Shutterfly Announces Third Quarter 2013 Financial Results

  Shutterfly Announces Third Quarter 2013 Financial Results

  *Net revenues increase 25% year-over-year to $122.7 million
  *GAAP net loss of ($0.27) per diluted share
  *Adjusted EBITDA loss of ($1.1) million
  *51^st consecutive quarter of year-over-year net revenue growth

Business Wire

REDWOOD CITY, Calif. -- October 29, 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 third quarter
ended September 30, 2013.

“We delivered another quarter of strong execution resulting in a 25% year over
year increase in revenue with improved profitability,” said Jeffrey
Housenbold, President and CEO. “We are now managing a portfolio of seven
consumer premium brands, along with our enterprise business, as we continue to
augment our organic growth with strategic and disciplined acquisitions. We
have a great line up of new products and services across our portfolio and are
prepared to delight our customers in the important fourth quarter.”

Third Quarter 2013 Financial Highlights

  *Net revenues totaled $122.7 million, a 25% year-over-year increase.
  *Third quarter 2013 represents the 51^st consecutive quarter of
    year-over-year net revenue growth.
  *Consumer net revenues totaled $112.7 million, a 25% year-over-year
    increase.
  *Enterprise net revenues totaled $10.0 million, a 22% year-over-year
    increase.
  *Gross profit margin was 42% of net revenues, compared to 44% in the third
    quarter of 2012.
  *Operating expenses, excluding $13.3 million of stock-based compensation,
    totaled $72.7 million.
  *GAAP net loss was ($10.1) million, compared to ($10.5) million in the
    third quarter of 2012.
  *GAAP net loss per diluted share was ($0.27), compared to ($0.29) in the
    third quarter of 2012.
  *Non-GAAP net loss per diluted share was ($0.24), compared to ($0.29) in
    the third quarter of 2012.
  *Adjusted EBITDA loss was ($1.1) million, compared to ($3.1) million in the
    third quarter of 2012.
  *At September 30, 2013, cash and cash equivalents totaled $335.1 million.

Third Quarter 2013 Operating Metrics

  *Transacting customers totaled 2.4 million, a 6% year-over-year increase.
  *Orders totaled 3.9 million, an 8% year-over-year increase.
  *Average order value was $29.07, an increase of 16% year-over-year.

Business Outlook

Fourth Quarter 2013:

  *Net revenues to range from $392.1 million to $405.1 million, a
    year-over-year increase of 11.5% to 15.2%.
  *GAAP gross profit margin to range from 60.3% to 61.3% of net revenues.
  *Non-GAAP gross profit margin to range from 61.1% to 62.1% of net revenues.
  *GAAP operating income to range from $94.9 million to $105.0 million.
  *Non-GAAP operating income to range from $116.6 million to $126.7 million.
  *GAAP effective tax rate to range from 57.6% to 59.9%.
  *GAAP net income per diluted share to range from $0.92 to $1.08.
  *Non-GAAP net income per diluted share to range from $0.95 to $1.11.
  *Weighted average diluted shares of approximately 39.9 million.
  *Adjusted EBITDA to range from $129.2 million to $139.3 million.

Full Year 2013:

  *Net revenues to range from $765.0 million to $778.0 million, a
    year-over-year increase of 19.4% to 21.4%.
  *GAAP gross profit margin to range from 52.9% to 53.5% of net revenues.
  *Non-GAAP gross profit margin to range from 54.5% to 55.2% of net revenues.
  *GAAP operating income to range from $12.4 million to $22.5 million.
  *Non-GAAP operating income to range from $94.5 million to $104.6 million.
  *GAAP effective tax rate to range from 30% to 35%.
  *GAAP net income per diluted share to range from $0.06 to $0.22.
  *Non-GAAP net income per diluted share to range from $0.20 to $0.35.
  *Weighted average diluted shares of approximately 39.6 million.
  *Adjusted EBITDA to range from $137.7 million to $147.8 million, or 18% to
    19% of net revenues.
  *Capital expenditures to range from 9.8% to 10.4% of net revenues.

Notes to the Third Quarter 2013 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 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 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 sponsorshipprograms.

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.

Third Quarter 2013 Conference Call

Management will review the third quarter 2013 financial results and its
expectations for the fourth quarter and full year 2013 on a conference call on
Tuesday, October 29, 2013 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, November 12,
2013. To hear the replay, please dial (404) 537-3406, replay passcode
77208774.

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 profit margins, non-GAAP
operating income (loss) and the related operating income (loss) margins,
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, which involve risks and
uncertainties. These forward-looking statements include statements regarding
the Company's growth, customer satisfaction with the Company’s products and
services and financial expectations for thefourth 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; decreased
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 and 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, 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; 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 Statements of Income
(In thousands, except per share amounts)
(Unaudited)
                        Three Months Ended         Nine Months Ended
                         September 30,               September 30,
                         2013         2012          2013         2012
                                                                   
Net revenues             $ 122,685     $ 98,536      $ 372,854     $ 288,847
Cost of net revenues      71,308      55,129      204,877     155,892 
Gross profit              51,377      43,407      167,977     132,955 
Operating expenses:
Technology and             27,508        21,538        78,032        60,976
development
Sales and marketing        36,774        29,575        109,946       86,615
General and               21,717      16,039      62,518      45,975  
administrative
Total operating           85,999      67,152      250,496     193,566 
expenses
Loss from operations       (34,622 )     (23,745 )     (82,519 )     (60,611 )
Interest expense           (3,609  )     (148    )     (5,684  )     (456    )
Interest and other        139         14          181         30      
income, net
Loss before income         (38,092 )     (23,879 )     (88,022 )     (61,037 )
taxes
Benefit from income       27,944      13,401      53,658      31,008  
taxes
Net loss                 $ (10,148 )   $ (10,478 )   $ (34,364 )   $ (30,029 )
                                                                   
                                                                   
Net loss per share -     $ (0.27   )   $ (0.29   )   $ (0.92   )   $ (0.84   )
basic and diluted
                                                                   
Weighted-average
shares outstanding -      37,814      36,062      37,541      35,691  
basic and diluted
                                                                   
Stock-based
compensation is
allocated as follows:
                                                                   
Cost of net revenues     $ 646         $ 424         $ 1,802       $ 1,329
Technology and             2,459         1,502         6,843         6,465
development
Sales and marketing        5,774         2,613         14,030        8,508
General and               5,103       3,826       15,494      11,206  
administrative
                         $ 13,982     $ 8,365      $ 38,169     $ 27,508  
                                                                             

Shutterfly, Inc.
Consolidated Balance Sheets
(In thousands, except par value amounts)
(Unaudited)
                                                               
                                                  September 30,   December 31,
                                                  2013            2012
                                                                  
ASSETS
Current assets:
Cash and cash equivalents                         $ 335,140       $   245,088
Accounts receivable, net                            15,640            13,574
Inventories                                         8,373             5,032
Deferred tax asset, current portion                 20,811            7,713
Prepaid expenses and other current assets          70,758          15,268
Total current assets                                450,722           286,675
Property and equipment, net                         135,593           92,667
Intangible assets, net                              120,241           122,269
Goodwill                                            379,675           358,349
Deferred tax asset, net of current portion          731               854
Other assets                                       15,783          4,310
Total assets                                      $ 1,102,745    $   865,124
                                                                  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable                                  $ 20,424        $   31,503
Accrued liabilities                                 40,751            88,472
Deferred revenue                                   21,025          17,845
Total current liabilities                           82,200            137,820
Convertible senior notes, net                       240,662           -
Deferred tax liability                              28,817            24,298
Other liabilities                                  21,382          11,720
Total liabilities                                  373,061         173,838
                                                                  
Stockholders' equity
Common stock, $0.0001 par value; 100,000 shares
authorized; 37,958 and 36,358 shares issued and     4                 4
outstanding at September 30, 2013 and December
31, 2012, respectively
Additional paid-in-capital                          757,113           652,110
Accumulated earnings/ (deficit)                    (27,433   )      39,172
Total stockholders' equity                         729,684         691,286
Total liabilities and stockholders' equity        $ 1,102,745    $   865,124
                                                                      

Shutterfly, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
                                                   Nine Months Ended
                                                    September 30,
                                                    2013          2012
                                                                             
Cash flows from operating activities:
Net loss                                            $ (34,364  )   $ (30,029 )
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization                         30,652         19,327
Amortization of intangible assets                     22,239         14,761
Amortization of debt discount and transaction         4,592          -
costs
Stock-based compensation, net of forfeitures          38,169         27,508
(Gain) / Loss on disposal of property and             10             (895    )
equipment
Deferred income taxes                                 (7,988   )     (4,729  )
Tax benefit from stock-based compensation             4,745          14,938
Excess tax benefits from stock-based compensation     (5,385   )     (14,938 )
Changes in operating assets and liabilities:
Accounts receivable, net                              (1,455   )     (1,587  )
Inventories                                           (2,426   )     (1,843  )
Prepaid expenses and other current assets             (53,774  )     (44,349 )
Other assets                                          (7,427   )     (30     )
Accounts payable                                      (10,670  )     3,790
Accrued and other liabilities                         (50,735  )     (27,327 )
Deferred revenue                                      2,188          3,620
Other non-current liabilities                        357          (407    )
Net cash used in operating activities                (71,272  )    (42,190 )
                                                                             
Cash flows from investing activities:
Acquisition of business and intangibles, net of       (41,120  )     (35,683 )
cash acquired
Purchases of property and equipment                   (48,550  )     (26,912 )
Capitalization of software and website                (12,057  )     (9,603  )
development costs
Proceeds from sale of equipment                      173          982     
Net cash used in investing activities                (101,554 )    (71,216 )
                                                                             
Cash flows from financing activities:
Proceeds from borrowings of convertible senior        291,897        -
notes, net of issuance costs
Proceeds from issuance of warrants                    43,560         -
Purchase of convertible note hedge                    (63,510  )     -
Principal payments of capital lease obligations       (488     )   -
Proceeds from issuance of common stock upon           18,275         8,538
exercise of stock options
Repurchases of common stock                           (32,241  )     -
Excess tax benefits from stock-based compensation    5,385        14,938  
Net cash provided by financing activities            262,878      23,476  
                                                                             
Net increase/ (decrease) in cash and cash             90,052         (89,930 )
equivalents
Cash and cash equivalents, beginning of period       245,088      179,915 
Cash and cash equivalents, end of period            $ 335,140     $ 89,985  
                                                                             
Supplemental schedule of non-cash activities
Net increase/ (decrease) in accrued purchases of    $ (1,506   )   $ 8,479
property and equipment
Increase in estimated fair market value of            4,552          4,850
building under build-to-suit lease
Amount due from adjustment of net working capital     73             -
from acquired business
Amount due for acquisition of business                -              165
                                                                             

Shutterfly, Inc.
Consumer Metrics Disclosure
                                                              
                                                     Three Months Ended
                                                     September 30,
                                                     2013        2012
                                                                 
Consumer Metrics
                                                                 
Customers                                            2,380,513   2,247,174
year-over-year growth                                6%
                                                                 
Orders                                               3,877,182   3,605,959
year-over-year growth                                8%
                                                                 
Average order value*                                 $29.07      $25.06
year-over-year growth                                16%
                                                                 
* 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          Adjustments           Range of
                       Estimate                                Estimate
                       From    To       From    To            From    To

      Three Months
      Ending
      December 31,
      2013

      Net revenues     $392.1   $405.1   -       -             $392.1   $405.1
      Gross profit     60.3%    61.3%    0.8%    0.8%    [a]   61.1%    62.1%
      margin
      Operating        $94.9    $105.0   $21.7   $21.7   [b]   $116.6   $126.7
      income
      Operating        24%      26%      6%      5%      [b]   30%      31%
      margin

      Stock-based      $13.5    $13.5    $13.5   $13.5         -        -
      compensation
      Amortization
      of intangible    $8.2     $8.2     $8.2    $8.2          -        -
      assets

      Adjusted                                                 $129.2   $139.3
      EBITDA*

      Diluted
      earnings per     $0.92    $1.08    $0.03   $0.04   [e]   $0.95    $1.11
      share
      Diluted          39.9     39.9
      shares
      Effective tax    59.9%    57.6%
      rate


      Twelve Months
      Ending
      December 31,
      2013

      Net revenues     $765.0   $778.0   -       -             $765.0   $778.0
      Gross profit     52.9%    53.5%    1.7%    1.7%    [c]   54.5%    55.2%
      margin
      Operating        $12.4    $22.5    $82.1   $82.1   [d]   $94.5    $104.6
      income
      Operating        2%       3%       10%     10%     [d]   12%      13%
      margin

      Stock-based      $51.7    $51.7    $51.7   $51.7         -        -
      compensation
      Amortization
      of intangible    $30.4    $30.4    $30.4   $30.4         -        -
      assets

      Adjusted                                                 $137.7   $147.8
      EBITDA*
      Adjusted
      EBITDA*                                                  18.0%    19.0%
      margin

      Diluted
      earnings per     $0.06    $0.22    $0.14   $0.13   [f]   $0.20    $0.35
      share
      Diluted          39.6     39.6
      shares
      Effective tax    30%      35%
      rate

      Capital
      expenditures     9.8%     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 $700K and amortization of purchased intangible assets of
      approximately $2.8 million.
      Reflects estimated adjustments for stock-based compensation expense of
[b]   approximately $13.5 million and amortization of purchased intangible
      assets of approximately $8.2 million.
      Reflects estimated adjustments for stock-based compensation expense of
[c]   approximately $2.5 million and amortization of purchased intangible
      assets of approximately $10.4 million.
      Reflects estimated adjustments for stock-based compensation expense of
[d]   approximately $51.7 million and amortization of purchased intangible
      assets of approximately $30.4 million.
[e]   Reflects estimated adjustments for interest expense of approximately
      $1.3 million, net of tax.
[f]   Reflects estimated adjustments for interest expense of approximately
      $5.7 million, net of tax.


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,
               2012           2012           2012           2012           2013           2013           2013           2012
                                                                                                                        
GAAP gross     $ 41,238       $ 48,310       $ 43,407       $ 212,812      $ 54,855       $ 61,745       $ 51,377       $ 345,767
profit
Stock-based      462            443            424            367            564            592            646            1,696
compensation
Amortization
of               1,454          1,516          1,570          1,856          2,390          2,608          2,685          6,396
intangible
assets
                                                                                                                
Non-GAAP       $ 43,154      $ 50,269      $ 45,401      $ 215,035     $ 57,809      $ 64,945      $ 54,708      $ 353,859 
gross profit
                                                                                                                        
Non-GAAP
gross profit    47      %     51      %     46      %     61       %    50      %     49      %     45      %     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,
               2012           2012           2012           2012           2013           2013           2013           2012
                                                                                                                        
GAAP
operating      $ (19,080 )    $ (17,786 )    $ (23,745 )    $ 101,324      $ (23,964 )    $ (23,933 )    $ (34,622 )    $ 40,713
income
(loss)
Stock-based      9,617          9,526          8,365          9,814          11,538         12,649         13,982         37,322
compensation
Amortization
of               4,013          5,090          5,658          5,924          6,511          7,539          8,189          20,685
intangible
assets
                                                                                                                
Non-GAAP
operating      $ (5,450  )    $ (3,170  )    $ (9,722  )    $ 117,062     $ (5,915  )    $ (3,745  )    $ (12,451 )    $ 98,720  
income
(loss)
                                                                                                                        
Non-GAAP
operating       (6      %)    (3      %)    (10     %)    33       %    (5      %)    (3      %)    (10     %)    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,
               2012           2012           2012           2012           2013           2013           2013           2012
                                                                                                                        
GAAP net
income         $ (10,040 )    $ (9,511  )    $ (10,478 )    $ 53,027       $ (12,405 )    $ (11,811 )    $ (10,148 )    $ 22,998
(loss)
Interest         152            156            148            141            139            1,936          3,609          597
expense
Interest and
other            (7      )      (9      )      (14     )      (12      )     (7      )      (35     )      (139    )      (42     )
income, net
Tax
(benefit)        (9,185  )      (8,422  )      (13,401 )      48,168         (11,691 )      (14,023 )      (27,944 )      17,160
provision
Depreciation
and              10,024         11,820         12,244         16,021         15,738         17,580         19,573         50,109
amortization
Stock-based      9,617          9,526          8,365          9,814          11,538         12,649         13,982         37,322
compensation
                                                                                                                
Non-GAAP
Adjusted       $ 561         $ 3,560       $ (3,136  )    $ 127,159     $ 3,312       $ 6,296       $ (1,067  )    $ 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,
               2012           2012           2012           2012           2013           2013           2013           2012
                                                                                                                        
Net cash
provided by
(used in)      $ (47,961 )    $ 9,339        $ (3,568  )    $ 193,571      $ (83,504 )    $ 11,923       $ 309          $ 151,381
operating
activities
Interest         152            156            148            141            139            1,936          3,609          597
expense
Interest and
other            (7      )      (9      )      (14     )      (12      )     (7      )      (35     )    (139      )      (42     )
income, net
Tax
(benefit)        (9,185  )      (8,422  )      (13,401 )      48,168         (11,691 )      (14,023 )      (27,944 )      17,160
provision
Changes in
operating        55,912         739            11,482         (111,895 )     101,426        2,555          19,961         (43,762 )
assets and
liabilities
Other           1,650        1,757        2,217        (2,814   )    (3,051  )     3,940        3,137        2,810   
adjustments
Non-GAAP
Adjusted        561          3,560        (3,136  )     127,159      3,312        6,296        (1,067  )     128,144 
EBITDA
Less:
Purchases of     (6,499  )      (12,264 )      (16,628 )      (12,838  )     (10,832 )      (15,869 )      (20,343 )      (48,229 )
property and
equipment
Less:
Capitalized
technology &     (3,072  )      (2,801  )      (3,730  )      (2,925   )     (3,495  )      (4,255  )      (4,307  )      (12,528 )
development
costs
                                                                                                                
Free cash      $ (9,010  )    $ (11,505 )    $ (23,494 )    $ 111,396     $ (11,015 )    $ (13,828 )    $ (25,717 )    $ 67,387  
flow
                                                                                                                        
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,       Sep. 30,       Dec. 31,
               2012           2012           2012           2012           2013           2013           2013           2012
GAAP net
income         $ (10,040 )    $ (9,511  )    $ (10,478 )    $ 53,027       $ (12,405 )    $ (11,811 )    $ (10,148 )    $ 22,998
(loss)
Add back
interest
expense
related to:
Amortization
of debt          -              -              -              -              -              1,401          2,771          -
discount
Amortization
of debt          -              -              -              -              -              160            260            -
issuance
costs
0.25% coupon     -              -              -              -              -              93             188            -
Tax effect      -            -            -            -            -            (770    )     (2,046  )     -       
Non-GAAP net
income          (10,040 )     (9,511  )     (10,478 )     53,027       (12,405 )     (10,927 )     (8,975  )     22,998  
(loss)
                                                                                                                        
GAAP diluted
shares           35,199         35,812         36,062         37,764         37,034         37,775         37,814         37,432
outstanding
Add back:
Dilutive
effect of       -            -            -            -            -            -            -            -       
convertible
notes
Non-GAAP
diluted         35,199       35,812       36,062       37,764       37,034       37,775       37,814       37,432  
shares
outstanding
                                                                                                                        
GAAP net
income         $ (0.29   )    $ (0.27   )    $ (0.29   )    $ 1.40        $ (0.33   )    $ (0.31   )    $ (0.27   )    $ 0.61    
(loss) per
share
Non-GAAP net
income         $ (0.29   )    $ (0.27   )    $ (0.29   )    $ 1.40        $ (0.33   )    $ (0.29   )    $ (0.24   )    $ 0.61    
(loss) per
share

Contact:

Shutterfly, Inc.
Media Relations:
Gretchen Sloan, 650-610-5276
gsloan@shutterfly.com
Investor Relations:
Michael Look, 650-610-5910
mlook@shutterfly.com
 
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