Shutterfly Announces Second Quarter 2015 Financial Results

  • Net revenues increase 16% year-over-year to $183.9 million
  • GAAP net loss of $(0.63) per share
  • Adjusted EBITDA of $15.6 million
  • 58th consecutive quarter of year-over-year net revenue growth

REDWOOD CITY, Calif.--()--Shutterfly, Inc. (NASDAQ:SFLY), the leading manufacturer and digital retailer of high-quality personalized products and services offered through a family of lifestyle brands, today announced financial results for the second quarter ended June 30, 2015.

“Second quarter performance was led by double digit organic growth at our flagship Shutterfly brand and strong momentum in our emerging Enterprise business,” said Shutterfly President and CEO Jeffrey Housenbold. “Our profitability metrics hit record levels for the quarter, giving us confidence that our expected margin improvement is beginning to materialize as we gain leverage from our investments in manufacturing and technology. For the balance of the year, we are focused on executing on the fourth quarter and our Shutterfly 3.0 vision, which will deliver a world-class memory management service backed by a best-in-class e-commerce solution.”

Second Quarter 2015 Financial Highlights

  • Net revenues totaled $183.9 million, a 16% year-over-year increase.
    • Consumer net revenues totaled $171.3 million, a 14% year-over-year increase.(1)
    • Enterprise net revenues totaled $12.6 million, a 40% year-over-year increase.(1)
  • Second quarter 2015 represents the 58th consecutive quarter of year-over-year net revenue growth.
  • Included in net revenues is a change in accounting estimate related to flash deal deferred revenue breakage of $7.5 million.
    • Excluding this amount, total net revenues totaled $176.4 million, an 11% year-over-year increase.(1)
    • Excluding this amount, consumer net revenues totaled $163.8 million, a 9% year-over-year increase.(1)
  • Gross profit margin was 47% of net revenues, compared to 48% in the second quarter of 2014.
    • Consumer gross profit margin was 51% of net revenues, compared to 52% in the second quarter of 2014. (1)
    • Enterprise gross profit margin was 19% of net revenues, compared to 18% in the second quarter of 2014. (1)
  • Operating expenses, excluding $15.3 million of stock-based compensation, totaled $100.3 million, a 13% year-over-year increase.
    • Excluding costs related to the flash deal deferred revenue breakage, total operating expenses excluding stock-based compensation totaled $96.9 million, a 9% year-over-year increase.
  • GAAP net loss was $23.8 million, compared to $27.1 million in the second quarter of 2014.
    • Excluding the effect of the flash deal deferred revenue breakage, GAAP net loss was $27.9 million in the second quarter of 2015.
  • GAAP net loss per diluted share was $0.63, compared to $0.70 in the second quarter of 2014.
  • Non-GAAP net loss per diluted share was $0.56, compared to $0.63 in the second quarter of 2014.
  • Adjusted EBITDA was $15.6 million, compared to $11.7 million in the second quarter of 2014.
  • At June 30, 2015, cash and investments totaled $200.1 million, reflecting more than $117 million in share repurchases and a cash deposit towards an accelerated stock repurchase agreement that will settle in the third quarter.
  • Total capital expenditures totaled $22.6 million compared to $28.1 million in the second quarter of 2014.
  • In the second quarter of 2015, the Company repurchased 0.9 million shares at an average price of $46.09 under its share repurchase program and entered into an accelerated stock repurchase agreement for up to $75 million that will be settled in the third quarter.

(1) Effective in the fourth quarter of 2014, the Company defined two reportable segments based on factors such as how management manages the operations and how the chief operating decision maker views results. The Company’s two reportable segments are Consumer and Enterprise. Refer to the Segment Disclosure table at the back of the release for segment level disclosures.

Second Quarter 2015 Consumer Operating Metrics

  • Transacting customers totaled 3.1 million, a 19% year-over-year increase.
  • Orders totaled 5.0 million, a 21% year-over-year increase.
  • Average order value excluding flash deal deferred revenue breakage was $32.50, a decrease of 10% year-over-year. Average order value without the impact of the flash deal deferred revenue breakage, the GrooveBook acquisition, and Treat, which was closed during the first quarter, was $36.51, a decrease of 1% year-over-year.

Business Outlook

Third Quarter 2015:

  • Net revenues to range from $164.5 million to $167.5 million, a year-over-year increase of 15.8% to 18.0%.
  • GAAP gross profit margin to range from 34.5% to 35.5% of net revenues.
  • Non-GAAP gross profit margin to range from 36.2% to 37.1% of net revenues.
  • GAAP operating loss to range from $57.3 million to $53.5 million.
  • Non-GAAP operating loss to range from $34.2 million to $31.6 million.
  • GAAP effective tax rate to range from 14.0% to 18.0%.
  • GAAP net loss per share to range from $1.47 to $1.32.
  • Weighted average shares of approximately 36.5 million.
  • Adjusted EBITDA to range from ($11.2) million to ($9.6) million.

Full Year 2015:

  • Net revenues to range from $1.040 billion to $1.060 billion, a year-over-year increase of 12.8% to 15.0%.
  • GAAP gross profit margin to range from 50.5% to 51.0% of net revenues.
  • Non-GAAP gross profit margin to range from 51.7% to 52.1% of net revenues.
  • GAAP operating income to range from $4.4 million to $14.7 million.
  • Non-GAAP operating income to range from $98.4 million to $107.4 million.
  • GAAP effective tax rate to range from 15.0% to 25.0%.
  • GAAP net loss per share to range from ($0.32) to ($0.13).
  • Weighted average shares of approximately 37.0 million.
  • Adjusted EBITDA to range from $185.9 million to $193.9 million, or 17.9% to 18.3% of net revenues.
  • Capital expenditures to range from 8.4% to 9.0% of net revenues.

Notes to the Second Quarter 2015 Financial Results and 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.

Free cash flow 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.

Non-GAAP earnings per share is defined as non-GAAP net income (loss), which excludes interest expense related to the Company’s issuance of 0.25% convertible senior notes in May 2013, divided by diluted non-GAAP shares outstanding, which is GAAP diluted weighted average shares outstanding less any shares issuable under the Company’s convertible senior notes.

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.

Enterprise segment 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 Enterprise) 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.

Second Quarter 2015 Conference Call

Management will review the second quarter 2015 financial results and its expectations for the third quarter and full year 2015 on a conference call on Wednesday, July 29, 2015 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 970-315-0490. The webcast, as well as a podcast, will be archived and available at http://www.shutterflyinc.com. A replay of the conference call will be available through Tuesday, August 11, 2015. To hear the replay, please dial 855-859-2056 or 404-537-3406, replay passcode 77933588.

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, free cash flow, and non-GAAP net income (loss) per share. 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), net income (loss) or net income (loss) per share 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 third quarter and full year 2015 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 innovative, new products and services on a timely and cost-effective basis; 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 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 manufacturer and digital retailer of high-quality personalized products and services offered through a family of lifestyle brands. 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; ThisLife, a private, cloud-based solution that makes it easy for consumers to find, share and enjoy their photos and videos, all in one place; GrooveBook, a mobile photo book app subscription service that sends customers a keepsake book of their mobile photos each month; and BorrowLenses, the premier online marketplace for photographic and video equipment rentals. For more information about Shutterfly, Inc. (NASDAQ:SFLY), visit www.shutterflyinc.com.

Shutterfly, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

   

 

Three Months Ended Six Months Ended
June 30, June 30,
2015   2014 2015   2014
 
Net revenues $ 183,879 $ 159,148 $ 343,857 $ 296,247
Cost of net revenues 96,647   83,335   191,354   159,678  
Gross profit 87,232   75,813   152,503   136,569  
Operating expenses:
Technology and development 36,502 32,131 73,862 63,614
Sales and marketing 50,446 44,480 94,976 86,613
General and administrative 28,676   25,899   58,281   51,650  
Total operating expenses 115,624   102,510   227,119   201,877  
Loss from operations (28,392 ) (26,697 ) (74,616 ) (65,308 )
Interest expense (4,985 ) (3,856 ) (9,721 ) (7,803 )
Interest and other income, net 120   54   222   281  
Loss before income taxes (33,257 ) (30,499 ) (84,115 ) (72,830 )
Benefit from income taxes 9,480   3,447   15,235   11,564  
Net loss $ (23,777 ) $ (27,052 ) $ (68,880 ) $ (61,266 )
 
 
 
Net loss per share - basic and diluted $ (0.63 ) $ (0.70 ) $ (1.82 ) $ (1.59 )
 
 
Weighted-average shares outstanding - basic and diluted 37,537   38,438   37,753   38,470  
 
Stock-based compensation is allocated as follows:
Cost of net revenues $ 1,001 $ 894 $ 2,193 $ 1,896
Technology and development 3,309 2,452 5,301 4,876
Sales and marketing 5,654 5,618 11,873 11,246
General and administrative 6,351   5,750   14,708   12,688  
$ 16,315   $ 14,714   $ 34,075   $ 30,706  
 

Shutterfly, Inc.

Consolidated Balance Sheets

(In thousands, except par value amounts)

(Unaudited)

   
June 30, December 31,
2015 2014
ASSETS
Current assets:
Cash and cash equivalents $ 133,554 $ 380,543
Short-term investments 56,282 64,866
Accounts receivable, net 24,143 31,105
Inventories 10,464 13,016
Deferred tax asset, current portion 32,119 34,645
Prepaid expenses and other current assets 46,303   24,983  
Total current assets 302,865 549,158
Long-term investments 10,257 29,928
Property and equipment, net 279,394 241,742
Intangible assets, net 74,116 87,950
Goodwill 408,975 408,975
Deferred tax asset, net of current portion 549 549
Other assets 12,359   13,976  
Total assets $ 1,088,515   $ 1,332,278  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 11,216 $ 30,086
Accrued liabilities 68,244 135,485
Deferred revenue 25,124   31,415  
Total current liabilities 104,584 196,986
Convertible senior notes, net 261,331 255,218
Deferred tax liability 38,980 48,090
Other liabilities 106,341   74,178  
Total liabilities 511,236   574,472  
Stockholders’ equity:
Common stock, $0.0001 par value; 100,000 shares authorized; 37,215 and 37,906 shares issued and outstanding on June 30, 2015 and December 31, 2014, respectively 4 4
Additional paid-in capital 814,359 838,313
Accumulated other comprehensive income/(loss) 11 (53 )
Accumulated deficit (237,095 ) (80,458 )
Total stockholders' equity 577,279   757,806  
Total liabilities and stockholders' equity $ 1,088,515   $ 1,332,278  
 

Shutterfly, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 
Six Months Ended
June 30,
2015   2014
Cash flows from operating activities:
Net loss $ (68,880 ) $ (61,266 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 40,881 29,194
Amortization of intangible assets 14,419 17,323
Amortization of debt discount and debt issuance costs 6,728 6,362
Stock-based compensation, net of forfeitures 34,075 30,706
Loss on disposal of property and equipment and rental assets 498 45
Deferred income taxes (6,623 ) (8,375 )
Tax benefit from stock-based compensation 13,986 15,461
Excess tax benefits from stock-based compensation (14,372 ) (15,743 )
Changes in operating assets and liabilities:
Accounts receivable, net 6,962 6,200
Inventories 2,552 522
Prepaid expenses and other current assets (21,320 ) (15,232 )
Other assets 757 (7,131 )
Accounts payable (17,753 ) (19,619 )
Accrued and other liabilities (74,829 ) (66,121 )
Deferred revenue (6,291 ) 3,077
Other non-current liabilities 3,650   (594 )
Net cash used in operating activities (85,560 ) (85,191 )
 
Cash flows from investing activities:
Purchases of property and equipment (28,935 ) (34,461 )
Capitalization of software and website development costs (9,297 ) (9,744 )
Purchases of investments (4,400 ) (101,259 )
Maturities and sales of investments 32,358 820
Proceeds from sale of property and equipment and rental assets 265   275  
Net cash used in investing activities (10,009 ) (144,369 )
 
Cash flows from financing activities:
Proceeds from issuance of common stock upon exercise of stock options 2,312 1,492
Repurchases of common stock (87,757 ) (46,031 )
Prepayment of accelerated share repurchase (75,000 )
Excess tax benefits from stock-based compensation 14,372 15,743
Principal payments of capital lease and financing obligations (5,347 ) (877 )
Net cash used in financing activities (151,420 ) (29,673 )
 
Net decrease in cash and cash equivalents (246,989 ) (259,233 )
Cash and cash equivalents, beginning of period 380,543   499,084  
Cash and cash equivalents, end of period $ 133,554   $ 239,851  
 
Supplemental schedule of non-cash activities
Net increase in accrued purchases of property and equipment $ 2,242 $ 4,692
Net increase in accrued capitalized software and website development costs 161 692
Increase in estimated fair market value of buildings under build-to-suit leases 16,414 12,910
Property and equipment acquired under capital leases 21,640
Amount due from adjustment of net working capital from acquired business 253
 

Shutterfly, Inc.

Consumer Metrics Disclosure

 

Three Months Ended
June 30,

2015   2014
Consumer Metrics
Customers 3,134,346 2,640,739
year-over-year growth 19 %
 
Orders 5,038,421 4,154,806
year-over-year growth 21 %
 
Average order value* $ 32.50 $ 36.14
year-over-year growth

(10

%)

 

* Average order value excludes Enterprise revenue and flash deal breakage revenue.

 

Shutterfly, Inc.

Segment Disclosure

(In thousands)

(Unaudited)

   
Three Months Ended Six Months Ended
June 30, June 30,
2015   2014 2015   2014
Consumer
Net revenues $ 171,274 $ 150,152 $ 320,062 $ 280,773
Cost of net revenues 83,387   72,250   164,165   138,658  
Gross margin 87,887   77,902   155,897   142,115  
Consumer gross margin 51.3 % 51.9 % 48.7 % 50.6 %
 
Enterprise
Net revenues 12,605 8,996 23,795 15,474
Cost of net revenues 10,245   7,368   20,133   13,478  
Gross margin 2,360   1,628   3,662   1,996  
Enterprise gross margin 18.7 % 18.1 % 15.4 % 12.9 %
 
Corporate (1)
Net revenues
Cost of net revenues 3,015   3,717   7,056   7,542  
Gross margin (3,015 ) (3,717 ) (7,056 ) (7,542 )
 
Consolidated
Net revenues 183,879 159,148 343,857 296,247
Cost of net revenues 96,647   83,335   191,354   159,678  
Gross margin $ 87,232   $ 75,813   $ 152,503   $ 136,569  
 
GAAP gross margin 47.4 % 47.6 % 44.4 % 46.1 %
 
Non-GAAP gross margin 49.1 % 50.0 % 46.4 % 48.6 %
 

(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 Forward-Looking Guidance for Non-GAAP Financial Measures to GAAP Measures
(In millions, except per share amounts)
                 
 
Forward-Looking Guidance
GAAP Non-GAAP
Range of Estimate Adjustments Range of Estimate
From To From To From To
 
Three Months Ending September 30, 2015
 
Net revenues $164.5 $167.5 - - $164.5 $167.5
Gross profit margin 34.5% 35.5% 1.7% 1.6% [a] 36.2% 37.1%
Operating loss ($57.3) ($53.5) $23.1 $21.9 [b] ($34.2) ($31.6)
Operating margin (34.8%) (32.0%) 14.0% 13.1% [b] (20.8%) (18.9%)
 
Stock-based compensation $16.5 $15.7 $16.5 $15.7 - -
Amortization of intangible assets $6.6 $6.2 $6.6 $6.2 - -
 
Adjusted EBITDA* ($11.2) ($9.6)
 
Diluted loss per share ($1.47) ($1.32) 0.08 $0.08 [e] (1.39) (1.24)
Weighted average diluted shares 36.5 36.5
Effective tax rate 14.0% 18.0%
 
Twelve Months Ending December 31, 2015
 
Net revenues $1,040.0 $1,060.0 - - $1,040.0 $1,060.0
Gross profit margin 50.5% 51.0% 1.2% 1.1% [c] 51.7% 52.1%
Operating income $4.4 $14.7 $94.0 $92.7 [d] $98.4 $107.4
Operating margin 0.4% 1.4% 9.1% 8.7% [d] 9.5% 10.1%
Operating income excluding restructuring $4.4 $14.7 $13.3 $15.3 [g] $17.7 $30.0
 
Stock-based compensation $67.0 $66.2 $67.0 $66.2 - -
Amortization of intangible assets $27.0 $26.5 $27.0 $26.5 - -
 
Adjusted EBITDA* $185.9 $193.9
Adjusted EBITDA* margin 17.9% 18.3%
Adjusted EBITDA* excluding restructuring $197.9 $207.9 [h]
Adjusted EBITDA* margin excluding restructuring 19.0% 19.6% [h]
 
Diluted earnings/(loss) per share ($0.32) ($0.13)

$0.29

$0.33

[f]

($0.03)

$0.20

Weighted average diluted shares 37.0 37.0
Effective tax rate 25.0% 15.0%
 
Capital expenditures - % of net revenues 8.4% 9.0%
 
 
 
 
*

Adjusted EBITDA is a non-GAAP financial measure defined as earnings before interest, taxes, depreciation, amortization and stock-based compensation.

 
[a]

Reflects estimated adjustments for stock-based compensation expense of approximately $1.0 million to $0.9 million and amortization of purchased intangible assets of approximately $1.8 million to $1.7 million.

[b]

Reflects estimated adjustment for stock-based compensation expense of approximately $16.5 million to $15.7 million, and amortization of purchased intangible assets of approximately $6.6 million to $6.2 million.

[c]

Reflects estimated adjustments for stock-based compensation expense of approximately $4.2 million to $4.1 million and amortization of purchased intangible assets of approximately $8.1 million to $7.9 million.

[d]

Reflects estimated adjustments for stock-based compensation expense of approximately $67 million to $66.2 million and amortization of purchased intangible assets of approximately $27.0 million to $26.5 million.

[e] Reflects estimated adjustments for interest expense of approximately $3.0 million, net of tax.
[f] Reflects estimated adjustments for interest expense of approximately $10.8 million to $12.2 million, net of tax.
[g] Reflects a range of estimated adjustments for the following restructuring events:
From To
Platform consolidation $ 5.0 $ 6.0

Facility closure/consolidation and Treat shutdown

5.0 6.0
Depreciation and amortization [1] 1.3 1.3

Proxy-related Costs

2.0 2.0
$ 13.3 $ 15.3
[1] Includes accelerated depreciation of capitalized website costs and amortization of intangible assets.
[h]

Reflects estimated adjustments for platform consolidation, facility closure and consolidations, Treat shutdown (excluding depreciation and amortization), and proxy-related costs of approximately $12.0 million to $14.0 million.

 

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, Dec. 31,
2014 2014 2014 2014 2015 2015 2014
 
GAAP gross profit $ 60,756 $ 75,813 $ 52,282 $ 280,009 $ 65,271 $ 87,232 $ 468,860
Stock-based compensation 1,002 894 886 875 1,192 1,001 3,657
Amortization of intangible assets 2,823     2,823   2,822     2,874   2,849   2,015     11,342  
Non-GAAP gross profit $ 64,581   $ 79,530   $ 55,990   $ 283,758   $ 69,312   $ 90,248   $ 483,859  
 
Non-GAAP gross profit margin 47%     50%   39%   59%   43%   49 %   53%  
 
 

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, Dec. 31,
2014 2014 2014 2014 2015 2015 2014
 
GAAP operating income (loss) $ (38,611 ) $ (26,697 ) $ (48,927 ) $ 120,480 $ (46,224) $ (28,392 ) $

6,245

Stock-based compensation 15,992 14,714 13,788 17,268 17,760 16,315

61,762

Amortization of intangible assets 8,583     8,740   8,530     8,014   7,684   6,735    

33,867

 
Non-GAAP operating income (loss) $ (14,036 ) $ (3,243 ) $ (26,609 ) $ 145,762   $ (20,780)   $ (5,342 ) $

101,874

 
 
Non-GAAP operating margin

(10

)%   (2 )% (19 )%   30 %

(13

)%

(3 )%  

11%

 
 

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, Dec. 31,
2014 2014 2014 2014 2015 2015 2014
 
GAAP net income (loss) $ (34,214 ) $ (27,052 ) $ (46,244 ) $ 99,650 $ (45,103 ) $ (23,777 ) $ (7,860 )
Interest Expense 3,947 3,856 4,381 4,548 4,736 4,985 16,732
Interest and other income, net (227 ) (54 ) (102 ) (125 ) (102 ) (120 ) (508 )
Tax (benefit) provision (8,117 ) (3,447 ) (6,962 ) 16,407 (5,755 ) (9,480 ) (2,119 )
Depreciation and amortization 22,805 23,712 25,415 26,820 27,593 27,707 98,752
Stock-based compensation 15,992     14,714   13,788     17,268   17,760   16,315     61,762  
Non-GAAP Adjusted EBITDA $ 186   $ 11,729   $ (9,724 ) $ 164,568   $ (871 ) $ 15,630   $ 166,759  
 

Shutterfly, Inc.

Reconciliation of Cash Flow from Operating Activities 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, Dec. 31,
2014 2014 2014 2014 2015 2015 2014
 
Net cash provided by (used in) operating activities $ (97,473 ) $ 12,282 $ (7,850 ) $ 259,529 $ (107,731 ) $ 22,171 $ 166,488
Interest Expense 3,947 3,856 4,381 4,548 4,736 4,985 16,732
Interest and other income, net (227 ) (54 ) (102 ) (125 ) (102 ) (120 ) (508 )
Tax (benefit) provision (8,117 ) (3,447 ) (6,962 ) 16,407 (5,755 ) (9,480 ) (2,119 )
Changes in operating assets and liabilities 106,531 (7,633 ) (2,521 ) (100,737 ) 113,075 (6,803 ) (4,360 )
Other adjustments (4,475 )   6,725   3,330     (15,054 ) (5,094 ) 4,877     (9,474 )
Non-GAAP Adjusted EBITDA 186     11,729   (9,724 )   164,568   (871 ) 15,630     166,759  
Less: Purchase of property and equipment (16,419 ) (22,734 ) (18,769 ) (10,573 ) (13,978 ) (17,199 ) (68,495 )
Less: Capitalized technology & development costs (5,112 ) (5,324 ) (6,084 ) (5,228 ) (4,072 ) (5,386 ) (21,748 )
                         
Free cash flow $ (21,345 ) $ (16,329 ) $ (34,577 ) $ 148,767   $ (18,921 ) $ (6,955 ) $ 76,516  
 

Shutterfly, Inc.

Reconciliation of Net Income(Loss) per Share to Non-GAAP Net Income(Loss) per Share

(In thousands)

(Unaudited)

 
Three Months Ended   Year Ended
Mar. 31, Jun. 30, Sep. 30, Dec. 31, Mar. 31, Jun. 30, Dec. 31,
2014 2014 2014 2014 2015 2015   2014
 
GAAP net income (loss) $ (34,214 )

$

(27,052

) $ (46,244 ) $ 99,650 $ (45,103 ) $ (23,777

)

 

$ (7,860 )
Add back interest expense related to:
Amortization of debt discount 2,870 2,911 2,951 2,994 3,035 3,078 11,726
Amortization of debt issuance costs 288 293 297 301 305 310 1,179
0.25% coupon 188 187 187 188 187 188 750
Tax effect (637 )   (438 ) (395 )   (1,430

)

(391 ) (731

)

 

  (2,900 )
Non-GAAP net income (loss) $ (31,505 ) $ (24,099 ) $ (43,204 ) $ 101,703   $ (41,967 ) $ (20,932

)

 

$ 2,895  
 
GAAP basic shares outstanding 38,503 38,438 $ 38,453 $ 38,412 $ 37,968 $ 37,537 $ 38,452
Add back:
Dilutive effect of stock options and restricted awards           1,219            
GAAP diluted shares outstanding 38,503     38,438   38,453     39,631   37,968   37,537       38,452  
Add back:
Dilutive effect of stock options and restricted awards 1,442
Dilutive effect of convertible notes                      
Non-GAAP diluted shares outstanding 38,503     38,438   38,453     39,631   37,968   37,537       39,894  
 
GAAP net income (loss) per share $ (0.89 ) $ (0.70 ) $ (1.20 ) $ 2.51   $ (1.19 ) $ (0.63

)

 

$ (0.20 )
Non-GAAP net income (loss) per share $ (0.82 ) $ (0.63 ) $ (1.12 ) $ 2.57   $ (1.11 ) $ (0.56

)

 

$ 0.07  

Contacts

Shutterfly, Inc.
Media Relations:
Gretchen Sloan, 650-610-5276
gsloan@shutterfly.com
or
Investor Relations:
Christiane Pelz, 650-632-2310
cpelz@shutterfly.com

Contacts

Shutterfly, Inc.
Media Relations:
Gretchen Sloan, 650-610-5276
gsloan@shutterfly.com
or
Investor Relations:
Christiane Pelz, 650-632-2310
cpelz@shutterfly.com