REDWOOD CITY, Calif., Oct 27, 2010 (BUSINESS WIRE) -- Shutterfly, Inc. (NASDAQ:SFLY), a leading Internet-based social expression and personal publishing service, today announced financial results for the three months ended September 30, 2010.
"Shutterfly continued the momentum from the first half of the year to drive record third quarter revenues, customers, orders and EBITDA," said President and Chief Executive Officer Jeffrey Housenbold. "Investments in our product and service offerings, platform infrastructure and people throughout 2010 have positioned us well for the Q4 holiday shopping period. Our commitment to innovation, design forward products and services, customer friendly policies, industry-leading quality and focused financial discipline continue to differentiate Shutterfly from the competition."
Third Quarter 2010 Financial Highlights
-- Net revenues totaled $49.0 million, a 21% year-over-year increase and a 25% increase excluding referral fee revenue.
-- Third quarter 2010 represents the 39th consecutive quarter of year-over-year net revenue growth.
-- Personalized Products & Services net revenues totaled $32.7 million, a 38% year-over-year increase and a 47% increase excluding referral fee revenue.
-- Personalized Products & Services net revenues represented 67% of total net revenues.
-- Net revenues from prints totaled $15.7 million and were in line with the third quarter of 2009.
-- Commercial print net revenues totaled $0.6 million.
-- Existing customers generated 76% of total net revenues.
-- Gross profit margin was 49% of net revenues, compared to 47% in the third quarter of 2009.
-- Operating expenses, excluding $3.7 million of stock-based compensation, totaled $28.3 million.
-- GAAP net loss was ($4.8) million, compared to a net loss of ($6.3) million in the third quarter of 2009.
-- GAAP net loss per diluted share was ($0.17), compared to a net loss per diluted share of ($0.25) in the third quarter of 2009.
-- Adjusted EBITDA was $2.2 million, compared to $2.0 million in the third quarter of 2009.
-- At September 30, 2010, the Company had $160.5 million of cash and cash equivalents.
Third Quarter 2010 Operating Metrics
-- Transacting customers totaled 1.2 million, a 27% increase over the third quarter of 2009.
-- Orders totaled 2.0 million, a 20% increase over the third quarter of 2009.
-- Average order value was $23.75, a 3% increase over the third quarter of 2009.
Recent Operating Highlights
-- Continued to improve our photo book creation experience by adding access to Picasa images from the photo book creation path, and by introducing new styles like travel, vacation, and holiday and enhancing layout control options.
-- Launched Shutterfly's largest holiday collection ever with nearly 1,400 new holiday designs across all form factors - including our new 5x5 flat stationery cards with new innovations like "Story Cards" and "Tarjetas de Navidad." Expanded our direct mail service to include 5x5 stationery cards in addition to 5x7 stationery cards and folded greeting cards.
-- Enhanced features added to Shutterfly's Classroom and Youth Sports Share sites to offer parents, teachers and coaches a powerful, easy-to-use solution for sharing information, photos and videos. Partnered with AYSO to make Share sites available to over 50,000 soccer teams across the country.
-- Expanded retail presence by providing Shutterfly customers more shopping options with in-store pickup at CVS/pharmacy and Walgreens locations, and by offering Best Buy customers promotional offers for photo books.
-- Introduced new calendar designs and form factors and unveiled a new home décor collection in time for the holiday gift giving season.
The Company's current financial expectations for the fourth quarter and the full year 2010 are as follows:
Fourth Quarter 2010:
-- Net revenues to range from $148.5 million to $153.5 million, a year-over-year increase of 13% to 17%.
-- GAAP gross profit margins to range from 60% to 62% of net revenues.
-- Non-GAAP gross profit margins to range from 60% to 62% of net revenues.
-- GAAP operating income to range from $40 million to $44 million.
-- Non-GAAP operating income to range from $44 million to $48 million.
-- GAAP effective tax rate to range from 36% to 38%.
-- Non-GAAP effective tax rate to range from 36% to 37%.
-- GAAP diluted net income per share to range from $0.86 to $0.92.
-- Non-GAAP diluted net income per share to range from $0.97 to $1.04.
-- Weighted average diluted shares of approximately 29.5 million.
-- Adjusted EBITDA to range from $49.5 million to $53.5 million.
Full Year 2010:
-- Net revenues to range from $290 million to $295 million, a year-over-year increase of 18% to 20%.
-- GAAP gross profit margins to range from 55% to 56% of net revenues.
-- Non-GAAP gross profit margins to range from 56% to 57% of net revenues.
-- GAAP operating income to range from $14 million to $18 million.
-- Non-GAAP operating income to range from $33 million to $37 million.
-- GAAP effective tax rate to range from 32% to 37%.
-- Non-GAAP effective tax rate to range from 36% to 37%.
-- GAAP diluted net income per share to range from $0.34 to $0.40.
-- Non-GAAP diluted net income per share to range from $0.74 to $0.81.
-- Weighted average diluted shares of 29.0 million.
-- Adjusted EBITDA to range from 19.5% to 20.5% of net revenues.
-- Capital expenditures to range from $22 million to $24 million.
Notes to the Third Quarter 2010 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 minus purchases of property, plant, and equipment, and capitalization of software and website development costs.
Print revenues consist of photo prints in wallet, 2x6, 4x6, 5x7, 8x10, photocards, and large format sizes.
Personalized Products and Services ("PPS") revenues primarily include photo books, stationery and folded greeting cards, calendars, and photo-based merchandise. PPS also includes revenue from advertising and sponsorship programs and referral fees. The Company's referral fee program was discontinued effective March 31, 2010, and no referral fee revenue has been recorded subsequent to that date.
Commercial printing revenues are a separate component of net revenues and are excluded from prints and PPS revenues.
Average order value is defined as total net revenues, excluding commercial printing revenues, divided by total orders.
The foregoing financial guidance replaces any of the Company's previously issued guidance and all such previous guidance should no longer be relied upon.
Third Quarter 2010 Conference Call
Management will review the third quarter 2010 financial results and its expectations for the fourth quarter and full year 2010 on a conference call on Wednesday, October 27, 2010 at 2:00 p.m. Pacific Daylight Time (5:00 p.m. Eastern Daylight Time). To listen to the call and view the accompanying slides, please visit http://www.shutterfly.com. In the Investor Relations area, found in the "About Us" section, 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.shutterfly.com. A replay of the conference call will be available through Monday, November 1, 2010. To hear the replay, please dial 706-645-9291, replay passcode 14159021.
About Non-GAAP Financial Information
This press release contains certain non-GAAP financial measures. Tables are provided at the end of this press release that reconcile the non-GAAP financial measures 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 margins, non-GAAP operating income (loss) and the related operating income (loss) margins, non-GAAP income (loss) per share, adjusted EBITDA and free cash flow. For more information, please see Shutterfly's SEC Filings.
To supplement the Company's consolidated financial statements presented on a GAAP basis, the Company believes 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 net income (loss) or net income (loss) per share determined in accordance with GAAP.
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, which involve risks and uncertainties. These forward-looking statements include all statements regarding the Company's financial expectations for the fourth quarter and full year 2010 set forth under the caption "Business Outlook." 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, our ability to expand our customer base and 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 on a timely basis, as well as consumer acceptance of, new products and services; our ability to develop additional adjacent lines of business; unforeseen changes in expense levels; and competition, 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" sections of the Company's Form 10-K for the year ended December 31, 2009, 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.
Founded in 1999, Shutterfly, Inc. is an Internet-based social expression and personal publishing service. Shutterfly provides high quality products and world class services that make it easy, convenient and fun for consumers to preserve their digital photos in a creative and thoughtful manner. Shutterfly's flagship product is its award-winning photo book line, which helps consumers celebrate memories and tell their stories in professionally bound coffee table books. More information about Shutterfly (NASDAQ:SFLY) is available at www.shutterfly.com. Shutterfly and Shutterfly.com are trademarks of Shutterfly, Inc.
|Condensed Consolidated Statement of Operations|
|(In thousands, except per share amounts)|
|Three Months Ended||Nine Months Ended|
|September 30,||September 30,|
|Cost of net revenues||24,906||21,420||70,663||61,161|
|Technology and development||11,602||11,390||36,248||33,347|
|Sales and marketing||11,500||9,377||32,968||26,075|
|General and administrative||8,927||7,363||27,348||22,642|
|Total operating expenses||32,029||28,130||96,564||82,064|
|Loss from operations||(7,977||)||(9,055||)||(25,720||)||(27,860||)|
|Interest and other income, net||26||74||462||681|
|Loss before income taxes||(7,951||)||(9,003||)||(25,300||)||(27,315||)|
|Benefit from income taxes||3,181||2,657||9,914||9,083|
|Net loss per share - basic and diluted||$||(0.17||)||$||(0.25||)||$||(0.57||)||$||(0.72||)|
|Weighted-average shares outstanding - basic and diluted||27,292||25,517||26,827||25,303|
|Stock-based compensation is allocated as follows:|
|Cost of net revenues||$||120||$||119||$||380||$||297|
|Technology and development||759||1,077||2,316||2,292|
|Sales and marketing||870||955||2,938||2,428|
|General and administrative||2,117||2,005||6,665||4,778|
|Condensed Consolidated Balance Sheet|
|(In thousands, except par value amounts)|