EX-99.1 2 sfly-6302016xresultsrelease.htm EXHIBIT 99.1 Exhibit
 
Shutterfly Announces Second Quarter 2016 Financial Results

●
Second quarter 2016 net revenues increase 11% year-over-year
●
Shutterfly Business Solutions segment revenues double year-over-year

REDWOOD CITY, Calif. July 27, 2016 -- 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 second quarter ended June 30, 2016.

“We’re pleased with our second quarter results,” said Christopher North, President and CEO. “Our performance was led by our flagship Shutterfly brand and continued strength in our SBS business. The team continues to make solid progress on Shutterfly 3.0, both in mobile and in migrating customers to the All New Shutterfly. Lastly, I’m delighted to have joined the Shutterfly team eight weeks ago, and look forward to working with the team as we enter the next phase of our growth.”

Second Quarter 2016 Financial Highlights
●
Net revenues totaled $204.0 million, an 11% year-over-year increase.
●
Consumer net revenues totaled $176.6 million, a 3% year-over-year increase.
●
Shutterfly Business Solutions net revenues totaled $27.4 million, a 117% year-over year increase.
●
Excluding a flash deal deferred revenue breakage catch-up in the second quarter of 2015, net revenues increased 16% year-over-year.
●
Excluding flash deal deferred revenue breakage in the second quarter of 2015, consumer net revenues increased 8% year-over-year.
●
Gross profit margin was 46.3% of net revenues, compared to 47.4% in the second quarter of 2015.
●
Excluding the effect of the flash deal deferred revenue breakage in the second quarter of 2015, gross profit margin was up 110 basis points year-over-year.
●
Operating expenses totaled $115.4 million compared to $115.6 million in the second quarter of 2015.
●
Excluding marketing expenses related to the flash deal deferred revenue breakage in the second quarter of 2015, total operating expenses increased 3% year-over-year.
●
Operating loss totaled $(21.1) million compared to a loss of $(28.4) million in the second quarter of 2015.
●
Net loss was $(16.5) million, compared to $(23.8) million in the second quarter of 2015.
●
Net loss per share was $(0.48), compared to $(0.63) in the second quarter of 2015.

1

●
Adjusted EBITDA was $18.2 million, compared to $15.6 million in the second quarter of 2015. Excluding the effect of the flash deal deferred revenue breakage in the second quarter of 2015 of $4 million, adjusted EBITDA increased 58%.
●
At June 30, 2016, cash and investments totaled $149.3 million.
●
In the second quarter of 2016, the Company repurchased 658,988 shares for $30.7 million, at an average price of $46.61 under its share repurchase program. As of June 30, 2016, $117.1 million remained authorized under the repurchase program.

Second Quarter 2016 Consumer Operating Metrics
●
Transacting customers totaled 3.3 million, an increase of 4% year-over-year.
●
Orders totaled 5.3 million, an increase of 5% year-over-year.
●
Average order value was $33.30, an increase of 2% year-over-year.

Business Outlook
Third Quarter 2016:
•
Net revenues to range from $179.2 million to $185.9 million, a year-over-year increase of 7.0% to 11.0%.
•
Gross profit margin to range from 36.7% to 37.8% of net revenues.
•
Operating loss to range from $(44.2) million to $(47.7) million.
•
Effective tax rate of 38.5%.
•
Net loss per share to range from $(0.90) to $(0.97).
•
Weighted average shares of approximately 34.0 million.
•
Adjusted EBITDA loss to range from $(1.0) million to $(4.0) million. 

Full Year 2016:
•
Net revenues to range from $1.130 billion to $1.160 billion, a year-over-year increase of 6.7% to 9.5%.
•
Gross profit margin to range from 51.3% to 51.7% of net revenues.
•
Operating income to range from $40.8 million to $55.6 million.
•
Effective tax rate to range from 38.5% to 39.5%.
•
Net income per share to range from $0.31 to $0.58.
•
Weighted average shares of approximately 35.3 million.
•
Adjusted EBITDA to range from $210.0 million to $222.9 million, or 18.6% to 19.2% of net revenues.
•
Free cash flow, defined as adjusted EBITDA less capital expenditures, to range from $130.0 million to $132.9 million.
•
Capital expenditures to range from 7.1% to 7.8% of net revenues.

2


Notes to the Second Quarter 2016 Financial Results and Operating Metrics and 2016 Business Outlook
Adjusted EBITDA is a non-GAAP financial measure that the Company defines as earnings before interest, taxes, depreciation, amortization and stock-based compensation.
Free cash flow is a non-GAAP financial measure that the Company defines as adjusted EBITDA less purchases of property, plant, and equipment and capitalization of software development costs.
Consumer 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 2016 financial results and its expectations for the third quarter and full year 2016 on a conference call on Wednesday, July 27, 2016 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 (888) 317-6003 or (412) 317-6061, and enter the conference access code 8724055.  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 Wednesday, August 10, 2016. To hear the replay, please dial (877) 344-7529 or (412) 317-0088, and enter access code 10088423.
 
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 gross profit margin, non-GAAP operating income (loss) and operating margin, adjusted EBITDA, and free cash flow. 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 www.sec.gov.
  

3


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 regarding the Company's growth and financial expectations for the third quarter and full year 2016 set forth under the caption "Business Outlook," and statements about historical results that may suggest trends for our business. 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; changes in 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, 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 and implement innovative, new products and services on a timely and cost-effective basis, including our next generation Shutterfly platform; consumer acceptance of our products and services; our ability to develop additional adjacent lines of business; unforeseen changes in expense levels; and competition and 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 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 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; MyPublisher, one of the pioneers in the photo book industry and creator of easy-to-use photo book-making software; 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 www.shutterflyinc.com.
Contacts
Investor Relations:
Shawn Tabak, 650-610-6026
stabak@shutterfly.com
 

Media Relations:
Gretchen Sloan, 650-610-5276
gsloan@shutterfly.com
 


4

Shutterfly, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)


 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Net revenues
$
203,961

 
$
183,879

 
$
385,670

 
$
343,857

Cost of net revenues
109,592

 
96,647

 
218,315

 
191,354

Gross profit
94,369

 
87,232

 
167,355

 
152,503

Operating expenses:
 
 
 

 
 

 
 

Technology and development
41,313

 
36,502

 
79,582

 
73,862

Sales and marketing
47,539

 
50,446

 
93,381

 
94,976

General and administrative
26,592

 
28,676

 
57,281

 
58,281

Total operating expenses
115,444

 
115,624

 
230,244

 
227,119

Loss from operations
(21,075
)
 
(28,392
)
 
(62,889
)
 
(74,616
)
Interest expense
(5,661
)
 
(4,985
)
 
(11,336
)
 
(9,721
)
Interest and other income, net
128

 
120

 
249

 
222

Loss before income taxes
(26,608
)
 
(33,257
)
 
(73,976
)
 
(84,115
)
Benefit from income taxes
10,123

 
9,480

 
28,055

 
15,235

Net loss
$
(16,485
)
 
$
(23,777
)
 
$
(45,921
)
 
$
(68,880
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss per share - basic and diluted
$
(0.48
)
 
$
(0.63
)
 
$
(1.34
)
 
$
(1.82
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares outstanding - basic and diluted
34,177

 
37,537

 
34,386

 
37,753

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation is allocated as follows:
 
 
 
 
 
 
 
Cost of net revenues
$
1,081

 
$
1,001

 
$
2,305

 
$
2,193

Technology and development
2,512

 
3,309

 
2,971

 
5,301

Sales and marketing
3,754

 
5,654

 
8,033

 
11,873

General and administrative
3,577

 
6,351

 
7,765

 
14,708

 
$
10,924

 
$
16,315

 
$
21,074

 
$
34,075

 
 
 
 
 
 
 
 
Depreciation and amortization is allocated as follows:
 
 
 
 
 
 
 
Cost of net revenues
$
13,842

 
$
12,697

 
$
27,384

 
$
25,376

Technology and development
8,430

 
8,010

 
16,823

 
15,840

Sales and marketing
3,694

 
4,779

 
8,409

 
9,681

General and administrative
2,391

 
2,220

 
4,855

 
4,403

 
$
28,357

 
$
27,706

 
$
57,471

 
$
55,300


5

Shutterfly, Inc.
Consolidated Balance Sheets
(In thousands, except par value amounts)
(Unaudited)

 
June 30,
 
December 31,
 
2016
 
2015
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
99,249

 
$
288,863

Short-term investments
31,564

 
22,918

Accounts receivable, net
28,946

 
55,222

Inventories
11,515

 
13,466

Prepaid expenses and other current assets
67,595

 
31,828

Total current assets
238,869

 
412,297

Long-term investments
18,504

 
29,005

Property and equipment, net
267,846

 
281,779

Intangible assets, net
51,763

 
62,323

Goodwill
408,975

 
408,975

Other assets
12,838

 
10,948

Total assets
$
998,795

 
$
1,205,327

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
11,642

 
$
35,329

Accrued liabilities
71,522

 
149,134

Deferred revenue, current portion
25,243

 
27,329

Total current liabilities
108,407

 
211,792

Convertible senior notes, net
271,476

 
264,361

Other liabilities
110,078

 
123,112

Total liabilities
489,961

 
599,265

Stockholders’ equity:
 
 
 
Common stock, $0.0001 par value; 100,000 shares authorized; 33,950 and 34,777 shares issued and outstanding on June 30, 2016 and December 31, 2015, respectively
3

 
4

Additional paid-in capital
926,956

 
900,218

Accumulated other comprehensive income (loss)
60

 
(68
)
Accumulated deficit
(418,185
)
 
(294,092
)
Total stockholders' equity
508,834

 
606,062

Total liabilities and stockholders' equity
$
998,795

 
$
1,205,327



6

Shutterfly, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Six Months Ended
 
June 30,
 
2016
 
2015
Cash flows from operating activities:
 
 
 
Net loss
$
(45,921
)
 
$
(68,880
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
46,278

 
40,881

Amortization of intangible assets
11,193

 
14,419

Amortization of debt discount and transaction costs
7,115

 
6,728

Stock-based compensation
21,074

 
34,075

Loss on disposal of property and equipment
324

 
498

Deferred income taxes
(3,567
)
 
(6,623
)
Tax benefit from stock-based compensation
4,021

 
13,986

Excess tax benefits from stock-based compensation
(5,233
)
 
(14,372
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
26,277

 
6,962

Inventories
1,951

 
2,552

Prepaid expenses and other assets
(34,045
)
 
(20,563
)
Accounts payable
(18,970
)
 
(17,753
)
Accrued and other liabilities
(77,504
)
 
(77,470
)
Net cash used in operating activities
(67,007
)
 
(85,560
)
 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(33,067
)
 
(28,935
)
Capitalization of software and website development costs
(18,083
)
 
(9,297
)
Purchases of investments
(15,936
)
 
(4,400
)
Proceeds from the maturities of investments
17,890

 
32,358

Proceeds from sale of property and equipment
10,247

 
265

Net cash used in investing activities
(38,949
)
 
(10,009
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Proceeds from issuance of common stock upon exercise of stock options
685

 
2,312

Repurchases of common stock
(78,172
)
 
(87,757
)
Excess tax benefits from stock-based compensation
5,233

 
14,372

Principal payments of capital lease and financing obligations
(11,404
)
 
(5,347
)
Prepayment of accelerated share repurchase
—

 
(75,000
)
Net cash used in financing activities
(83,658
)
 
(151,420
)
 
 
 
 
Net decrease in cash and cash equivalents
(189,614
)
 
(246,989
)
Cash and cash equivalents, beginning of period
288,863

 
380,543

Cash and cash equivalents, end of period
$
99,249

 
$
133,554

 
 
 
 
 
 
 
 
Supplemental schedule of non-cash investing / financing activities:
 
 
 
Net increase (decrease) in accrued purchases of property and equipment
$
(5,565
)
 
$
2,242

Net increase in accrued capitalized software and website development costs
137

 
161

Stock-based compensation capitalized with software and website development costs
959

 
673

Increase in estimated fair market value of buildings under build-to-suit leases
—

 
16,414

Property and equipment acquired under capital leases
—

 
21,640

 

7

Shutterfly, Inc.
Consumer Metrics Disclosure

 
Three Months Ended
 
June 30,
 
2016
 
2015
Consumer Metrics
 
 
 
Customers
3,259,915

 
3,134,346

   year-over-year growth
4
%
 
 
 
 
 
 
Orders
5,303,137

 
5,038,421

   year-over-year growth
5
%
 
 
 
 
 
 
Average order value*

$33.30

 

$32.50

   year-over-year growth
2
%
 
 

* Average order value excludes Shutterfly Business Solutions revenue. AOV for the second quarter of 2015 excluded a flash deal deferred revenue breakage catch-up.



8

Shutterfly, Inc.
Segment Disclosure
(In thousands)
(Unaudited)

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2016
 
2015
 
2016
 
2015
Consumer
 
 
 
 
 
 
 
Net revenues
$
176,617

 
$
171,274

 
$
331,998

 
$
320,062

Cost of net revenues
85,276

 
83,387

 
171,613

 
164,165

Gross profit
91,341

 
87,887

 
160,385

 
155,897

Consumer gross profit margin
51.7
%
 
51.3
%
 
48.3
%
 
48.7
%
 
 
 
 
 
 
 
 
Shutterfly Business Solutions (SBS)
 
 
 
 
 
 
 
Net revenues
27,344

 
12,605

 
53,672

 
23,795

Cost of net revenues
21,810

 
10,245

 
41,520

 
20,133

Gross profit
5,534

 
2,360

 
12,152

 
3,662

SBS gross profit margin
20.2
%
 
18.7
%
 
22.6
%
 
15.4
%
 
 
 
 
 
 
 
 
Corporate (1)
 
 
 
 
 
 
 
Net revenues
—

 
—

 
—

 
—

Cost of net revenues
2,506

 
3,015

 
5,182

 
7,056

Gross profit
(2,506
)
 
(3,015
)
 
(5,182
)
 
(7,056
)
 
 
 
 
 
 
 
 
Consolidated
 
 
 
 
 
 
 
Net revenues
203,961

 
183,879

 
385,670

 
343,857

Cost of net revenues
109,592

 
96,647

 
218,315

 
191,354

Gross profit
$
94,369

 
$
87,232

 
$
167,355

 
$
152,503

 
 
 
 
 
 
 
 
Gross profit margin
46.3
%
 
47.4
%
 
43.4
%
 
44.4
%

(1) Corporate category includes activities that are not directly attributable or allocable to a specific segment. This category consists of stock-based compensation and amortization of intangible assets.


9


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,
 
Dec. 31,
 
2015
 
2015
 
2015
 
2015
 
2016
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP gross profit
$
65,271

 
$
87,232

 
$
59,501

 
$
319,347

 
$
72,986

 
$
94,369

 
$
531,351

Stock-based compensation
1,192

 
1,001

 
952

 
989

 
1,224

 
1,081

 
4,134

Amortization of intangible assets
2,849

 
2,014

 
1,713

 
1,526

 
1,452

 
1,424

 
8,102

Non-GAAP gross profit
$
69,312

 
$
90,247

 
$
62,166

 
$
321,862

 
$
75,662

 
$
96,874

 
$
543,587

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP gross profit margin
43
%
 
49
%
 
37
%
 
59
%
 
42
%
 
47
%
 
51
%

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,
 
Dec. 31,
 
2015
 
2015
 
2015
 
2015
 
2016
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP operating income (loss)
$
(46,224
)
 
$
(28,392
)
 
$
(49,066
)
 
$
141,947

 
$
(41,814
)
 
$
(21,075
)
 
$
18,265

Stock-based compensation
17,760

 
16,315

 
15,756

 
10,627

 
10,150

 
10,924

 
60,458

Amortization of intangible assets
7,684

 
6,735

 
6,379

 
6,252

 
6,119

 
5,074

 
27,050

Non-GAAP operating income (loss)
$
(20,780
)
 
$
(5,342
)
 
$
(26,931
)
 
$
158,826

 
$
(25,545
)
 
$
(5,077
)
 
$
105,773

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating margin
(13
)%
 
(3
)%
 
(16
)%
 
29
%
 
(14
)%
 
(2
)%
 
10
%

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,
 
Dec. 31,
 
2015
 
2015
 
2015
 
2015
 
2016
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP net income (loss)
$
(45,103
)
 
$
(23,777
)
 
$
(63,077
)
 
$
131,114

 
$
(29,436
)
 
$
(16,485
)
 
$
(843
)
Interest expense
4,736

 
4,985

 
5,613

 
5,664

 
5,675

 
5,661

 
20,998

Interest and other income, net
(102
)
 
(120
)
 
(433
)
 
(89
)
 
(121
)
 
(128
)
 
(744
)
Tax (benefit) provision
(5,755
)
 
(9,480
)
 
8,831

 
5,258

 
(17,932
)
 
(10,123
)
 
(1,146
)
Depreciation and amortization
27,593

 
27,707

 
28,933

 
29,044

 
29,114

 
28,357

 
113,277

Stock-based compensation
17,760

 
16,315

 
15,756

 
10,627

 
10,150

 
10,924

 
60,458

Non-GAAP Adjusted EBITDA
$
(871
)
 
$
15,630

 
$
(4,377
)
 
$
181,618

 
$
(2,550
)
 
$
18,206

 
$
192,000



10

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,
 
Jun. 30,
 
Dec. 31,
 
2015
 
2015
 
2015
 
2015
 
2016
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net cash provided by (used in) operating activities
$
(107,731
)
 
$
22,171

 
$
(22,140
)
 
$
272,737

 
$
(83,923
)
 
$
16,916

 
$
165,037

Interest expense
4,736

 
4,985

 
5,613

 
5,664

 
5,675

 
5,661

 
20,998

Interest and other income, net
(102
)
 
(120
)
 
(433
)
 
(89
)
 
(121
)
 
(128
)
 
(744
)
Tax (benefit) provision
(5,755
)
 
(9,480
)
 
8,831

 
5,258

 
(17,932
)
 
(10,123
)
 
(1,146
)
Changes in operating assets and liabilities
113,075

 
(6,803
)
 
134

 
(87,013
)
 
99,917

 
2,374

 
19,393

Other adjustments
(5,094
)
 
4,877

 
3,618

 
(14,939
)
 
(6,166
)
 
3,506

 
(11,538
)
Non-GAAP Adjusted EBITDA
(871
)
 
15,630

 
(4,377
)
 
181,618

 
(2,550
)
 
18,206

 
192,000

Less: Purchases of property and equipment
(13,978
)
 
(17,199
)
 
(15,117
)
 
(12,972
)
 
(5,497
)
 
(22,005
)
 
(59,266
)
Less: Capitalized technology & development costs
(4,072
)
 
(5,386
)
 
(6,353
)
 
(6,302
)
 
(8,168
)
 
(10,052
)
 
(22,113
)
Add: Capex adjustments [1]
—

 
—

 
—

 
—

 
—

 
9,827

 
—

Free cash flow
$
(18,921
)
 
$
(6,955
)
 
$
(25,847
)
 
$
162,344

 
$
(16,215
)
 
$
(4,024
)
 
$
110,621

 
 
 
 
 
 
 
 
 
 
 
 
 
 
[1] In the second quarter of 2016, the Company acquired and immediately sold $9.8 million of printers.



11

Shutterfly, Inc.
Reconciliation of Forward-Looking Guidance for Non-GAAP Financial Measures to GAAP Measures
(In millions, except per share amounts)
 
Forward-Looking Guidance
 
Three Months Ending
September 30, 2016
 
Twelve Months Ending
December 31, 2016
 
Low
 
High
 
Low
 
High
 
 
 
 
 
 
 
 
Net revenues

$179.2

 

$185.9

 

$1,130.0

 

$1,160.0

 
 
 
 
 
 
 
 
GAAP gross profit margin
36.7
%
 
37.8
%
 
51.3
%
 
51.7
%
 
 
 
 
 
 
 
 
GAAP operating income (loss)

($47.7
)
 

($44.2
)
 

$40.8

 

$55.6

GAAP operating margin
(26.6
%)
 
(23.8
%)
 
3.6
%
 
4.8
%
 
 
 
 
 
 
 
 
GAAP operating income (loss)

($47.7
)
 

($44.2
)
 

$40.8

 

$55.6

Stock-based compensation

$13.0

 

$12.5

 

$48.9

 

$47.0

Amortization of intangible assets

$4.6

 

$4.6

 

$20.1

 

$20.1

Depreciation

$26.1

 

$26.1

 

$100.2

 

$100.2

Adjusted EBITDA

($4.0
)
 

($1.0
)
 

$210.0

 

$222.9

Adjusted EBITDA margin
(2.2
%)
 
(0.5
%)
 
18.6
%
 
19.2
%
 
 
 
 
 
 
 
 
Capital expenditures*
 
 
 
 

$80.0

 

$90.0

Capital expenditures as % of net revenues


 


 
7.1
%
 
7.8
%
 
 
 
 
 
 
 
 
Free cash flow**
 
 
 
 

$130.0

 

$132.9

Free cash flow as % of net revenues


 


 
11.5
%
 
11.5
%
 
 
 
 
 
 
 
 
Tax rate
38.5
%
 
38.5
%
 
39.5
%
 
38.5
%
 
 
 
 
 
 
 
 
Net income (loss) per share
 
 
 
 
 
 
 
Basic

($0.97
)
 

($0.90
)
 
—

 
—

Diluted
—

 
—

 

$0.31

 

$0.58

 
 
 
 
 
 
 
 
Weighted average shares
 
 
 
 
 
 
 
Basic
34.0

 
34.0

 
—

 
—

Diluted
—

 
—

 
35.3

 
35.3

 
 
 
 
 
 
 
 
* Excludes $9.8 million related to printers that were acquired and then immediately sold in the second quarter of 2016
** Free cash flow is defined as adjusted EBITDA less capital expenditures
 
 
 
 
 
 
 


12