Shutterfly Announces Fourth Quarter and Full Year 2012 Financial Results
Shutterfly Announces Fourth Quarter and Full Year 2012 Financial Results
* Fourth Quarter 2012 net revenues increase 33% year-over-year to $351.8
million
* Full Year 2012 net revenues increase 35% year-over-year to $640.6 million
* Record Full Year Adjusted EBITDA of $128.1 million, 53% higher than 2011
* 48^th consecutive quarter of year-over-year net revenue growth
Business Wire
REDWOOD CITY, Calif. -- February 5, 2013
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 fourth quarter and
full year-ended December 31, 2012.
“Our unwavering commitment to innovation, outstanding product quality, stylish
designs, exceptional customer service and overall value, combined with our
focus on strong execution led to another year of record revenues, adjusted
EBITDA, and free cash flows,” said President and Chief Executive Officer
Jeffrey Housenbold. “Our singular focus on addressing the ever increasing
challenges that consumers face as they try to do more with their photos and
memories, has enabled Shutterfly to emerge as the market leader. We remain
confident in our strategy and in the early and large markets in which we
operate.”
Fourth Quarter 2012 Financial Highlights
* Net revenues totaled $351.8 million, a 33% year-over-year increase, and
the 48th consecutive quarter of year-over-year net revenue growth.
* Consumer net revenues totaled $343.5 million, a 33% year-over-year
increase.
* Enterprise net revenues totaled $8.3 million, a 79% year-over-year
increase.
* Gross profit margin was 60.5% of net revenues, compared to 58.9% in the
fourth quarter of 2011.
* Operating expenses, excluding $9.4 million of stock-based compensation,
totaled $102.0 million.
* GAAP net income was $53.0 million, compared to $35.4 million in the fourth
quarter of 2011.
* GAAP net income per diluted share was $1.40, compared to $0.97 in the
fourth quarter of 2011.
* Adjusted EBITDA was $127.2 million, compared to $89.3 million in the
fourth quarter of 2011.
* At December 31, 2012, cash and cash equivalents totaled $245.1 million.
Full Year 2012 Financial Highlights
* Net revenues totaled $640.6 million, a 35% year-over-year increase.
* Consumer net revenues totaled $613.4 million, a 33% year-over-year
increase.
* Enterprise net revenues totaled $27.2 million, a 101% year-over-year
increase.
* Gross profit margin was 54.0% of net revenues, compared to 53.6% in 2011.
* Operating expenses, excluding $35.6 million of stock-based compensation,
totaled $269.4 million.
* GAAP net income was $23.0 million, compared to $14.0 million in 2011.
* GAAP net income per diluted share was $0.61, compared to $0.40 in 2011.
* Adjusted EBITDA was $128.1 million, compared to $83.7 million in 2011.
Fourth Quarter 2012 Consumer Metrics
* Transacting customers totaled 4.2 million, a 30% year-over-year increase.
* Orders totaled 6.9 million, a 33% year-over-year increase.
* Average order value was $49.80, flat compared to the fourth quarter 2011.
Full Year 2012 Consumer Metrics
* Transacting customers totaled 7.1 million, a 31% year-over-year increase.
* Orders totaled 16.3 million, a 29% year-over-year increase.
* Average order value was $37.58, a decrease of 2% year-over-year.
Business Outlook
First Quarter 2013:
* Net revenues to range from $107.2 million to $110.0 million, a
year-over-year increase of 17.4% to 20.5%.
* GAAP gross profit margin to range from 43.0% to 44.0% of net revenues.
* Non-GAAP gross profit margin to range from 44.8% to 45.8% of net revenues.
* GAAP operating loss to range from ($26.8) million to ($27.8) million.
* Non-GAAP operating loss to range from ($9.4) million to ($10.4) million.
* GAAP effective tax rate to range from 45% to 46%.
* GAAP net loss per diluted share to range from ($0.39) to ($0.42).
* Weighted average diluted shares of approximately 36.8 million.
* Adjusted EBITDA loss to range from ($2.5) million to ($3.5) million.
Full Year 2013:
* Net revenues to range from $739.7 million to $746.0 million, a
year-over-year increase of 15.5% to 16.5%.
* GAAP gross profit margin to range from 52.0% to 53.0% of net revenues.
* Non-GAAP gross profit margin to range from 53.3% to 54.3% of net revenues.
* GAAP operating income to range from $25.0 million to $35.0 million.
* Non-GAAP operating income to range from $91.7 million to $101.7 million.
* GAAP effective tax rate to range from 40% to 42%.
* GAAP net income per diluted share to range from $0.38 to $0.51.
* Weighted average diluted shares of approximately 38.4 million.
* Adjusted EBITDA to range from $133.1 million to $141.7 million, or 18% to
19% of net revenues.
* Capital expenditures to range from 9.4% to 10.4% of net revenues.
Notes to the Fourth Quarter 2012 and Full Year 2012 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.
Consumer category includes net revenues from stationery and greeting cards,
photo books, calendars and photo-based merchandise, photo prints, and the
related shipping revenues. Consumer also includes net revenues from
advertising and sponsorship programs.
Enterprise category 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.
Fourth Quarter and Full Year 2012 Conference Call
Management will review the fourth quarter and full year 2012 financial results
and its expectations for the first quarter and full year 2013 on a conference
call on Tuesday, February 5, 2013 at 2:00 p.m. Pacific Daylight Time (5:00
p.m. Eastern 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 Tuesday, February 19, 2013. To hear the replay, please
dial (404) 537-3406, replay passcode 88660359.
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, 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, 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
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 first quarter and full
year 2013 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, increase sales to existing customers and meet
production requirements; our ability to successfully integrate acquired
assets; our ability to retain and hire necessary employees 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, 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-Q for the quarter ended September 30, 2012, 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; and Treat, personalized greeting cards that really stand
out. For more information about Shutterfly, Inc. (NASDAQ:SFLY), visit
www.shutterfly-inc.com.
Shutterfly, Inc.
Consolidated Statement
of Income
(In thousands, except
per share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2012 2011 2012 2011
Net revenues $ 351,777 $ 263,754 $ 640,624 $ 473,270
Cost of net revenues 138,965 108,468 294,857 219,542
Gross profit 212,812 155,286 345,767 253,728
Operating expenses:
Technology and 24,770 17,485 85,746 65,675
development
Sales and marketing 62,191 49,505 148,806 113,952
General and 24,527 15,687 70,502 58,710
administrative
Total operating 111,488 82,677 305,054 238,337
expenses
Income from operations 101,324 72,609 40,713 15,391
Interest expense (141 ) (64 ) (597 ) (64 )
Interest and other 12 10 42 35
income, net
Income before income 101,195 72,555 40,158 15,362
taxes
Provision for income (48,168 ) (37,144 ) (17,160 ) (1,314 )
taxes
Net income $ 53,027 $ 35,411 $ 22,998 $ 14,048
Net income per share
Basic $ 1.46 $ 1.02 $ 0.64 $ 0.43
Diluted $ 1.40 $ 0.97 $ 0.61 $ 0.40
Weighted-average
shares outstanding:
Basic 36,232 34,743 35,826 32,788
Diluted 37,764 36,490 37,432 35,007
Stock-based
compensation is
allocated as follows:
Cost of net revenues $ 367 $ 625 $ 1,696 $ 2,138
Technology and 2,170 2,182 8,635 8,201
development
Sales and marketing 3,051 2,574 11,559 11,350
General and 4,226 1,333 15,432 12,181
administrative
$ 9,814 $ 6,714 $ 37,322 $ 33,870
Shutterfly, Inc.
Consolidated Balance Sheet
(In thousands, except par value amounts)
(Unaudited)
December 31, December 31,
2012 2011
ASSETS
Current assets:
Cash and cash equivalents $ 245,088 $ 179,915
Accounts receivable, net 13,574 12,997
Inventories 5,032 3,726
Deferred tax asset, current portion 7,713 598
Prepaid expenses and other current assets 15,044 13,870
Total current assets 286,451 211,106
Property and equipment, net 92,667 54,123
Intangible assets, net 122,269 95,016
Goodwill 358,349 340,408
Deferred tax asset, net of current portion 854 3,785
Other assets 4,534 5,448
Total assets $ 865,124 $ 709,886
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 31,503 $ 9,470
Accrued liabilities 88,472 59,271
Deferred revenue 17,845 12,106
Total current liabilities 137,820 80,847
Deferred tax liability 24,298 13,948
Other liabilities 11,720 6,094
Total liabilities 173,838 100,889
Stockholders' equity
Common stock, $0.0001 par value; 100,000 shares
authorized; 36,358 and 34,839 shares issued and 4 4
outstanding at December 31, 2012 and December
31, 2011, respectively
Additional paid-in-capital 652,110 589,067
Accumulated earnings 39,172 19,926
Total stockholders' equity 691,286 608,997
Total liabilities and stockholders' equity $ 865,124 $ 709,886
Shutterfly, Inc.
Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
Twelve Months Ended
December 31,
2012 2011
Cash flows from operating activities:
Net income $ 22,998 $ 14,048
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 29,424 22,316
Amortization of intangible assets 20,685 12,136
Stock-based compensation, net of forfeitures 37,322 33,870
Gain on disposal of property and equipment (861 ) (301 )
Deferred income taxes 54 (5,766 )
Tax benefit from stock-based compensation 14,619 8,391
Excess tax benefits from stock-based (16,622 ) (8,380 )
compensation
Changes in operating assets and liabilities:
Accounts receivable, net (577 ) (7,205 )
Inventories (1,306 ) 766
Prepaid expenses and other current assets (1,155 ) (5,667 )
Other assets (32 ) (1,402 )
Accounts payable 15,230 (16,458 )
Accrued and other liabilities 26,610 12,255
Deferred revenue 5,739 1,870
Other non-current liabilities (747 ) 2,775
Net cash provided by operating activities 151,381 63,248
Cash flows from investing activities:
Acquisition of business and intangibles, net of (57,212 ) (133,705 )
cash acquired
Purchases of property and equipment (40,535 ) (23,149 )
Capitalization of software and website (12,528 ) (10,050 )
development costs
Proceeds from sale of equipment 986 676
Net cash used in investing activities (109,289 ) (166,228 )
Cash flows from financing activities:
Principal payments of capital lease obligations - (6 )
Proceeds from issuance of common stock upon 10,211 22,277
exercise of stock options
Repurchases of common stock (3,752 ) -
Excess tax benefits from stock-based 16,622 8,380
compensation
Net cash provided by financing activities 23,081 30,651
Net increase/(decrease) in cash and cash 65,173 (72,329 )
equivalents
Cash and cash equivalents, beginning of period 179,915 252,244
Cash and cash equivalents, end of period $ 245,088 $ 179,915
Supplemental schedule of non-cash activities
Net change in accrued purchases of property and $ 7,694 $ 412
equipment
Fair market value of building under 6,372 -
build-to-suit lease
Amount due for acquisition of business 963 -
Shutterfly, Inc.
User Metrics Disclosure
Three Months Ended Twelve Months Ended
December 31, December 31,
2012 2011 2012 2011
User Metrics
Customers 4,227,247 3,246,117 7,062,001 5,388,402
year-over-year growth 30% 31%
Orders 6,897,969 5,189,943 16,321,828 12,676,455
year-over-year growth 33% 29%
Average order value* $49.80 $49.93 $37.58 $38.30
year-over-year growth 0% -2%
Average orders per customer 1.6x 1.6x 2.3x 2.4x
* Average order value
excludes Enterprise revenue.
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 March 31,
2013
Net revenues $107.2 $110.0 - - $107.2 $110.0
Gross profit 43.0% 44.0% 1.8% 1.8% [a] 44.8% 45.8%
margin
Operating loss ($27.8) ($26.8) $17.4 $17.4 [b] ($10.4) ($9.4)
Operating margin (26%) (24%) 16% 15% [b] (10%) (9%)
Stock-based $10.8 $10.8 $10.8 $10.8 - -
compensation
Amortization of
intangible $6.5 $6.5 $6.5 $6.5 - -
assets
Adjusted EBITDA* ($3.5) ($2.5)
Diluted loss per ($0.42) ($0.39)
share
Diluted shares 36.8 36.8
Effective tax 45% 46%
rate
Twelve Months
Ending December
31, 2013
Net revenues $739.7 $746.0 - - $739.7 $746.0
Gross profit 52.0% 53.0% 1.3% 1.3% [c] 53.3% 54.3%
margin
Operating income $25.0 $35.0 $66.7 $66.7 [d] $91.7 $101.7
Operating margin 3% 5% 9% 9% [d] 12% 14%
Stock-based $41.7 $41.7 $41.7 $41.7 - -
compensation
Amortization of
intangible $25.0 $25.0 $25.0 $25.0 - -
assets
Adjusted EBITDA* $133.1 $141.7
Adjusted EBITDA* 18.0% 19.0%
margin
Diluted earnings $0.38 $0.51
per share
Diluted shares 38.4 38.4
Effective tax 40% 42%
rate
Capital
expenditures - % 9.4% 10.4%
of net revenues
Adjusted EBITDA is a non-GAAP financial measure defined as earnings
* before interest, taxes, depreciation, amortization and stock-based
compensation.
Reflects estimated adjustments for stock-based compensation expense of
[a] approximately $500K and amortization of purchased intangible assets of
approximately $1.5 million.
Reflects estimated adjustments for stock-based compensation expense of
[b] approximately $10.8 million and amortization of purchased intangible
assets of approximately $6.5 million
Reflects estimated adjustments for stock-based compensation expense of
[c] approximately $1.8 million and amortization of purchased intangible
assets of approximately $7.8 million.
Reflects estimated adjustments for stock-based compensation expense of
[d] approximately $41.7 million and amortization of purchased intangible
assets of approximately $25.0 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, Sep. 30 Dec. 31, Dec. 31, Dec. 31,
2011 2011 2011 2011 2012 2012 2012 2012 2011 2012
GAAP gross $ 27,683 $ 35,883 $ 34,876 $ 155,286 $ 41,238 $ 48,310 $ 43,407 $ 212,812 $ 253,728 $ 345,767
profit
Stock-based 175 754 584 625 462 443 424 367 2,138 1,696
compensation
Amortization
of 611 1,345 1,417 1,425 1,454 1,516 1,570 1,856 4,798 6,396
intangible
assets
Non-GAAP $ 28,469 $ 37,982 $ 36,877 $ 157,336 $ 43,154 $ 50,269 $ 45,401 $ 215,035 $ 260,664 $ 353,859
gross profit
Non-GAAP
gross profit 50 % 50 % 48 % 60 % 47 % 51 % 46 % 61 % 55 % 55 %
margin
Shutterfly,
Inc.
Reconciliation of GAAP Operating Margin to Non-GAAP Operating Margin
(In
thousands)
(Unaudited)
Three Months Ended Year Ended
Mar. 31, Jun. 30, Sep. 30, Dec. 31, Mar. 31, Jun. 30, Sep. 30 Dec. 31, Dec. 31, Dec. 31,
2011 2011 2011 2011 2012 2012 2012 2012 2011 2012
GAAP
operating $ (12,986 ) $ (21,540 ) $ (22,692 ) $ 72,609 $ (19,080 ) $ (17,786 ) $ (23,745 ) $ 101,324 $ 15,391 $ 40,713
income
(loss)
Stock-based 5,235 12,099 9,822 6,714 9,617 9,526 8,365 9,814 33,870 $ 37,322
compensation
Amortization
of 719 3,487 3,961 3,969 4,013 5,090 5,658 5,924 12,136 $ 20,685
intangible
assets
Non-GAAP
operating $ (7,032 ) $ (5,954 ) $ (8,909 ) $ 83,292 $ (5,450 ) $ (3,170 ) $ (9,722 ) $ 117,062 $ 61,397 $ 98,720
income
(loss)
Non-GAAP
operating (12 %) (8 %) (12 %) 32 % (6 %) (3 %) (10 %) 33 % 13 % 15 %
margin
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,
2011 2011 2011 2011 2012 2012 2012 2012 2011 2012
GAAP net
income $ (7,760 ) $ (3,650 ) $ (9,953 ) $ 35,411 $ (10,040 ) $ (9,511 ) $ (10,478 ) $ 53,027 $ 14,048 $ 22,998
(loss)
Interest - - - 64 152 156 148 141 64 597
expense
Interest and
other (14 ) (6 ) (5 ) (10 ) (7 ) (9 ) (14 ) (12 ) (35 ) (42 )
income, net
Tax benefit (5,212 ) (17,884 ) (12,734 ) 37,144 (9,185 ) (8,422 ) (13,401 ) 48,168 1,314 17,160
(provision)
Depreciation
and 5,833 9,159 9,534 9,926 10,024 11,820 12,244 16,021 34,452 50,109
amortization
Stock-based 5,235 12,099 9,822 6,714 9,617 9,526 8,365 9,814 33,870 37,322
compensation
Non-GAAP
Adjusted $ (1,918 ) $ (282 ) $ (3,336 ) $ 89,249 $ 561 $ 3,560 $ (3,136 ) $ 127,159 $ 83,713 $ 128,144
EBITDA
Shutterfly,
Inc.
Reconciliation of Cash Flow from Operating Activities to Non-GAAP Adjusted EBITDA and Free Cash Flow
(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,
2011 2011 2011 2011 2012 2012 2012 2012 2011 2012
Net cash
provided by
(used in) $ (52,849 ) $ (5,165 ) $ (1,577 ) $ 122,839 $ (47,961 ) $ 9,339 $ (3,568 ) $ 193,571 $ 63,248 $ 151,381
operating
activities
Interest - - - 64 152 156 148 141 64 597
expense
Interest and
other (14 ) (6 ) (5 ) (10 ) (7 ) (9 ) (14 ) (12 ) (35 ) (42 )
income, net
Tax benefit (5,212 ) (17,884 ) (12,734 ) 37,144 (9,185 ) (8,422 ) (13,401 ) 48,168 1,314 17,160
(provision)
Changes in
operating 55,702 23,217 8,962 (74,815 ) 55,912 739 11,482 (111,895 ) 13,066 (43,762 )
assets and
liabilities
Other 455 (444 ) 2,018 4,027 1,650 1,757 2,217 (2,814 ) 6,056 2,810
adjustments
Non-GAAP
Adjusted (1,918 ) (282 ) (3,336 ) 89,249 561 3,560 (3,136 ) 127,159 83,713 128,144
EBITDA
Less:
Purchases of (5,446 ) (3,811 ) (9,310 ) (4,994 ) (6,499 ) (12,264 ) (16,628 ) (12,838 ) (23,561 ) (48,229 )
property and
equipment
Less:
Capitalized
technology & (2,318 ) (2,726 ) (2,833 ) (2,173 ) (3,072 ) (2,801 ) (3,730 ) (2,925 ) (10,050 ) (12,528 )
development
costs
Free cash $ (9,682 ) $ (6,819 ) $ (15,479 ) $ 82,082 $ (9,010 ) $ (11,505 ) $ (23,494 ) $ 111,396 $ 50,102 $ 67,387
flow
Contact:
Media Relations:
Gretchen Sloan, 650-610-5276
gsloan@shutterfly.com
Investor Relations:
Michael Look, 650-610-5910
mlook@shutterfly.com
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