Shutterfly Announces Fourth Quarter and Full Year 2013 Financial Results

  Shutterfly Announces Fourth Quarter and Full Year 2013 Financial Results

  *Fourth Quarter 2013 net revenues increase 17% year-over-year to $410.8
    million
  *Full Year 2013 net revenues increase 22% year-over-year to $783.6 million
  *Full Year 2013 GAAP net income of $0.24 per diluted share
  *Record Full Year adjusted EBITDA of $150.4 million, an increase of 17%
    year-over-year
  *52^nd consecutive quarter of year-over-year net revenue growth

Business Wire

REDWOOD CITY, Calif. -- February 5, 2014

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, 2013.

“Q4 was a strong finish to another outstanding year at Shutterfly resulting in
record revenue, adjusted EBITDA and free cash flow,” said President and Chief
Executive Officer Jeffrey Housenbold. “We executed well against our 2013
strategic plan while simultaneously focusing on the long-term through smart
investments in consumer facing programs and back-end infrastructure projects
that will provide future scale and scope efficiencies.”

Fourth Quarter 2013 Financial Highlights

  *Net revenues totaled $410.8 million, a 17% year-over-year increase.
  *Fourth quarter 2013 represents the 52^nd consecutive quarter of
    year-over-year net revenue growth.
  *Consumer net revenues totaled $398.6 million, a 16% year-over-year
    increase.
  *Enterprise net revenues totaled $12.2 million, a 48% year-over-year
    increase.
  *Gross profit margin was 59.9% of net revenues, compared to 60.5% in the
    fourth quarter of 2012.
  *Operating expenses, excluding $14.7 million of stock-based compensation,
    totaled $126.8 million.
  *GAAP net income was $43.6 million, compared to $53.0 million in the fourth
    quarter of 2012.
  *GAAP net income per diluted share was $1.10, compared to $1.40 in the
    fourth quarter of 2012.
  *Non-GAAP net income per diluted share was $1.20, compared to $1.40 in the
    fourth quarter of 2012.
  *Adjusted EBITDA was $141.9 million, compared to $127.2 million in the
    fourth quarter of 2012.
  *At December 31, 2013, cash and cash equivalents totaled $499.1 million.

Full Year 2013 Financial Highlights

  *Net revenues totaled $783.6 million, a 22% year-over-year increase.
  *Consumer net revenues totaled $746.0 million, a 22% year-over-year
    increase.
  *Enterprise net revenues totaled $37.7 million, a 39% year-over-year
    increase.
  *Gross profit margin was 52.8% of net revenues, compared to 54.0% in 2012.
  *Operating expenses, excluding $51.0 million of stock-based compensation,
    totaled $340.9 million.
  *GAAP net income was $9.3 million, compared to $23.0 million in 2012.
  *GAAP net income per diluted share was $0.24, compared to $0.61 in 2012.
  *Non-GAAP net income per diluted share was $0.38, compared to $0.61 in
    2012.
  *Adjusted EBITDA was $150.4 million, compared to $128.1 million in 2012.

Fourth Quarter 2013 Operating Metrics

  *Transacting customers totaled 4.7 million, a 10% year-over-year increase.
  *Orders totaled 7.7 million, a 12% year-over-year increase.
  *Average order value was $51.80, an increase of 4% year-over-year.

Full Year 2013 Operating Metrics

  *Transacting customers totaled 8.1 million, a 15% year-over-year increase.
  *Orders totaled 18.6 million, a 14% year-over-year increase.
  *Average order value was $40.19, an increase of 7% year-over-year.

Business Outlook

First Quarter 2014:

  *Net revenues to range from $132.0 million to $135.0 million, a
    year-over-year increase of 13.1% to 15.7%.
  *GAAP gross profit margin to range from 44.5% to 45.0% of net revenues.
  *Non-GAAP gross profit margin to range from 47.4% to 47.9% of net revenues.
  *GAAP operating loss to range from ($41.5) million to ($43.5) million.
  *Non-GAAP operating loss to range from ($14.9) million to ($16.9) million.
  *GAAP effective tax rate to range from 18.8% to 20.2%.
  *GAAP net loss per diluted share to range from ($0.93) to ($0.99).
  *Non-GAAP net loss per diluted share to range from ($0.86) to ($0.92).
  *Weighted average diluted shares of approximately 38.7 million.
  *Adjusted EBITDA to range from a loss of ($1.5) million to income of $0.5
    million.

Full Year 2014:

  *Net revenues to range from $900.0 million to $920.0 million, a
    year-over-year increase of 14.8% to 17.4%.
  *Net revenue guidance reflects a reduction of $15 million due to the
    termination of the Costco relationship.
  *GAAP gross profit margin to range from 52.0% to 53.0% of net revenues.
  *Non-GAAP gross profit margin to range from 53.7% to 54.6% of net revenues.
  *GAAP operating income/(loss) to range from a loss of ($11.5) million to
    income of $1.7 million.
  *Non-GAAP operating income to range from $94.5 million to $109.1 million.
  *GAAP effective tax rate to range from 18% to 23%.
  *GAAP net loss per diluted share to range from ($0.27) to ($0.55).
  *Non-GAAP net loss per diluted share to range from ($0.02) to ($0.28).
  *Net loss per share guidance reflects the impact of a full year of
    depreciation from our expanded and acquired manufacturing facilities and
    acquired rental assets, increased stock based compensation, and a full
    year of intangible amortization from 2013 acquisitions.
  *Weighted average diluted shares of approximately 40.8 million.
  *Adjusted EBITDA to range from $160.2 million to $174.8 million, or 17.8%
    to 19.0% of net revenues.
  *Capital expenditures to range from 9.5% to 10.5% of net revenues.

Notes to the Fourth Quarter 2013 and Full Year 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 Company’s issuance of 0.25%
convertible senior notes in May 2013, divided by diluted non-GAAP shares
outstanding, which is GAAP diluted weighted average shares outstanding less
any shares issuable under the Company’s convertible senior notes.

Consumer category includes net revenues from stationery and greeting cards,
photo books, calendars and photo-based merchandise, photo prints, and the
related shipping revenues and rental revenue. Consumer also includes net
revenues from advertising and 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.

Fourth Quarter and Full Year 2013 Conference Call

Management will review the fourth quarter and full year 2013 financial results
and its expectations for the first quarter and full year 2014 on a conference
call on Wednesday, February 5, 2014 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 Wednesday, February 19, 2014. To hear the replay, please
dial (855) 859-2056 or (404) 537-3406, replay passcode 31471397.

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 thefirst quarter and full year 2014
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 and the pricing
strategies of our competitors, which could lead to pricing pressure. For more
information regarding the risks and uncertainties that could cause actual
results to differ materially from those expressed or implied in these
forward-looking statements, as well as risks relating to our business in
general, we refer you to the "Risk Factors" section of the Company's most
recent Form 10-K and Form 10-Q, and the Company's other filings, which are
available on the Securities and Exchange Commission's Web site at www.sec.gov.
These forward-looking statements are based on current expectations and the
Company assumes no obligation to update this information.

About Shutterfly, Inc.

Shutterfly, Inc. is the leading manufacturer and digital retailer of
high-quality personalized products and services offered through a family of
lifestyle brands. Founded in 1999, the Shutterfly, Inc. family of brands
includes Shutterfly, where your photos come to life in photo books, cards and
gifts; Tiny Prints, premium cards and stationery for all life’s occasions;
Wedding Paper Divas, wedding invitations and stationery for every step of the
planning process; Treat, personalized greeting cards that really stand out;
MyPublisher, one of the pioneers in the photo book industry and creator of
easy-to-use photo book-making software; ThisLife,a private, cloud-based
solution that makes it easy for consumers to find, share and enjoy their
photos and videos, all in one place; and BorrowLenses, the premier online
marketplace for photographic and video equipment rentals. For more information
about Shutterfly, Inc. (NASDAQ:SFLY), visit www.shutterflyinc.com.

                                                               
Shutterfly, Inc.
Consolidated Statements
of Income
(In thousands, except
per share amounts)
(Unaudited)
                         Three Months Ended          Twelve Months Ended
                         December 31,                December 31,
                          2013        2012        2013        2012    
                                                                   
Net revenues             $ 410,788     $ 351,777     $ 783,642     $ 640,624
Cost of net revenues      164,716     138,965     369,593     294,857 
Gross profit              246,072     212,812     414,049     345,767 
Operating expenses:
Technology and             30,963        24,770        108,995       85,746
development
Sales and marketing        80,039        62,191        189,985       148,806
General and               30,493      24,527      93,011      70,502  
administrative
Total operating expenses  141,495     111,488     391,991     305,054 
Income from operations     104,577       101,324       22,058        40,713
Interest expense           (3,762  )     (141    )     (9,446  )     (597    )
Interest and other        127         12          308         42      
income, net
Income before income       100,942       101,195       12,920        40,158
taxes
Provision for income      (57,293 )    (48,168 )    (3,635  )    (17,160 )
taxes
Net income               $ 43,649     $ 53,027     $ 9,285      $ 22,998  
                                                                   
                                                                   
Net income per share
Basic                    $ 1.15       $ 1.46       $ 0.25       $ 0.64    
Diluted                  $ 1.10       $ 1.40       $ 0.24       $ 0.61    
                                                                   
Weighted-average shares
outstanding
Basic                     38,097      36,232      37,680      35,826  
Diluted                   39,713      37,764      39,493      37,432  
                                                                   
Stock-based compensation
is allocated as follows:
                                                                   
Cost of net revenues     $ 683         $ 367         $ 2,485       $ 1,696
Technology and             2,634         2,170         9,477         8,635
development
Sales and marketing        5,744         3,051         19,774        11,559
General and               6,298       4,226       21,792      15,432  
administrative
                         $ 15,359     $ 9,814      $ 53,528     $ 37,322  

                                                                
Shutterfly, Inc.
Consolidated Balance Sheets
(In thousands, except par value amounts)
(Unaudited)
                                                                  
                                                   December 31,   December 31,
                                                   2013           2012
                                                                  
ASSETS
Current assets:
Cash and cash equivalents                          $  499,084     $   245,088
Accounts receivable, net                              21,641          13,574
Inventories                                           9,629           5,032
Deferred tax asset, current portion                   26,942          7,713
Prepaid expenses and other current assets            21,260         15,268
Total current assets                                  578,556         286,675
Property and equipment, net                           155,727         92,667
Intangible assets, net                                118,621         122,269
Goodwill                                              397,306         358,349
Deferred tax asset, net of current portion            520             854
Other assets                                         15,412         4,310
Total assets                                       $  1,266,142   $   865,124
                                                                  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable                                   $  33,656      $   31,503
Accrued liabilities                                   107,448         88,472
Deferred revenue                                     24,114         17,845
Total current liabilities                             165,218         137,820
Convertible senior notes, net                         243,493         -
Deferred tax liability                                42,995          24,298
Other liabilities                                    26,341         11,720
Total liabilities                                    478,047        173,838
                                                                  
Stockholders' equity
Common stock, $0.0001 par value; 100,000 shares
authorized; 38,196 and 36,358 shares issued and
outstanding at December 31, 2013 and December 31,     4               4
2012, respectively
Additional paid-in-capital                            771,875         652,110
Accumulated earnings                                 16,216         39,172
Total stockholders' equity                           788,095        691,286
Total liabilities and stockholders' equity         $  1,266,142   $   865,124
                                                                     

                                                               
Shutterfly, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
                                                   Twelve Months Ended
                                                   December 31,
                                                    2013         2012     
Cash flows from operating activities:
Net income                                         $ 9,285        $ 22,998
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization                        43,887         29,424
Amortization of intangible assets                    30,969         20,685
Amortization of debt discount and transaction        7,707          -
costs
Stock-based compensation, net of forfeitures         53,528         37,322
(Gain) / Loss on disposal of property and            13             (861     )
equipment
Deferred income taxes                                331            54
Tax benefit from stock-based compensation            2,957          14,619
Excess tax benefits from stock-based                 (3,635   )     (16,622  )
compensation
Changes in operating assets and liabilities:
Accounts receivable, net                             (7,174   )     (577     )
Inventories                                          (3,681   )     (1,306   )
Prepaid expenses and other current assets            (4,347   )     (1,399   )
Other assets                                         (7,669   )     212
Accounts payable                                     3,583          15,230
Accrued and other liabilities                        16,089         26,610
Deferred revenue                                     5,258          5,739
Other non-current liabilities                       167          (747     )
Net cash provided by operating activities           147,268      151,381  
                                                                  
Cash flows from investing activities:
Acquisition of business and intangible assets,       (76,893  )     (57,212  )
net of cash acquired
Purchases of property and equipment                  (62,582  )     (40,535  )
Capitalization of software and website               (15,760  )     (12,528  )
development costs
Proceeds from sale of equipment                     388          986      
Net cash used in investing activities               (154,847 )    (109,289 )
                                                                  
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  )     -
Proceeds from issuance of common stock upon          19,112         10,211
exercise of stock options
Repurchases of common stock                          (32,241  )     (3,752   )
Excess tax benefits from stock-based                 3,635          16,622
compensation
Principal payments of capital lease obligations     (878     )    -        
Net cash provided by financing activities           261,575      23,081   
                                                                  
Net increase in cash and cash equivalents            253,996        65,173
Cash and cash equivalents, beginning of period      245,088      179,915  
Cash and cash equivalents, end of period           $ 499,084     $ 245,088  
                                                                  
Supplemental schedule of non-cash activities
Net increase/ (decrease) in accrued purchases of   $ (3,372   )   $ 7,694
property and equipment
Increase in estimated fair market value of           10,080         6,372
building under build-to-suit lease

                                                               
Shutterfly, Inc.
Consumer Metrics Disclosure
                                                                    
                               Three Months Ended      Twelve Months Ended
                               December 31,            December 31,
                               2013        2012        2013         2012
                                                                    
Consumer Metrics
                                                                    
Customers                      4,652,682   4,227,247   8,094,038    7,062,001
year-over-year growth          10%                     15%
                                                                    
Orders                         7,693,863   6,897,969   18,561,022   16,321,828
year-over-year growth          12%                     14%
                                                                    
Average order value*           $51.80      $49.80      $40.19       $37.58
year-over-year growth          4%                      7%
                                                                    
* 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, 2014
                                                                         
      Net revenues  $132.0    $135.0    -        -              $132.0   $135.0
      Gross profit  44.5%     45.0%     2.9%     2.9%     [a]   47.4%    47.9%
      margin
      Operating     ($43.5)   ($41.5)   $26.6    $26.6    [b]   ($16.9)  ($14.9)
      loss
      Operating     (33%)     (31%)     20%      20%      [b]   (13%)    (11%)
      margin
                                                                         
      Stock-based   $18.0     $18.0     $18.0    $18.0          -        -
      compensation
      Amortization
      of intangible $8.6      $8.6      $8.6     $8.6           -        -
      assets
                                                                         
      Adjusted                                                  ($1.5)   $0.5
      EBITDA*
                                                                         
      Diluted loss  ($0.99)   ($0.93)   $0.07    $0.07    [e]   ($0.92)  ($0.86)
      per share
      Diluted       38.7      38.7
      shares
      Effective     18.8%     20.2%
      tax rate
                                                                         
                                                                         
      Twelve Months Ending
      December 31, 2014
                                                                         
      Net revenues  $900.0    $920.0    -        -              $900.0   $920.0
      Gross profit  52.0%     53.0%     1.7%     1.6%     [c]   53.7%    54.6%
      margin
      Operating
      income /      ($11.5)   $1.7      $106.0   $107.5   [d]   $94.5    $109.1
      (loss)
      Operating     (1%)      0%        12%      12%      [d]   11%      12%
      margin
                                                                         
      Stock-based   $72.5     $72.5     $72.5    $72.5          -        -
      compensation
      Amortization
      of intangible $33.5     $35.0     $33.5    $35.0          -        -
      assets
                                                                         
      Adjusted                                                  $160.2   $174.8
      EBITDA*
      Adjusted
      EBITDA*                                                   17.8%    19.0%
      margin
                                                                         
      Diluted loss  ($0.55)   ($0.27)   $0.27    $0.26    [f]   ($0.28)  ($0.02)
      per share
      Diluted       40.8      40.8
      shares
      Effective     18%       23%
      tax rate
                                                                         
      Capital
      expenditures  9.5%      10.5%
      - % of net
      revenues
                                                                         
                                                                         
                                                                         
                                                                         
*     Adjusted EBITDA is a non-GAAP financial measure defined as earnings before
      interest, taxes, depreciation, amortization and stock-based compensation.
[a]   Reflects estimated adjustments for stock-based compensation expense of
      approximately $1.0 million and amortization of purchased intangible assets
      of approximately $2.8 million.
[b]   Reflects estimated adjustments for stock-based compensation expense of
      approximately $18.0 million and amortization of purchased intangible
      assets of approximately $8.6 million
[c]   Reflects estimated adjustments for stock-based compensation expense of
      approximately $3.7 million and amortization of purchased intangible assets
      of approximately $11.3 million.
[d]   Reflects estimated adjustments for stock-based compensation expense of
      approximately $72.5 million and amortization of purchased intangible
      assets of approximately $33.5 million to $35.0 million.
[e]   Reflects estimated adjustments for interest expense of
      approximately $2.7 million, net of tax.
[f]   Reflects estimated adjustments for interest expense of approximately $10.5
      million to $11.2 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,      Dec. 31,     Dec. 31,
                2012        2012        2012        2012         2013        2013        2013        2013         2012        2013
                                                                                                                                      
GAAP gross     $ 41,238     $ 48,310     $ 43,407     $ 212,812     $ 54,855     $ 61,745     $ 51,377     $ 246,072     $ 345,767    $ 414,049
profit
Stock-based      462          443          424          367           564          592          646          683           1,696        2,485
compensation
Amortization
of              1,454       1,516       1,570       1,856        2,390       2,608       2,685       2,800        6,396       10,483
intangible
assets
Non-GAAP
gross          $ 43,154     $ 50,269     $ 45,401     $ 215,035     $ 57,809     $ 64,945     $ 54,708     $ 249,555     $ 353,859    $ 427,017
profit
                                                                                                                                      
Non-GAAP
gross profit    47%         51%         46%         61%          50%         49%         45%         61%          55%         54%
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,
                2012        2012        2012        2012         2013        2013        2013        2013         2012        2013
                                                                                                                                      
GAAP
operating      $ (19,080)   $ (17,786)   $ (23,745)   $ 101,324     $ (23,964)   $ (23,933)   $ (34,622)   $ 104,577     $ 40,713     $ 22,058
income
(loss)
Stock-based      9,617        9,526        8,365        9,814         11,538       12,649       13,982       15,359        37,322       53,528
compensation
Amortization
of              4,013       5,090       5,658       5,924        6,511       7,539       8,189       8,730        20,685      30,969
intangible
assets
Non-GAAP
operating      $ (5,450)    $ (3,170)    $ (9,722)    $ 117,062     $ (5,915)    $ (3,745)    $ (12,451)   $ 128,666     $ 98,720     $ 106,555
income
(loss)
                                                                                                                                      
Non-GAAP
operating       (6%)        (3%)        (10%)       33%          (5%)        (3%)        (10%)       31%          15%         14%
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,
                2012        2012        2012        2012         2013        2013        2013        2013         2012        2013
                                                                                                                                      
GAAP net
income         $ (10,040)   $ (9,511)    $ (10,478)   $ 53,027      $ (12,405)   $ (11,811)   $ (10,148)   $ 43,649      $ 22,998     $ 9,285
(loss)
Interest         152          156          148          141           139          1,936        3,609        3,762         597          9,446
expense
Interest and
other            (7)          (9)          (14)         (12)          (7)          (35)         (139)        (127)         (42)         (308)
income, net
Tax
(benefit)        (9,185)      (8,422)      (13,401)     48,168        (11,691)     (14,023)     (27,944)     57,293        17,160       3,635
provision
Depreciation
and              10,024       11,820       12,244       16,021        15,738       17,580       19,573       21,965        50,109       74,856
amortization
Stock-based     9,617       9,526       8,365       9,814        11,538      12,649      13,982      15,359       37,322      53,528
compensation
Non-GAAP
Adjusted       $ 561        $ 3,560      $ (3,136)    $ 127,159     $ 3,312      $ 6,296      $ (1,067)    $ 141,901     $ 128,144    $ 150,442
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,
                2012        2012        2012        2012         2013        2013        2013        2013         2012        2013
                                                                                                                                      
Net cash
provided by
(used in)      $ (47,961)   $ 9,339      $ (3,568)    $ 193,571     $ (83,504)   $ 11,923     $ 309        $ 218,540     $ 151,381    $ 147,268
operating
activities
Interest         152          156          148          141           139          1,936        3,609        3,762         597          9,446
expense
Interest and
other            (7)          (9)          (14)         (12)          (7)          (35)         (139)        (127)         (42)         (308)
income, net
Tax
(benefit)        (9,185)      (8,422)      (13,401)     48,168        (11,691)     (14,023)     (27,944)     57,293        17,160       3,635
provision
Changes in
operating        55,912       739          11,482       (111,895)     101,426      2,555        19,961       (126,168)     (43,762)     (2,226)
assets and
liabilities
Other           1,650       1,757       2,217       (2,814)      (3,051)     3,940       3,137       (11,399)     2,810       (7,373)
adjustments
Non-GAAP
Adjusted        561         3,560       (3,136)     127,159      3,312       6,296       (1,067)     141,901      128,144     150,442
EBITDA
Less:
Purchases of     (6,499)      (12,264)     (16,628)     (12,838)      (10,832)     (15,869)     (20,343)     (12,166)      (48,229)     (59,210)
property and
equipment
Less:
Capitalized
technology &     (3,072)      (2,801)      (3,730)      (2,925)       (3,495)      (4,255)      (4,307)      (3,703)       (12,528)     (15,760)
development
costs
                                                                                                                             
Free cash      $ (9,010)    $ (11,505)   $ (23,494)   $ 111,396     $ (11,015)   $ (13,828)   $ (25,717)   $ 126,032     $ 67,387     $ 75,472
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,      Dec. 31,     Dec. 31,
                2012        2012        2012        2012         2013        2013        2013        2013         2012        2013
GAAP net
income         $ (10,040)   $ (9,511)    $ (10,478)   $ 53,027      $ (12,405)   $ (11,811)   $ (10,148)   $ 43,649      $ 22,998     $ 9,285
(loss)
Add back interest expense
related to:
Amortization
of debt          -            -            -            -             -            1,401        2,771        2,830         -            7,002
discount
Amortization
of debt          -            -            -            -             -            160          260          285           -            705
issuance
costs
0.25%            -            -            -            -             -            93           188          188           -            469
coupon
Tax effect      -           -           -           -            -           (770)       (2,046)     516          -           (2,300)
Non-GAAP net
income         $ (10,040)   $ (9,511)    $ (10,478)   $ 53,027      $ (12,405)   $ (10,927)   $ (8,975)    $ 47,468      $ 22,998     $ 15,161
(loss)
                                                                                                                                      
GAAP diluted
shares           35,199       35,812       36,062       37,764        37,034       37,775       37,814       39,713        37,432       39,493
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      39,713       37,432      39,493
shares
outstanding
                                                                                                                                      
GAAP net
income         $ (0.29)     $ (0.27)     $ (0.29)     $ 1.40        $ (0.33)     $ (0.31)     $ (0.27)     $ 1.10        $ 0.61       $ 0.24
(loss) per
share
Non-GAAP net
income         $ (0.29)     $ (0.27)     $ (0.29)     $ 1.40        $ (0.33)     $ (0.29)     $ (0.24)     $ 1.20        $ 0.61       $ 0.38
(loss) per
share

Contact:

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