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REDWOOD CITY, Calif.–(BUSINESS WIRE)– Shutterfly, Inc. (NASDAQ:SFLY), the leading online retailer and manufacturer of high-quality personalized products and services, today announced financial results for the second quarter ended June 30, 2017.

“Q2 was a solid quarter for Shutterfly, led by our flagship Shutterfly brand and our SBS segment,” said Christopher North, President and Chief Executive Officer. “We made excellent progress against our platform consolidation and restructuring initiatives, and remain on track to complete both prior to the fourth quarter. In particular, we reached a major milestone by re-launching the Tiny Prints boutique on, bringing our top two brands onto a single platform. At the same time, we executed against our other areas of strategic focus, adding to our product range in Home Décor and Personalized Gifts, launching significant updates to our mobile app, extending our lead in manufacturing with the second phase of our HP printer upgrade, and improving the speed and reliability of our websites. SBS further expanded its relationship with key clients, supporting our confidence in the full-year plan for 20% SBS growth. Overall, we’re pleased to reiterate our full year guidance for 2017.”

Second Quarter 2017 Financial Highlights

Net revenues totaled $209.0 million, a 2% year-over-year increase. Consumer net revenues totaled $179.1 million, a 1% year-over-year increase. Shutterfly Business Solutions net revenues totaled $29.9 million, a 10% year-over-year increase.

GAAP Operating loss totaled $31.8 million and Net loss was $22.8 million or $0.68 per share.

On a proforma basis, which excludes restructuring charges of $4.7 million and capital lease termination charges of $8.1 million, our operating loss was $19.1 million, Adjusted EBITDA was $17.4 million, and Net loss was $14.9 million or $0.44 per share.

“In the quarter we took advantage of an opportunity to complete the upgrade of our printer fleet, which we expect will benefit us through improved quality, increased throughput and automation, and lower consumable costs resulting in approximately $15.0 million of expense savings over the next five years,” said Mike Pope, Chief Financial Officer.

As part of the transaction, we purchased leased equipment from the existing vendor for $21.6 million and immediately resold that equipment to HP for $20.5 million, resulting in a minimal cash outlay of $1.1 million. Under GAAP, the purchase of the existing leased equipment reduced the Company’s previously recorded future capital lease obligations on the balance sheet by $12.2 million and resulted in a balance sheet write-off of $8.1 million, which is recognized in our income statement under Capital Lease Termination in the quarter ended June 30, 2017. The remaining $1.3 million was recorded as a capital expenditure.

Restructuring charges for the second quarter totaled $4.7 million and are primarily related to property, plant and equipment and employees costs.

During the second quarter of 2017, we repurchased a total of 603 thousand shares for $30.0 million bringing our year to date repurchases to just over 1.0 million shares. At this time, we anticipate repurchasing approximately $60.0 million over the second half of 2017, bringing total estimated share repurchases for 2017 to $110.0 million, which approximates annual cash expected to be generated in the full year 2017.

Our senior convertible notes due in May 2018 were reclassified from long-term liabilities to current as these are now within one year of maturity. We are currently evaluating a number of alternatives and expect to complete a financing before year-end.

Business Outlook [1]

Third Quarter 2017:

● Net revenues to range from $187.0 million to $193.0 million.

● Gross profit margin to range from 35.0% to 35.5% of net revenues.

● Operating loss to range from $38.0 million to $35.0 million.

● Effective tax rate of 38.0%.

● Net loss per share to range from $0.80 to $0.76.

● Weighted average shares of approximately 33.6 million.

● Adjusted EBITDA to range from $0.0 million to $3.0 million.

Full Year 2017:

● Net revenues to range from $1.135 billion to $1.165 billion.[2]

● Gross profit margin to range from 49.0% to 50.0% of net revenues.

● Operating income to range from $48.5 million to $68.5 million.

● Effective tax rate of 37.5%.

● Net income per share to range from $0.45 to $0.80.

● Weighted average shares of approximately 34.5 million.

● Adjusted EBITDA to range from $210.0 million to $230.0 million.

● Capital expenditures to be approximately $75.0 million.

[1] Excludes full year restructuring charges ranging from $15.0 million to $17.5 million as well as any costs related to refinancing our convertible debt and capital lease termination charges of $8.1 million.

[2] In 2017, net revenues from SBS segment are expected to increase 20% over 2016.

Notes to the Second Quarter 2017 Financial Results and Operating Metrics and 2017 Business Outlook

Adjusted EBITDA is a non-GAAP financial measure that the Company defines as earnings before interest, taxes, depreciation, amortization, stock-based compensation, capital lease termination, and restructuring.

Adjusted EBITDA minus capital expenditures is a non-GAAP financial measure that the Company defines as adjusted EBITDA less purchases of property, plant, and equipment and capitalization of software development costs. This measure was referred to as “free cash flow” prior to the fourth quarter of 2016.

Consumer segment 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 sponsorship programs.

Shutterfly Business Solutions (SBS) 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 SBS) divided by total orders.

The foregoing financial guidance replaces any of the Company’s previously issued financial guidance which should no longer be relied upon.

Second Quarter Conference Call

Management will review the second quarter 2017 financial results and its expectations for the third quarter and full year 2017 on a conference call on Tuesday, July 25, 2017 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 In the Investor Relations area, click on the link provided for the webcast, or dial (888) 317-6003 or (412) 317-6061, and ask to be to be joined into the Shutterfly call. The webcast will be archived and available at in the Investor Relations section. A replay of the conference call will be available through Tuesday, August 8, 2017. To hear the replay, please dial (877) 344-7529 or (412) 317-0088, and enter access code 10109987.

Non-GAAP Financial Information

This press release contains non-GAAP financial measures. Tables are provided at the end of this press release that reconcile the non-GAAP financial measures that the Company uses to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP financial measures include non-GAAP net income (loss) and net income (loss) per share, adjusted EBITDA, and adjusted EBITDA minus capital expenditures. 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), or net income (loss) 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

Notice Regarding Forward-Looking Statements

This media release contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. These forward-looking statements include statements about the status of our restructuring, the anticipated benefits of upgrading our printer fleet, our expectation of completing a financing before year end, and our business outlook for the third quarter and full year 2017 and statements about historical results that may suggest trends for our business. You can identify these statements by the use of terminology such as “guidance”, “believe”, “expect”, “will”, “should,” “could”, “estimate”, “anticipate” or similar forward-looking terms. You should not rely on these forward-looking statements as they involve risks and uncertainties that may cause actual results to vary materially from the forward-looking statements. Factors that might contribute to such differences include, among others, decreased consumer discretionary spending as a result of general economic conditions; our ability to expand our customer base and increase sales to existing customers; our ability to meet production requirements; our ability to 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, including our next generation Shutterfly platform; unforeseen difficulties executing on planned strategic restructuring activities; 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 our SEC filings, including our most recent Form 10-K and 10-Q, which are available on the Securities and Exchange Commission’s Web site at These forward-looking statements are based on current expectations and the company assumes no obligation to update this information.

About Shutterfly, Inc.

Shutterfly, Inc. is the leading online retailer and manufacturer of high-quality personalized products and services. Founded in 1999, the Shutterfly, Inc. brands includes Shutterfly, where your photos come to life in photo books, gifts, and cards and stationery with premium offerings in its Tiny Prints boutique; Wedding Paper Divas, wedding invitations and stationery for every step of the planning process; BorrowLenses, the premier online marketplace for photographic and video equipment rentals; and GrooveBook, an iPhone and Android app and subscription service that prints up to 100 mobile phone photos in a GrooveBook and mails it to customers every month. For more information about Shutterfly, Inc. (SFLY), visit

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