Stock Update (NASDAQ:SFLY): Shutterfly, Inc. Announces Fourth Quarter and Full Year 2015 Financial Results


SFLY

Shutterfly, Inc. (NASDAQ:SFLY), the leading manufacturer and digital retailer of high-quality personalized products and services offered through a family of lifestyle brands, today announced financial results for the fourth quarter ended December 31, 2015.

“Shutterfly delivered outstanding results in 2015 with record revenue, adjusted EBITDA, free cash flow and free cash flow per share,” said Jeffrey Housenbold, president and chief executive officer of Shutterfly. “We surpassed two important milestones of $1 billion in revenue and $100 millionin free cash flow. Our consumer business delivered solid growth and our enterprise revenue nearly doubled. We are starting to see the benefit from our strategic investments in expanding margins, and we expect free cash flow to continue growing faster than revenue as we enter a more normalized capital spending cycle. The team is excited to begin rolling out the first phase of Shutterfly 3.0 in the first quarter of 2016, providing customers with a superior memory preservation and creation experience.

“Our Chairman Phil Marineau will take over as interim CEO upon my previously announced departure on February 19. It’s been an amazing eleven years and I am so proud of what we’ve accomplished. I am confident that Shutterfly is in a strong position as the clear category leader, with a strong team that is committed to innovation, growth and helping our customers share life’s joy,” concluded Housenbold.

Fourth Quarter 2015 Financial Highlights

  • Net revenues totaled $548.1 million, a 13% year-over-year increase.
  • Fourth quarter 2015 represents the 60th consecutive quarter of year-over-year net revenue growth.
    • Consumer net revenues totaled $503.3 million, a 9% year-over-year increase.(1)
    • Enterprise net revenues totaled $44.7 million, a 119% year-over-year increase.(1)
  • Gross profit margin was 58.3% of net revenues, compared to 57.9% in the fourth quarter of 2014.
    • Consumer gross profit margin was 62.4% of net revenues, compared to 60.7% in the fourth quarter of 2014. (1)
    • Enterprise gross profit margin was 17.1% of net revenues, compared to 12.9% in the fourth quarter of 2014. (1)
  • Operating expenses, excluding $9.6 million of stock-based compensation, totaled $167.8 million.
  • GAAP net income was $131.1 million, compared to $99.7 million in the fourth quarter of 2014.
  • GAAP net income per share was $3.57, compared to $2.51 in the fourth quarter of 2014.
  • Non-GAAP net income per share was $3.45, compared to $2.57 in the fourth quarter of 2014.
  • Adjusted EBITDA income was $181.6 million, compared to $164.6 million in the fourth quarter of 2014.
  • At December 31, 2015, cash and investments totaled $340.8 million.
  • In the fourth quarter of 2015, the Company repurchased 1.1 million shares at an average price of $42.14 under its share repurchase program.

Full Year 2015 Financial Highlights

  • Net revenues totaled $1.06 billion, a 15% year-over-year increase.
    • Consumer net revenues totaled $961.4 million, a 10% year-over-year increase.
    • Enterprise net revenues totaled $98.0 million, a 94% year-over-year increase.
  • Gross profit margin was 50.2% of net revenues, compared to 50.9% in 2014.
    • Consumer gross profit margin was 54.6% of net revenues compared to 54.7% in 2014. (1)
    • Enterprise gross profit margin was 18.6% of net revenues compared to 14.2% in 2014. (1)
  • Operating expenses, excluding $56.3 million of stock-based compensation, totaled $456.8 million.
  • GAAP net loss was $(0.8) million, compared to GAAP net loss of $(7.9) million in 2014.
  • GAAP net loss per share was $(0.02), compared to GAAP net loss per share of $(0.20) in 2014.
  • Non-GAAP net income per share was $0.14, compared to $0.07 in 2014.
  • Adjusted EBITDA was $192.0 million, compared to $166.8 million in 2014.
  • Total capital expenditures totaled $81.4 million compared to $90.2 million in 2014.
  • Free Cash Flow was $110.6 million, compared to $76.5 million in 2014.
  • During 2015, the Company repurchased approximately 4.9 million shares for a total repurchase amount of $215.9 million under its share repurchase program. The Company has $95.3 million remaining available for repurchase under its share repurchase program at year end.

(1) Effective in the fourth quarter of 2014, the Company defined two reportable segments based on factors such as how management manages the operations and how the chief operating decision maker views results. The Company’s two reportable segments are Consumer and Enterprise. Refer to the Segment Disclosure table at the back of the release for segment level disclosures.

Fourth Quarter 2015 Consumer Operating Metrics

  • Transacting customers totaled 6.1 million, an 8% year-over-year increase.
  • Orders totaled 10.3 million, a 7% year-over-year increase.
  • Average order value was $48.96, an increase of 1% year-over-year.

Full Year 2015 Consumer Operating Metrics

  • Transacting customers totaled 9.8 million, a 6% year-over-year increase.
  • Orders totaled 25.8 million, a 19% year-over-year increase.
  • Average order value was $37.26, a decrease of 7% year-over-year.
  • Average order value excluding GrooveBook(2) was $40.98, remaining flat compared to the same period in 2014.

(2) In October 2014, the Company acquired GrooveBook, a mobile photobook app subscription service which has a significantly lower average order value than the other Shutterfly, Inc. brands.

Business Outlook (3)

First Quarter 2016:

  • Net revenues to range from $173.0 million to $180.0 million, a year-over-year increase of 8.1% to 12.5%.
  • GAAP gross profit margin to range from 40.0% to 41.0% of net revenues.
  • Non-GAAP gross profit margin to range from 41.5% to 42.5% of net revenues.
  • GAAP operating loss to range from ($43.2) million to ($46.2) million.
  • Non-GAAP operating loss to range from ($26.0) million to ($29.0) million.
  • GAAP effective tax rate to range from 31.5% to 33.9%.
  • GAAP net loss per share to range from ($0.92) to ($1.01).
  • Weighted average shares of approximately 35.0 million.
  • Adjusted EBITDA to range from ($1.8) million to ($4.8) million.

Full Year 2016:

  • Net revenues to range from $1.120 billion to $1.160 billion, a year-over-year increase of 5.7% to 9.5%.
  • GAAP gross profit margin to range from 50.9% to 51.7% of net revenues.
  • Non-GAAP gross profit margin to range from 52.0% to 52.6% of net revenues.
  • GAAP operating income to range from $32.6 million to $53.9 million.
  • Non-GAAP operating income to range from $103.7 million to $122.7 million.
  • GAAP effective tax rate to range from 31.5% to 33.9%.
  • GAAP net income per share to range from $0.19 to $0.58.
  • Weighted average shares of approximately 36.0 million.
  • Adjusted EBITDA to range from $203.9 million to $222.9 million, or 18.2% to 19.2% of net revenues.
  • Free cash flow to range from $124.0 million to $132.9 million.
  • Capital expenditures to range from 7.1% to 7.8% of net revenues.

(3) Includes $3.3 million in executive severance charges.

Notes to the Fourth Quarter 2015 and Full Year 2015 Financial Results and Operating Metrics and 2015 Business Outlook

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

Free cash flow is a non-GAAP financial measure that the Company defines as adjusted EBITDA less purchases of property, plant, and equipment and capitalization of software development costs.

Non-GAAP earnings per share is defined as non-GAAP net income (loss), which excludes interest expense related to the Company’s issuance of 0.25% convertible senior notes in May 2013, divided by diluted non-GAAP shares outstanding, which is GAAP diluted weighted average shares outstanding less any shares issuable under the Company’s convertible senior notes.

Consumer 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.

Enterprise segment includes net revenues primarily from variable, four-color direct marketing collateral manufactured and fulfilled for business customers.

Average Order Value (AOV) is defined as total net revenues (excluding Enterprise) divided by total orders.

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

Shares of Shutterfly are down nearly 2% in after-hours trading. SFLY has a 1-year high of $49.10 and a 1-year low of $35.22. The stock’s 50-day moving average is $42.31 and its 200-day moving average is $41.61.

On the ratings front, Shutterfly has been the subject of a number of recent research reports. In a report issued on February 1, RBC analyst Rohit Kulkarni reiterated a Buy rating on SFLY, with a price target of $52, which represents a potential upside of 27.4% from where the stock is currently trading. Separately, on the same day, Cantor Fitzgerald’s Youssef Squali reiterated a Buy rating on the stock and has a price target of $58.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Rohit Kulkarni and Youssef Squali have a total average return of -2.9% and 13.5% respectively. Kulkarni has a success rate of 36.0% and is ranked #2873 out of 3600 analysts, while Squali has a success rate of 56.5% and is ranked #28.

The street is mostly Bullish on SFLY stock. Out of 5 analysts who cover the stock, 5 suggest a Buy rating . The 12-month average price target assigned to the stock is $55.00, which represents a potential upside of 34.7% from where the stock is currently trading.

Shutterfly Inc manufacturers and digitally retails personalized products and services offered through a family of lifestyle brands.