Press Releases

Shutterfly, Inc.
Jan 30, 2018

Shutterfly Announces Fourth Quarter and Full Year 2017 Financial Results

REDWOOD CITY, Calif.--(BUSINESS WIRE)--Jan. 30, 2018-- Shutterfly, Inc. (NASDAQ:SFLY), the leading online retailer and manufacturer of high-quality personalized products and services, today announced financial results for the fourth quarter and full year ended December 31, 2017.

“Q4 was a strong conclusion to a year in which we made significant strides in positioning Shutterfly for long-term, profitable growth,” said Christopher North, President and Chief Executive Officer. “I’m proud of the effort from the Shutterfly team which has allowed us to bring our customers together on a single consumer platform, re-focusing on Shutterfly and Tiny Prints, our two strongest Consumer brands. We exceeded the high-end of guidance on all major metrics thanks to organic growth in the Shutterfly brand, good retention of customers and revenues from legacy websites, accelerating mobile growth, overperformance by Shutterfly Business Solutions, and continued expense control.”

North continued, “At the same time, today we announced a definitive agreement to acquire Lifetouch, the leader in school photography. Lifetouch is a strong strategic fit, bringing significant synergies while adding scale and profitability. With this acquisition, and continued growth in our existing Shutterfly business, we are targeting a minimum of $450 million of Adjusted EBITDA by 2020.” Please see our separate press release announcing Shutterfly’s definitive agreement to acquire privately-held Lifetouch.

Fourth Quarter 2017 Financial Highlights

Net revenues totaled $593.8 million, a 6% year-over-year increase. Consumer net revenues totaled $521.8 million, flat year-over-year which were better than anticipated, as growth in the Shutterfly brand was offset by loss of revenue from the three websites we shut down. Shutterfly Business Solutions net revenues totaled $71.9 million, an 81% year-over-year increase.

GAAP Operating income totaled $179.0 million, a $25.2 million or 16% year-over-year increase. Net income was $111.7 million or $3.37 per share. Adjusted EBITDA was $215.6 million, a $20.8 million or 11% year-over-year increase.

On a proforma basis, which excludes a benefit from tax reform of $8.9 million, Net income was $102.8 million, an increase of $11.9 million or 13%, and Earnings per share increased $0.48 per share to $3.11 per share.

During the fourth quarter of 2017, we repurchased a total of 660 thousand shares for $30.0 million bringing our year-to-date repurchases to over 2.3 million shares and total share repurchases for 2017 to $110.0 million.

Full Year 2017 Financial Highlights

Net revenues totaled $1,190.2 million, a 5% year-over-year increase. Consumer net revenues totaled $997.0 million, flat year-over-year as anticipated, as growth in the Shutterfly brand was offset by loss of revenue from the three websites we shut down. Shutterfly Business Solutions net revenues totaled $193.2 million, a 41% year-over-year increase.

GAAP Operating income totaled $61.6 million and Net income was $30.1 million or $0.88 per share.

On a proforma basis, our operating income was $86.7 million[1], a $37.6 million or a 76% year-over-year increase. Adjusted EBITDA was $234.1 million[2], a $25.6 million or 12% year-over-year increase and Net income was $35.8 million[2], a $19.9 million or 125% year-over-year increase. Earnings per share increased $0.60 per share to $1.05 per share.

[1] Normalized for restructuring charges of $17.0 million and capital lease termination charges of $8.1 million
[2] Refer to page 14 for reconciliation of GAAP net income to Non-GAAP net income and reconciliation of GAAP net income to Non-GAAP Adjusted EBITDA.

Business Outlook[1]

Full Year 2018:

  • Net revenues to range from $1,220.0 million to $1,260.0 million
  • Consumer revenue to range from $1,020.0 million to $1,050.0 million
  • We anticipate mid-to-high single digit Shutterfly brand growth will be offset by lost revenue from the three websites we shut down
  • We expect Consumer revenue to increase throughout the year. We expect a mid-single digit Consumer decline in the first half of 2018, a return to modest growth in the third quarter of 2018, and high-single digit growth in the fourth quarter of 2018, our first, true like-for-like comparable period
  • SBS revenue to range from $200.0 million to $210.0 million
  • Gross profit margin to range from 48.5% to 49.5% of net revenues
  • Operating income to range from $115.0 million to $135.0 million
  • Effective tax rate of 26.0%
  • Net income per share to range from $1.94 to $2.38
  • Weighted average shares of approximately 33.9 million
  • Adjusted EBITDA to range from $260.0 million to $280.0 million
  • Capital expenditures to be approximately $65.0 million

First Quarter 2018:

  • Net revenues to range from $190.0 million to $194.0 million
  • Consumer net revenue expected to decline mid-single digits over the first quarter of 2017
  • Gross profit margin to range from 38.0% to 38.5% of net revenues
  • Operating loss to range from $34.0 million to $32.0 million
  • Effective tax rate of 26.0%
  • Net loss per share to range from $0.96 to $0.92
  • Weighted average shares of approximately 32.5 million
  • Adjusted EBITDA to range from $3.0 million to $5.0 million

[1]Excludes Lifetouch and acquisition-related expenses.

Notes to the Fourth Quarter 2017 Financial Results and Operating Metrics and 2018 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.

Free cash flow is a non-GAAP financial measure that the Company defines as cash provided by operating activities less capital expenditures.

Consumer segment includes net revenues from cards and stationery, professionally-bound photo books, home décor, personalized gifts, high quality prints, and other photo-based merchandise, and the related shipping revenues as well as rental revenue from the BorrowLenses brand. Consumer also includes net revenues from advertising displayed in the Company’s website.

Shutterfly Business Solutions (SBS) includes net revenues generated from the printing and shipping of marketing and variable data print products and formats.

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 2017 financial results and its expectations for the first quarter and full year 2018 on a conference call on Tuesday, January 30, 2018 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, February 13, 2018. To hear the replay, please dial (877) 344-7529 or (412) 317-0088 and enter access code 10116000.

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, adjusted EBITDA minus capital expenditures, and free cash flow. 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 cash flows provided by (used in) operating activities determined in accordance with GAAP. For more information, please see Shutterfly'sSEC 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.

We have provided a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure, where possible, except that we have not reconciled our 2020 non-GAAP Adjusted EBITDA target of $450 million to comparable GAAP operating income at this stage of the process because it is unreasonably difficult to provide guidance for stock-based compensation expense, capitalization and amortization of internal-use software and charges related to the proposed acquisition, which are reconciling items between GAAP operating loss and non-GAAP Adjusted EBITDA. The factors that may impact our future stock-based compensation expense and capitalization and amortization of internal-use software are out of our control and/or cannot be reasonably predicted, and therefore we are unable to provide such guidance without unreasonable effort. Factors include our market capitalization and related volatility of our stock price and our inability to project the cost or scope of internally produced software and charges related to the proposed acquisition during this time period.

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 long-term, profitable growth; our minimum Adjusted EBITDA targets by 2020; our business outlook for the first quarter and full year 2018; 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; competition and the pricing strategies of our competitors, which could lead to pricing pressure; the possibility that the closing conditions to the proposed Lifetouch acquisition may not be satisfied or waived, including that a governmental entity may prohibit, delay or refuse to grant a regulatory approval; delay in closing the Lifetouch acquisition or the possibility of non-consummation of the transaction; the risk of stockholder litigation in connection with contemplated Lifetouch Acquisition; the retention of Lifetouch employees and our ability to successfully integrate the Lifetouch businesses; risks inherent in the achievement of anticipated synergies and the timing thereof; and general economic conditions and changes in laws and regulations. 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.

   

Shutterfly, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 
Three Months Ended Twelve Months Ended
December 31, December 31,
2017   2016 2017   2016
 
Net revenues $ 593,755 $ 561,226 $ 1,190,202 $ 1,134,224
Cost of net revenues 254,218 230,048 619,650 566,117
Restructuring     1,475    
Gross profit 339,537   331,178   569,077   568,107  
Operating expenses:
Technology and development 43,415 44,043 168,383 166,909
Sales and marketing 78,503 98,301 197,708 233,585
General and administrative 38,597 35,041 117,797 118,503
Capital lease termination 8,098
Restructuring     15,491    
Total operating expenses 160,515   177,385   507,477   518,997  
Income from operations 179,022 153,793 61,600 49,110
Interest expense (9,219 ) (5,961 ) (27,836 ) (23,023 )
Interest and other income, net 794   122   1,481   501  
Income before income taxes 170,597 147,954 35,245 26,588
Provision for income taxes (58,873 ) (56,972 ) (5,160 ) (10,682 )
Net income $ 111,724   $ 90,982   $ 30,085   $ 15,906  
 
Net income per share:
Basic $ 3.45   $ 2.70   $ 0.91   $ 0.47  
Diluted $ 3.37   $ 2.63   $ 0.88   $ 0.45  
Weighted-average shares outstanding:
Basic 32,372   33,683   33,113   34,097  
Diluted 33,114   34,625   34,106   35,190  
 
Stock-based compensation is allocated as follows:
Cost of net revenues $ 1,055 $ 1,143 $ 4,339 $ 4,579
Technology and development 2,391 2,854 9,778 8,550
Sales and marketing 3,211 3,748 12,229 15,445
General and administrative 4,206 4,659 17,227 17,118
Restructuring     814    
$ 10,863   $ 12,404   $ 44,387   $ 45,692  
 
Depreciation and amortization is allocated as follows:
Cost of net revenues $ 15,682 $ 15,914 $ 60,415 $ 57,362
Technology and development 6,935 7,542 28,457 32,549
Sales and marketing 2,122 3,124 10,393 14,706
General and administrative 985 2,013 4,597 9,034
Restructuring     5,999    
$ 25,724   $ 28,593   $ 109,861   $ 113,651  
 
   

Shutterfly, Inc.

Consolidated Balance Sheets

(In thousands, except par value amounts)

(Unaudited)

 
December 31, 2017 December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents $ 489,894 $ 289,224
Short-term investments 178,021 26,352
Accounts receivable, net 82,317 57,365
Inventories 11,019 11,751
Prepaid expenses and other current assets 41,383   48,084  
Total current assets 802,634 432,776
Long-term investments 9,242 14,479
Property and equipment, net 266,860 284,110
Intangible assets, net 29,671 43,420
Goodwill 408,975 408,975
Other assets 17,418   11,816  
Total assets $ 1,534,800   $ 1,195,576  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt $ 297,054 $
Accounts payable 91,473 58,790
Accrued liabilities 159,248 138,869
Deferred revenue, current portion 24,649   22,929  
Total current liabilities 572,424 220,588
Long-term debt 292,457 278,792
Other liabilities 119,195   137,035  
Total liabilities 984,076   636,415  
Stockholders’ equity:

Common stock, $0.0001 par value; 100,000 shares authorized; 32,297 and 33,637 shares issued and outstanding on December 31, 2017 and December 31, 2016, respectively

3 3
Additional paid-in capital 996,301 949,864
Accumulated other comprehensive income (loss) 1,778 (32 )
Accumulated deficit (447,358 ) (390,674 )
Total stockholders' equity 550,724   559,161  
Total liabilities and stockholders' equity $ 1,534,800   $ 1,195,576  
 
 

Shutterfly, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 
Twelve Months Ended
December 31,
2017   2016
Cash flows from operating activities:
Net income $ 30,085 $ 15,906
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 88,946 93,531
Amortization of intangible assets 14,916 20,120
Amortization of debt discount and issuance costs 15,508 14,432
Stock-based compensation 43,573 45,692
Loss on disposal of property and equipment 1,141 738
Deferred income taxes (161 ) 8,899
Tax benefit from stock-based compensation 290
Excess tax benefits from stock-based compensation (2,413 )
Restructuring 10,882
Changes in operating assets and liabilities:
Accounts receivable (24,952 ) (2,142 )
Inventories (743 ) 1,715
Prepaid expenses and other assets 5,603 (19,140 )
Accounts payable 32,189 27,128
Accrued and other liabilities 22,537   (11,333 )
Net cash provided by operating activities 239,524   193,423  
 
Cash flows from investing activities:
Purchases of property and equipment (36,745 ) (56,264 )
Capitalization of software and website development costs (34,006 ) (33,423 )
Purchases of investments (205,466 ) (29,422 )
Proceeds from the maturities of investments 45,257 28,234
Proceeds from the sales of investments 13,874 12,213
Proceeds from sale of property and equipment 21,724   14,261  
Net cash used in investing activities (195,362 ) (64,401 )
 
Cash flows from financing activities:
Proceeds from issuance of common stock upon exercise of stock options 677 2,104
Repurchases of common stock (110,000 ) (112,488 )
Excess tax benefits from stock-based compensation 2,413
Principal payments of capital lease and financing obligations (29,380 ) (19,377 )
Payment for contingent consideration liabilities (1,313 )
Proceeds from borrowings, net of issuance costs 295,211    
Net cash provided by (used in) financing activities 156,508   (128,661 )
 
Net increase in cash and cash equivalents 200,670 361
Cash and cash equivalents, beginning of period 289,224   288,863  
Cash and cash equivalents, end of period $ 489,894   $ 289,224  
 
Supplemental schedule of non-cash investing / financing activities:
Net increase (decrease) in accrued purchases of property and equipment $ 2,693 $ (4,013 )
Net decrease in accrued capitalized software and website development costs (396 ) (319 )
Stock-based compensation capitalized with software and website development costs 1,373 1,560
Property and equipment acquired under capital leases 19,145 23,946
 
   

Shutterfly, Inc.

Consumer Metrics Disclosure

(Unaudited)

 
Three Months Ended Twelve Months Ended
December 31, December 31,
2017   2016 2017   2016
Consumer Metrics
Customers [1] 6,110,833 6,219,011 10,048,431 10,115,763
year-over-year change (2 )% (1 )%
 
Orders 10,463,752 10,869,499 26,328,121 27,108,889
year-over-year change (4 )% (3 )%
 
Average order value [2] $49.87 $47.98 $37.87 $36.80
year-over-year change 4 % 3 %
 
[1] An active customer is defined as one that has transacted in the last trailing twelve months.
[2] 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,
2017   2016 2017   2016
Consumer
Net revenues $ 521,809 $ 521,484 $ 996,963 $ 997,556
Cost of net revenues 193,320 198,949 456,665 455,387
Restructuring     1,475    
Gross profit $ 328,489   $ 322,535   $ 538,823   $ 542,169  
Consumer gross profit margin 63.0 % 61.8 % 54.0 % 54.3 %
 
Shutterfly Business Solutions (SBS)
Net revenues $ 71,946 $ 39,742 $ 193,239 $ 136,668
Cost of net revenues 58,812   28,673   154,068   100,582  
Gross profit $ 13,134   $ 11,069   $ 39,171   $ 36,086  
SBS gross profit margin 18.3 % 27.9 % 20.3 % 26.4 %
 
Corporate [1]
Net revenues $ $ $ $
Cost of net revenues 2,086   2,426   8,917   10,148  
Gross profit $ (2,086 ) $ (2,426 ) $ (8,917 ) $ (10,148 )
 
Consolidated
Net revenues $ 593,755 $ 561,226 $ 1,190,202 $ 1,134,224
Cost of net revenues 254,218 230,048 619,650 566,117
Restructuring     1,475    
Gross profit $ 339,537   $ 331,178   $ 569,077   $ 568,107  
 
Gross profit margin 57.2 % 59.0 % 47.8 % 50.1 %
 
Gross profit margin excluding restructuring 57.2 % 59.0 % 47.9 % 50.1 %
 

[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.

Consumer Revenues by Brand

(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,
2016 2016 2016 2016 2017 2017 2017 2017 2016 2017
 
Consumer net revenues
Shutterfly brand $ 114,407 $ 133,387 $ 111,035 $ 404,101 $ 123,903 $ 139,908 $ 115,883 $ 464,547 $ 762,930 $ 844,242
Tiny Prints Boutique

1,942

48,932 50,874
Tiny Prints [1] 12,202 14,757 7,963 93,635 10,465 12,917 128,557 23,382
Wedding Paper Divas [2] 16,407 14,642 11,423 8,957 14,290 11,365 8,523 51,429 34,178
MyPublisher [3] 4,980 4,538 4,413 6,561 4,936 6,056 20,492 10,992
Other 7,385   9,293   9,240   8,230   7,051   8,844   9,070   8,330   34,148   33,295
Total $ 155,381   $ 176,617   $ 144,074   $ 521,484   $ 160,645   $ 179,090   $ 135,418   $ 521,809   $ 997,556   $ 996,963
 
[1] Tiny Prints website shut down on June 28, 2017.
[2] Wedding Paper Divas website shut down on September 13, 2017.
[3] MyPublisher website shut down on May 15, 2017.
 
 

Shutterfly, Inc.

Restructuring

(In thousands)

(Unaudited)

 
Twelve Months Ended
December 31, 2017
Restructuring:
Property and equipment $ 8,414
Employee costs 5,851
Inventory 1,475
Other costs 1,226
Total $ 16,966
 

There were no restructuring charges for the three months ended December 31, 2017.

   

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, Dec. 31,   Dec. 31,
2016 2016 2016 2016 2017 2017 2017 2017 2016 2017
 
GAAP net income (loss) $ (29,436 ) $ (16,485 ) $ (29,155 ) $ 90,982 $ (33,194 ) $ (22,838 ) $ (25,607 ) $ 111,724 $ 15,906 $ 30,085
Capital lease termination 8,098 8,098
Restructuring 8,976 4,673 3,317 16,966
Tax benefit impact of restructuring and capital lease termination charges (3,948 ) (4,829 ) (1,669 ) (10,446 )
Benefit from 2017 tax reform legislation               (8,875 )   (8,875 )
Non-GAAP net income (loss) $ (29,436 ) $ (16,485 ) $ (29,155 ) $ 90,982   $ (28,166 ) $ (14,896 ) $ (23,959 ) $ 102,849   $ 15,906   $ 35,828  
 
GAAP diluted shares outstanding 34,596   34,177   33,932   34,625   33,712   33,579   32,878   33,114   35,190   34,106  
Non-GAAP diluted shares outstanding 34,596   34,177   33,932   34,625   33,712   33,579   32,878   33,114   35,190   34,106  
 
GAAP net income (loss) per share $ (0.85 ) $ (0.48 ) $ (0.86 ) $ 2.63   $ (0.98 ) $ (0.68 ) $ (0.78 ) $ 3.37   $ 0.45   $ 0.88  
Non-GAAP net income (loss) per share $ (0.85 ) $ (0.48 ) $ (0.86 ) $ 2.63   $ (0.84 ) $ (0.44 ) $ (0.73 ) $ 3.11   $ 0.45   $ 1.05  
 
   

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,
2016 2016 2016 2016 2017 2017 2017 2017 2016 2017
 
GAAP net income (loss) $ (29,436 ) $ (16,485 ) $ (29,155 ) $ 90,982 $ (33,194 ) $ (22,838 ) $ (25,607 ) $ 111,724 $ 15,906 $ 30,085
Interest expense 5,675 5,661 5,726 5,961 5,964 5,955 6,699 9,219 23,023 27,836
Interest and other income, net (121 ) (128 ) (130 ) (122 ) (189 ) (244 ) (253 ) (794 ) (501 ) (1,481 )
Tax (benefit) provision (17,932 ) (10,123 ) (18,235 ) 56,972 (22,341 ) (14,713 ) (16,660 ) 58,873 10,682 5,160
Depreciation and amortization 29,114 28,357 27,587 28,593 27,364 25,957 24,815 25,724 113,651 103,862
Stock-based compensation 10,150 10,924 12,214 12,404 11,505 10,469 10,736 10,863 45,692 43,573
Capital lease termination 8,098 8,098
Restructuring         8,976   4,673   3,317       16,966  
Non-GAAP Adjusted EBITDA $ (2,550 ) $ 18,206   $ (1,993 ) $ 194,790   $ (1,915 ) $ 17,357   $ 3,047   $ 215,609   $ 208,453   $ 234,099  
 
   

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,
2016 [2] 2016 2016 2016 2017 2017 2017 2017 2016 2017
 
Net cash provided by (used in) operating activities $ (82,610 ) $ 16,916 $ (4,881 ) $ 263,998 $ (72,386 ) $ 13,672 $ (21,945 ) $ 320,183 $ 193,423 $ 239,524
Interest expense 5,675 5,661 5,726 5,961 5,964 5,955 6,699 9,219 23,023 27,836
Interest and other income, net (121 ) (128 ) (130 ) (122 ) (189 ) (244 ) (253 ) (794 ) (501 ) (1,481 )
Tax (benefit) provision (17,932 ) (10,123 ) (18,235 ) 56,972 (22,341 ) (14,713 ) (16,660 ) 58,873 10,682 5,160
Changes in operating assets and liabilities 98,604 2,374 29,155 (126,361 ) 92,194 (2,565 ) 35,336 (159,600 ) 3,772 (34,634 )
Other adjustments (6,166 ) 3,506 (13,628 ) (5,658 ) (6,265 ) 5,377 (2,575 ) (13,026 ) (21,946 ) (16,488 )
Capital lease termination 8,098 8,098
Cash restructuring         1,108   1,777   2,445   754     6,084  
Non-GAAP Adjusted EBITDA (2,550 ) 18,206   (1,993 ) 194,790   (1,915 ) 17,357   3,047   215,609   208,453   234,099  
Less: Purchases of property and equipment (5,497 ) (22,005 ) (14,957 ) (9,792 ) (1,669 ) (7,252 ) (18,302 ) (12,215 ) (52,251 ) (39,438 )
Less: Capitalized technology & development costs (8,168 ) (10,052 ) (8,819 ) (6,065 ) (7,726 ) (9,602 ) (8,488 ) (7,794 ) (33,104 ) (33,610 )
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 ) $ 195,600   $ 132,925   $ 161,051  
 
[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 GAAP Operating Cash Flow to Free Cash Flow

(In thousands)

(Unaudited)

 
Year Ended
2017     2016     2015
 
Net cash provided by operating activities $ 239,524 $ 193,423 $ 165,037
Less: capital expenditures[1] 70,751   79,860   76,669
Free cash flow $ 168,773   $ 113,563   $ 88,368
% Growth over prior year 49 % 29 %
 
[1] Excludes purchase of printers of $9.8 million that the Company acquired and immediately sold during the second quarter of 2016.
 
 

Shutterfly, Inc.

Reconciliation of Forward-Looking Guidance for Non-GAAP Financial Measures

(In millions, except per share amounts)

(Unaudited)

 
Forward-Looking Guidance [1]
Three Months Ending

March 31, 2018

  Twelve Months Ending

December 31, 2018

Low   High Low   High
 
Net revenues $190.0 $194.0 $1,220.0 $1,260.0
Consumer revenues $1,020.0 $1,050.0
SBS revenues $200.0 $210.0
 
Gross profit margin 38.0 % 38.5 % 48.5 % 49.5 %
 
Operating income (loss) ($34.0 ) ($32.0 ) $115.0 $135.0
Operating margin (17.9 %) (16.5 %) 9.4 % 10.7 %
 
Operating income (loss) ($34.0 ) ($32.0 ) $115.0 $135.0
Stock-based compensation $12.0 $12.0 $50.0 $50.0
Amortization of intangible assets $2.4 $2.4 $6.0 $6.0
Depreciation $22.5   $22.5   $89.0   $89.0  
Adjusted EBITDA $3.0   $5.0   $260.0   $280.0  
Adjusted EBITDA margin 1.6 % 2.6 % 21.3 % 22.2 %
 
Capital expenditures $65.0 $65.0
Capital expenditures as % of net revenues 5.3 % 5.2 %
 
Tax rate 26.0 % 26.0 % 26.0 % 26.0 %
 
Net income (loss) per share
Basic ($0.96 ) ($0.92 )
Diluted $1.94 $2.38
 
Weighted average shares
Basic 32.5 32.5
Diluted 33.9 33.9
 
[1] Excludes Lifetouch and acquisition-related expenses.
 

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