[October 24, 2017] |
|
Shutterfly Announces Third Quarter 2017 Financial Results
Shutterfly, Inc. (NASDAQ:SFLY), the leading online retailer and
manufacturer of high-quality personalized products and services, today
announced financial results for the third quarter ended September 30,
2017.
"Q3 marked an important milestone for the company as we substantially
completed the platform consolidation and the restructuring announced
earlier this year in February," said Christopher North, President and
Chief Executive Officer. "Now, Shutterfly, TinyPrints, and our Weddings
business - representing the overwhelming majority of our Consumer
customers - are on a single technical platform. Combined with our
streamlined cost structure and sharpened focus, we're in a strong
position to execute against our growth plan going forward."
"Our Shutterfly brand and Shutterfly Business Solutions performed well
in Q3. We continue to make good progress against our areas of strategic
focus while maintaining strong cost control, and also closed a $500
million credit facility. And we're ready for the fourth quarter with a
beautiful selection of holiday products for both Shutterfly and
TinyPrints customers, and having significantly improved customer
experiences both on the web and in our mobile app."
Third Quarter 2017 Financial Highlights
Net revenues totaled $195.4 million, a 4% year-over-year increase.
Consumer net revenues totaled $135.4 million, a 6% year-over-year
decrease as anticipated, as we migrated TinyPrints customers to the
Shutterfly Platform, and shut down Wedding Paper Divas in the quarter
and MyPublisher earlier in the year. Shutterfly Business Solutions net
revenues totaled $60.0 million, a 39% year-over-year increase.
GAAP Operating loss totaled $35.8 million and Net loss was $25.6 million
or $0.78 per share.
On a proforma basis, which excludes restructuring charges of $3.3
million, our operating loss was $32.5 million, Adjusted EBITDA was $3.0
million, and Net loss was $24.0 million or $0.73 per share.
Restructuring charges for the third quarter are primarily related to
property and equipment, and employee costs. Restructuring costs on a
year-to-date basis were $17.0 million. Approximately 30% of these
restructuring costs are in cash, which is less than our initial forecast
of 50%.
During the third quarter of 2017, we entered into a credit agreement
which provides for a $300 million Delayed Draw Term Loan B and a $200
million revolving credit facility. The proceeds from the Term Loan B
will finance the repayment of our $300 million convertible debt due in
May 2018, which we expect to repay at maturity. Given the economic
provisions of the delayed draw, we funded the $300 million term loan in
the month of October. The term loan carries variable interest at LIBOR +
250 basis points with a seven-year tenor. Concurrent with the funding,
we hedged $150 million of the notional value of the loan with interest
rate swaps, resulting in a fixed interest rate of 4.27% for the hedged
portion of the debt.
During the third quarter of 2017, we repurchased a total of 632 thousand
shares for $30.0 million bringing our year-to-date repurchases to over
1.6 million shares. We anticipate repurchasing approximately $30.0
million in the fourth quarter of 2017, bringing total estimated share
repurchases for 2017 to $110.0 million.
Earlier in the year, we announced that we would undertake a strategic
review of BorrowLenses. We completed the process in the third quarter,
and decided to retain and operate the business. BorrowLenses is growing
at a modest growth rate and generates positive cash flow.
Business Outlook [1]
Full Year 2017:
For the full year we are maintaining our guidance for Net revenues and
Adjusted EBITDA, raising our guidance for Operating Income and Earnings
Per Share, and decreasing our guidance for capital expenditures.
-
Net revenues to range from $1.135 billion to $1.165 billion[2]
-
Gross profit margin to range from 48.0% to 49.0% of net revenues
-
Operating income to range from $59.0 million to $79.0 million
-
Effective tax rate of 37.5%
-
Net income per share to range from $0.60 to $0.95
-
Weighted average shares of approximately 34.2 million
-
Adjusted EBITDA to range from $210.0 million to $230.0 million
-
Capital expenditures to be approximately $70.0 million
Fourth Quarter 2017:
-
Net revenues to range from $538.0 million to $568.0 million
-
Gross profit margin to range from 58.0% to 60.0% of net revenues
-
Operating income to range from $151.5 million to $171.5 million
-
Effective tax rate of 39.0%
-
Net income per share to range from $2.60 to $3.00
-
Weighted average shares of approximately 33.4 million
-
Adjusted EBITDA to range from $191.5 million to $211.5 million
[1]
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Excludes restructuring charges as well as any costs related to
refinancing our convertible debt and capital lease termination
charges of $8.1 million.
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[2]
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In 2017, net revenues from SBS segment are expected to increase 20%
over 2016.
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Notes to the Third Quarter 2017 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,
stock-based compensation, capital lease termination, and restructuring.
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.
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.
Third Quarter Conference Call
Management will review the third quarter 2017 financial results and its
expectations for the fourth quarter and full year 2017 on a conference
call on Tuesday, October 24, 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) 243-4451 or (412) 542-4135, and ask to be to be
joined into the Shutterfly call. 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 Tuesday, November 7, 2017. To hear the replay,
please dial (877) 344-7529 or (412) 317-0088, and enter access code
10112161.
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 net income (loss) and net income (loss) per share, 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 our expected positioning for future growth,
our readiness for the all-important fourth quarter and for the full year
2017, our anticipated share repurchase levels and statements about
historical results that may suggest trends for our business. You can
identify these statements by the use of terminology such as "guidance",
"believe", "expect", "will", "should," "could", "estimate", "anticipate"
or similar forward-looking terms. You should not rely on these
forward-looking statements as they involve risks and uncertainties that
may cause actual results to vary materially from the forward-looking
statements. Factors that might contribute to such differences include,
among others, decreased consumer discretionary spending as a result of
general economic conditions; our ability to expand our customer base and
increase sales to existing customers; our ability to meet production
requirements; 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
innovative, new products and services on a timely and cost-effective
basis; failure to realize the anticipated benefits of our 2017
restructuring activities; consumer acceptance of our products and
services; our ability to develop additional adjacent lines of
business; unforeseen changes in expense levels; and competition and the
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 our SEC filings, including our most recent Form 10-K
and 10-Q, which are available on the Securities and Exchange
Commission's Web site 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. brands includes Shutterfly,
where your photos come to life in photo books, gifts, and cards and
stationery - with premium offerings in its Tiny
Prints boutique - as well as wedding invitations and stationery for
every step of the planning process; 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.
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Shutterfly, Inc.
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Consolidated Statements of Operations
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(In thousands, except per share amounts)
|
(Unaudited)
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Three Months Ended
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|
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Nine Months Ended
|
|
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September 30,
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September 30,
|
|
|
|
|
2017
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|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
|
$
|
195,443
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|
|
|
$
|
187,328
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|
|
|
$
|
596,447
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|
|
|
$
|
572,998
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|
Cost of net revenues
|
|
|
|
131,108
|
|
|
|
117,754
|
|
|
|
365,432
|
|
|
|
336,069
|
|
Restructuring
|
|
|
|
39
|
|
|
|
-
|
|
|
|
1,475
|
|
|
|
-
|
|
Gross profit
|
|
|
|
64,296
|
|
|
|
69,574
|
|
|
|
229,540
|
|
|
|
236,929
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
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|
Technology and development
|
|
|
|
39,614
|
|
|
|
43,284
|
|
|
|
124,968
|
|
|
|
122,866
|
|
Sales and marketing
|
|
|
|
33,331
|
|
|
|
41,903
|
|
|
|
119,205
|
|
|
|
135,284
|
|
General and administrative
|
|
|
|
23,894
|
|
|
|
26,181
|
|
|
|
79,200
|
|
|
|
83,462
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|
Capital lease termination
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,098
|
|
|
|
-
|
|
Restructuring
|
|
|
|
3,278
|
|
|
|
-
|
|
|
|
15,491
|
|
|
|
-
|
|
Total operating expenses
|
|
|
|
100,117
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|
|
|
111,368
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|
|
|
346,962
|
|
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|
341,612
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Loss from operations
|
|
|
|
(35,821
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)
|
|
|
(41,794
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)
|
|
|
(117,422
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)
|
|
|
(104,683
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)
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Interest expense
|
|
|
|
(6,699
|
)
|
|
|
(5,726
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)
|
|
|
(18,617
|
)
|
|
|
(17,062
|
)
|
Interest and other income, net
|
|
|
|
253
|
|
|
|
130
|
|
|
|
687
|
|
|
|
379
|
|
Loss before income taxes
|
|
|
|
(42,267
|
)
|
|
|
(47,390
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)
|
|
|
(135,352
|
)
|
|
|
(121,366
|
)
|
Benefit from income taxes
|
|
|
|
16,660
|
|
|
|
18,235
|
|
|
|
53,713
|
|
|
|
46,290
|
|
Net loss
|
|
|
|
$
|
(25,607
|
)
|
|
|
$
|
(29,155
|
)
|
|
|
$
|
(81,639
|
)
|
|
|
$
|
(75,076
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted
|
|
|
|
$
|
(0.78
|
)
|
|
|
$
|
(0.86
|
)
|
|
|
$
|
(2.45
|
)
|
|
|
$
|
(2.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding - basic and diluted
|
|
|
|
32,878
|
|
|
|
33,932
|
|
|
|
33,363
|
|
|
|
34,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Stock-based compensation is allocated as follows:
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|
|
|
|
|
|
|
|
|
|
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|
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Cost of net revenues
|
|
|
|
$
|
1,041
|
|
|
|
$
|
1,131
|
|
|
|
$
|
3,284
|
|
|
|
$
|
3,436
|
|
Technology and development
|
|
|
|
2,512
|
|
|
|
2,725
|
|
|
|
7,388
|
|
|
|
5,696
|
|
Sales and marketing
|
|
|
|
2,864
|
|
|
|
3,664
|
|
|
|
9,017
|
|
|
|
11,697
|
|
General and administrative
|
|
|
|
4,319
|
|
|
|
4,694
|
|
|
|
13,021
|
|
|
|
12,459
|
|
Restructuring
|
|
|
|
-
|
|
|
|
-
|
|
|
|
814
|
|
|
|
-
|
|
|
|
|
|
$
|
10,736
|
|
|
|
$
|
12,214
|
|
|
|
$
|
33,524
|
|
|
|
$
|
33,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization is allocated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net revenues
|
|
|
|
$
|
14,681
|
|
|
|
$
|
14,063
|
|
|
|
$
|
44,733
|
|
|
|
$
|
41,447
|
|
Technology and development
|
|
|
|
6,634
|
|
|
|
8,184
|
|
|
|
21,522
|
|
|
|
25,007
|
|
Sales and marketing
|
|
|
|
2,484
|
|
|
|
3,174
|
|
|
|
8,271
|
|
|
|
11,582
|
|
General and administrative
|
|
|
|
1,016
|
|
|
|
2,166
|
|
|
|
3,611
|
|
|
|
7,022
|
|
Restructuring
|
|
|
|
665
|
|
|
|
-
|
|
|
|
5,999
|
|
|
|
-
|
|
|
|
|
|
$
|
25,480
|
|
|
|
$
|
27,587
|
|
|
|
$
|
84,136
|
|
|
|
$
|
85,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shutterfly, Inc.
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Consolidated Balance Sheets
|
(In thousands, except par value amounts)
|
(Unaudited)
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
55,959
|
|
|
|
$
|
289,224
|
|
Short-term investments
|
|
|
|
44,977
|
|
|
|
26,352
|
|
Accounts receivable, net
|
|
|
|
61,468
|
|
|
|
57,365
|
|
Inventories
|
|
|
|
12,057
|
|
|
|
11,751
|
|
Prepaid expenses and other current assets
|
|
|
|
81,322
|
|
|
|
48,084
|
|
Total current assets
|
|
|
|
255,783
|
|
|
|
432,776
|
|
Long-term investments
|
|
|
|
11,739
|
|
|
|
14,479
|
|
Property and equipment, net
|
|
|
|
269,145
|
|
|
|
284,110
|
|
Intangible assets, net
|
|
|
|
32,544
|
|
|
|
43,420
|
|
Goodwill
|
|
|
|
408,975
|
|
|
|
408,975
|
|
Other assets
|
|
|
|
28,751
|
|
|
|
11,816
|
|
Total assets
|
|
|
|
$
|
1,006,937
|
|
|
|
$
|
1,195,576
|
|
|
|
|
|
|
|
|
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LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Convertible senior notes, current
|
|
|
|
$
|
290,157
|
|
|
|
$
|
-
|
|
Accounts payable
|
|
|
|
25,098
|
|
|
|
58,790
|
|
Accrued liabilities
|
|
|
|
90,596
|
|
|
|
138,869
|
|
Deferred revenue, current portion
|
|
|
|
22,794
|
|
|
|
22,929
|
|
Total current liabilities
|
|
|
|
428,645
|
|
|
|
220,588
|
|
Convertible senior notes, net
|
|
|
|
-
|
|
|
|
278,792
|
|
Other liabilities
|
|
|
|
121,522
|
|
|
|
137,035
|
|
Total liabilities
|
|
|
|
550,167
|
|
|
|
636,415
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value; 100,000 shares authorized; 32,798
and 33,637 shares issued and outstanding on September 30, 2017 and
December 31, 2016, respectively
|
|
|
|
3
|
|
|
|
3
|
|
Additional paid-in capital
|
|
|
|
985,098
|
|
|
|
949,864
|
|
Accumulated other comprehensive income (loss)
|
|
|
|
828
|
|
|
|
(32
|
)
|
Accumulated deficit
|
|
|
|
(529,159
|
)
|
|
|
(390,674
|
)
|
Total stockholders' equity
|
|
|
|
456,770
|
|
|
|
559,161
|
|
Total liabilities and stockholders' equity
|
|
|
|
$
|
1,006,937
|
|
|
|
$
|
1,195,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shutterfly, Inc.
|
Consolidated Statements of Cash Flows
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
|
|
2017
|
|
|
2016
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
$
|
(81,639
|
)
|
|
|
$
|
(75,076
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
66,367
|
|
|
|
69,314
|
|
Amortization of intangible assets
|
|
|
|
11,770
|
|
|
|
15,744
|
|
Amortization of debt discount and issuance costs
|
|
|
|
11,365
|
|
|
|
10,747
|
|
Stock-based compensation
|
|
|
|
32,710
|
|
|
|
33,288
|
|
Loss on disposal of property and equipment
|
|
|
|
705
|
|
|
|
378
|
|
Deferred income taxes
|
|
|
|
(8,607
|
)
|
|
|
5,786
|
|
Tax benefit from stock-based compensation
|
|
|
|
-
|
|
|
|
263
|
|
Excess tax benefits from stock-based compensation
|
|
|
|
-
|
|
|
|
(886
|
)
|
Restructuring
|
|
|
|
11,636
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
(4,103
|
)
|
|
|
10,463
|
|
Inventories
|
|
|
|
(1,782
|
)
|
|
|
2,115
|
|
Prepaid expenses and other assets
|
|
|
|
(34,064
|
)
|
|
|
(61,113
|
)
|
Accounts payable
|
|
|
|
(35,819
|
)
|
|
|
(15,105
|
)
|
Accrued and other liabilities
|
|
|
|
(49,198
|
)
|
|
|
(66,493
|
)
|
Net cash used in operating activities
|
|
|
|
(80,659
|
)
|
|
|
(70,575
|
)
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
|
(22,960
|
)
|
|
|
(43,733
|
)
|
Capitalization of software and website development costs
|
|
|
|
(25,977
|
)
|
|
|
(27,136
|
)
|
Purchases of investments
|
|
|
|
(44,381
|
)
|
|
|
(21,891
|
)
|
Proceeds from the maturities of investments
|
|
|
|
28,456
|
|
|
|
25,070
|
|
Proceeds from sale of property and equipment
|
|
|
|
21,232
|
|
|
|
14,071
|
|
Net cash used in investing activities
|
|
|
|
(43,630
|
)
|
|
|
(53,619
|
)
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock upon exercise of stock options
|
|
|
|
626
|
|
|
|
1,935
|
|
Repurchases of common stock
|
|
|
|
(80,000
|
)
|
|
|
(90,837
|
)
|
Excess tax benefits from stock-based compensation
|
|
|
|
-
|
|
|
|
886
|
|
Principal payments of capital lease and financing obligations
|
|
|
|
(24,813
|
)
|
|
|
(15,128
|
)
|
Payment for contingent consideration liabilities
|
|
|
|
-
|
|
|
|
(1,313
|
)
|
Payment of credit agreement issuance costs
|
|
|
|
(4,789
|
)
|
|
|
-
|
|
Net cash used in financing activities
|
|
|
|
(108,976
|
)
|
|
|
(104,457
|
)
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
|
(233,265
|
)
|
|
|
(228,651
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
|
289,224
|
|
|
|
288,863
|
|
Cash and cash equivalents, end of period
|
|
|
|
$
|
55,959
|
|
|
|
$
|
60,212
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of non-cash investing / financing
activities:
|
|
|
|
|
|
|
|
Net increase (decrease) in accrued purchases of property and
equipment
|
|
|
|
$
|
4,263
|
|
|
|
$
|
(1,274
|
)
|
Net decrease in accrued capitalized software and website development
costs
|
|
|
|
(161
|
)
|
|
|
(97
|
)
|
Stock-based compensation capitalized with software and website
development costs
|
|
|
|
1,084
|
|
|
|
1,322
|
|
Property and equipment acquired under capital leases
|
|
|
|
18,224
|
|
|
|
23,946
|
|
|
|
|
|
|
|
|
|
|
|
|
Shutterfly, Inc.
|
Consumer Metrics Disclosure
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
September 30,
|
|
|
|
|
2017 [2]
|
|
|
2016
|
Consumer Metrics
|
|
|
|
|
|
|
|
Customers
|
|
|
|
2,969,451
|
|
|
|
3,150,894
|
year-over-year change
|
|
|
|
(6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
Orders
|
|
|
|
4,861,262
|
|
|
|
5,394,902
|
year-over-year change
|
|
|
|
(10
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
Average order value [1]
|
|
|
|
$27.86
|
|
|
|
$26.71
|
year-over-year change
|
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
[1]
|
|
|
|
Average order value excludes Shutterfly Business Solutions revenue.
|
[2]
|
|
|
|
In the third quarter of 2017, customers and orders decreased over
the prior year, primarily due to the platform consolidation.
|
|
|
|
|
|
|
Shutterfly, Inc.
|
Segment Disclosure
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
|
$
|
135,418
|
|
|
|
$
|
144,074
|
|
|
|
$
|
475,153
|
|
|
|
$
|
476,072
|
|
Cost of net revenues
|
|
|
|
|
81,439
|
|
|
|
|
84,825
|
|
|
|
|
263,345
|
|
|
|
|
256,438
|
|
Restructuring
|
|
|
|
|
39
|
|
|
|
|
-
|
|
|
|
|
1,475
|
|
|
|
|
-
|
|
Gross profit
|
|
|
|
$
|
53,940
|
|
|
|
$
|
59,249
|
|
|
|
$
|
210,333
|
|
|
|
$
|
219,634
|
|
Consumer gross profit margin
|
|
|
|
|
39.8
|
%
|
|
|
|
41.1
|
%
|
|
|
|
44.3
|
%
|
|
|
|
46.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shutterfly Business Solutions (SBS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
|
$
|
60,025
|
|
|
|
$
|
43,254
|
|
|
|
$
|
121,294
|
|
|
|
$
|
96,926
|
|
Cost of net revenues
|
|
|
|
|
47,520
|
|
|
|
|
30,389
|
|
|
|
|
95,256
|
|
|
|
|
71,909
|
|
Gross profit
|
|
|
|
$
|
12,505
|
|
|
|
$
|
12,865
|
|
|
|
$
|
26,038
|
|
|
|
$
|
25,017
|
|
SBS gross profit margin
|
|
|
|
|
20.8
|
%
|
|
|
|
29.7
|
%
|
|
|
|
21.5
|
%
|
|
|
|
25.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate [1]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
Cost of net revenues
|
|
|
|
|
2,149
|
|
|
|
|
2,540
|
|
|
|
|
6,831
|
|
|
|
|
7,722
|
|
Gross profit
|
|
|
|
$
|
(2,149
|
)
|
|
|
$
|
(2,540
|
)
|
|
|
$
|
(6,831
|
)
|
|
|
$
|
(7,722
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
|
$
|
195,443
|
|
|
|
$
|
187,328
|
|
|
|
$
|
596,447
|
|
|
|
$
|
572,998
|
|
Cost of net revenues
|
|
|
|
|
131,108
|
|
|
|
|
117,754
|
|
|
|
|
365,432
|
|
|
|
|
336,069
|
|
Restructuring
|
|
|
|
|
39
|
|
|
|
|
-
|
|
|
|
|
1,475
|
|
|
|
|
-
|
|
Gross profit
|
|
|
|
$
|
64,296
|
|
|
|
$
|
69,574
|
|
|
|
$
|
229,540
|
|
|
|
$
|
236,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit margin
|
|
|
|
|
32.9
|
%
|
|
|
|
37.1
|
%
|
|
|
|
38.5
|
%
|
|
|
|
41.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit margin excluding restructuring
|
|
|
|
|
32.9
|
%
|
|
|
|
37.1
|
%
|
|
|
|
38.7
|
%
|
|
|
|
41.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[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.
|
Restructuring
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30, 2017
|
|
|
September 30, 2017
|
Restructuring:
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
|
$
|
1,798
|
|
|
$
|
8,414
|
Employee costs
|
|
|
|
697
|
|
|
5,851
|
Inventory
|
|
|
|
39
|
|
|
1,475
|
Other costs
|
|
|
|
783
|
|
|
1,226
|
Total
|
|
|
|
$
|
3,317
|
|
|
$
|
16,966
|
|
|
|
|
|
|
|
|
|
|
|
Shutterfly, Inc.
|
Reconciliation of Net Income (Loss) to Non-GAAP Net Income (Loss)
and Non-GAAP Net Income (Loss) per Share
|
(In thousands, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
Three Months Ended
|
|
|
Year Ended
|
|
|
|
|
Mar. 31,
|
|
|
Jun. 30,
|
|
|
Sep. 30,
|
|
|
Dec. 31,
|
|
|
Mar. 31,
|
|
|
Jun. 30,
|
|
|
Sep. 30,
|
|
|
Dec. 31,
|
|
|
|
|
2016
|
|
|
2016
|
|
|
2016
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income (loss)
|
|
|
|
$
|
(29,436
|
)
|
|
|
$
|
(16,485
|
)
|
|
|
$
|
(29,155
|
)
|
|
|
$
|
90,982
|
|
|
|
$
|
(33,194
|
)
|
|
|
$
|
(22,838
|
)
|
|
|
$
|
(25,607
|
)
|
|
|
$
|
15,906
|
Capital lease termination
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,098
|
|
|
|
-
|
|
|
|
-
|
Restructuring
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,976
|
|
|
|
4,673
|
|
|
|
3,317
|
|
|
|
-
|
Tax benefit impact of restructuring and capital lease termination
charges
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,948
|
)
|
|
|
(4,829
|
)
|
|
|
(1,669
|
)
|
|
|
-
|
Non-GAAP net income (loss)
|
|
|
|
$
|
(29,436
|
)
|
|
|
$
|
(16,485
|
)
|
|
|
$
|
(29,155
|
)
|
|
|
$
|
90,982
|
|
|
|
$
|
(28,166
|
)
|
|
|
$
|
(14,896
|
)
|
|
|
$
|
(23,959
|
)
|
|
|
$
|
15,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP diluted shares outstanding
|
|
|
|
34,596
|
|
|
|
34,177
|
|
|
|
33,932
|
|
|
|
34,625
|
|
|
|
33,712
|
|
|
|
33,579
|
|
|
|
32,878
|
|
|
|
35,190
|
Non-GAAP diluted shares outstanding
|
|
|
|
34,596
|
|
|
|
34,177
|
|
|
|
33,932
|
|
|
|
34,625
|
|
|
|
33,712
|
|
|
|
33,579
|
|
|
|
32,878
|
|
|
|
35,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income (loss) per share
|
|
|
|
$
|
(0.85
|
)
|
|
|
$
|
(0.48
|
)
|
|
|
$
|
(0.86
|
)
|
|
|
$
|
2.63
|
|
|
|
$
|
(0.98
|
)
|
|
|
$
|
(0.68
|
)
|
|
|
$
|
(0.78
|
)
|
|
|
$
|
0.45
|
Non-GAAP net income (loss) per share
|
|
|
|
$
|
(0.85
|
)
|
|
|
$
|
(0.48
|
)
|
|
|
$
|
(0.86
|
)
|
|
|
$
|
2.63
|
|
|
|
$
|
(0.84
|
)
|
|
|
$
|
(0.44
|
)
|
|
|
$
|
(0.73
|
)
|
|
|
$
|
0.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
|
|
2016
|
|
|
2016
|
|
|
2016
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income (loss)
|
|
|
|
$
|
(29,436
|
)
|
|
|
$
|
(16,485
|
)
|
|
|
$
|
(29,155
|
)
|
|
|
$
|
90,982
|
|
|
|
$
|
(33,194
|
)
|
|
|
$
|
(22,838
|
)
|
|
|
$
|
(25,607
|
)
|
|
|
$
|
15,906
|
|
Interest expense
|
|
|
|
5,675
|
|
|
|
5,661
|
|
|
|
5,726
|
|
|
|
5,961
|
|
|
|
5,964
|
|
|
|
5,955
|
|
|
|
6,699
|
|
|
|
23,023
|
|
Interest and other income, net
|
|
|
|
(121
|
)
|
|
|
(128
|
)
|
|
|
(130
|
)
|
|
|
(122
|
)
|
|
|
(189
|
)
|
|
|
(244
|
)
|
|
|
(253
|
)
|
|
|
(501
|
)
|
Tax (benefit) provision
|
|
|
|
(17,932
|
)
|
|
|
(10,123
|
)
|
|
|
(18,235
|
)
|
|
|
56,972
|
|
|
|
(22,341
|
)
|
|
|
(14,713
|
)
|
|
|
(16,660
|
)
|
|
|
10,682
|
|
Depreciation and amortization
|
|
|
|
29,114
|
|
|
|
28,357
|
|
|
|
27,587
|
|
|
|
28,593
|
|
|
|
27,364
|
|
|
|
25,957
|
|
|
|
24,815
|
|
|
|
113,651
|
|
Stock-based compensation
|
|
|
|
10,150
|
|
|
|
10,924
|
|
|
|
12,214
|
|
|
|
12,404
|
|
|
|
11,505
|
|
|
|
10,469
|
|
|
|
10,736
|
|
|
|
45,692
|
|
Capital lease termination
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,098
|
|
|
|
-
|
|
|
|
-
|
|
Restructuring
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,976
|
|
|
|
4,673
|
|
|
|
3,317
|
|
|
|
-
|
|
Non-GAAP Adjusted EBITDA
|
|
|
|
$
|
(2,550
|
)
|
|
|
$
|
18,206
|
|
|
|
$
|
(1,993
|
)
|
|
|
$
|
194,790
|
|
|
|
$
|
(1,915
|
)
|
|
|
$
|
17,357
|
|
|
|
$
|
3,047
|
|
|
|
$
|
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,
|
|
|
|
|
2016 [2]
|
|
|
2016
|
|
|
2016
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
|
$
|
(82,610
|
)
|
|
|
$
|
16,916
|
|
|
|
$
|
(4,881
|
)
|
|
|
$
|
263,998
|
|
|
|
$
|
(72,386
|
)
|
|
|
$
|
13,672
|
|
|
|
$
|
(21,945
|
)
|
|
|
$
|
193,423
|
|
Interest expense
|
|
|
|
5,675
|
|
|
|
5,661
|
|
|
|
5,726
|
|
|
|
5,961
|
|
|
|
5,964
|
|
|
|
5,955
|
|
|
|
6,699
|
|
|
|
23,023
|
|
Interest and other income, net
|
|
|
|
(121
|
)
|
|
|
(128
|
)
|
|
|
(130
|
)
|
|
|
(122
|
)
|
|
|
(189
|
)
|
|
|
(244
|
)
|
|
|
(253
|
)
|
|
|
(501
|
)
|
Tax (benefit) provision
|
|
|
|
(17,932
|
)
|
|
|
(10,123
|
)
|
|
|
(18,235
|
)
|
|
|
56,972
|
|
|
|
(22,341
|
)
|
|
|
(14,713
|
)
|
|
|
(16,660
|
)
|
|
|
10,682
|
|
Changes in operating assets and liabilities
|
|
|
|
98,604
|
|
|
|
2,374
|
|
|
|
29,155
|
|
|
|
(126,361
|
)
|
|
|
92,194
|
|
|
|
(2,565
|
)
|
|
|
35,336
|
|
|
|
3,772
|
|
Other adjustments
|
|
|
|
(6,166
|
)
|
|
|
3,506
|
|
|
|
(13,628
|
)
|
|
|
(5,658
|
)
|
|
|
(6,265
|
)
|
|
|
5,377
|
|
|
|
(2,575
|
)
|
|
|
(21,946
|
)
|
Capital lease termination
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,098
|
|
|
|
-
|
|
|
|
-
|
|
Cash restructuring
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,108
|
|
|
|
1,777
|
|
|
|
2,445
|
|
|
|
-
|
|
Non-GAAP Adjusted EBITDA
|
|
|
|
(2,550
|
)
|
|
|
18,206
|
|
|
|
(1,993
|
)
|
|
|
194,790
|
|
|
|
(1,915
|
)
|
|
|
17,357
|
|
|
|
3,047
|
|
|
|
208,453
|
|
Less: Purchases of property and equipment
|
|
|
|
(5,497
|
)
|
|
|
(22,005
|
)
|
|
|
(14,957
|
)
|
|
|
(9,792
|
)
|
|
|
(1,669
|
)
|
|
|
(7,252
|
)
|
|
|
(18,302
|
)
|
|
|
(52,251
|
)
|
Less: Capitalized technology & development costs
|
|
|
|
(8,168
|
)
|
|
|
(10,052
|
)
|
|
|
(8,819
|
)
|
|
|
(6,065
|
)
|
|
|
(7,726
|
)
|
|
|
(9,602
|
)
|
|
|
(8,488
|
)
|
|
|
(33,104
|
)
|
Add: Capex adjustments [1]
|
|
|
|
-
|
|
|
|
9,827
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,827
|
|
Adjusted EBITDA minus capital expenditures
|
|
|
|
$
|
(16,215
|
)
|
|
|
$
|
(4,024
|
)
|
|
|
$
|
(25,769
|
)
|
|
|
$
|
178,933
|
|
|
|
$
|
(11,310
|
)
|
|
|
$
|
503
|
|
|
|
$
|
(23,743
|
)
|
|
|
$
|
132,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[1]
|
|
|
|
In the second quarter of 2016, the Company acquired and immediately
sold $9.8 million of printers.
|
[2]
|
|
|
|
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
|
(In millions, except per share amounts)
|
|
|
|
|
|
Forward-Looking Guidance [1]
|
|
|
|
|
Three Months Ending
|
|
|
Twelve Months Ending
|
|
|
|
|
December 31, 2017
|
|
|
December 31, 2017
|
|
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues [2]
|
|
|
|
$
|
538.0
|
|
|
|
$
|
568.0
|
|
|
|
$
|
1,135.0
|
|
|
|
$
|
1,165.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit margin
|
|
|
|
|
58.0
|
%
|
|
|
|
60.0
|
%
|
|
|
|
48.0
|
%
|
|
|
|
49.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
$
|
151.5
|
|
|
|
$
|
171.5
|
|
|
|
$
|
59.0
|
|
|
|
$
|
79.0
|
|
Operating margin
|
|
|
|
|
28.1
|
%
|
|
|
|
30.2
|
%
|
|
|
|
5.2
|
%
|
|
|
|
6.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
$
|
151.5
|
|
|
|
$
|
171.5
|
|
|
|
$
|
59.0
|
|
|
|
$
|
79.0
|
|
Stock-based compensation
|
|
|
|
$
|
13.3
|
|
|
|
$
|
13.3
|
|
|
|
$
|
46.0
|
|
|
|
$
|
46.0
|
|
Amortization of intangible assets
|
|
|
|
$
|
3.1
|
|
|
|
$
|
3.1
|
|
|
|
$
|
15.0
|
|
|
|
$
|
15.0
|
|
Depreciation
|
|
|
|
$
|
23.6
|
|
|
|
$
|
23.6
|
|
|
|
$
|
90.0
|
|
|
|
$
|
90.0
|
|
Adjusted EBITDA
|
|
|
|
$
|
191.5
|
|
|
|
$
|
211.5
|
|
|
|
$
|
210.0
|
|
|
|
$
|
230.0
|
|
Adjusted EBITDA margin
|
|
|
|
|
35.6
|
%
|
|
|
|
37.2
|
%
|
|
|
|
18.5
|
%
|
|
|
|
19.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
|
|
|
|
|
$
|
70.0
|
|
|
|
$
|
70.0
|
|
Capital expenditures as % of net revenues
|
|
|
|
|
|
|
|
|
|
|
6.2
|
%
|
|
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA minus capital expenditures
|
|
|
|
|
|
|
|
|
|
$
|
140.0
|
|
|
|
$
|
160.0
|
|
Adjusted EBITDA minus capital expenditures as % of net revenues
|
|
|
|
|
|
|
|
|
|
|
12.3
|
%
|
|
|
|
13.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax rate
|
|
|
|
|
39.0
|
%
|
|
|
|
39.0
|
%
|
|
|
|
37.5
|
%
|
|
|
|
37.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
$
|
2.60
|
|
|
|
$
|
3.00
|
|
|
|
$
|
0.60
|
|
|
|
$
|
0.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
33.4
|
|
|
|
|
33.4
|
|
|
|
|
34.2
|
|
|
|
|
34.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[1]
|
|
|
|
Excludes restructuring charges as well as any costs related to
refinancing our convertible debt and capital lease termination
charges of $8.1 million.
|
[2]
|
|
|
|
In 2017, net revenues from SBS Segment to increase 20% over 2016.
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20171024006596/en/
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|