Ladies and gentlemen, welcome to the Cimpress Fiscal Year 2017 Fourth Quarter and Full Year Q&A Earnings Conference Call. My name is Nova, and I'll be your operator for today. This call is being hosted by Robert Keane, President and CEO; and Sean Quinn, Executive 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 Robert Keane for opening remarks.

Hello, everyone. Thanks for joining us this morning. Before we take your questions, I would like to make a few brief comments about some of the announcements we made yesterday. Fiscal year 2017 was a year in which we made substantial amounts of investments for our future and it also was a year of evolution for Cimpress. It was a noisy year in terms of financial results. And that noise came from many different factors, such as the organizational decentralization, tax movements, acquisitions, acquisition earn-outs, our planned divestiture of Albumprinter, increased organic investment, currency volatility, share-based compensation and other items. So we've provided detailed information in our earnings documents and other documents to help sort through all of the moving pieces. We appreciate that this takes time to digest, and we appreciate your efforts to understand both our story and our results. Despite the noise in the numbers, we believe the change that we went through, and the changes that we went through in fiscal 2017, position us for a very successful future. We've done a lot of work, but we still have a lot of work to do to realize the operational benefits of our recent decentralization, as well as to drive strong returns on past investments while continuing to invest in the areas that are important to our business. If we execute well, it should translate into value creation for all of our constituents, our customers, our long-term shareholders and our team members. As I've done for the past two years, I have written about our capital allocation and the strategic implications of our organizational decentralization in a letter to investors, which is now posted on our Investor Relations website. I strongly encourage you to read this letter if you have not already. We hope you will also join us, either in person or via the Internet, for our upcoming Investor Day on August 8, 2017, where we will discuss all these topics in detail and you'll have a chance to meet more of the executive team. With that, we'd like to take your questions.

Now we'll proceed with the first question. Our first question comes from the line of Matt Thornton of SunTrust.

Hey, good morning, Robert. Good morning, Sean. Couple of questions if I could here, maybe starting with Vistaprint, the up 6% organic in the quarter, I know there were some Easter timing issues, and I know that this number does tend to be a little bit lumpy anyway. But the 6% is kind of the lowest we've seen in, I don't know, 10 or 11 quarters or so. Anything else unusual that you would call out in influencing that number in the quarter? And then just secondarily, around Albumprinter and the pending sale, from a modeling perspective, should we think of Albumprinter as being accretive or dilutive to overall margins? And then relatedly, the 3 times turns on debt to EBITDA that you're targeting by end of the calendar year, is that now dependent on the Albumprinter proceeds? Or is that completely separate? Thanks so much.

Great. Thanks, Matt. It's Sean, and appreciate your questions. I'll start out with the first one, on Vistaprint. So, I mean, you mentioned a few of the reasons for the lower growth this quarter. I mean, there are a few specific things to call out, but nothing out of the ordinary. The first one is the Easter timing, which we talked about in the call last quarter and was the reason, in Q3, why revenue growth had accelerated, and one of the reasons why you see the deceleration sequentially in Q4. There's some other smaller changes, like some backlog timing and so forth, but nothing out of the ordinary. The only other thing I would call out is that it was a strong comp from last year, 12% growth last year. Now, the things that we really focus on here are really two things. One is, what are the metrics that we see underneath these numbers? And then two, what is the growth over longer periods of time, so not quarter-to-quarter. And as you said, and as we say very consistently in all of our materials, quarter-to-quarter, we expect that revenue growth will fluctuate. So as we look at the customer metrics, really, it's a continuation of the story that we've been talking about for nearly two years now. We continue to see strong growth in our repeat bookings, new customers grew for, now, the fifth quarter in a row, the spend per customer is strong. NPS remains stable. And so all those things remain intact. So really no change there. We continue to be happy with the trends that we see. If you pull back and you look at the full year, the full year growth was 9% and that's really right in line with our expectations internally and very consistent with – excuse me, the commentary that we provided at the beginning of the year. So really nothing else to call out there. In terms of your next question on Albumprinter and whether or not it's margin dilutive, we don't get into specifics around margin. So I won't go into too much detail there. But in terms of how that impacts our leverage, so as we've said over the last two quarters, ever since we completed the acquisition of National Pen, we are on a path to delever back to approximately 3 times by the end of the calendar year. These conversations around Albumprinter had started over the last few quarters. And so we are aware of them. But that wasn't something that we are relying upon in our plans, and so it helps. Now that said, we do lose the EBITDA, of course, for Albumprinter along with getting the proceeds. And so, it doesn't have that much impact on our leverage ratio, but of course, brings down our debt balance.

Great. Very helpful. I'll jump back in the queue. Thanks guys.

Thanks a lot, Matt.

And our next question comes from Kevin Steinke of Barrington Research. Your line is open, sir.

Good morning. So in your prepared comments, you mentioned that in fiscal year 2018 that you expect there will be a small year-over-year increase in shipping price reduction investment versus fiscal 2017. So wonder if you could just talk through the factors that you believe will drive that slight year-over-year increase?

Yeah. Sure, Kevin. So, good morning, and thanks for the question. The increase, Kevin, is actually very modest, it's almost flat. And so, in fiscal year 2017, from both an operating income standpoint and free cash flow, the net investment was $19 million, and in FY 2018, it's expected to be $20 million. And so that's really just a reflection of kind of a full year of some of that investment in some of the larger jurisdictions. Otherwise, yeah (8:34), it's basically that we remain on track with that investment. We continue to be happy with what we see there. We see some of the same stuff we've talked about over the last few quarters. Good trends in how that's impacting conversion and repeat rate. We look at this specifically in our NPS scores and we see that both satisfaction on this topic is up and dissatisfaction is down. So it's a continuation of the journey that we've been on the last two quarters or three quarters. And next year's investment is just a reflection of continuing on that path. Just to be clear, in case it's not clear, we sometimes get this question, the number that's presented in our table of investments for next year is the absolute investment. That is not an incremental investment. So the incremental investment is just the $1 million, the difference.

Okay, thanks. That's helpful. And then WIRmachenDRUCK, obviously, has performed quite well. The earn-out obligation has increased over the last few quarters there. Just wondering what's kind of setting that particular Upload and Print business apart? Why it's performing so well? And if there's any lessons you can learn from that business to apply to others in that segment?

Sure, Kevin. Robert here. One, we are happy with the overall performance of the portfolio and we have some great performers in addition to WIRmachenDRUCK. It's certainly – the portfolio is not dependent on WIRmachenDRUCK for its success. We've had some investments we've overpaid for, and we've had multiples that we are happy with. Now WIRmachenDRUCK, really, the reason for the increased or for the recognition of the earn-out is that that earn-out is based on their ability to generate given level of gross profit. And we feel more and more comfortable, we are comfortable that they will hit the upper end of that range. So it's tied to a combination of factors. But it includes, in the end, it comes down to how much gross profit we believe it can generate which was a key performance indicator which we tie that payout to. And to your question, can we learn things from them, yes, and we've been happy to see that they've been learning things from other parts of the Upload and Print portfolio as well. So, we are actively looking for best practices across those subsidiary businesses within the Upload and Print reporting segment and sharing best practices that – with the specific question of WIRmachenDRUCK goes bi-directional manner.

Maybe just one thing that I would add to as a housekeeping item to help you, in this year's GAAP results, there was a significant amount of noise from the change in the earn-out that you referenced, Kevin. As we cross the end of the year, we are, on the balance sheet, fully accrued for the earn-out, less some timing discounts. So, we shouldn't see that type of volatility in the P&L as we go forward.

Okay, thanks. Just one last question here. On Albumprinter, the decision to sell that, as you said, that fits within the sphere of mass customization. I've always gotten the sense that that business has performed well for you. So, just wondering what are the better uses of capital that you potentially see versus continuing to own that business?

Well, we really like the team at Albumprinter. Several of the key executives now in Cimpress overall came from Albumprinter. It's a great business, we believe, with a strong future for the team that's taking it out with a private equity purchase. As much as I'd like to say, it's been a great success. We think this is a – it hasn't been a big failure for us financially, but it hasn't been a great success. We basically, depending if you're looking at euros or dollars, are floating around our 8.5% cost of capital. And that's not a success in terms of deployment of capital. Now, we wish we could've done better. Now, I think, why not continue in that and improve the business? Because obviously with the competitive process and we had multiple people bidding, and the buyer believes that they can create great value going forward. So, I guess, what's the question you're bringing up is, why do we believe we shouldn't have kept that and achieve those returns that the PE firm believes they can make in the future. I think, the reality is that when we look at our strengths of where we are as a business, I'll just take in the European market where Albumprinter plays, it is very strong in the Benelux and Nordics market. But there are very strong players in – particularly two large players, one in Germany and other parts of Europe and one more in France and the U.K. So we don't believe that we would ever become the clear market leader in Europe, and it's a business where we never found a way to bring it into the United States. So we think that be it (14:08) Shutterfly or others as great companies in the U.S. who really own that market. So, it was really a question of the old adage. I think, going back to (14:17) to be number one or two in a market or not be in the market. And we look at other places in the promotional product space, in the Upload and Print, in the Vistaprint space, in Mall (14:29) where we're investing and we believe that we have a stronger chance of really becoming the number one or two player in those markets. And in a world of constrained capital, we go to where we think the biggest opportunity is, which is, in summary, why we came to the decision it would be best to divest the asset right now.

I'll just add – this is Meredith. The Vistaprint business sells photo books and other photo products, some of which are produced by Albumprinter. And that will now move to a partnership, and the Albumprinter business is going to connect through our mass customization platform in order to do that. And we'll continue that relationship as long as it's mutually beneficial.

Yeah. I agree with that, Meredith. One thing, they've already been connected for quite some time and they will continue to use that interface.

Okay, thanks. That's very helpful. Thank you for taking the questions.

You're welcome.

Thanks, Kevin.

Thanks, Kevin.

Our next question comes from the line of Brian Fitzgerald of Jefferies.

Thanks, guys. Maybe from a higher level, I'm wondering if you could talk us through the rationale of shifting how you're thinking about investment spend categorization as you kind of laid out in the shareholder letter. What is driving the change? And how should we think about major organic growth versus diverse? Will you be talking to that, giving similar breakdowns of steady state cash flow? How should we be thinking about that?

Hi, Brian; Robert here. So, at the highest level, what we're trying to expose to our investors is structured in an identical way to the way we speak at the supervisory board of directors, at the executive team, at the management board. So, we have, with the reorganization we announced six months ago, gone to a structure where we have much more holistic autonomous businesses, and we have vastly less centrally-managed investments and overhead. And in that new organizational paradigm, the way we are managing going forward is as – what you see in the documents we put out last night. So, the concept of major investments versus diverse, other is not something we're using internally anymore. So we're no longer going to be talking about that externally. And we think that's appropriate, because it gives you the ability to – although it's a change, it's a change for us as well. It will keep our communication, in our analysis that we speak about publicly, consistent with what we are doing internally.

Maybe just to add one thing, which is that many of those major organic investments are still large discrete investments that are being made and are being run separately. And so, you still see them show up in our investment table here, just that categorization has changed. Probably the biggest difference is in Columbus, which has been moved into the Vistaprint business and further integrated there. And that's why we have broken that out separately.

That's a good point, Sean. And just to be more specific on that, Most of World and the platform, as examples, were part of those major investments, and those are still visible in the current reporting.

Yeah. As is Corporate Solutions.

Thank you.

Okay. Thanks, Robert. Thanks, Sean.

Thanks, Brian.

Thank you, Brian.

Thank you. And our next question comes from the line of Matt Thornton from SunTrust.

Hey, guys. A couple of follow-ups, if I could, really quickly. First, on the restructuring, do we hit full run rate in terms of the expected kind of quarterly savings? Did we hit full run rate in the June quarter? Similarly, as we think about the model, the investment plan kind of stepping down in fiscal 2018, any color you have in terms of the impact, maybe first half of the year versus second half of the year, or how that kind of lays out? And then, just for a another modeling question, tax rate, both GAAP and cash, any color you can offer as we think about fiscal 2018? Thanks so much.

Yeah. Great questions, Matt. So, let me start off with the restructuring. The – so we – from an operating income standpoint, we more or less hit full run rate as we exit Q4. From a free cash flow perspective, there are still some payments left to be made. And so that will still be mostly in Q1 of next year, after which we really hit a full run rate. One of the things that we did, and we hope it's helpful, but I realize that it could be confusing, when we first talked about the restructuring and the savings that we expected to get, we talked about that in reference to our plans. And we did that because we don't issue in-year profitability guidance. And so that was really the only reference point that we had. As we finished the year, we thought it was more helpful to use a reference point, which is to compare back to our fiscal 2017 actuals, so that you know what the year-over-year impact is. And that's the frame that we've used in the earnings materials we released last night. And so there we say, from a free cash flow perspective, that we expect about $35 million of benefit next year; and from an operating income standpoint, about $50 million. And as I said, from a free cash flow perspective, we would get to kind of full run rate in our second quarter, after we run through the end of our kind of severance payments attached to that action. So that's the restructuring. On the investment plan, Matt, I think you were wanting to know, of the decrease in our organic investments, is that kind of throughout the year or more weighted towards the back half of the year? There is a little…

Great. Thanks, Sean.

So, this is Meredith. We actually had a few questions that got pre-submitted. And I thought I would take an opportunity to ask a couple of them. So, one of the questions is actually sort of a jumping off point from the savings that you were talking about, Sean. Are the savings from the restructuring effort related to decentralization, separate from the anticipated reduction in organic investments? So – or is there overlap there, between those two numbers?

Yeah. So, there is a little bit of overlap and – but they are from – and the majority of them are separate. So, the thing that I think may be most useful for folks to look at, and I know that we released a lot of materials last night, and I'm sure people are still either starting to go through them or still sorting through them. As I referenced to Matt's earlier question around the restructuring savings, we expect $35 million of savings from a free cash flow perspective. But if you look at our range of steady state free cash flow, you see that the impact on steady state free cash flow is a little bit less, about $30 million, when we try and pro forma that. And the difference there is because some of the savings have come from a reduction in our investments. So, that does have some impact. I would say it probably has a bit more impact from an operating income standpoint than it does free cash flow, because of things like share-based compensation. So there is a bit of overlap. But it's certainly not the majority of the decrease in our investment that's coming from that, it's very much the minority.

Excellent, thank you. So, another question. Is it fair to say that the growth trajectory of the business hasn't changed in light of the reduced spending, and that we should expect natural operating leverage to supplement margin expansion from the reduced investment spending?

So I think the answer is yes. The – well, one – maybe I'll take them separately and then bring them back together. So, one, you can see, we don't give any specific guidance on growth for a particular year, but you can refer back to Robert's letter to investors, where we talk about trends over multiple years and you see that, those trends we expect to remain intact. The commentary that we provided in the past year is consistent with what's in the letter for this year. And so, yes, there is not a change in growth trajectory as we see it over a multi-year period. And there has not been any impact, therefore, on growth from the decentralization that we've done or the savings that we expect to get. So, when you put those back together, if we were to stay on the same growth trajectory and we have savings, then yes, that would imply that that would be accretive to margins.

Great. So, another housekeeping question on National Pen. How consistent is the Q4 revenue with what you expected when you bought the business? I'll also add in there, or versus last quarter, once we saw revenue growth coming down, what value-creating economic decisions are being made there that are impacting growth, will you have to write-down any of this investment?

Well, during the end (25:50), any time we would know that we'd have to write-down an investment, we would write it down and we would've announced it. So, we certainly don't expect to write it down. We're very happy with the National Pen acquisition. I say in the letter that, it's a deal model which we've set up in terms of, the investment is holding its course, we're only six months into it. The – I say a couple of different components of it. One is that, the – I'll talk to the reduced marketing. This was a choice where, although revenues were being driven by marketing spend, if you looked at it from an ROI perspective, it was bad investment. It was investment that wasn't meeting our hurdle rates. And so, the management team there was the team that recommended cutting this. And we think that was a perfect example of where the revenue growth does not correlate with value creation if it's been done at below our hurdle rates. So, we step back and we – all the things we're doing here, and we have been the last six months, we expect to do in the next six months are broadly in line with what we did – we thought in our acquisition. We are driving synergies. We are focusing on the nuts and bolts. And when I say we, in an autonomous world that we're operating in, it's really the leadership team at National Pen building back up the core economic logic in the case of marketing of COCA, cost of customer acquisition, relative to the cash flows generated per customer acquired. And we believe, as we said in the letter that went out that we can go back and do (27:40) solid single-digit growth over the coming 12 months.

Great. Right. I'm going to ask one more pre-submitted question, this is a bigger picture question. So, as a follow-on, thinking about the decentralization that we've done relative to what we have talked about in the past in terms of being able to leverage centralized production through the mass customization platform and get good value and improved revenue and improved cost as a result of that, with the decentralization, does that make that value proposition or opportunity to create value go away, and in what ways would the decentralization actually help us be more competitive in each of our businesses?

Okay, one, we – at the highest level, the reason we reorganized is, the recognition, as we've gotten to be a bigger and more complicated business, with over 10,000 employees in over 20 different countries that, to use a generalization, staying small in our – the way we operate, even as we get big is very important. And that we needed to ensure a much tighter communication across all the components of the value chain for our different businesses. And so that, as I say in the letter, the – although clearly, and I'll speak about it in a moment, there are great advantages of scale that the centralization that was tied to how we were trying to avail ourselves to those – the scale advantages had a cost which outweighed the benefits. So, again, if we're going back to what we talked about six months ago here, but I think it's an important big picture for the investors to understand is that, we focused on those few select areas where either we think we can drive the most value through scale, and operationally, that is the technology component of the mass customization platform, which we've been building for the last several years, and that remains central. And secondly, the procurement of major categories of commodities, equipment and shipping. Now, we also obviously keep central those things which must be done central, this call and other types of things. But everything else we've decentralized. Now, does that mean we are going away from the economies of scale? No. Because, what it does mean is that, take the example of National Pen versus Vistaprint. They are both very, very strong in different types of mass customized products. And the scale of National Pen in customized writing instruments is vastly larger than Vistaprint and vice versa for component and products that Vistaprint does. So, now, through the interface of the mass customization platform, Vistaprint and National Pen, as just two examples of many, can exchange value internally to Cimpress, but between each organization. And the benefits of scale that National Pen have in the production, in the supply chain, in the product development, can be a benefit to Vistaprint. Those types of point-to-point connections happen between our Upload and Print businesses, between Vistaprint and Upload and Print, between – in any different direction. So, we believe that this new structure, at the highest level, will allow us to get the majority or, potentially, the vast majority of the benefit of scale, yet, greatly mitigate or hopefully eliminate the vast majority of the cost of centralization. And by cost, it's not just the dollars we spend on centralization, but it's the cost of having to manage across a $2 billion plus revenue business and make decisions which, on average, may be right, but for each of the individual businesses, are not optimal.

That's great. Thank you, Robert. I might also add that, we will probably be talking about some of these topics in more detail at our upcoming Investor Day on August 8 here in Waltham, Massachusetts and also online.

And ladies and gentlemen, this concludes the question-and-answer session. I'd like to turn the call back to Robert for closing remarks.

Thank you, everyone, for joining us today. Again, we look forward to fiscal year 2018, now that we've reshaped our company and function of the goals we've set out quite a while ago, the well-established and hopefully well-articulated strategic and financial objectives. As Meredith said, we look forward to seeing you at our Investor Day on August 8 here in Waltham, Massachusetts. Have a great day, everyone.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the call. You may now disconnect. Everyone, have a wonderful day.