EX-99.01 2 sflyq409_pressrelease.htm SFLY Q4 2009 PRESS RELEASE sflyq409_pressrelease.htm

Exhibit 99.01
  
Shutterfly Announces Fourth Quarter and Full Year 2009 Financial Results


 
●
Fourth Quarter 2009 net revenues increase 22% year-over-year to $131.1 million
 
●
Full Year 2009 net revenues increase 15% year-over-year to $246.4 million
 
●
Fourth Quarter 2009 GAAP Net Income of $0.88 per diluted share
 
●
Record Full Year 2009 Adjusted EBITDA of $50.2 million, representing 20.4% of net revenues
 
●
Record Full Year 2009 Free Cash Flows of $32.5 million

REDWOOD CITY, February 4, 2010 -- Shutterfly, Inc. (NASDAQ:SFLY), the leading Internet-based social expression and personal publishing service, today announced financial results for the fourth quarter and full year 2009.
 
“Our strategic investments throughout 2009, combined with our focus on strong execution, innovation and improved efficiencies led to record revenues, profits, and free cash flows,” said President and Chief Executive Officer Jeffrey Housenbold.   “We continue to outpace the industry in terms of innovation, user experience, quality, and customer service.  With the social expression and personal publishing markets still in the early stages, Shutterfly will focus on extending our leadership position in these large markets throughout 2010.”
 
Fourth Quarter 2009 Financial Highlights
 
●
Net revenues totaled $131.1 million, a 22% year-over-year increase.
●
Fourth quarter 2009 represents the 36th consecutive quarter of year-over-year net revenue growth.
●
Personalized Products & Services net revenues totaled $93.2 million, a 29% year-over-year increase.
●
Personalized Products & Services net revenues represented 71% of total net revenues.
●
Net revenues from prints increased 4% year-over-year, to $36.6 million.
●
Commercial print net revenues totaled $1.2 million.
●
Existing customers generated 73% of total net revenues.
●
Referral fee revenues totaled $2.5 million, an 8% year-over-year decrease.
●
Gross profit margin was 61% of net revenues, consistent with 61% in the fourth quarter of 2008.
●
Operating expenses, excluding $4.4 million of stock-based compensation, totaled $39.6 million.
●
GAAP net income was $24.1 million, compared to net income of $14.4 million in the fourth quarter of 2008.
●
GAAP net income per diluted share was $0.88, compared to $0.56 in the fourth quarter of 2008.
●
Adjusted EBITDA was $47.9 million, compared to $38.6 million in the fourth quarter of 2008.
●
At December 31, 2009, the Company had $180.7 million of cash, cash equivalents and short-term investments.


Full Year 2009 Financial Highlights
 
●
Net revenues totaled $246.4 million, a 15% year-over-year increase.
●
Personalized Products & Services net revenues totaled $161.7 million, a 25% year-over-year increase.
●
Personalized Products & Services net revenues represented 66% of total net revenues.
●
Net revenues from prints declined 3% year-over-year, to $80.9 million.
●
Commercial print net revenues totaled $3.8 million.
●
Existing customers generated 75% of total net revenues.
●
Referral fee revenues totaled $6.2 million, or 2.5% of net revenues, a 6% year-over-year decrease.
●
Gross profit margin was 55% of net revenues, consistent with 55% in 2008.
●
Operating expenses, excluding $13.9 million of stock-based compensation, totaled $112.2 million.
●
GAAP net income was $5.9 million, compared to net income of $3.7 million in 2008.
●
GAAP net income per diluted share was $0.22, compared to $0.14 in 2008.
●
Adjusted EBITDA was $50.2 million, compared to $38.4 million in 2008.


Fourth Quarter 2009 Operating Metrics
 
●
Transacting customers totaled 1.9 million, an 18% increase over the fourth quarter of 2008.
●
Orders totaled 3.1 million, a 12% increase over the fourth quarter of 2008.
●
Average order value was $42.40, an 8% increase over the fourth quarter of 2008.


Full Year 2009 Operating Metrics
 
●
Transacting customers totaled 3.3 million, an 18% increase over 2008.
●
Orders totaled 7.9 million, a 4% increase over 2008.
●
Average order value was $30.74, a 9% increase over 2008.
 
 
 
 
 
Recent Operating Highlights
 
 
●
Launched SimplePathTM Photo Book creation experience, allowing customers to make a Photo Book in just a few clicks.
●
Launched our largest holiday card collection, including Shutterfly “Support -A- Cause” cards from organizations like LiveSTRONG and Special Olympics and expanded our Cards and Stationery line to include more designs for baby, wedding and social occasions.
●
Deepened our presence in social media and mobile platforms with the acquisition of Tiny Pictures and the launch of WinkTM by Shutterfly.

Business Outlook
 
The referral fee program with Web Loyalty will be discontinued effective March 31, 2010.  As a result, referral fee revenues during 2010 are expected to total less than 1% of total net revenues and no referral fee revenues are expected after the first quarter.  After giving full effect to the expected reduction in 2010 referral fee revenues, the Company's current financial expectations for the first quarter and the full year 2010 are as follows:
 
First Quarter 2010:
 
●
Net revenues to range from $40.0 million to $42.0 million, a 11% to 17% year-over-year increase.
●
GAAP gross profit margins to range from 45% to 47% of net revenues.
●
Non-GAAP gross profit margins to range from 47% to 49% of net revenues.
●
GAAP operating loss to range from ($10) million to ($11) million.
●
Non-GAAP operating loss to range from ($5) million to ($6) million.
●
GAAP effective tax rate to range from 34% to 38%.
●
Non-GAAP effective tax rate to range from 33% to 37%.
●
GAAP diluted net loss per share to range from ($0.23) to ($0.27).
●
Non-GAAP diluted net loss per share to range from ($0.12) to ($0.15).
●
Weighted average diluted shares of approximately 26.2 million.
●
Adjusted EBITDA to range from break-even to $1 million.
 
Full Year 2010:
 
●
Net revenues to range from $267 million to $277 million, a 9% to 13% year-over-year increase.
●
GAAP gross profit margins to range from 53% to 55% of net revenues.
●
Non-GAAP gross profit margins to range from 54% to 56% of net revenues.
●
GAAP operating income to range from $8 million to $15 million.
●
Non-GAAP operating income to range from $26 million to $33 million.
●
GAAP effective tax rate to range from 34% to 38%.
●
Non-GAAP effective tax rate to range from 33% to 37%.
●
GAAP diluted net income per share to range from $0.18 to $0.33.
●
Non-GAAP diluted net income per share to range from $0.61 to $0.74.
●
Weighted average diluted shares of approximately 28.2 million.
●
Adjusted EBITDA to range from 18% to 20% of net revenues.
●
Capital expenditures to approximate 7% to 9% of 2010 net revenues.
 
 
 
Notes to the Fourth Quarter and Full Year 2009 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 minus purchases of property, plant, and equipment, and capitalization of software and website development costs.
 
Print revenues consist of photo prints in wallet, 4x6, 5x7, 8x10, photocards, and large format sizes.
 
Personalized Products and Services (“PPS”) revenues primarily include photo books, stationery and folded greeting cards, calendars, and photo-based merchandise.  PPS also includes revenue from advertising and sponsorship programs and referral fees. 
 
Commercial printing revenues are a separate component of net revenues and are excluded from prints and PPS revenues.
 
Average order value is defined as total net revenues, excluding commercial printing revenue, divided by total orders.
 
Fourth quarter 2008 financial results are as restated.  See Form 8-K dated October 23, 2009 for details of restatement which recorded an additional $1.1 million of stock-based compensation in FY 2008, of which $0.4 million related to fourth quarter 2008.
 
The foregoing financial guidance replaces any of the Company’s previously issued guidance and all such previous guidance should no longer be relied upon.
 
 
Fourth Quarter 2009 Conference Call
 
Management will review the fourth quarter and full year 2009 financial results and its expectations for the first quarter and full year 2010 results on a conference call on Thursday, February 4, 2010 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.shutterfly.com.  In the Investor Relations area, found in the “About Us” section, click on the link provided for the webcast, or dial 816-581-1703.  The webcast, as well as a podcast, will be archived and available at http://www.shutterfly.com.  A replay of the conference call will be available through Wednesday, February 17, 2010. To hear the replay, please dial 719-457-0820, replay pass code 8438694.
 
About Non-GAAP Financial Information
 
This press release contains certain non-GAAP financial measures.  Tables are provided in the press release that reconciles 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 margins, non-GAAP operating income (loss) and the related operating income (loss) margins, non-GAAP income (loss) per share, Adjusted EBITDA and free cash flow.   When used in connection with historical results and forward-looking guidance, the non-GAAP financial measure Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and stock-based compensation while free cash flow is defined as Adjusted EBITDA less purchases of property and equipment and capitalization of software and website development costs. For more information, please see Shutterfly's SEC Filings.
 
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 net income (loss) or net income (loss) per share determined in accordance with GAAP.
  
 
 
 
Notice Regarding Forward-Looking Statements
 
This press 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 all statements regarding the Company's financial expectations for the first quarter and full year 2010 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, our ability to expand our customer base; 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 on a timely basis, as well as consumer acceptance of, new products and services; our ability to develop additional adjacent lines of business;  unforeseen changes in expense levels; and competition, which could lead to pricing pressure. For more information regarding the risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these forward-looking statements, as well as risks relating to our business in general, we refer you to the "Risk Factors" sections of the Company's Form 10-K/A for the year ended December 31, 2008, 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
Founded in 1999, Shutterfly, Inc. is an Internet-based social expression and personal publishing service.  Shutterfly provides high quality products and world class services that make it easy, convenient and fun for consumers to preserve their digital photos in a creative and thoughtful manner.  Shutterfly's flagship product is its award-winning photo book line, which helps consumers celebrate memories and tell their stories in professionally bound coffee table books.  More information about Shutterfly (NASDAQ:SFLY) is available at www.shutterfly.com.  Shutterfly and Shutterfly.com are trademarks of Shutterfly, Inc.

Contacts
Media Relations:
Gretchen Sloan, 650-610-5276
gsloan@shutterfly.com
 
 
Investor Relations:
John Kaelle, 650-610-3541
jkaelle@shutterfly.com
 


 
 
 
 
Shutterfly, Inc.
                        
Consolidated Statements of Operations
                        
(In thousands, except per share amounts)
                        
(Unaudited)
                        
   
Three Months Ended
    
Twelve Months Ended
  
   
December 31,
    
December 31,
  
   
2009
    
2008
    
2009
    
2008
  
           as restated              
Net revenues
   $ 131,067     $ 107,742     $ 246,432     $ 213,480  
Cost of net revenues
     50,487       42,436       111,648       96,214  
Gross profit
     80,580       65,306       134,784       117,266  
Operating expenses:
                                
Technology and development
     12,656       10,912       46,003       39,707  
Sales and marketing
     18,795       15,276       44,870       42,212  
General and administrative
     12,560       10,442       35,201       32,741  
Total operating expenses
     44,011       36,630       126,074       114,660  
Income from operations
     36,569       28,676       8,710       2,606  
Interest expense
     (20 )     (88 )     (157 )     (273 )
Interest and other income, net
     133       385       814       2,898  
Income before income taxes
     36,682       28,973       9,367       5,231  
Provision for income taxes
     (12,596 )     (14,604 )     (3,514 )     (1,571 )
Net income
   $ 24,086     $ 14,369     $ 5,853     $ 3,660  
                                 
                                 
Net income per share:
                                
Basic
   $ 0.93     $ 0.57     $ 0.23     $ 0.15  
Diluted
   $ 0.88     $ 0.56     $ 0.22     $ 0.14  
                                 
Weighted-average shares:
                                
Basic
     25,768       25,084       25,420       25,036  
Diluted
     27,433       25,455       26,810       25,787  
                                 
Stock-based compensation is allocated as follows:
                                
                                 
Cost of net revenues
   $ 119     $ 70     $ 416     $ 372  
Technology and development
     1,049       712       3,340       2,404  
Sales and marketing
     1,149       718       3,577       2,452  
General and administrative
     2,162       1,195       6,940       4,522  
    $ 4,479     $ 2,695     $ 14,273     $ 9,750  

 
 
 
 
Shutterfly, Inc.
            
Consolidated Balance Sheets
            
(In thousands, except par value amounts)
            
(Unaudited)
            
   
December 31,
  
   
2009
    
2008
  
             
ASSETS
            
Current assets:
            
   Cash and cash equivalents
   $ 132,812     $ 88,164  
   Short-term investments
     47,925       -  
   Accounts receivable, net
     5,472       5,992  
   Inventories
     2,968       3,610  
   Deferred tax asset, current portion
     2,243       1,194  
   Prepaid expenses and other current assets
     4,501       4,749  
              Total current assets
     195,921       103,709  
Long-term investments
     -       52,250  
Property and equipment, net
     41,845       48,108  
Goodwill and intangible assets, net
     13,406       14,547  
Deferred tax asset, net of current portion
     14,674       12,266  
Other assets
     5,467       2,417  
              Total assets
   $ 271,313     $ 233,297  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities:
                
   Accounts payable
   $ 13,116     $ 11,214  
   Accrued liabilities
     32,793       24,802  
   Deferred revenue
     8,602       9,461  
              Total current liabilities
     54,511       45,477  
Other liabilities
     1,638       1,018  
              Total liabilities
     56,149       46,495  
                 
Stockholders' equity
                
   Common stock, $0.0001 par value; 100,000 shares authorized; 25,909 and
                
        25,138 shares issued and outstanding on December 31, 2009 and
                
        December 31, 2008, respectively
     3       2  
   Additional paid-in-capital
     226,410       203,902  
   Accumulated deficit
     (11,249 )     (17,102 )
              Total stockholders' equity
     215,164       186,802  
              Total liabilities and stockholders' equity
   $ 271,313     $ 233,297  

 
 
 

Shutterfly, Inc.
            
Consolidated Statements of Cash Flows
            
(In thousands)
            
(Unaudited)
            
   
Twelve Months Ended
  
   
December 31,
  
   
2009
    
2008
  
             
Cash flows from operating activities:
            
Net income
   $ 5,853     $ 3,660  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Depreciation and amortization
     25,122       24,211  
Amortization of intangible assets
     2,072       1,827  
Stock-based compensation, net of forfeitures
     14,273       9,750  
Loss on disposal of property and equipment
     346       308  
Deferred income taxes
     (2,903 )     (312 )
Tax benefit from stock-based compensation
     4,965       156  
Excess tax benefits from stock-based compensation
     (3,273 )     (538 )
Gain on auction rate securities Rights
     2,747       (9,013 )
Impairment of auction rate securities
     (2,747 )     9,013  
Changes in operating assets and liabilities:
                
Accounts receivable, net
     520       (1,512 )
Inventories, net
     642       1,178  
Prepaid expenses and other current assets
     501       (120 )
Other assets
     (3,282 )     (243 )
Accounts payable
     1,947       2,431  
Accrued and other liabilities
     7,966       5,482  
Deferred revenue
     (859 )     762  
Net cash provided by operating activities
     53,890       47,040  
                 
Cash flows from investing activities:
                
Purchases of property and equipment
     (13,762 )     (18,220 )
Capitalization of software and website development costs
     (3,891 )     (4,527 )
Acquisition of business and intangibles, net of cash acquired
     (795 )     (10,097 )
Proceeds from sale of short term investments
     -       3,002  
Proceeds from sale of equipment
     -       6  
Purchase of auction rate securities
     -       (52,250 )
Proceeds from the sale of auction rate securities
     4,325       -  
Net cash used in investing activities
     (14,123 )     (82,086 )
                 
Cash flows from financing activities:
                
Principal payments of capital lease obligations
     (91 )     (808 )
Proceeds from issuance of common stock upon exercise of stock options
     2,740       1,158  
Shares withheld for payment of employee's withholding tax liability
     (1,041 )     (260 )
Excess tax benefits from stock-based compensation
     3,273       538  
Net cash provided by financing activities
     4,881       628  
                 
Net increase (decrease) in cash and cash equivalents
     44,648       (34,418 )
Cash and cash equivalents, beginning of period
     88,164       122,582  
Cash and cash equivalents, end of period
   $ 132,812     $ 88,164  
                 
Supplemental disclosures of cash flow information:
                
Cash paid during the period for:
                
Interest
   $ 12     $ 47  
Income taxes
     2,644       535  
                 
Supplemental schedule of non-cash investing activities
                
Accrued acquisition liabilities
     -       400  
Net change in accrued purchases of property and equipment
     2       -  
Escrow liability from acquisition of business
     150       -  

 
 
 

Shutterfly, Inc.
                        
User Metrics Disclosure
                      
                         
   
Three Months Ended
    
Twelve Months Ended
  
   
December 31,
December 31,
  
   
2009
    
2008
    
2009
    
2008
  
                         
User Metrics
                        
                         
Customers
     1,852,302       1,571,700       3,281,468       2,788,743  
   year-over-year growth
     18 %     14 %     18 %     18 %
                                 
Orders
     3,061,667       2,734,394       7,891,057       7,569,448  
   year-over-year growth
     12 %     3 %     4 %     7 %
                                 
Average order value*
   $ 42.40     $ 39.28     $ 30.74     $ 28.16  
   year-over-year growth
     8 %     7 %     9 %     6 %
                                 
Average orders per customer
     1.7 x     1.7 x     2.4 x     2.7 x
                                 
*Average order value excludes commercial printing 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, 2010
                      
                             
 
   Net revenues
  
$40.0
  
$42.0
  
       -
  
       -
    
$40.0
  
$42.0
 
   Gross profit margin
  
45%
  
47%
  
2%
[a]
  
47%
  
49%
 
   Operating loss
  
($11)
  
($10)
  
$5
[b]
  
($6)
  
($5)
 
   Operating margin
  
(27%)
  
(23%)
  
12%
[b]
  
(15%)
  
(11%)
                             
 
   Stock-based compensation
  
$4.3
  
$4.3
  
$4.3
  
$4.3
    
              -
  
              -
 
   Amortization of intangible assets
  
$0.6
  
$0.6
  
$0.6
  
$0.6
    
              -
  
              -
                             
 
   Adjusted EBITDA*
                    
$0.0
  
$1.0
                             
 
   Diluted loss per share
  
($0.27)
  
($0.23)
  
($0.12)
  
($0.11)
[c]
  
($0.15)
  
($0.12)
 
   Diluted shares
  
26.2
  
26.2
  
       -
  
       -
    
26.2
  
26.2
 
   Effective tax rate
  
34%
  
38%
  
(1%)
[d]
  
33%
  
37%
                             
                             
 
Twelve Months Ending December 31, 2010
                      
                             
 
   Net revenues
  
$267.0
  
$277.0
  
       -
  
       -
    
$267.0
  
$277.0
 
   Gross profit margin
  
53%
  
55%
  
1%
[e]
  
54%
  
56%
 
   Operating income
  
$8
  
$15
  
$18
[f]
  
$26
  
$33
 
   Operating margin
  
3%
  
5%
  
7%
[f]
  
10%
  
12%
                             
 
   Stock-based compensation
  
$15.6
  
$15.6
  
$15.6
  
$15.6
    
              -
  
              -
 
   Amortization of intangible assets
  
$2.4
  
$2.4
  
$2.4
  
$2.4
    
              -
  
              -
                             
 
   Adjusted EBITDA*
                    
$48
  
$55
 
   Adjusted EBITDA* margin
                    
18%
  
20%
                             
 
   Diluted earnings per share
  
$0.18
  
$0.33
  
$0.43
  
$0.41
[g]
  
$0.61
  
$0.74
 
   Diluted shares
  
28.2
  
28.2
  
       -
  
       -
    
28.2
  
28.2
 
   Effective tax rate
  
34%
  
38%
  
(1%)
[h]
  
33%
  
37%
                             
 
   Capital expenditures (% of net revenues)
7%
  
9%
            
7%
  
9%
                             
                             
                             
                             
*
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 $150k and amortization of purchased intangible assets of approximately $600k.
[b]
Reflects estimated adjustments for stock-based compensation expense of approximately $4.3 million and amortization of purchased intangible assets of approximately $600k.
[c]
Reflects the estimated adjustments in item [b] and the income tax impact related to these adjustments.
[d]
Reflects the estimated adjustments to the effective tax rate based on the adjustments in item [b].
[e]
Reflects estimated adjustments for stock-based compensation expense of approximately $660k and amortization of purchased intangible assets of approximately $2.4 million.
[f]
Reflects estimated adjustments for stock-based compensation expense of approximately $15.6 million and amortization of purchased intangible assets of approximately $2.4 million.
[g]
Reflects the estimated adjustments in item [f] and the income tax impact related to these adjustments.
[h]
Reflects the estimated adjustments to the effective tax rate based on the adjustments in item [f].
  

 
 
 
 
Shutterfly, Inc.
                                                            
Reconciliation of GAAP Gross Profit Margin to Non-GAAP Gross Profit Margin
                          
(In thousands)
                                                            
(Unaudited)
                                                            
*As restated            
   
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,
  
   
2008*
    
2008*
    
2008*
    
2008*
    
2009
    
2009
    
2009
    
2009
    
2008
    
2009
  
                                                             
GAAP gross profit
   $ 16,401     $ 18,058     $ 17,502     $ 65,306     $ 16,340     $ 18,789     $ 19,075     $ 80,580     $ 117,266     $ 134,784  
Stock-based compensation expense within cost of net revenues
     92       101       109       70       95       82       119       119       372       416  
Amortization of intangible assets within cost of net revenues
     367       367       367       368       367       394       460       488       1,469       1,709  
                                                                                 
Non-GAAP gross profit
   $ 16,860     $ 18,526     $ 17,978     $ 65,744     $ 16,802     $ 19,265     $ 19,654     $ 81,187     $ 119,107     $ 136,909  
                                                                                 
Non-GAAP gross profit margin
     49 %     52 %     50 %     61 %     47 %     50 %     49 %     62 %     56 %     56 %

Shutterfly, Inc.
                                                            
Reconciliation of GAAP Operating Margin to Non-GAAP Operating Margin
                          
(In thousands)
                                                            
(Unaudited)
                                                            
*As restated                                                            
    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,
  
   
2008*
    
2008*
    
2008*
    
2008*
    
2009
    
2009
    
2009
    
2009
    
2008
    
2009
  
                                                             
GAAP operating income (loss)
   $ (8,672 )   $ (8,172 )   $ (9,226 )   $ 28,676     $ (9,396 )   $ (9,408 )   $ (9,055 )     36,569     $ 2,606     $ 8,710  
Stock-based compensation expense
     2,058       2,321       2,676       2,695       2,804       2,834       4,156       4,479       9,750       14,273  
Amortization of intangible assets
     457       457       457       456       457       484       550       581       1,827       2,072  
                                                                                 
Non-GAAP operating income (loss)
   $ (6,157 )   $ (5,394 )   $ (6,093 )   $ 31,827     $ (6,135 )   $ (6,090 )   $ (4,349 )   $ 41,629     $ 14,183     $ 25,055  
                                                                                 
Non-GAAP operating margin
     (18 %)     (15 %)     (17 %)     30 %     (17 %)     (16 %)     (11 %)     32 %     7 %     10 %

Shutterfly, Inc.
                                                            
Reconciliation of GAAP Net Income to Non-GAAP Net Income
                                
(In thousands)
                                                            
(Unaudited)
                                                            
*As restated                                                            
    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,
  
   
2008*
    
2008*
    
2008*
    
2008*
    
2009
    
2009
    
2009
    
2009
    
2008
    
2009
  
                                                             
GAAP net income (loss)
   $ (3,763 )   $ (4,146 )   $ (2,800 )   $ 14,369     $ (6,232 )   $ (5,655 )   $ (6,346 )   $ 24,086     $ 3,660     $ 5,853  
Stock-based compensation expense
     2,058       2,321       2,676       2,695       2,804       2,834       4,156       4,479       9,750       14,273  
Amortization of intangible assets
     457       457       457       456       457       484       550       581       1,827       2,072  
Income taxes associated with certain non-GAAP entries
     (1,703 )     (1,523 )     (3,202 )     3,068       (1,168 )     (1,190 )     (1,255 )     (1,542 )     (3,360 )     (5,155 )
                                                                                 
Non-GAAP net income (loss)
   $ (2,951 )   $ (2,891 )   $ (2,869 )   $ 20,588     $ (4,139 )   $ (3,527 )   $ (2,895 )   $ 27,604     $ 11,877     $ 17,043  
                                                                                 
                                                                                 
Diluted net income per share:
                                                                                
GAAP
   $ (0.15 )   $ (0.17 )   $ (0.11 )   $ 0.56     $ (0.25 )   $ (0.22 )   $ (0.25 )   $ 0.88     $ 0.14     $ 0.22  
Non-GAAP
   $ (0.12 )   $ (0.12 )   $ (0.11 )   $ 0.81     $ (0.16 )   $ (0.14 )   $ (0.11 )   $ 1.01     $ 0.46     $ 0.64  
                                                                                 
Shares used in GAAP and non-GAAP diluted net income per-share calculation
     24,949       25,045       25,067       25,455       25,148       25,246       25,517       27,433       25,787       26,810  

 
 
 

Shutterfly, Inc.
                                                            
Reconciliation of GAAP to Non-GAAP Effective Tax Rate
                          
(In thousands)
                                                            
(Unaudited)
                                                            
*As restated                                                            
    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,
  
   
2008*
    
2008*
    
2008*
    
2008*
    
2009
    
2009
    
2009
    
2009
    
2008
    
2009
  
                                                             
GAAP benefit (provision) for income taxes
   $ 3,590     $ 3,371     $ 6,071     $ (14,604 )   $ 2,928     $ 3,497     $ 2,657       (12,596 )   $ (1,571 )   $ (3,514 )
Income taxes associated with certain non-GAAP entries
     (1,703 )     (1,523 )     (3,202 )     3,068       (1,168 )     (1,190 )     (1,255 )     (1,542 )     (3,360 )     (5,155 )
                                                                                 
Non-GAAP benefit (provision) for income taxes
   $ 1,887     $ 1,848     $ 2,869     $ (11,536 )   $ 1,760     $ 2,307     $ 1,402     $ (14,138 )   $ (4,931 )   $ (8,669 )
                                                                                 
GAAP income (loss) before income taxes
   $ (7,353 )   $ (7,517 )   $ (8,871 )   $ 28,973     $ (9,160 )   $ (9,152 )   $ (9,003 )     36,682     $ 5,231     $ 9,367  
Stock-based compensation expense
     2,058       2,321       2,676       2,695       2,804       2,834       4,156       4,479       9,750       14,273  
Amortization of intangible assets
     457       457       457       456       457       484       550       581       1,827       2,072  
                                                                                 
Non-GAAP income (loss) before income taxes
   $ (4,838 )   $ (4,739 )   $ (5,738 )   $ 32,124     $ (5,899 )   $ (5,834 )   $ (4,297 )   $ 41,742     $ 16,808     $ 25,712  
                                                                                 
GAAP Effective tax rate
     49 %     45 %     68 %     50 %     32 %     38 %     30 %     34 %     30 %     38 %
                                                                                 
Non-GAAP effective tax rate
     39 %     39 %     50 %     36 %     30 %     40 %     33 %     34 %     29 %     34 %

Shutterfly, Inc.
                                                            
Reconciliation of Non-GAAP Adjusted EBITDA
                                
(In thousands)
                                                            
(Unaudited)
                                                  
 
  
*As restated                                                      
    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,
  
   
2008*
    
2008*
    
2008*
    
2008*
    
2009
    
2009
    
2009
    
2009
    
2008
    
2009
  
                                                             
GAAP net income (loss)
   $ (3,763 )   $ (4,146 )   $ (2,800 )   $ 14,369     $ (6,232 )   $ (5,655 )   $ (6,346 )   $ 24,086       3,660       5,853  
Interest Expense
     28       57       100       88       88       27       22       20       273       157  
Interest and Other Income, net
     (1,347 )     (712 )     (455 )     (385 )     (324 )     (283 )     (74 )     (133 )     (2,898 )     (814 )
Tax Provision
     (3,590 )     (3,371 )     (6,071 )     14,604       (2,928 )     (3,497 )     (2,657 )     12,596       1,571       3,514  
Depreciation and amortization
     5,885       6,266       6,682       7,205       6,706       6,779       6,850       6,859       26,038       27,194  
Stock-based compensation expense
     2,058       2,321       2,676       2,695       2,804       2,834       4,156       4,479       9,750       14,273  
                                                                                 
Non-GAAP Adjusted EBITDA
   $ (729 )   $ 415     $ 132     $ 38,576     $ 114     $ 205     $ 1,951     $ 47,907     $ 38,394     $ 50,177  

Shutterfly, Inc.
                                                            
Reconciliation of Non-GAAP Adjusted EBITDA to Free Cash Flows
                          
(In thousands)
                                                            
(Unaudited)
                                                            
*As restated                                                            
    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,
  
   
2008*
    
2008*
    
2008*
    
2008*
    
2009
    
2009
    
2009
    
2009
    
2008
    
2009
  
                                                             
Non-GAAP Adjusted EBITDA
   $ (729 )   $ 415     $ 132     $ 38,576     $ 114     $ 205     $ 1,951     $ 47,907     $ 38,394     $ 50,177  
Less: Purchases of property and equipment
     (7,930 )     (3,840 )     (4,990 )     (1,460 )     (4,158 )     (1,826 )     (3,811 )     (3,969 )     (18,220 )     (13,764 )
Less: Capitalized technology & development costs
     (848 )     (1,410 )     (981 )     (1,288 )     (824 )     (1,114 )     (1,094 )     (859 )     (4,527 )     (3,891 )
                                                                                 
Free cash flows
   $ (9,507 )   $ (4,835 )   $ (5,839 )   $ 35,828     $ (4,868 )   $ (2,735 )   $ (2,954 )   $ 43,079     $ 15,647     $ 32,522