REDWOOD CITY, Calif.--(BUSINESS WIRE)--Shutterfly, Inc. (NASDAQ:SFLY), the leading online retailer and manufacturer of high-quality personalized products and services, today announced financial results for the fourth quarter ended December 31, 2016. At the same time, the Company announced a new vision built around four strategic areas. Over the course of 2017, Shutterfly, Inc. will restructure to focus resources on these high-potential opportunities.
2016 Full Year Financial Performance
- Net revenues totaled $1.13 billion, compared to $1.06 billion in 2015.
- Adjusted EBITDA totaled $208.5 million, compared to $192.0 million in 2015.
- GAAP operating income of $49.1 million, compared to $18.3 million in 2015.
- Net income per share was $0.45, compared to a net loss per share of $(0.02) in 2015.
"We’re proud of our 2016 delivery against key initiatives, particularly Shutterfly Business Solutions, mobile, and product range expansion, as well as our continued progress on Operating Income, which more than doubled year-over-year,” said Christopher North, President and Chief Executive Officer of Shutterfly. “At the same time, Consumer growth came towards the low end of our guidance, and Adjusted EBITDA slightly below guidance, as Shutterfly-brand growth was offset by revenue declines in the Tiny Prints, Wedding Paper Divas, MyPublisher, and BorrowLenses brands.”
“To drive sustainable growth and long-term value creation, we’re announcing plans today to significantly simplify our Consumer business in 2017 as the first step in our longer-term strategy,” added North.
Shutterfly shared its vision for the future. The Company’s Consumer vision is to help people share life’s joy by being the leading online retailer and manufacturer of high-quality personalized products. This is complemented by the Company’s Enterprise vision of being the leading digital manufacturing platform for business. To support this vision, Shutterfly announced four areas of strategic focus going forward: (1) make purchasing personalized products simple, (2) expand our range of categories and products, (3) pivot towards mobile, and (4) leverage our manufacturing platform.
To focus resources on these four components of the strategic plan, Shutterfly will restructure in 2017, with the following changes occurring over the course of the year:
- Shutterfly is re-investing in Tiny Prints as its premium cards & stationery brand, creating a Tiny Prints boutique on a dedicated tab on Shutterfly.com later this year.
- The new Shutterfly Wedding Store will be the focus of the Company’s wedding strategy, including a premium Wedding Paper Divas-branded stationery collection.
- The MyPublisher brand will be retired in favor of the industry leading Shutterfly Photo Books category.
- Current Tiny Prints, Wedding Paper Divas, and MyPublisher customers will migrate to Shutterfly.com and the legacy websites will shut down.
- Three very small businesses, TripPix and FavePix, as well as the Shutterfly Pro Gallery service will be shut down.
- Santa Clara-based teams will be consolidated into Redwood City corporate headquarters. The Santa Clara office and both New York locations will be closed.
- Headcount will be reduced by approximately 13% or 260 employees.
- The transition will happen over the course of the first three quarters of 2017 and is expected to be complete before the holiday peak season.
- BorrowLenses will undertake a strategic review for possible sale.
- Going forward, Shutterfly will invest in a single Consumer platform, with all customers benefiting from continued investment in the Shutterfly.com site.
As a result of these changes, the Company expects to incur restructuring charges over the course of 2017 ranging from $15 million to $20 million.
“Our vision is strongly motivated by the belief that sustainable growth comes from innovating on behalf of customers over the long term. At the same time, our plan strikes a balance between investing for growth and delivering improvements in profitability. In each of 2017 and 2018, we will deliver sequential improvements in profitability as well as quality of earnings, while funding re-investment in the business to drive growth in 2019 and beyond,” North concluded.
Fourth Quarter 2016 Financial Highlights
-
Net revenues totaled $561.2 million, a 2% year-over-year increase.
- Consumer net revenues totaled $521.5 million, a 4% year-over-year increase.
- Shutterfly Business Solutions (SBS) net revenues totaled $39.7 million, an 11% year-over-year decrease.
- Excluding one-time SBS shipping pass through revenue of $14.0 million in the fourth quarter of 2015, SBS net revenues increased 29% year-over-year.
-
Gross profit margin was 59.0% of net revenues, compared to 58.3% in
the fourth quarter of 2015.
- Excluding the effect of one-time SBS shipping revenue in the fourth quarter of 2015, gross profit margin decreased 80 basis points year-over-year.
- Excluding the effect of one-time SBS shipping revenue in the fourth quarter of 2015, SBS gross profit margin increased 300 basis points year-over-year.
- Operating expenses totaled $177.4 million, compared to $177.4 million in the fourth quarter of 2015.
- Operating income totaled $153.8 million, compared to $141.9 million in the fourth quarter of 2015.
-
Net income was $91.0 million, compared to $131.1 million in the fourth
quarter of 2015.
- Net income in the fourth quarter decreased by $40.1 million in 2016 due to a tax rate true-up in the fourth quarter of 2015 which positively impacted net income in the prior year.
- Net income per share was $2.63, compared to $3.57 in the fourth quarter of 2015.
- Adjusted EBITDA was $194.8 million, compared to $181.6 million in the fourth quarter of 2015.
- In the fourth quarter of 2016, the Company repurchased 463,851 shares for $21.6 million, at an average price of $46.68 under its share repurchase program.
Full Year 2016 Financial Highlights
-
Net revenues totaled $1.13 billion, a 7% year-over-year increase.
- Consumer net revenues totaled $997.6 million, a 4% year-over-year increase.
- SBS net revenues totaled $136.7 million, a 39% year-over-year increase.
- Gross profit margin was 50.1% of net revenues, compared to 50.2% in 2015.
- Operating expenses totaled $519.0 million, compared to $513.1 million in 2015.
- Operating income totaled $49.1 million, compared to $18.3 million in 2015.
- Net income was $15.9 million, compared to a net loss of $(0.8) million in 2015.
- Net income per share was $0.45, compared to a net loss per share of $(0.02) in 2015.
- Adjusted EBITDA was $208.5 million, compared to $192.0 million in 2015.
- At December 31, 2016, cash and investments totaled $330.1 million.
- Total capital expenditures totaled $75.6 million, compared to $81.4 million in 2015.[1]
- Adjusted EBITDA minus capital expenditures[2] was $132.9 million, compared to $110.6 million in 2015.
- During 2016, the Company repurchased approximately 2.5 million shares for $112.5 million, at an average price of $44.55 under its share repurchase program. As of December 31, 2016, $82.8 million remained authorized under the repurchase program.
[1] Total capital expenditures of $75.6 million excludes $9.8 million related to printers that were acquired and immediately sold in the second quarter of 2016.
[2] Adjusted EBITDA minus capital expenditures was referred to as "free cash flow" prior to the fourth quarter of 2016.
Fourth Quarter 2016 Consumer Operating Metrics
- Transacting customers totaled 6.2 million, an increase of 1% year-over-year.
- Orders totaled 10.9 million, an increase of 6% year-over-year.
- Average order value was $47.98, a decrease of 2% year-over-year.
Full Year 2016 Consumer Operating Metrics
- Transacting customers totaled 10.1 million, an increase of 4% year-over-year.
- Orders totaled 27.1 million, an increase of 5% year-over-year.
- Average order value was $36.80, a decrease of 1% year-over-year.
Business Outlook [3]
First Quarter 2017:
- Net revenues to range from $185.0 million to $190.0 million.
- Gross profit margin to range from 37.0% to 37.5% of net revenues.
- Operating loss to range from $(48.0) million to $(45.5) million.
- Effective tax rate of 37.5%.
- Net loss per share to range from $(1.00) to $(0.95).
- Weighted average shares of approximately 33.7 million.
- Adjusted EBITDA loss to range from $(7.0) million to $(4.5) million.
Full Year 2017:
- Net revenues to range from $1.135 billion to $1.165 billion.[4]
- Gross profit margin to range from 49.0% to 50.0% of net revenues.
- Operating income to range from $48.5 million to $68.5 million.
- Effective tax rate of 37.5%.
- Net income per share to range from $0.45 to $0.80.
- Weighted average shares of approximately 34.5 million.
- Adjusted EBITDA to range from $210.0 million to $230.0 million.
- Capital expenditures to be approximately $75.0 million.
“In an effort to provide a view into the full benefits of the changes we are making, we are providing high level thoughts for 2018, our first full year operating after the restructuring. For 2018, we are targeting an increase to total net revenues of approximately $70.0 million driven by continued growth in SBS of approximately 20% and mid-single digit growth in Consumer. We are targeting an increase to GAAP gross profit of approximately $40.0 million and an increase to both Adjusted EBITDA and GAAP Operating Income of approximately $50.0 million. We are targeting capital expenditures to remain flat at approximately $75.0 million. No restructuring charges are expected in 2018, ” said Mike Pope, Chief Financial Officer of Shutterfly.
[3] Excludes restructuring charges ranging from $15 million to $20 million as well as any costs related to refinancing our convertible debt.
[4] In 2017, net revenues from SBS segment to increase 20% over 2016.
Notes to the Fourth Quarter 2016 Financial Results and Operating Metrics and 2017 Business Outlook
Adjusted EBITDA is a non-GAAP financial measure that the Company defines as earnings before interest, taxes, depreciation, amortization and stock-based compensation.
Adjusted EBITDA minus capital expenditures is a non-GAAP financial measure that the Company defines as adjusted EBITDA less purchases of property, plant, and equipment and capitalization of software development costs. This measure was referred to as "free cash flow" prior to the fourth quarter of 2016.
Consumer segment includes net revenues from stationery and greeting cards, photo books, calendars and photo-based merchandise, photo prints, and the related shipping revenues and rental revenue. Consumer also includes net revenues from advertising and sponsorship programs.
Shutterfly Business Solutions (SBS) includes net revenues primarily from variable, four-color direct marketing collateral manufactured and fulfilled for business customers.
Average Order Value (AOV) is defined as total net revenues (excluding SBS) divided by total orders.
The foregoing financial guidance replaces any of the Company’s previously issued financial guidance which should no longer be relied upon.
Fourth Quarter Conference Call
Management will review the fourth quarter 2016 financial results and its expectations for the first quarter and full year 2017 on a conference call on Wednesday, February 1, 2017 at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). To listen to the call and view the accompanying slides, please visit http://www.shutterflyinc.com. In the Investor Relations area, click on the link provided for the webcast, or dial (888) 317-6003 or (412) 317-6061, and enter the conference access code 9725499. The webcast will be archived and available at http://www.shutterflyinc.com in the investor relations section. A replay of the conference call will be available through Wednesday, February 15, 2017. To hear the replay, please dial (877) 344-7529 or (412) 317-0088, and enter access code 10098795.
Non-GAAP Financial Information
This press release contains non-GAAP financial measures. Tables are provided at the end of this press release that reconcile the non-GAAP financial measures that the Company uses to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP financial measures include non-GAAP gross profit margin, non-GAAP operating income (loss) and operating margin, adjusted EBITDA, and adjusted EBITDA minus capital expenditures. The method the Company uses to produce non-GAAP financial measures is not computed according to GAAP and may differ from methods used by other companies.
To supplement the Company's consolidated financial statements presented on a GAAP basis, we believe that these non-GAAP measures provide useful information about the Company's core operating results and thus are appropriate to enhance the overall understanding of the Company's past financial performance and its prospects for the future. These adjustments to the Company's GAAP results are made with the intent of providing both management and investors a more complete understanding of the Company's underlying operational results and trends and performance. Management uses these non-GAAP measures to evaluate the Company's financial results, develop budgets, manage expenditures, and determine employee compensation. The presentation of additional information is not meant to be considered in isolation or as a substitute for or superior to gross margins, operating income (loss), or net income (loss) determined in accordance with GAAP. For more information, please see Shutterfly's SEC Filings, including the most recent Form 10-K and Form 10-Q, which are available on the Securities and Exchange Commission's Web site at www.sec.gov.
Notice Regarding Forward-Looking Statements
This media release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. These forward-looking statements include statements regarding the Company's growth and financial expectations for the first quarter, full year 2017 and full year 2018 set forth under the caption "Business Outlook," and statements about historical results that may suggest trends for our business. The Company's actual results may differ materially from those anticipated in these forward-looking statements. Factors that might contribute to such differences include, among others, economic downturns and the general state of the economy; changes in consumer discretionary spending as a result of the macroeconomic environment; the loss of sales partners for our products; our ability to expand our customer base, increase sales to existing customers and meet production requirements; our ability to successfully integrate acquired businesses and assets; our ability to retain and hire necessary employees, including seasonal personnel, and appropriately staff our operations; the impact of seasonality on our business; our ability to develop and implement innovative, new products and services on a timely and cost-effective basis, including our next generation Shutterfly platform; consumer acceptance of our products and services; our ability to develop additional adjacent lines of business; unforeseen changes in expense levels; and competition and pricing strategies of our competitors, which could lead to pricing pressure. For more information regarding the risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these forward-looking statements, as well as risks relating to our business in general, we refer you to the "Risk Factors" section of the Company's most recent Form 10-K and Form 10-Q, and the Company's other filings, which are available on the Securities and Exchange Commission's website at www.sec.gov. These forward-looking statements are based on current expectations and the Company assumes no obligation to update this information.
About Shutterfly, Inc.
Shutterfly, Inc. is the leading online retailer and manufacturer of high-quality personalized products and services. Founded in 1999, the Shutterfly, Inc. family of brands includes Shutterfly, where your photos come to life in photo books, cards and gifts; Tiny Prints, premium cards and stationery for all life’s occasions; Wedding Paper Divas, wedding invitations and stationery for every step of the planning process; MyPublisher, one of the pioneers in the photo book industry and creator of easy-to-use photo book-making software; BorrowLenses, the premier online marketplace for photographic and video equipment rentals; and Groovebook, an iPhone and Android app and subscription service that prints up to 100 mobile phone photos in a Groovebook and mails it to customers every month. For more information about Shutterfly, Inc. (SFLY), visit www.shutterflyinc.com.
| Shutterfly, Inc. | ||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Net revenues | $ | 561,226 | $ | 548,080 | $ | 1,134,224 | $ | 1,059,429 | ||||||||
| Cost of net revenues | 230,048 | 228,733 | 566,117 | 528,078 | ||||||||||||
| Gross profit | 331,178 | 319,347 | 568,107 | 531,351 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Technology and development | 44,043 | 43,390 | 166,909 | 155,318 | ||||||||||||
| Sales and marketing | 98,301 | 98,721 | 233,585 | 236,749 | ||||||||||||
| General and administrative | 35,041 | 35,289 | 118,503 | 121,019 | ||||||||||||
| Total operating expenses | 177,385 | 177,400 | 518,997 | 513,086 | ||||||||||||
| Income from operations | 153,793 | 141,947 | 49,110 | 18,265 | ||||||||||||
| Interest expense | (5,961 | ) | (5,664 | ) | (23,023 | ) | (20,998 | ) | ||||||||
| Interest and other income, net | 122 | 89 | 501 | 744 | ||||||||||||
| Income (loss) before income taxes | 147,954 | 136,372 | 26,588 | (1,989 | ) | |||||||||||
| Benefit from (provision for) income taxes | (56,972 | ) | (5,258 | ) | (10,682 | ) | 1,146 | |||||||||
| Net income (loss) | $ | 90,982 | $ | 131,114 | $ | 15,906 | $ | (843 | ) | |||||||
| Net income (loss) per share: | ||||||||||||||||
| Basic | $ | 2.70 | $ | 3.73 | $ | 0.47 | $ | (0.02 | ) | |||||||
| Diluted | $ | 2.63 | $ | 3.57 | $ | 0.45 | $ | (0.02 | ) | |||||||
| Weighted-average shares outstanding: | ||||||||||||||||
| Basic | 33,683 | 35,172 | 34,097 | 36,761 | ||||||||||||
| Diluted | 34,625 | 36,743 | 35,190 | 36,761 | ||||||||||||
| Stock-based compensation is allocated as follows: | ||||||||||||||||
| Cost of net revenues | $ | 1,143 | $ | 989 | $ | 4,579 | $ | 4,134 | ||||||||
| Technology and development | 2,854 | 3,096 | 8,550 | 10,840 | ||||||||||||
| Sales and marketing | 3,748 | 4,310 | 15,445 | 21,512 | ||||||||||||
| General and administrative | 4,659 | 2,232 | 17,118 | 23,972 | ||||||||||||
| $ | 12,404 | $ | 10,627 | $ | 45,692 | $ | 60,458 | |||||||||
| Depreciation and amortization is allocated as follows: | ||||||||||||||||
| Cost of net revenues | $ | 15,914 | $ | 13,412 | $ | 57,362 | $ | 52,075 | ||||||||
| Technology and development | 7,542 | 8,598 | 32,549 | 32,952 | ||||||||||||
| Sales and marketing | 3,124 | 4,724 | 14,706 | 19,132 | ||||||||||||
| General and administrative | 2,013 | 2,310 | 9,034 | 9,118 | ||||||||||||
| $ | 28,593 | $ | 29,044 | $ | 113,651 | $ | 113,277 | |||||||||
| Shutterfly, Inc. | ||||||||
| Consolidated Balance Sheets | ||||||||
| (In thousands, except par value amounts) | ||||||||
| (Unaudited) | ||||||||
| December 31, | December 31, | |||||||
| 2016 | 2015 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 289,224 | $ | 288,863 | ||||
| Short-term investments | 26,352 | 22,918 | ||||||
| Accounts receivable, net | 57,365 | 55,222 | ||||||
| Inventories | 11,751 | 13,466 | ||||||
| Prepaid expenses and other current assets | 48,084 | 31,828 | ||||||
| Total current assets | 432,776 | 412,297 | ||||||
| Long-term investments | 14,479 | 29,005 | ||||||
| Property and equipment, net | 284,110 | 281,779 | ||||||
| Intangible assets, net | 43,420 | 62,323 | ||||||
| Goodwill | 408,975 | 408,975 | ||||||
| Other assets | 11,816 | 10,948 | ||||||
| Total assets | $ | 1,195,576 | $ | 1,205,327 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 58,790 | $ | 35,329 | ||||
| Accrued liabilities | 138,869 | 149,134 | ||||||
| Deferred revenue, current portion | 22,929 | 27,329 | ||||||
| Total current liabilities | 220,588 | 211,792 | ||||||
| Convertible senior notes, net | 278,792 | 264,361 | ||||||
| Other liabilities | 137,035 | 123,112 | ||||||
| Total liabilities | 636,415 | 599,265 | ||||||
| Stockholders’ equity: | ||||||||
| Common stock, $0.0001 par value; 100,000 shares authorized; 33,637 and 34,777 shares issued and outstanding on December 31, 2016 and December 31, 2015, respectively | 3 | 4 | ||||||
| Additional paid-in capital | 949,864 | 900,218 | ||||||
| Accumulated other comprehensive loss | (32 | ) | (68 | ) | ||||
| Accumulated deficit | (390,674 | ) | (294,092 | ) | ||||
| Total stockholders' equity | 559,161 | 606,062 | ||||||
| Total liabilities and stockholders' equity | $ | 1,195,576 | $ | 1,205,327 | ||||
| Shutterfly, Inc. | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
| Twelve Months Ended | ||||||||
| December 31, | ||||||||
| 2016 | 2015 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | 15,906 | $ | (843 | ) | |||
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Depreciation and amortization | 93,531 | 86,290 | ||||||
| Amortization of intangible assets | 20,120 | 26,987 | ||||||
| Amortization of debt discount and transaction costs | 14,432 | 13,647 | ||||||
| Stock-based compensation | 45,692 | 60,458 | ||||||
| Loss on disposal of property and equipment | 738 | 1,755 | ||||||
| Deferred income taxes | 8,899 | (2,149 | ) | |||||
| Tax benefit from stock-based compensation | 290 | 98 | ||||||
| Excess tax benefits from stock-based compensation | (2,413 | ) | (1,813 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (2,142 | ) | (24,117 | ) | ||||
| Inventories | 1,715 | (450 | ) | |||||
| Prepaid expenses and other assets | (19,140 | ) | (7,436 | ) | ||||
| Accounts payable | 27,128 | 3,139 | ||||||
| Accrued and other liabilities | (11,333 | ) | 9,471 | |||||
| Net cash provided by operating activities | 193,423 | 165,037 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (56,264 | ) | (55,448 | ) | ||||
| Capitalization of software and website development costs | (33,423 | ) | (21,221 | ) | ||||
| Purchases of investments | (29,422 | ) | (31,073 | ) | ||||
| Proceeds from the maturities and sales of investments | 40,447 | 73,454 | ||||||
| Proceeds from sale of property and equipment | 14,261 | 1,298 | ||||||
| Acquisition of business and intangible assets, net of cash acquired | — | (127 | ) | |||||
| Net cash used in investing activities | (64,401 | ) | (33,117 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock upon exercise of stock options | 2,104 | 3,221 | ||||||
| Repurchases of common stock | (112,488 | ) | (179,090 | ) | ||||
| Excess tax benefits from stock-based compensation | 2,413 | 1,813 | ||||||
| Principal payments of capital lease and financing obligations | (19,377 | ) | (12,723 | ) | ||||
| Prepayment of accelerated share repurchase | — | (75,000 | ) | |||||
| Refund of accelerated share repurchase | — | 38,179 | ||||||
| Payment for contingent consideration liabilities | (1,313 | ) | — | |||||
| Net cash used in financing activities | (128,661 | ) | (223,600 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | 361 | (91,680 | ) | |||||
| Cash and cash equivalents, beginning of period | 288,863 | 380,543 | ||||||
| Cash and cash equivalents, end of period | $ | 289,224 | $ | 288,863 | ||||
| Supplemental schedule of non-cash investing / financing activities: | ||||||||
| Net increase (decrease) in accrued purchases of property and equipment | $ | (4,013 | ) | $ | 3,818 | |||
| Net increase (decrease) in accrued capitalized software and website development costs | (319 | ) | 892 | |||||
| Stock-based compensation capitalized with software and website development costs | 1,560 | 1,247 | ||||||
| Increase in estimated fair market value of buildings under build-to-suit leases | — | 17,161 | ||||||
| Property and equipment acquired under capital leases | 23,946 | 29,097 | ||||||
| Shutterfly, Inc. | |||||||||||
| Consumer Metrics Disclosure | |||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||
| December 31, | December 31, | ||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||
| Consumer Metrics | |||||||||||
| Customers | 6,219,011 | 6,141,073 | 10,115,763 | 9,750,590 | |||||||
| year-over-year growth | 1 | % | 4 | % | |||||||
| Orders | 10,869,499 | 10,280,487 | 27,108,889 | 25,805,801 | |||||||
| year-over-year growth | 6 | % | 5 | % | |||||||
| Average order value [1] | $47.98 | $48.96 | $36.80 | $37.26 | |||||||
| year-over-year growth | (2 | )% | (1 | )% | |||||||
|
[1] Average order value excludes Shutterfly Business Solutions revenue. |
| Shutterfly, Inc. | ||||||||||||||||
| Segment Disclosure | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Consumer | ||||||||||||||||
| Net revenues | $ | 521,484 | $ | 503,331 | $ | 997,556 | $ | 961,418 | ||||||||
| Cost of net revenues | 198,949 | 189,125 | 455,387 | 436,050 | ||||||||||||
| Gross profit | 322,535 | 314,206 | 542,169 | 525,368 | ||||||||||||
| Consumer gross profit margin | 61.8 | % | 62.4 | % | 54.3 | % | 54.6 | % | ||||||||
| Shutterfly Business Solutions (SBS) | ||||||||||||||||
| Net revenues | 39,742 | 44,749 | 136,668 | 98,011 | ||||||||||||
| Cost of net revenues | 28,673 | 37,090 | 100,582 | 79,789 | ||||||||||||
| Gross profit | 11,069 | 7,659 | 36,086 | 18,222 | ||||||||||||
| SBS gross profit margin | 27.9 | % | 17.1 | % | 26.4 | % | 18.6 | % | ||||||||
| Corporate [1] | ||||||||||||||||
| Net revenues | — | — | — | — | ||||||||||||
| Cost of net revenues | 2,426 | 2,518 | 10,148 | 12,239 | ||||||||||||
| Gross profit | (2,426 | ) | (2,518 | ) | (10,148 | ) | (12,239 | ) | ||||||||
| Consolidated | ||||||||||||||||
| Net revenues | 561,226 | 548,080 | 1,134,224 | 1,059,429 | ||||||||||||
| Cost of net revenues | 230,048 | 228,733 | 566,117 | 528,078 | ||||||||||||
| Gross profit | $ | 331,178 | $ | 319,347 | $ | 568,107 | $ | 531,351 | ||||||||
| Gross profit margin | 59.0 | % | 58.3 | % | 50.1 | % | 50.2 | % | ||||||||
|
[1] Corporate category includes activities that are not directly attributable or allocable to a specific segment. This category consists of stock-based compensation and amortization of intangible assets. |
| Shutterfly, Inc. | ||||||||||||||||||||||||||||||||||||||||
| Reconciliation of GAAP Gross Profit Margin to Non-GAAP Gross Profit Margin | ||||||||||||||||||||||||||||||||||||||||
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| Mar. 31, | Jun. 30, | Sep. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sep. 30, | Dec. 31, | Dec. 31, | Dec. 31, | |||||||||||||||||||||||||||||||
| 2015 | 2015 | 2015 | 2015 | 2016 | 2016 | 2016 | 2016 | 2015 | 2016 | |||||||||||||||||||||||||||||||
| GAAP gross profit | $ | 65,271 | $ | 87,232 | $ | 59,501 | $ | 319,347 | $ | 72,986 | $ | 94,369 | $ | 69,574 | $ | 331,178 | $ | 531,351 | $ | 568,107 | ||||||||||||||||||||
| Stock-based compensation | 1,192 | 1,001 | 952 | 989 | 1,224 | 1,081 | 1,131 | 1,143 | 4,134 | 4,579 | ||||||||||||||||||||||||||||||
| Amortization of intangible assets | 2,849 | 2,014 | 1,713 | 1,526 | 1,452 | 1,424 | 1,409 | 1,283 | 8,102 | 5,568 | ||||||||||||||||||||||||||||||
| Non-GAAP gross profit | $ | 69,312 | $ | 90,247 | $ | 62,166 | $ | 321,862 | $ | 75,662 | $ | 96,874 | $ | 72,114 | $ | 333,604 | $ | 543,587 | $ | 578,254 | ||||||||||||||||||||
| Non-GAAP gross profit margin | 43 | % | 49 | % | 37 | % | 59 | % | 42 | % | 47 | % | 38 | % | 59 | % | 51 | % | 51 | % | ||||||||||||||||||||
| Shutterfly, Inc. | ||||||||||||||||||||||||||||||||||||||||
| Reconciliation of GAAP Operating Margin to Non-GAAP Operating Margin | ||||||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||||||||||||||||||||||||||
| Mar. 31, | Jun. 30, | Sep. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sep. 30, | Dec. 31, | Dec. 31, | Dec. 31, | |||||||||||||||||||||||||||||||
| 2015 | 2015 | 2015 | 2015 | 2016 | 2016 | 2016 | 2016 | 2015 | 2016 | |||||||||||||||||||||||||||||||
| GAAP operating income (loss) | $ | (46,224 | ) | $ | (28,392 | ) | $ | (49,066 | ) | $ | 141,947 | $ | (41,814 | ) | $ | (21,075 | ) | $ | (41,794 | ) | $ | 153,793 | $ | 18,265 | $ | 49,110 | ||||||||||||||
| Stock-based compensation | 17,760 | 16,315 | 15,756 | 10,627 | 10,150 | 10,924 | 12,214 | 12,404 | 60,458 | 45,692 | ||||||||||||||||||||||||||||||
| Amortization of intangible assets | 7,684 | 6,735 | 6,379 | 6,252 | 6,119 | 5,074 | 4,551 | 4,376 | 27,050 | 20,120 | ||||||||||||||||||||||||||||||
| Non-GAAP operating income (loss) | $ | (20,780 | ) | $ | (5,342 | ) | $ | (26,931 | ) | $ | 158,826 | $ | (25,545 | ) | $ | (5,077 | ) | $ | (25,029 | ) | $ | 170,573 | $ | 105,773 | $ | 114,922 | ||||||||||||||
| Non-GAAP operating margin | (13 | )% | (3 | )% | (16 | )% | 29 | % | (14 | )% | (2 | )% | (13 | )% | 30 | % | 10 | % | 10 | % | ||||||||||||||||||||
| Shutterfly, Inc. | ||||||||||||||||||||||||||||||||||||||||
| Reconciliation of Net Income (Loss) to Non-GAAP Adjusted EBITDA | ||||||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||||||||||||||||||||||||||
| Mar. 31, | Jun. 30, | Sep. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sep. 30, | Dec. 31, | Dec. 31, | Dec. 31, | |||||||||||||||||||||||||||||||
| 2015 | 2015 | 2015 | 2015 | 2016 | 2016 | 2016 | 2016 | 2015 | 2016 | |||||||||||||||||||||||||||||||
| GAAP net income (loss) | $ | (45,103 | ) | $ | (23,777 | ) | $ | (63,077 | ) | $ | 131,114 | $ | (29,436 | ) | $ | (16,485 | ) | $ | (29,155 | ) | $ | 90,982 | $ | (843 | ) | $ | 15,906 | |||||||||||||
| Interest expense | 4,736 | 4,985 | 5,613 | 5,664 | 5,675 | 5,661 | 5,726 | 5,961 | 20,998 | 23,023 | ||||||||||||||||||||||||||||||
| Interest and other income, net | (102 | ) | (120 | ) | (433 | ) | (89 | ) | (121 | ) | (128 | ) | (130 | ) | (122 | ) | (744 | ) | (501 | ) | ||||||||||||||||||||
| Tax (benefit) provision | (5,755 | ) | (9,480 | ) | 8,831 | 5,258 | (17,932 | ) | (10,123 | ) | (18,235 | ) | 56,972 | (1,146 | ) | 10,682 | ||||||||||||||||||||||||
| Depreciation and amortization | 27,593 | 27,707 | 28,933 | 29,044 | 29,114 | 28,357 | 27,587 | 28,593 | 113,277 | 113,651 | ||||||||||||||||||||||||||||||
| Stock-based compensation | 17,760 | 16,315 | 15,756 | 10,627 | 10,150 | 10,924 | 12,214 | 12,404 | 60,458 | 45,692 | ||||||||||||||||||||||||||||||
| Non-GAAP Adjusted EBITDA | $ | (871 | ) | $ | 15,630 | $ | (4,377 | ) | $ | 181,618 | $ | (2,550 | ) | $ | 18,206 | $ | (1,993 | ) | $ | 194,790 | $ | 192,000 | $ | 208,453 | ||||||||||||||||
| Shutterfly, Inc. | ||||||||||||||||||||||||||||||||||||||||
| Reconciliation of Cash Flow from Operating Activities to Non-GAAP Adjusted EBITDA and Adjusted EBITDA minus Capital Expenditures | ||||||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||||||||||||||||||||||||||
| Mar. 31, | Jun. 30, | Sep. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sep. 30, | Dec. 31, | Dec. 31, | Dec. 31, | |||||||||||||||||||||||||||||||
| 2015 | 2015 | 2015 | 2015 |
2016 [3] |
2016 | 2016 | 2016 | 2015 | 2016 | |||||||||||||||||||||||||||||||
| Net cash provided by (used in) operating activities | $ | (107,731 | ) | $ | 22,171 | $ | (22,140 | ) | $ | 272,737 | $ | (82,610 | ) | $ | 16,916 | $ | (4,881 | ) | $ | 263,998 | $ | 165,037 | $ | 193,423 | ||||||||||||||||
| Interest expense | 4,736 | 4,985 | 5,613 | 5,664 | 5,675 | 5,661 | 5,726 | 5,961 | 20,998 | 23,023 | ||||||||||||||||||||||||||||||
| Interest and other income, net | (102 | ) | (120 | ) | (433 | ) | (89 | ) | (121 | ) | (128 | ) | (130 | ) | (122 | ) | (744 | ) | (501 | ) | ||||||||||||||||||||
| Tax (benefit) provision | (5,755 | ) | (9,480 | ) | 8,831 | 5,258 | (17,932 | ) | (10,123 | ) | (18,235 | ) | 56,972 | (1,146 | ) | 10,682 | ||||||||||||||||||||||||
| Changes in operating assets and liabilities | 113,075 | (6,803 | ) | 134 | (87,013 | ) | 98,604 | 2,374 | 29,155 | (126,361 | ) | 19,393 | 3,772 | |||||||||||||||||||||||||||
| Other adjustments | (5,094 | ) | 4,877 | 3,618 | (14,939 | ) | (6,166 | ) | 3,506 | (13,628 | ) | (5,658 | ) | (11,538 | ) | (21,946 | ) | |||||||||||||||||||||||
| Non-GAAP Adjusted EBITDA | (871 | ) | 15,630 | (4,377 | ) | 181,618 | (2,550 | ) | 18,206 | (1,993 | ) | 194,790 | 192,000 | 208,453 | ||||||||||||||||||||||||||
| Less: Purchases of property and equipment | (13,978 | ) | (17,199 | ) | (15,117 | ) | (12,972 | ) | (5,497 | ) | (22,005 | ) | (14,957 | ) | (9,792 | ) | (59,266 | ) | (52,251 | ) | ||||||||||||||||||||
| Less: Capitalized technology & development costs | (4,072 | ) | (5,386 | ) | (6,353 | ) | (6,302 | ) | (8,168 | ) | (10,052 | ) | (8,819 | ) | (6,065 | ) | (22,113 | ) | (33,104 | ) | ||||||||||||||||||||
| Add: Capex adjustments [1] | — | — | — | — | — | 9,827 | — | — | — | 9,827 | ||||||||||||||||||||||||||||||
| Adjusted EBITDA minus capital expenditures [2] | $ | (18,921 | ) | $ | (6,955 | ) | $ | (25,847 | ) | $ | 162,344 | $ | (16,215 | ) | $ | (4,024 | ) | $ | (25,769 | ) | $ | 178,933 | $ | 110,621 | $ | 132,925 | ||||||||||||||
|
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[1] In the second quarter of 2016, the Company acquired and immediately sold $9.8 million of printers. |
|
[2] Adjusted EBITDA minus capital expenditures was referred to as "free cash flow" prior to the fourth quarter of 2016. |
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[3] The Company reclassified an immaterial contingent consideration payment (to Groovebook Founders) in the first quarter of 2016 between operating and financing activities within the cash flow statement. |
| Shutterfly, Inc. | ||||||||||||
| Reconciliation of Forward-Looking Guidance for Non-GAAP Financial Measures to GAAP Measures | ||||||||||||
| (In millions, except per share amounts) | ||||||||||||
| Forward-Looking Guidance [1] | ||||||||||||
| Three Months Ending | Twelve Months Ending | |||||||||||
| March 31, 2017 | December 31, 2017 | |||||||||||
| Low | High | Low | High | |||||||||
| Net revenues [2] | $185.0 | $190.0 | $1,135.0 | $1,165.0 | ||||||||
| GAAP gross profit margin | 37.0 | % | 37.5 | % | 49.0 | % | 50.0 | % | ||||
| GAAP operating income (loss) | ($48.0 | ) | ($45.5 | ) | $48.5 | $68.5 | ||||||
| GAAP operating margin | (26.0 | %) | (24.0 | %) | 4.3 | % | 5.9 | % | ||||
| GAAP operating income (loss) | ($48.0 | ) | ($45.5 | ) | $48.5 | $68.5 | ||||||
| Stock-based compensation | $12.4 | $12.4 | $49.0 | $49.0 | ||||||||
| Amortization of intangible assets | $4.3 | $4.3 | $14.9 | $14.9 | ||||||||
| Depreciation | $24.3 | $24.3 | $97.6 | $97.6 | ||||||||
| Adjusted EBITDA | ($7.0 | ) | ($4.5 | ) | $210.0 | $230.0 | ||||||
| Adjusted EBITDA margin | (3.8 | %) | (2.4 | %) | 18.5 | % | 19.7 | % | ||||
| Capital expenditures | $75.0 | $75.0 | ||||||||||
| Capital expenditures as % of net revenues | 6.6 | % | 6.4 | % | ||||||||
| Adjusted EBITDA minus capital expenditures [3] | $135.0 | $155.0 | ||||||||||
| Adjusted EBITDA minus capital expenditures as % of net revenues | 11.9 | % | 13.3 | % | ||||||||
| Tax rate | 37.5 | % | 37.5 | % | 37.5 | % | 37.5 | % | ||||
| Net income (loss) per share | ||||||||||||
| Basic | ($1.00 | ) | ($0.95 | ) | — | — | ||||||
| Diluted | — | — | $0.45 | $0.80 | ||||||||
| Weighted average shares | ||||||||||||
| Basic | 33.7 | 33.7 | — | — | ||||||||
| Diluted | — | — | 34.5 | 34.5 | ||||||||
|
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[1] Excludes expected restructuring charges ranging from $15 million to $20 million as well as any costs related to refinancing our convertible debt. |
|
[2] In 2017, net revenues from SBS Segment to increase 20% over 2016. |
|
[3] Adjusted EBITDA minus capital expenditures was referred to as "free cash flow" prior to the fourth quarter of 2016. |