversary, the first full quarter that they’ve been with us.

And then just two quick follow-ups, I guess if I could, on the Corporate Solutions side, while we’re on that topic, the Amazon and kind of beta partnership, I think once you’ve mentioned of that in the prepared remarks, I guess any update there? And then just lastly, maybe Robert, the equity incentive plan that you guys have proposed in the proxy, maybe if you could just give us maybe two minutes on the rationale and how we should be thinking about that proposal? I think that will be helpful as well.

So, Matt, I’ll take the one on Amazon and then, I’ll turn it over to Robert on incentive evolution. So, just quickly on Amazon, there’s really not much to update. We continue to be in test mode with Amazon. It’s currently a very limited one product, one region test. And there’s really not much to update there. We’re here to support Amazon, if they decide to go forward in a bigger way; we’re helpful for doing that, but it’s still very much a test and still extremely immaterial to our overall results.

And as to the incentive evolution change, what I’d like to do is first of all say, I really encourage people to read the proxy. Secondly, I encourage people to send questions as we’ve spoken about in the proxy. At the end of the letter from Scott, or Chairman of our Compensation Committee, which is accompanying the proxy, we mentioned and you can send questions to Meredith and she will compile those. We will also be then taking all those questions and giving updated list of questions and answers. So, I will give an overview as you mentioned but we want to make sure we give everyone the opportunity to ask whatever questions they feel are important. So, at a high level, I think we are very excited about this plan because we believe it directly aligns the objective of myself to every other executives and many mangers throughout the business, employed throughout the business with long-term focus on the performance of the business. And again, noting this is a complicated subject, we’re going in great detail in the proxy. What we like about this is that it has some very significant upside, which is counterbalanced by some very significant downside. And there’s much more downside to the point of zero long-term payout than there really is in any other plan we’ve seen on the market and certainly we’ve ever had as a company. So, we believe that this will become a core building block in building a culture and a company mindset which is focused on the long-term, which will be good for all of our long-term shareholders. So, I’ll stop there. And Sean, if you want to add anything, feel free.

No, I don’t think I’ll add anything to that.

Our next question is comes from Chris Merwin with Barclays. Your line is open.

So, I just had a follow-up question on Exagroup. I know you said the growth was being impacted by some increased competition. So, does that mean that there may be more opportunities for M&A, whether it’d be in France or elsewhere in Europe and just generally how should we be thinking about the pace of M&A going forward? And then just a second question on intrinsic value per share, obviously that’s a big focus for you all and I assume will continue to be going forward. ROIC was down a little bit this quarter. And just curious if there is any one-time items in there and how we should think about ROIC trending on a go forward basis.

As to the question on Exaprint and competition, one, we are of course, careful not to overly cannibalize our own business, but we find Pixartprinting and Easyflyer growing very strongly in the French market. So, again, as we look at the overall basket of Upload and Print brands that we own and we control in France, we’re very happy with the growth there. Now, we are not the only competitors there; there are multiple other good competitors. But, I think that the -- in a test to what is a rapidly changing market shifting from traditional ways of operating to the online ways that we are the leader in France, but I guess as far the only player. In terms of the ROIC, I am going to turn that to you, Sean, but before I do I just want to say that I do see a distinction between the quarterly reported ROIC and the core intrinsic value of the shares, which we talk a lot about in our annual letter. It certainly gives you some view on where the quarter will be going, but that’s the reported earnings and return as opposed to some -- it’s net of investments that we believe are often building value.

Yes. And I’ll just add a few things to that, Chris. So, I think in terms of our ROIC, there’s couple of things that you need to think kind of, one is as Robert said, we are investing heavily in the business. And so, in some respects if you think about the concepts of steady state free cash flow that we outlined in our August Investor Day and the fact that our overall free cash flow is depressed by these investments that we’re making that we think are great returning investments in many ways, the numerator of ROIC is impacted in a similar way, especially because it is a trailing 12-month. So that’s certainly one. Two is we’ve expanded the balance sheet quite a bit over the last year or two years. And just take this quarter as an example, the WIRmachenDRUCK acquisition was a material expansion of our investor capital base, yet only has two months worth of contribution in the NOPAT numerator relative to the trailing 12-month. And so, if you were to think about the Upload and Print portfolio as a whole and €450 million or more of capital that we’ve invested there over time especially because of the growth of those businesses, you would expect that the NOPAT contribution relative to the invested capital would continue to increase and materially impact that. But again, it is suppressed by also the other investments we’re making throughout the business.

I guess a quick follow-up, if you won’t mind just commenting on your current appetite for M&A in light of, Robert, your comments on competition.

We have always been and certainly in the last three or four years speaking to many, many companies and we continue to do this, but we usually speak to 20, 30 companies, for every one we ever end up getting into a deal with. So I certainly don’t want to predict the cadence by which we will do M&A in the future. We’re certainly open to considering that -- we’re certainly open to do that but there’s nothing that I would say would materially change how we’ve thought about it in the last two or three years.

Our next question comes from Paul Bieber with Bank of America. Your line is open.

A couple questions, I was hoping you could provide some color on the acceleration and Vistaprint revenue growth. And then also I was hoping you could provide color on the decline in year-over-year gross margin; is that just a just a mix-up from upload and print or is there some other factor that’s driving some of the gross margin declines? And then the third question is why is it appropriate to use the three-year moving average to price of the units of the new plan? I was hoping you could spend a little bit of time on that.

Sure. So I’ll take the first two Paul and then either Robert or I will take three, I think average questions. So, first one, acceleration in the VBU. So, yes the VBU on a constant currency basis has 10% revenue growth this quarter and there is really a variety of contributors to that, Paul. And I would say that in the aggregate everything I’m going to describe speaks to the progress that we’re making in the Vistaprint business and overall gives us the confidence that we can get to our aspirational goal of returning that business to a double-digit growth. So, let me just go through a few of them, so repeat revenue, as we’ve seen the last few quarters continues to grow faster, than new customer revenue but repeat bookings growing at double-digit rate. And new customer bookings, I think this is our second quarter now where that’s growing, which is now going in the right direction, largely due to first quarter revenue growth. We’ve got for the first quarter and in I believe 10 quarters, our number of new customers is now not declining, that’s flat versus the start, so that’s a good data point as well. When we look at our focus product categories, like postcards of flyers, or signage commercial products and apparel, they’re all growing faster than the average. So, we like what we see there. And I can keep going, gross profit per customer trends that continue in the right direction. So, when you put all those together, I think those are in the aggregate what’s contributing to the acceleration in the Vistaprint business. Of course, there is a mix by geography, and Robert alluded to this to an earlier question. We do see double-digit growth in the U.S. and Canada, Australia, Europe is definitely behind that. And so, we like what we see there. We are also careful to mention that in Q3, we did start to test more and lowering our shipping charges particularly in the UK market. In Q4, we will start to do that, in some of our other markets, including our major markets. And so we expect that the impact there will increase in Q4 and likely into fiscal ‘17 as well. And so we don’t want to declare this, now we’re at double-digit growth and we’re going to stay here, we’ll continue to look at investing in the Vistaprint business and making sure that we’re doing the right things for the customer. And ultimately, we think that’s going to lead to the long-term success of that business. To your question about gross margin -- go ahead, Paul.

I’m sorry. Go ahead.

So on gross margin, there is really two main things to point out there. The first one is we continue to see the mix shift towards Upload and Print. And so, let me just give you three data points, Paul. This quarter, about 27% of our revenue was in the Upload and Print portfolio. If you were to look at last year quarter, it was about 11%. And then, the beginning of the year, Q1 was 20%. So, you see this continued upward trend in the contribution of Upload and Print, both because of the acquisitions that we’ve made, as well as the growth in that portfolio. So, that’s the dominant trend and a trend that we expect will continue. The other main thing to point out for this quarter is that the $7 million write-down of technology and production equipment that we spoke about earlier in the call went through the COGS line and so that has something like 200 basis points of impact this quarter, which wouldn’t otherwise be recurring.

As to your question on the three-year moving average choice, it was the outcome of a lot of discussion and investigation and debate by the compensation committee. And certainly, I and Sean and other members of the management team took part in those. And I’d say a couple of things. One is you have to recall that we are looking to have a proxy for the rate of change in a long-term value of the business. And the term rate of change is important because we are looking at a percentage change, where the beginning measuring point and the endpoint are a three year moving average. So, that it impacts both sides. Secondly, we are going to -- we certainly expected over time, as it has happened in the past, there will be times when the spot daily price is above and other times when it’s below the three-year moving average, so that when an executive looks at multiple grant over a series of years, there will be a buffering of those times where it’s above and below. So, the reason that with that in mind, the comp committee went towards this is one it eliminates most of the volatility that otherwise can create enormous mismatch between our daily share price and more enduring rates of change the intrinsic value of the business. Secondly, and I think very importantly, it’s a simple measure that both our shareholders and team members can easily calculate and track over time, alternatives that we looked at were much more complicated, if we try to find alternative proxies for the rate of change of intrinsic value per share. And then finally, it really encourages our team members to have a behavior to be aligned in a way which we believe maximize the value of the business over the long term.

Our next question is comes from Victor Anthony with Axiom Capital. Your line is open.

Yes, thanks. So, it looks like your investments are coming in below original plan. Robert, maybe you could talk about areas that you’d like to step up investment. I know you talked in the past about shipment being one of them, another one being Vistaprint and probably moving that over to U.S., any other areas of investments that you think over the next several months where you want to at least increase investment?

At the highest level for Sean’s comments and for the pre-release comment, we see the investment in this fiscal year coming in a little bit light relative to what we thought they were when we had the August Investor Day. Now, there are many puts and takes, one of the areas where we do mention that we have started rolling out and we expect to accelerate in the next several months that our part of the puts and take within the context of that overall investment context where we are a little light is that we do expect to accelerate and to roll out price changes where we reduce the price of shipping under the Vistaprint brand. And that does create a headwind because we have less revenues coming in, but we believe it’s the right thing to do long-term. But that won’t change the overall context we’ve described today.

Our next question is comes from Youssef Squali with Cantor Fitzgerald. Your line is open.

I just want to come back to a couple of things that were mentioned on the call. So, on these investments, I know you’re saying lower, slightly lower. Can you help us just quantify, so for instance in the organic investment side, I think in 2015, if I remember correctly, it was $80 million. I think you have guided to $110 million, so, an incremental $30 million. So, what would little lower mean; is it 10% lower; is it 20% lower, just to help us put some numbers around that? And then on the equity incentive plan, so my understanding is that you’re also eliminating the annual cash and bonus replacing it with an increase in base salary, Sean, can you help us maybe understand the impacts on operating expenses in 2017, if this were to pass? And then, I have one last one on taxes.

So, Youssef, on your question relative to the investment spend, so, we haven’t sized -- we say a little bit less, we haven’t sized what that is. And the reason there is not to be unhelpful but this is definitely a process that we go through throughout the year. And so, we continuously evaluate the investment opportunities that are in front of us within these categories and that can fluctuate over time. But the numbers that we provided back in August are sort of boundaries for that. And so if you think about something like shipping, which we talked about on the call last quarter, the investments that we’re making there were not ones that were necessarily part of the plans that we had back in August. But, as we work through the year and in testing, we decided that was the right thing to do. And those investments that we’re making there are absolutely within the context of the numbers that we provided. But, you can see where that can change over time. And so, even if we’re a bit under in a certain category, it may be the case that somewhere else we end up a bit over because we decide to make more investments though. So, that’s why we haven’t sized that anymore specifically. Of course, as we get to the end of the year, which is not going to be as helpful for you as you update your model this quarter, but as we get to the end of the year, we will give you retrospectives on what we spent there. The question on the equity incentive plan, you Youssef, were asking specifically about the bonus being brought into base salary. So, I’ll answer that specifically and then let me just broaden it out to point…

And I guess my last question is around taxes. So, now, we are in the 20% to 25% range, maybe Robert, you can help us just understand how we got there. There was a time when you guys were a 10% or 11% tax payer, not domiciled in the U.S., I am assuming that hasn’t changed. But what’s driving that rate and is this kind of the new normal for Vistaprint? Thanks.

So, I am certainly going to defer it to Sean for the bulk of this but at the highest level, when we were at the 10%, 11% rate and although we were founded in Europe, originally, we were in Bermuda at the time and being back in the European structure, we have much more tightly aligned our tax structure with our real operational structure in terms -- we always had servers and real operations in Bermuda, but it’s even more closely aligned with our structure today. We think that that is from the highest level, a good period but from a defensibility perspective it’s much more defensible. But it doesn’t mean we have a higher tax rate. And then, secondly, we have acquired companies in higher tax rates. And Sean, I am going to turn this over to you for any other additional specifics you can provide?

So, let me just try and help you, Youssef, with kind of what changed this quarter relative to last quarter. We started out the year with commentary that our GAAP effective tax rate we thought would be in the range of 20% to 25%, and then our cash taxes would be a bit higher. Last quarter, you may recall that we actually lowered that. We said, we thought for the full year, we would be at 15% to 20%. That in large part remains true other than because of the large goodwill impairment that runs through the GAAP P&L without any tax benefit that effectively increases the tax rate for this year. And so that was really the only change that happened between Q2 and Q3, but it certainly does have an impact on the GAAP tax rate for this year. So that was the main driver there. Just stepping back, maybe just a couple of things to add to Robert’s commentary, one, as Robert said, of course, we need to make sure that our tax structure is aligned to the way we operate the business and we absolutely have that. Most recently, over the last few years, we’ve invested heavily in these Upload and Print businesses, which generally operate in higher tax jurisdictions and are very profitable. And so that has influenced the tax rate. When we think about the tax rate, of course, you’d always want that to be as low as you can, within the bounds of the tax regulations. But in and of itself, we don’t view a tax rate that’s lower or higher is necessarily good. What we do is we look at the aggregate returns from the underlying investment. And if you have something like, business like Pixartprinting that operates in Italy, that is a business that’s returning very well but has a higher tax rate. That’s absolutely fine, and we’ll do that every day we can. So, those are some of the drivers and how we think about it. But, as I said, the quarter-to-quarter change is really driven by the goodwill impairment.

So barring any other goodwill impairments or other non-recurring things, you’re back to that 15% to 20% range going forward. I know, you’re not necessarily guiding for beyond 2016 but as people model this line item, 15% and 20% is a good place to start?

I won’t go that far; I’ll leave you to conclude to that. It is for this year, would be 15% to 20% absent the goodwill impairment, but we haven’t guided beyond fiscal ‘16 as it relates to the tax rate. The other thing on tax is just to make sure that it’s clear in your models is that we did receive about $8.5 million tax refund this quarter. So, our cash taxes have trended down this quarter. And that relates to just the carry back of losses to a prior year that’s not operational.

Our final question comes from Glenn Greenberg with Brave Warrior. Your line is open.

I just wanted to go back to the Exaprint commentary. As I recall, you had an option to purchase the remaining 30% of the business in 2017 for up to €47 million. What’s happened to that option; do you expect to exercise it?

So, let me just more specifically outline what the option is. So, you’re right, Glenn. There is an option for the remaining 30%. It was a reciprocal option. And so there is a call and a put feature to it. So, it’s not fully within our control. There was a range though of the exercised price of that option, as you outlined, Glenn, which went up to €47 million and as low as €39 million. And that spread there was effectively, you think about that like an earn-out, and it was based on revenue performance through calendar 2017. We fully anticipate that either the call or the put will still happen. And so, the €39 million, we still expect will be expended. And the timing of the option I believe is 2019. That said, we don’t expect that we would pay near that €47 million, more likely the €39 million or something materially above that.

Okay. So, the all in cost would be €130 million for the business?

That’s correct.

And the write down was $30 million or €30 million?

It was $30 million. And so, it equates to something, I think, just over 20% of the -- what you would consider the full value of the investment or full cost of the investment.

And Sean, just over 20% assuming full value does not include the additional $8 million contingent payment, which if you have gotten that contingent payment, the performance would have had you perform basically in line with our deal model.

So, what kind of calculation did you do, Sean, to come up with the 20% impairment rather than 30% or 10% impairment?

Yes. So, there are fairly specific rules from an accounting standpoint that are complex, and I won’t go through all the details there. But I mean in broad strokes, Glenn, we have an annual capital allocation process that we go through with the leaders around the business and keep the Board close to that. Obviously, Robert and I are heavily involved in that. And through that process, we obviously update our long range forecast of what we think these businesses can do. And so, that really was the primary input to the process. And so, when we take those future after-tax cash flows that we forecasted and put those through many of the same assumptions that we use in the deal model in terms of discount rates and some customer behaviors and so forth, that’s what led us to ultimately to answer that we arrived at. Of course, there’s more complexity underneath that as far as the more granular mechanics and how we went through it but that’s really the...

So what kind of discount rate you used though that’s what I was trying to get at?

So, we used a discount rate of about 13% for this deal. The way that the rules work is the discount rate has to be specific to that company, and it’s not our overall discount rate that we would think about from a consolidated standpoint, which is our rack of about 8.5% So it is higher than that.

Thanks, great. Thank you.

Thanks, Glenn. So, operator, I think you said that was the last call. Is that right?

That is correct. I’ll now turn it back over to Robert Keane for closing remarks.

Okay. Well, thank you all for calling in for this quarterly call. And we certainly look forward to seeing you and talking to you three months from now as we wrap up this fiscal year. And we very much appreciate the time and effort that you and shareholders are putting into understanding and hopefully supporting our proxy request. We do believe that that is something that we can really align the management team to the long-term of the business. But most of all, we appreciate your continued interest in Cimpress and look forward to talking to you soon. Thank you very much.

Thank you, ladies and gentlemen. That does conclude today’s conference. You may all disconnect. And, everyone have a great day.