Shutterfly, Inc. (NASDAQ:SFLY), the leading retailer and
manufacturing platform dedicated to helping capture, preserve, and
share life’s important moments, today announced financial results
for the first quarter ended March 31, 2019.
“Our first-quarter results were solid across all three
divisions, Shutterfly Consumer, Lifetouch, and SBS,” said
Christopher North, President and Chief Executive Officer. “We met
our expectations on revenue and exceeded our expectations on
Adjusted EBITDA in the quarter. In addition, we made good progress
against key initiatives across the company, including product range
expansion, mobile, and personalized marketing in Shutterfly
Consumer, and integration with Lifetouch. We also won a new client
in SBS.”
Earlier this year, the Company announced that its Board of
Directors had formed a Strategic Review Committee and retained
Morgan Stanley as a financial advisor. The Committee continues its
ongoing review of strategic alternatives and has no further update
at this time. The Board has not set a timetable for the conclusion
of its review of strategic alternatives. There can be no assurance
that the review of strategic alternatives will result in a
transaction or other outcome.
First Quarter 2019 Financial
Highlights
GAAP net revenue was $325 million. Shutterfly Consumer segment
net revenue totaled $149 million, a 2% year-over-year
decrease. Shutterfly Consumer revenue was negatively impacted in
the first quarter of 2019 by approximately $6.0 million primarily
due to exiting the fourth quarter of 2018 with a lower
year-over-year backlog. Lifetouch segment net revenue was
$129 million. Shutterfly Business Solutions segment net
revenue totaled $47 million, a 2% year-over-year decrease. GAAP
operating loss totaled $106 million. Net loss was $84 million or a
loss of $2.47 per share.
Non-GAAP net revenue, excluding purchase accounting adjustments
related to the deferred revenue write-down, due to the Lifetouch
acquisition, was $325 million, a 63% year-over-year increase driven
by the Lifetouch acquisition. Non-GAAP Lifetouch segment net
revenue was $130 million. Normalized operating loss, excluding
restructuring, executive transition and strategic review charges,
and purchase accounting adjustment related to the deferred revenue
write-down, was $99 million. Normalized net loss was $83 million.
Adjusted EBITDA loss was $45 million.
In the first quarter of 2019, the Company had an immaterial
out-of-period adjustment for shipping services provided in the
fourth quarter of 2018 of $2.8 million, which lowered our Adjusted
EBITDA. Excluding this immaterial out-of-period adjustment,
Adjusted EBITDA loss would have been $42.5 million.
A reconciliation of GAAP to non-GAAP financial measures has been
provided in the financial statement tables included in this press
release. An explanation of these measures is also included below
under the heading “Non-GAAP Financial Information.”
Business
Outlook[1][2]
The Company is revising its guidance on operating income and
earnings per share due to a decrease in share-based compensation,
and is updating non-GAAP guidance for the year ending December 31,
2019 to the following (in millions, except per share amounts):
Prior Non-GAAP Guidance as of
February 5, 2019 for the Twelve Months Ending
December 31, 2019
Updated Non-GAAP Guidance for
the Twelve Months Ending December 31, 2019
Low High Change Low
High Net revenue $2,130 $2,210 $2,130 $2,210
Shutterfly Consumer net revenue $975 $1,025 $975 $1,025 Lifetouch
net revenue $915 $935 $915 $935 SBS net revenue $240 $250 $240 $250
Gross profit margin 51.4 % 51.7 % 51.4 % 51.7 %
Operating income $76 $101 $4 $80 $105 Adjusted EBITDA $315 $340
$315 $340 Earnings per share $0.55 $1.06 $0.05 $0.61 $1.11
Capital Expenditures $125 $130 $125 $130 [1] Excludes
any costs related to executive transition, the strategic review and
the facility closures in 2019. Also excludes any proceeds from the
sale of existing facilities. [2] The Company's business outlook is
composed entirely of non-GAAP measures. The Company considers it
unreasonably difficult to reconcile its outlook to comparable GAAP
measures. For additional information, see "Non-GAAP Information"
below.
Notes to the First Quarter 2019 Financial Results and
Operating Metrics and 2019 Business Outlook
Adjusted EBITDA is a non-GAAP financial measure that the Company
defines as earnings before interest, taxes, depreciation,
amortization, stock-based compensation, restructuring,
acquisition-related costs, and executive transition and strategic
review charges.
Shutterfly Consumer segment includes sales from the Shutterfly
brand, the Tiny Prints boutique and BorrowLenses, and are derived
from the sale of a variety of products such as,
professionally-bound photo books, cards and stationery, custom home
décor products and unique photo gifts, calendars and prints, and
the related shipping revenue, as well as rental revenue from the
BorrowLenses brand. Shutterfly Consumer also includes revenue from
advertising displayed on the Company’s website.
Lifetouch segment includes net revenue from professional
photography services for schools, preschools and churches, as well
as retail studios operated by Lifetouch under the JCPenney Portrait
brand.
Shutterfly Business Solutions ("SBS") segment includes net
revenue from personalized direct marketing and other end-consumer
communications as well as just-in-time, inventory-free printing for
the Company's business customers.
Average Order Value ("AOV") is defined as total net revenue
(Shutterfly Consumer revenue only) divided by total orders.
The financial guidance herein replaces any of the Company’s
previously issued financial guidance which should no longer be
relied upon.
First Quarter Conference Call
Management will review the first quarter 2019 financial results
and its expectations for the second quarter and full year 2019 on a
conference call on Thursday, April 25, 2019 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 (844) 763-8274 or (412) 717-9224, and ask to be to
be joined into the Shutterfly call. The webcast will be
archived and available at http://www.shutterflyinc.com in the
Investor Relations section. A replay of the conference call
will be available through Thursday, May 9, 2019. To hear the
replay, please dial (877) 344-7529 or (412) 317-0088 and enter
access code 10130408.
Non-GAAP Financial Information
To supplement the Company’s consolidated financial statements,
which are prepared and presented in accordance with U.S. generally
accepted accounting principles (GAAP), the Company uses certain
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 GAAP. These non-GAAP financial measures
include non-GAAP net revenue, non-GAAP Lifetouch segment net
revenue, non-GAAP gross margin, normalized operating income (loss),
normalized net income (loss), non-GAAP diluted net income (loss)
per share and Adjusted EBITDA. 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.
The Company believes that these non-GAAP measures provide useful
information about the Company's core operating results and thus are
appropriate to enhance the overall understanding of the Company's
past financial performance and its prospects for the future. These
adjustments to the Company's GAAP results are made with the intent
of providing both management and investors a more complete
understanding of the Company's underlying operational results and
trends and performance. Management uses these non-GAAP measures to
evaluate the Company's financial results, develop budgets, manage
expenditures, and determine employee compensation. The presentation
of additional information is not meant to be considered in
isolation or as a substitute for or superior to gross margins, net
revenue, operating income (loss), net income (loss), or net income
(loss) per share determined in accordance with GAAP. For more
information, please see Shutterfly's Securities and Exchange
Commission (“SEC”) filings, including the most recent Form 10-K and
Form 10-Q, which are available on the SEC's website at www.sec.gov.
The Company has provided a reconciliation of each non-GAAP
financial measure to the most directly comparable GAAP financial
measure, where possible, except that the Company has not reconciled
its second quarter and full year 2019 guidance to comparable GAAP
measures at this stage of the process because it is unreasonably
difficult to provide guidance for stock-based compensation expense;
capitalization and amortization of internal-use software; costs
related to executive transition, the strategic review, the facility
closures in 2019 and proceeds from the sale of existing facilities,
which are reconciling items between GAAP measures and non-GAAP
measures. The factors that may impact future stock-based
compensation expense; capitalization and amortization of
internal-use software; costs related to executive transition; the
strategic review; the facility closures in 2019; and the proceeds
from the sale of existing facilities are out of the Company's
control and/or cannot be reasonably predicted, and therefore the
Company is unable to provide such guidance without unreasonable
effort. These factors include the Company's market capitalization
and related volatility of its stock price; its inability to project
the cost or scope of internally produced software; its inability to
estimate the charges related to the facility closures in 2019 and
the proceeds from the sale of existing facilities; its ability to
attract new management personnel; and the lack of assurance that
the review of strategic alternatives will result in a transaction
or other outcome.
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 the Company's business outlook
for the second quarter of 2019 and full year 2019. 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 spending as a
result of general economic conditions; consumer acceptance of the
Company’s products and services; the Company’s ability to develop
innovative, new products and services on a timely and
cost-effective basis; the Company’s ability to expand its customer
base and increase sales to existing customers; the Company’s
ability to meet production requirements; and general economic
conditions and changes in laws and regulations. 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
the Company's business in general, the Company refers you to the
“Risk Factors” section of its SEC filings, including the Company's
most recent Form 10-K and 10-Q, which are available on the SEC’s
website 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 retailer and manufacturing
platform for personalized products and communications. Founded in
1999, Shutterfly, Inc. has three divisions: Shutterfly Consumer,
Lifetouch, and Shutterfly Business Solutions. Shutterfly Consumer
and Lifetouch help consumers capture, preserve, and share life’s
important moments through professional and personal photography,
and personalized products. The Shutterfly brand brings photos to
life in photo books, gifts, home décor, and cards and stationery.
Lifetouch is the national leader in school photography, built on
the enduring tradition of “Picture Day”, and also serves families
through portrait studios and other partnerships. Shutterfly
Business Solutions delivers digital printing services that enable
efficient and effective customer engagement through personalized
communications. For more information about Shutterfly, Inc.
(Nasdaq: SFLY), visit www.shutterflyinc.com.
Appendix 1.1 Shutterfly, Inc. Consolidated
Statements of Operations - GAAP (In thousands, except per
share amounts) (Unaudited) Three Months
Ended March 31, 2019 2018
Net revenue $ 324,681 $ 199,725 Cost of net revenue 210,399 126,046
Gross profit 114,282 73,679 Operating expenses: Technology and
development 48,332 38,504 Sales and marketing[1] 119,370 37,720
General and administrative[2] 48,388 31,565 Restructuring 3,973 —
Total operating expenses 220,063 107,789 Loss from operations
(105,781) (34,110) Interest expense (18,253) (9,633) Interest and
other income, net 1,178 1,749 Loss before income taxes (122,856)
(41,994) Benefit from income taxes 39,237 14,829 Net loss $
(83,619) $ (27,165) Net loss per share - basic and diluted $
(2.47) $ (0.83) Weighted-average shares outstanding - basic
and diluted 33,918 32,702 Stock-based compensation is
allocated as follows: Cost of net revenue $ 892 $ 999 Technology
and development 2,298 2,429 Sales and marketing 3,466 3,504 General
and administrative 5,383 4,760 $ 12,039 $ 11,692
Depreciation and amortization is allocated as follows: Cost of net
revenue $ 24,286 $ 15,441 Technology and development 6,470 6,297
Sales and marketing 9,865 2,041 General and administrative 1,537
1,119 Restructuring 1,296 — $ 43,454 $ 24,898 [1] The Sales
and marketing expenses of $119.4 million for the three months ended
March 31, 2019 includes $0.4 million of costs related to executive
transition and the strategic review. [2] The General and
administrative expenses of $48.4 million for the three months ended
March 31, 2019 includes $2.2 million of costs related to executive
transition and the strategic review. The General and administrative
expenses of $31.6 million for the three months ended March 31, 2018
includes $4.6 million of acquisition-related costs.
Appendix 1.2
Shutterfly, Inc. Consolidated Balance Sheets - GAAP
(In thousands, except par value amounts) (Unaudited)
March 31, 2019 December 31, 2018 ASSETS
Current assets: Cash and cash equivalents $ 156,337 $ 521,567
Short-term investments 24,439 34,011 Accounts receivable, net
56,735 87,023 Inventories 20,932 18,015 Prepaid expenses and other
current assets 102,869 66,961 Total current assets 361,312 727,577
Long-term investments 6,082 10,808 Property and equipment, net
342,073 381,018 Intangible assets, net 303,526 316,154 Goodwill
843,628 843,607 Other assets 89,293 23,045 Total assets $ 1,945,914
$ 2,302,209
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities: Current portion of long-term debt $ 5,348 $
14,203 Accounts payable 41,569 105,407 Accrued liabilities 137,000
226,445 Operating lease liabilities, current portion 21,564 —
Deferred revenue, current portion 96,341 57,319 Total current
liabilities 301,822 403,374 Long-term debt 900,145 1,090,442
Operating lease liabilities 60,701 — Other liabilities 84,619
134,027 Total liabilities 1,347,287 1,627,843 Stockholders’ equity:
Common stock, $0.0001 par value; 100,000 shares authorized; 34,181
and 33,673 shares issued and outstanding on March 31, 2019 and
December 31, 2018, respectively 3 3 Additional paid-in capital
1,077,922 1,065,531 Accumulated other comprehensive income 1,053
1,592 Accumulated deficit (480,351) (392,760)
Total stockholders' equity
598,627 674,366 Total liabilities and stockholders' equity $
1,945,914 $ 2,302,209
Appendix 1.3
Shutterfly, Inc. Consolidated Statements of Cash Flows -
GAAP (In thousands) (Unaudited) Three
Months Ended March 31, 2019 2018 Cash
flows from operating activities: Net loss $ (83,619) $ (27,165)
Adjustments to reconcile net loss to net cash used in operating
activities: Depreciation and amortization 29,333 22,564
Amortization of intangible assets 12,825 2,334 Amortization of debt
discount and issuance costs 4,660 4,122 Stock-based compensation
12,039 11,692 (Gain) loss on disposal of property and equipment
(465) 225 Deferred income taxes 2,420 4,264 Restructuring 1,347 —
Other (37) — Changes in operating assets and liabilities: Accounts
receivable 30,294 28,174 Inventories (2,959) 869 Prepaid expenses
and other assets (31,169) (15,642) Accounts payable (65,277)
(73,773) Accrued and other liabilities (53,507) (81,996) Net cash
used in operating activities (144,115) (124,332)
Cash
flows from investing activities: Purchases of property and
equipment (13,726) (8,075) Capitalization of software and website
development costs (13,927) (8,584) Purchases of investments —
(9,523) Proceeds from maturities of investments 14,444 72,068
Proceeds from sales of property and equipment 956 649 Net cash
(used in) provided by investing activities (12,253) 46,535
Cash flows from financing activities: Proceeds from issuance
of common stock upon exercise of stock options 60 13,775 Principal
payments of borrowings (203,891) (750) Payment of debt issuance
costs — (1,108) Principal payments of finance lease liabilities
(5,312) (4,643) Net cash (used in) provided by investing activities
(209,143) 7,274 Effect of exchange rate changes on cash and
cash equivalents 281 — Net decrease in cash and cash equivalents
(365,230) (70,523) Cash and cash equivalents, beginning of period
521,567 489,894 Cash and cash equivalents, end of period $ 156,337
$ 419,371
Supplemental schedule of non-cash investing /
financing activities: Net decrease in accrued purchases of
property and equipment $ (1,420) $ (3,780) Net increase in accrued
capitalized software and website development costs 1,920 357
Stock-based compensation capitalized with software and website
development costs 292 323 Leased assets obtained in exchange for
financing lease liabilities — 2,969
Appendix
1.4 Shutterfly, Inc. Shutterfly Consumer Metrics
Disclosure (Unaudited) Three Months Ended
March 31, 2019 2018 Shutterfly
Consumer Metrics Customers [1] 2,872,369 3,220,881
year-over-year change (11) % Orders 4,108,645 5,076,150
year-over-year change (19) % Average order value [2] $36.23
$29.96 year-over-year change 21 % [1] An active customer is
defined as one that has transacted in the last trailing-twelve
months. [2] Average order value solely includes Shutterfly Consumer
revenue.
Appendix 1.5 Shutterfly,
Inc. Shutterfly Consumer Net Revenue by Brand (In
thousands) (Unaudited) Three Months Ended
Year Ended Mar. 31, Jun. 30,
Sep. 30, Dec. 31, Mar. 31,
Dec. 31, 2018 2018 2018 2018
2019 2018 Shutterfly Consumer net revenue[1]
Shutterfly Brand Core $ 111,668 $ 116,041 $ 85,502 $ 369,016 $
105,076 $ 682,228 Shutterfly Brand PGHD 30,965 38,163 30,006
110,173 34,585 209,307 Tiny Prints Boutique 2,134 1,374 1,446
39,910 1,695 44,864 Other 7,292 9,425 9,934 8,779 7,491 35,430
Total $ 152,059 $ 165,003 $ 126,888 $ 527,878 $ 148,847 $ 971,829
[1] This 2018 quarterly net revenue by brand table has been
updated to allocate order-to-billed adjustments to each brand of
Shutterfly Consumer net revenue.
Appendix 2.1
Shutterfly, Inc.
Segment Disclosure
(In thousands)
(Unaudited)
The margin of the Company's three segments compares to
non-GAAP operating loss by adding corporate expenses, amortization
of intangible assets, stock-based compensation, restructuring,
acquisition-related, and executive transition and strategic review
charges.
Three Months Ended March 31,
2019 2018 Shutterfly Consumer: Net revenue $
148,847 $ 152,059 Cost of net revenue[1] 90,406 84,845 Technology
and development 33,523 32,129 Sales and marketing 29,123 30,725
Credit card fees 4,156 4,199 Margin[1][2] $ (8,361) $ 161 Margin %
(5.6) % 0.1 % Lifetouch[3]: Net revenue[4] $ 129,952 $ —
Cost of net revenue 78,328 — Technology and development 7,973 —
Sales and marketing 76,295 — Credit card fees 2,227 — Margin[2] $
(34,871) $ — Margin % (26.8) % — % Shutterfly Business
Solutions: Net revenue $ 46,527 $ 47,666 Cost of net revenue 38,151
39,910 Technology and development 3,292 3,945 Sales and marketing
1,408 1,450 Margin[2] $ 3,676 $ 2,361 Margin % 7.9 % 5.0 %
Consolidated Segments: Net revenue[4] $ 325,326 $ 199,725 Cost of
net revenue[1] 206,885 124,755 Technology and development 44,788
36,074 Sales and marketing 106,826 32,175 Credit card fees 6,383
4,199 Margin[1][2] $ (39,556) $ 2,522 Margin % (12.2) % 1.3 %
[1] Includes an immaterial out-of-period adjustment
for shipping services provided in the fourth quarter of 2018 of
$2.8 million, which increased cost of net revenue and lowered
segment margin. [2] The margins reported reflect only costs that
are directly attributable or allocable to a specific segment and
exclude corporate expenses, amortization of intangible assets,
stock-based compensation, restructuring, acquisition-related, and
executive transition and strategic review charges. [3] The Company
acquired Lifetouch on April 2, 2018. [4] Lifetouch net revenue
presented in management reporting related to certain obligations
that would have otherwise been recorded by Lifetouch as an
independent entity but were not recognized in our condensed
consolidated financial statements for the three months ended March
31, 2019 due to business combination accounting requirements.
The following table reconciles segment margin to total operating
loss, segment net revenue to Net revenue, and segment cost of net
revenue to Cost of net revenue:
Three Months Ended March 31, 2019
2018 Total segment margin $ (39,556) $ 2,522
Purchase accounting deferred revenue adjustment[1] (645) —
Corporate expenses[2] (35,089) (18,021) Amortization of intangible
assets (12,825) (2,334) Stock-based compensation expense (12,039)
(11,692) Restructuring (3,973) — Executive transition and strategic
review charges (1,654) — Acquisition-related charges — (4,585)
Operating loss $ (105,781) $ (34,110) Operating margin (32.6) %
(17.1) % Total segment net revenue $ 325,326 $
199,725 Purchase accounting deferred revenue adjustment[1] (645) —
Net revenue $ 324,681 $ 199,725 Total segment cost of net
revenue $ 206,885 $ 124,755 Stock-based compensation for cost of
net revenue 892 999 Amortization of intangible assets for cost of
net revenue 2,622 292 Cost of net revenue $ 210,399 $ 126,046
[1] Lifetouch net revenue presented in management reporting
related to certain obligations that would have otherwise been
recorded by Lifetouch as an independent entity but were not
recognized in our condensed consolidated financial statements for
the three months ended March 31, 2019 due to business combination
accounting requirements. [2] Corporate expenses include activities
that are not directly attributable or allocable to a specific
segment. This category consists primarily of expenses related to
certain functions performed at the corporate level such as
non-manufacturing facilities, human resources, finance and
accounting, legal, information technology, integration, etc.
Appendix 3.1
Shutterfly, Inc.
Reconciliation of Non-GAAP Financial
Measures
(In thousands)
(Unaudited)
The GAAP and Non-GAAP amounts presented below for the three
months ended March 31, 2019 are impacted by an immaterial
out-of-period adjustment for shipping services provided in the
fourth quarter of 2018 of $2.8 million, which increased cost of net
revenue and burdened gross margin, operating loss, net loss, and
Adjusted EBITDA loss.
Three Months Ended
Three Months Ended March 31,
2019 March 31, 2019 GAAP Income Normalized
Statement Adjustments Non-GAAP Net revenue:
Shutterfly Consumer $ 148,847 $ 148,847 Lifetouch 129,307 645 [2]
129,952 Shutterfly Business Solutions 46,527 46,527 Total
net revenue 324,681 645 325,326 Cost of net revenue 210,399 [1]
210,399 Gross profit 114,282 [1] 645 114,927 Gross profit
margin 35.2 % [1] 35.3 % Operating expenses: Technology and
development 48,332 48,332 Sales and marketing 119,370 (379) [3]
118,991 General and administrative 48,388 (2,186) [3] 46,202
Restructuring 3,973 (3,973) [4] — Total operating expenses 220,063
(6,538) 213,525 Operating loss (105,781) [1] 7,183 (98,598)
Operating margin (32.6) % [1] (30.3) % Interest expense
(18,253) 3,886 [5] (14,367) Interest and other income, net 1,178
1,178 Income before income taxes (122,856) [1] 11,069
(111,787) Benefit from income taxes 39,237 [1] 29,069 Net loss $
(83,619) [1] $ (82,718) Net loss per share - basic and
diluted $ (2.47) [1] $ (2.44) Weighted-average shares
outstanding - basic and diluted 33,918 33,918 Operating loss
$ (105,781) $ (98,598) Stock-based compensation 12,039 (911) [3]
11,128 Amortization of intangible assets 12,825 12,825 Depreciation
30,629 (1,296) [4] 29,333 Adjusted EBITDA $ (45,312)
Adjusted EBITDA margin
(13.9) % [1] Includes an immaterial out-of-period adjustment
for shipping services provided in the fourth quarter of 2018 of
$2.8 million, which increased cost of net revenue, and burdened
gross margin, operating loss, net loss, and Adjusted EBITDA loss.
[2] Lifetouch net revenue presented in management reporting related
to certain obligations that would have otherwise been recorded by
Lifetouch as an independent entity but were not recognized in our
condensed consolidated financial statements for the three months
ended March 31, 2019 due to business combination accounting
requirements. [3] Charges related to executive transition and the
strategic review of which $0.9 million was related to stock-based
compensation expense. [4] Restructuring charge related to the
planned closure of four Lifetouch facilities of which $1.3 million
was related to depreciation expense. [5] Non-cash charges related
to the $200 million debt repayment made in January 2019 that is
considered a partial early debt extinguishment.
Appendix 4.1 Shutterfly, Inc.
Reconciliation of Net Income (Loss) to Non-GAAP Net Income
(Loss) and Non-GAAP Net Income (Loss) per Share (In
thousands, except per share amounts) (Unaudited)
Three Months Ended Year Ended Mar. 31,
Jun. 30, Sep. 30, Dec. 31,
Mar. 31, Dec. 31, 2018 2018
2018 2018 2019 2018 GAAP net
income (loss) $ (27,165) $ (26,512) $ (73,543) $ 177,616 $ (83,619)
$ 50,396 Restructuring — 2,952 — 1,667 3,973 4,618
Acquisition-related charges 4,585 8,000 2,392 572 — 15,549 Purchase
accounting adjustments — 44,282 3,958 2,298 645 50,538 Executive
transition and strategic review charges — — — — 2,565 — Debt
repayment impact — — — — 3,886 — Tax benefit impact of adjustments
(1,185) (15,171) (3,603) 5,050 (10,168) (14,910) Non-GAAP net
income (loss) $ (23,765) $ 13,551 $ (70,796) $ 187,203 $ (82,718) $
106,191 GAAP diluted shares outstanding 32,702 33,234 33,470
34,218 33,918 34,832 Non-GAAP diluted shares outstanding 32,702
35,775 33,470 34,218 33,918 34,832 GAAP net income (loss)
per share $ (0.83) $ (0.80) $ (2.20) $ 5.19 $ (2.47) $ 1.45
Non-GAAP net income (loss) per share $ (0.73) $ 0.38 $ (2.12) $
5.47 $ (2.44) $ 3.05
Appendix 4.2
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, Dec.
31, 2018 2018 2018 2018 2019
2018 GAAP net income (loss) $ (27,165) $ (26,512) $
(73,543) $ 177,616 $ (83,619) $ 50,396 Interest expense 9,633
17,769 16,660 17,176 18,253 61,239 Interest and other income, net
(1,749) (1,561) (856) (1,278) (1,178) (5,444) Tax (benefit)
provision (14,829) (12,607) (28,797) 65,496 (39,237) 9,262
Depreciation and amortization 24,898 40,377 41,970 43,883 42,158
151,127 Stock-based compensation 11,692 11,697 11,931 12,400 11,128
47,721 Restructuring — 2,952 — 1,667 3,973 4,618 Executive
transition and strategic review charges — — — — 2,565 —
Acquisition-related charges 4,585 8,000 2,392 572 — 15,549 Purchase
accounting adjustments — 44,282 3,958 2,298 645 50,538 Non-GAAP
Adjusted EBITDA $ 7,065 $ 84,397 $ (26,285) $ 319,830 $ (45,312) $
385,006
Appendix 4.3 Shutterfly,
Inc. Reconciliation of Cash Flow from Operating Activities
to Non-GAAP Adjusted EBITDA (In thousands)
(Unaudited) Three Months Ended Year
Ended Mar. 31, Jun. 30, Sep.
30, Dec. 31, Mar. 31, Dec.
31, 2018 2018[1] 2018 2018
2019 2018 Net cash provided by (used in)
operating activities $ (124,332) $ (75,233) $ 27,041 $ 374,450 $
(144,115) $ 201,926 Interest expense 9,633 17,769 16,660 17,176
18,253 61,239 Interest and other income, net (1,749) (1,561) (856)
(1,278) (1,178) (5,444) Tax (benefit) provision (14,829) (12,607)
(28,797) 65,496 (39,237) 9,262 Changes in operating assets and
liabilities 142,368 53,888 (45,554) (150,834) 122,617 (132) Other
adjustments (8,611) 47,659 (1,129) 11,950 (6,577) 49,868 Cash
restructuring — 2,200 — — 2,626 2,200 Cash executive transition and
strategic review charges — — — — 1,654 — Acquisition-related
charges 4,585 8,000 2,392 572 — 15,549 Purchase accounting
adjustments — 44,282 3,958 2,298 645 50,538 Non-GAAP Adjusted
EBITDA $ 7,065 $ 84,397 $ (26,285) $ 319,830 $ (45,312) $ 385,006
[1] During the third quarter of 2018, the Company identified
certain amounts attributable to the repayment of accreted interest
on its convertible senior notes that were misclassified within the
statement of cash flows. This misclassification resulted in a $64
million understatement of net cash used in operating activities
with a corresponding understatement of cash provided by financing
activities for the second quarter of 2018. The quarterly amounts in
the above table have been revised to appropriately reflect such
repayment of accreted interest in cash used in operating activities
during the second quarter of 2018.
Appendix 5.1
Shutterfly, Inc. Forward-Looking Guidance for Non-GAAP
Financial Measures (In millions, except per share
amounts) (Unaudited) Forward-Looking
Guidance[1][2]
Three Months EndingJune 30,
2019
Twelve Months Ending December
31, 2019
Low High Low High
Net revenue $469 $479 $2,130
$2,210 Shutterfly Consumer net revenue $166 $170 $975 $1,025
Lifetouch net revenue $255 $258 $915 $935 SBS net revenue $48 $51
$240 $250
Gross profit $239 $244
$1,095 $1,143 Gross profit margin 51.0
% 51.0 % 51.4 % 51.7
% Operating income (loss) $0 $5
$80 $105 Operating margin — % 1.1 % 3.8 % 4.8 %
Operating income (loss) $0 $5
$80 $105 Stock-based compensation $13 $13 $50 $50
Amortization of intangible assets $13 $13 $51 $51 Depreciation $33
$33 $133 $133
Adjusted EBITDA $59 $64
$315 $340 Adjusted EBITDA margin 12.6 % 13.4 % 14.8 %
15.4 %
Capital Expenditures — —
$125
$130 Capital expenditures as % of net revenue — — 5.9 % 5.9
%
Tax rate 22.0 % 22.0 %
30.0 % 30.0 % Net income
(loss) per share Basic
($0.27)
($0.17) — — Diluted — — $0.61 $1.11
Weighted average
shares Basic 34.5 34.5 — — Diluted — — 34.8 34.8 [1]
Excludes any costs related to executive transition, the strategic
review, the facility closures in 2019, and any non-recurring
charges related to the $200 million debt repayment made in January
2019. Also excludes any proceeds from the sale of existing
facilities. [2] The Company's business outlook is composed entirely
of non-GAAP measures. The Company considers it unreasonably
difficult to reconcile its outlook to comparable GAAP measures.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190425005945/en/
Investor Relations:Shawn Tabak,
650-610-6026stabak@shutterfly.com
Media Relations:Sondra Harding,
650-610-5129sharding@shutterfly.com
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