Ladies and gentleman, welcome to the VistaPrint's third quarter 2008 Q&A earnings conference call. My name is Jeremy and I will be your operator for today. This call is being hosted by Robert Keane, President and CEO and Harpreet Grewal, Executive Vice President and Chief Financial Officer. 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.

So, operator, we're going to take the first call to keep running.

(Operator Instructions). And your first question comes from the line of Youssef Squali with Jefferies & Company. You may proceed. Youssef Squali - Jefferies & Company: Thank you very much and that's Youssef Squali. Couple of questions Robert and Harp. I guess the question is for Harp. If I look at your US revenues or growth in the US revenues, it looks like it was up about 39% year-on-year, pretty healthy, but if I look at the prior two quarters they were up over 50% and certainly even higher than prior quarters of last year. Can you just speak on that and is that a reflection of the kind of bigger macro economic softness, or is there anything else going on? And secondly, I know you don't guide to web sessions, but they have kind of fluctuated up and down more on the last two or three quarters than in the past. Can you speak to what you have done from, or what you are doing from a marketing perspective to affect that variable maybe less this quarter than you've done in prior quarters? Thank you.

Certainly and I'll take part of it and I think I'll ask Robert also to take part of the question as well. In terms of the North American growth, you are right that we grew 39% and it's very much in line with what we predicted for high growth trajectory. And, in terms of understanding should the variables be contributed to this high growth trajectory, we continue to acquire large number of new customers of [great focus]. We continue to diversify our product portfolio and continue to execute to the transformational market our trajectory that we have talked about in the past. We do know that there are a couple of things that in this particular quarter that were little different for Q3 of fiscal year '08. We do know there were fewer peak selling days. We also know that for our strategy of related to NTR, as NTR has clamp down it's percentage of revenues relative to the previous year comparisons that obviously and NTR being predominantly a North American revenue source that has an impact as well. So, I don't think that that we look at and say that our previous statements related to seeing any material impact to our business relative to the downturn in the economy. Those statements are still valid. We look at the statistics, we look at trend line and we don't see any impact that we can ascertain one way or the other related to the downturn and it's reflected in the fact that we raise our guidance last quarter, which North America is still 61% of total revenues or 62% and we just raised our guidance again more than just for these aspects. So, I think hopefully that provides a little bit of perspective on that side. On the web session, it's difficult for us to answer that question relative to whether we are doing any thing differently, because I know it's a broken record here, but we just don't target web sessions conversion rates, or AOV and we -- and the channel manager has sent it to maximize contribution margin and contribution dollars contributed. And, if they find abilities to do so by maximizing increasing seasons and lower conversion rates that you saw in this particular quarter. We saw a trend that was actually entirely consistent with, even though there are no targets, with what I would have expected. Sessions came down versus Q2 when they tend to peak. Conversion rates went up a very healthy 80 basis points as well. And so, to that extent, while we don't target it, there were trajectories and trends that were entirely consistent with historical, if you look at last two, three fiscal years. So, hopefully, that's a little more visibility. Youssef Squali - Jefferies & Company: Was there any change to the channel mix?

Nope. I think if you look at the channel mix in terms of what we show and display in the presentation, you see that the channels, relative to the major channels, leave a bucket, stayed reasonably consistently. While we don't show the specific percentages, they are correct in terms of what they show. So page search was about 16%. If you look at people coming in directly by typing on our URL, typing vistaprint.com, or responding to our permission-based email, all those percentages are about the same in this capacity. I mean, obviously, channel partners change, vary, but that just happens in the course of business. Youssef Squali - Jefferies & Company: Thank you.

Thank you, Youssef.

And your next question is from the line of Jennifer Watson with Goldman Sachs. You may proceed.

Great. Thank you. What assumptions have you guys made for the contribution of website services to that guidance? Have you not factored that in yet or is that something that you guys have been planning to roll out and had factored into fiscal year '09 when you gave it for the first time last quarter as well?

Yeah. We planned to roll it out for quite some time. It's been in development for quite some time. So, the introduction of this product or other products in the future that we know of wouldn't change that. And, yeah, I think that's simply because there's a long lead time between the development of the product and the launch of the product.

Okay, got it. And can you discuss some of the swing factors for the CapEx? Obviously, the range has been narrowed based on the guidance. But can you just talk about why it's coming in a little bit lower than what you have previously anticipated?

Certainly. So, I think it's on CapEx. The primary reason is a large part of this is related to timing. So, operationally nothing material has changed our focus at where we look to make investments relative to capital expenditures, a quarter ago, in January, when we gave guidance for Q3. We're executing operationally consistently both on the topline and where we're investing our dollars. But the large part just comes to that we make the payment to the vendor. Did we finish the negotiations with a particular vendor that we anticipated finishing? And those are just marginal changes that happen with the dates that you have as at the end of the quarter.

Okay, great. Thank you.

And your next question is from the line of Jim Friedland with Cowen & Company. Jim Friedland - Cowen & Company: Sorry. I got in a little late. So, I may repeat something. Just cut me off if it's a repeat question. First question is on customer acquisitioning costs. It looks like they were down pretty meaningfully in the quarter for the third quarter in a row and even down in absolute dollar terms. Is that something that can be a continuous trend and where are you deriving that benefit from? And the second question, I'll follow-up, but it's related to OfficeMax. But I'll ask it after you answer this one.

Okay. On the COCA side, first of all, I'll the highlight the fact that it's difficult to derive an absolute COCA based on the information we provide. So, I think you can get a directional indication. What I would say is rather than affirming that COCAs on an absolute basis came down three consecutive quarters, because we don't provide the guidance to be able to get to that level of precision, I think you are quite right in noting that our COCAs are in a very narrowband and notwithstanding some seasonal fluctuations from, say, December to the March quarter that have been seen in the past. And I think the positive of this is that we're able to maintain COCAs in a very narrowband, yet continue to increase our customer acquisition in the way that we showed in acquiring over 1.2 million in customers. Jim Friedland - Cowen & Company: Are there any channels that are generating a greater percentage of the ads that are cheaper new channels that you can talk about?

I would say we don't want to get into that detail, but as Harp mentioned in a previous question about channels in general, there has been a stability at all the high level metrics and is always turned up and down within those different metrics. But if you look at the pie chart we show every quarter of channels, it's being quite stable. Jim Friedland - Cowen & Company: Okay. And then, the second question is on OfficeMax, one, did that have an impact on AOVs in the quarter, and just generally, how is that progressing versus your expectation? And last, now that OfficeMax has had a chance to look at it and maybe some potential future partners, how is your pipeline for that type of a kiosk product chain where you are today versus where you were may be when you just launched it?

Sure. In terms of the specifics, I can't talk about the AOV specifically, but I can tell you OfficeMax is on plan. We did get the full revenue run rate we expected, but we don't break it out. In terms of other strategic prospects or strategic partnership prospects, we can't comment in this venue, but we do, as we have for a long time had active dialogues with a number of different potential partners. Jim Friedland - Cowen & Company: Okay. Fair enough. Thanks.

Thank you.

And your next question is from the line of Scott Devitt with Stifel Nicolaus. You may proceed.

Hi, thanks. Question relates to the international operations. Last quarter the percentage growth accelerated for the first time since the move of the marketing heads and then the hiring of the 50 additional people as well. But also in dollar terms, you had a $14 million, absolute dollar increase sequentially last quarter, and it looks likes this quarter international revenues sequentially were actually down and the ex-currency growth rate reverse. So, I just wonder, if you just kind of walk through the international business, what's driving that and maybe why there is sequential change after that one quarter uptick? Thank you.

Yeah, I think, thank you. I think, we had a phenomenal Q2 internationally, and if you look at the revenue that we had year-over-year internationally, it's great. We just had a very, very, very strong December quarter. And so, I would say that the year-to-year comparison is more appropriate, it was just coming off of a great holiday quarter there.

Thanks.

Thank you.

And your next question is from the line of Randy Hugen with Piper Jaffray. You may proceed.

Thanks. Was there a measurable shift in revenue from third party royal programs in the quarter?

We don't, we haven't made, we don't have our specifics, but I think it's fair to say that we have focused on diversification field works and more strategic referral partners and that diversification continues to accelerate in terms of its contribution to the total referral fees so, relative to our own internal plans and it's very consistent with that. But, you are right, you're right in assuming that greater percentage came from non-membership referral partners this quarter than they did in previous quarters.

Okay, thanks. That's helpful. And then, what's the rational for tightening the top end of EPS guidance. Is that fully a function of option expense, or currency or is this something happening fundamentally in the business causing you to be more cautious or are you now planning for some incremental spending?

I think it's really just the way we mange the business to a range of EPS and we are now two and half months away from and the end, or leaving up at the end of the quarter. So, able to be add more precision and its right, smack in the middle of the range we have been talking about.

All right. And then sorry.

No go ahead, I am sorry.

Okay. And, then could you give us an update on where you are in terms of utilization, capacity with those land and facility investments that you made in the quarter. Where we are and when that you make additional land facility investment.

Exactly so, so, in terms of utilization, we continue to and from a manufacturing perspective to be in the mid 60s and it's standard answer we gave, because that's where we execute too. We have an internal service level agreement that we found that are executing at these sort of growth rates, so the complexities we're managing is the best place to be and meet overall objectives that we have. So, that stays in place. In terms of land and facility, you're right, of the $14 million or so that we spend on CapEx, a vast majority this quarter about 58% was on manned facility and I think that's consistent with some of the things that we've talked about. So, those have been that we continue to look for additional land purchase both in Venlo and Windsor and it should become available if we are able to execute purchase agreements, we will go forward and purchase the land to make sure that we don't get landlocked. And, we have more flexibility and so we found opportunities this quarter both in Venlo and Windsor. Secondly, we did continue and completed the expansion of our facility in Venlo. And, so that we started several quarters ago and so that impacted this quarter as well. In terms of process what you've generally find is that Q3, the March quarter as generally a light quarter from our past purchase because generally we ramp up ahead of the holiday season and the fourth quarter of fiscal year or the first quarter of fiscal year over the first quarter of fiscal year ahead of the holiday season. In this quarter, we've just come obviously off the holiday season. So, in terms of press purchases, it's recently consistent with previous fiscal years as well.

All right. Thanks a lot.

Thank you.

And your next question comes from the line of Nate Swanson with ThinkEquity. Go ahead.

Hi Nate.

Hi. How are you?

Good.

Just going back to the sales and marketing line. Your new customer acquisition continues to trend well. Your conversion rates continue to go up. I'm wondering, how do you think about balancing your reinvestment dollars in terms of broadening the product and services portfolio versus maybe stepping on the gas in terms of new customer acquisition and market share expansion?

I think, it's a good question. If you get to the way we run the business, which is -- we have a very large number of growth investments that are all discretionary, and they really appear throughout the profit and loss statement. Your question could be in acquisition, customer acquisition, we certainly believe the -- our allies are very, very strong, and from an ally perspective, can justify more. Likewise, we think it could be in technology and development, in core corporate infrastructure and finance or human resources, or any other part of the P&L. We have a large number of opportunities to invest. So, what we do is, given our way of managing the business, we horse-race and horse-trade those various growth investments one against each other. And, we are pretty agnostic in terms of where we'll make those investments. We go where we believe. The greatest opportunity is, given where we are, at a given point in time.

Okay. Well, let me ask it another way, then maybe. I mean, if you were to think about your product portfolio three to five years from now, are we 20% there in terms of having the full offering 50% or is there anyway to sort of quantify how far along you think you are?

I wouldn't try to quantify it, because I think we keep expanding the definition of the sets of marketing needs that small businesses have and we, I think, have a history, if you look at VistaPrint over the last four years, or even longer than that, of constantly expanding our value proposition. Today, we are offering a lot of things that a small business needs to market a business, but certainly not everything. And, we participate in fairly right sort of categories, but we do believe there is a large opportunity to expand our services and products, both within the categories we're currently in as well as in the adjacent categories and services. So that said, we are not pre-announcing anything, and I wouldn't want to put a percentage on it, but we do believe there is a lot of growth ahead of us, both in new product introductions as well as in the growth of our current product set, which is a very young product set and is going through a lot of -- just organic growth post launch.

Yeah. Okay, and then I guess, I know you don't give margin guidance, but as we think about something like websites, which would seems like a high margin recurring revenue business, I was wondering what you thought the margin impact from, as you move from product to services might be over a longer three to five year period?

Yeah well, in websites, gross margins and contribution margins are above our corporate average, but initially, the operating margins may be lower due to cost and other things like customer service for other areas. Over time, those digital or electronic-type products do have an inherently higher gross margin, and I think even just like we have other products that are pulled or mixed down, that would help pull it back up.

Okay, excellent. Thank you.

Thank you.

And your next question comes from the line of Dom LaCava of Canaccord Adams. You may proceed.

Thanks for taking my question.

You're welcome.

Just had a quick question on the website business. I may have missed it; I had to cut in and out. But did you have anecdotal color on what kind of interest you're seeing in that product? I don't know if you can give a number of people or was it above expectations, so far? I know it's new but just…

We wouldn't want to comment on that in terms of the numbers or specifics. We can say that we're pleased with it. It's very, very early on. We launched this month. But we're pleased with it, although it's a very fresh launch.

Okay. Fair enough. And then as far as Intuit, I know in the last call you'd mentioned that it was second half of calendar '08 impact and you are looking at a few quarters of dilution tied to that. Has that changed at all or are you still on track with how you characterize that?

No. We're still very consistent with past characterizations. We're in an investment stage right now, but we're excited about the opportunity. We think they are going to be a great partner.

Okay. And then, I guess couple of modeling type. The tax rate looks like a penny of the upside versus consensus came from tax rate. I mean is 10% still the number we should be thinking about?

Yeah. I think between 10% and 11% is what we've talked about in the past. And so, that's consistent. And I'd say there was a gain from a tax side. There wasn't quite a penny, but there was a gain related to reversal and accrual.

Right. Okay. I think somebody touched upon the gross margins. It looks like gross margin guidance came down 1 percentage point. I know you touched on some of the impact in this quarter. You may have touched up on this, but what's driving the forward, downward guidance for gross margins?

Yeah. So, from a guidance perspective relative to what we gave last quarter, the range is 61% to 63% at this point. And I think we have three quarters of actuals at this point and we are here with two months left in the quarter. So, it's a natural for us to kind of become more comfortable with what it should be. And I think right now we would expect 61% to 63% from a gross margin perspective, understanding that if we look at the last quarter on a year-to-year comparison on gross margins of the almost 400 basis point decline, almost 70% of it is due to currency and product mix related to postage associated with our mailing services offering.

Okay, got it. And I didn't see guidance for stock-based comp, maybe in there, but I may have looked over it.

It's a footnote. It's little over $4 million. It's a footnote on the guidance page of the presentation.

Okay, got it. All right, great. Thank you very much.

Thank you.

And your next question comes from the line of Piyush Sharma of Longbow Research. You may proceed.

Good afternoon, guys.

Good afternoon.

I understand the third quarter conversion rate just moves it seasonally, but its one thing growing 100 basis points from 4% and it's another growing from 5.5%. Could you provide more color on what specific incremental cross-selling efforts you undertook in this last quarter that drove this uptick?

I would go back to what Harp said, which is, it's a common refrain VistaPrint in that we have three metrics that have to be taken in totality, in the conversion rate sessions, in AOV fluctuates. So, I will be glad to make a couple of comments on that, on the conversion rates specifically, but we really don't manage through any one of them. We manage the product of those three factors. So, specifically to conversion rates, with that important caveat, conversion rates reflect a lot of different things ranging from the ways we are improving in the ease of reordering to more complex usability in taxonomy improvements, and as we continue to improve our value proposition that we believe that would also expect to contribute towards better conversion returns. So, I think it’s a combination of a lot of important blocking and tackling in our user interface, in our taxonomy, in our core value proposition. But even I would say that we would expect it to fluctuate up and down as it has in the past, although all those numbers we hope will trend overtime up into the right.

Okay. And just one more housekeeping question, could you disclose roughly what percentage of the 48 million sessions were in the US, if you could?

Yeah. I think you asked us whether if we can disclose the number of 48 million sessions, what were in the US. If that's the question, we actually don't, we have never disclosed that.

Okay, understood. Thank you, guys.

And your next question is from the line of Franco Turrinelli with William Blair.

All right. Good afternoon, Harp and Rob. How are you?

Good. How are you?

Good. I have a question, but I'd like to understand a little bit better how we should think about this playing out over time. There's been obviously a lot of discussion about gross margins and operating margins. And one of the things that I want to get a bit more color from you on is it seems that some of these partnerships and wholesale agreements are coming. More important and I think you've commented that that will result in somewhat lower gross margin but higher contribution margin. Kind of two questions. I mean is that something that in your opinion we're seeing already in the results? And secondly, how should we think about that playing out over next year or so with relationships like Intuit getting more traction?

I think on the whole, yeah, your characterization of what we've indicated in the past is accurate, which is, in most cases -- relationships like OfficeMax and Intuit and some of the Business Solutions really and the Business Solutions initiatives that we have, gross margins tend to be lower and contribution margins tend to be higher. And so, we are already seeing that to the extent without disclosing how large the OfficeMax relationships or our Business Solutions relationships are to the extent that that financial framework plays through it is reflected. And particularly, you'd see the next real marketing cost and the contribution mark as that flow out of that. Going forward, as long as the relationships that are structured are structured in a similar manner, which certainly we'd expect, but the general framework will be the same, I think if it becomes larger you'll see a more material impact flowing through the contribution margin line. Having said all of that, there is leverage that comes at the contribution margin line, at the operating income margin line from these relationships, and so that's absolutely consistent. But notwithstanding that, we may decide to spend that leverage in extra marketing and other things. And so, that's the only caveat I put there. We executed the EPS target that we've set and the ranges that we've set. And so with that caveat, the previous answer kind of holds.

Yeah. Harp, I mean it just feels like we're increasingly, particularly when we look at year-over-year trends or longer term trends, it just feels like we're increasingly comparing apples-to-oranges because the business is changing in important ways, in terms of how you're distributing the product, and what type of product you're distributing?

So, I mean, so you do see, for example three quarters depend on external marketing and that I think is valid to reflect on and to leverage that for three consecutive quarters. Is it entirely all due to Office Max being announced at three quarters ago - no. But, I think there is a change we've invested behind this as our many of these initiatives and we are pursuing them and to that extent, you do see that will accrue on the external marketing line and that you all see playing it through on the gross margin line, the impact of that as well.

In fact, Robert speaking, I'd just also add that in a business, we grow at different rates but for simple math, if a business is growing at 50% a year, obviously it's a 100 in the first year, then one year later it's a 150, two years later 225, and three years later it's over 300. And, so in a very short period, it's tripling the size of the business and your fundamental question I heard was, are there apples and oranges in comparison? I'd say yes and no. I mean, we still are the same corporation. We're still serving the same fundamental need, but I think in a company which is trying to create a transformational and very disruptive change in a very large market and grow as fast as we are, the business of today is much larger than the business from a few years ago. The year we filed to go public, we did $90 million in driving revenues. That would be a very bad quarter right now. So -- and we didn't go public that one year. So I think that there is just, as a business that's one of the reasons we've chosen to take this financial strategy of targeting the bottom line and recognizing there will be significant movements around the P&L because from a competitive perspective and a strategic perspective, we very much believe in focusing on the customer needs and as I often say defining the terms of the competitive playing field on our returns. And that's been a very successful strategy in the past and it does make it -- it doesn't mean that some significant movement will happen in P&L numbers and that's why we focus on the bottom lines so much.

One other question for maybe for you Robert. You made I thought an important comment in your prepared remarks that non-holiday products produce record sequential so [have] revenue gains. And I think, one of the things I am trying to understand as we look back to the prior quarter, obviously consumers paid a significant part of it. I think you mentioned at that time it was there 20%, was that an unusually high level, innovative, as we strip out the consumer part of it. I am assuming that we would see pretty strong and in fact stronger sequential growth than we've seen in the total numbers overall?

Yes, absolutely. I think it was even a little more than 20%. We haven't given the exact amount in the December quarter. But, the December quarter was a phenomenal quarter and because of that the March quarter is a tough relative comparison, but so yeah we did know that at the end of December and in January in our last conference call we set guidance and try to meet it. In Q3, it was on plan, adjusted Q2 was extraordinary. So, if you look at where people expected us to be in this quarter, quarter-on-quarter that's ending June relative to our guidance for June, we're way, way above it. It's just that we happen to accelerate in the December quarter due to some great holiday revenues.

Great. Thanks, Robert.

Thank you.

And gentleman, your final question comes from the line of Mark May with Needham & Company. You may proceed. Mark May - Needham & Company: Hi, good evening. As you're expanding your product portfolio, particularly in the area of software and services, I guess one thing that I'm asking myself is can I look back at previous efforts and see to what extent they're indicators of your success in areas like websites and things like that. So, the question is maybe could you shed some light on how well you've done, and I know it's still early days, but in the email marketing services in the email space? And maybe talk about, you had a partnership with someone in the websites design space in the past, maybe if you could provide some indicators about what sort of consumer uptick you had from that partnership? Thanks.

Okay. So, just to be clear, I may have misinterpreted your question, but we are not in the email marketing space. We're in mailing services space where we will do the services of mailing postcards through the physical mail for our customers. I think to your broader question, we have a very, very strong track record of introducing new complementary products around a core value proposition of helping a small business market their business. And if you go back to our Analyst Day not only one year, last autumn, but a year and half ago, we showed pie charts of where we saw small business marketing at that time, and we've kind of walked around that pie chart introducing these new types of products with great success. And we've shown other trends in pie charts where business cards, which used to be the vast majority of our business, are now well below half of our business. And I think that that is something we will continue to see, that we will continue to redefine VistaPrint's customer value proposition around offering everything of small needs, business needs to market their business. Now, in terms of partnership, we've had some partnerships with some great companies in the past, including a website space. We, in the end, decided which product is best for us to go at this alone. But clearly, we believe this is a product that can have some significant cross-selling into our existing base just as we've introduced signage or we've introduced apparel products or promotional giveaway products like pens. We believe this is a part of how a small business wants to present their identity. Mark, we may have lost you, or operator, I think the caller may be offline?

Mark, your line is still open. Are you finished?

Okay. Operator, we can hang up. He may have a problem with his line.

All right. Mr. May, has dropped. At this time, with no further questions, I'd like to bring the call back to Mr. Robert Keane for any closing remarks.

Okay. Well, thank you very much everyone for your time. We had another great quarter for VistaPrint and we very much appreciate your interest in the company. Thanks for all your participation in today's call. Have a great evening.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the presentation and you may now disconnect. Have yourselves a wonderful day.