SFLY
$51.50
Shutterfly
$.59
1.16%
Earnings Details
4th Quarter December 2016
Wednesday, February 01, 2017 4:02:00 PM
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Summary

Shutterfly Misses

Shutterfly (SFLY) reported 4th Quarter December 2016 earnings of $2.74 per share on revenue of $561.2 million. The consensus earnings estimate was $2.84 per share on revenue of $586.4 million. The Earnings Whisper number was $2.93 per share. Revenue grew 2.4% on a year-over-year basis.

The company said it expects a first quarter loss of $1.00 to $0.95 per share on revenue of $185.0 million to $190.0 million and 2017 earnings of $0.45 to $0.80 per share on revenue of $1.135 billion to $1.165 billion. The current consensus estimate is a loss of $0.87 per share on revenue of $199.2 million for the quarter ending March 31, 2017 and $1.20 per share on revenue of $1.28 billion for the year ending December 31, 2017.

Shutterfly Inc manufacturers and digitally retails personalized products and services offered through a family of lifestyle brands.

Results
Reported Earnings
$2.74
Earnings Whisper
$2.93
Consensus Estimate
$2.84
Reported Revenue
$561.2 Mil
Revenue Estimate
$586.4 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Shutterfly Announces Fourth Quarter and Full Year 2016 Financial Results

Full Year net income of $15.9 million

--New focus on four strategic areas announced, supported by 2017 restructuring

Significant increases in profitability and quality of earnings in 2017 and 2018 support reinvestment towards sustainable growth

Shutterfly, Inc. (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
3
4
and 34,777 shares issued and outstanding on December 31, 2016 and
December 31, 2015, respectively
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
$
(4,013 )
$
3,818
equipment
Net increase (decrease) in accrued capitalized software and website
(319 )
892
development costs
Stock-based compensation capitalized with software and website
1,560
1,247
development costs
Increase in estimated fair market value of buildings under
--
17,161
build-to-suit leases
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
(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 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
[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.
[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
[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.

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SOURCE: Shutterfly, Inc.

Shutterfly, Inc.
Investor Relations:
Shawn Tabak, 650-610-6026
stabak@shutterfly.com
or
Media Relations:
Nicole Stier, 650-610-6013
nstier@shutterfly.com