Shutterfly Announces Second Quarter 2017 Financial Results

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

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

Second Quarter 2017 Financial Highlights
Net revenues totaled $209.0 million, a 2% year-over-year increase. Consumer net revenues totaled $179.1 million, a 1% year-over-year increase. Shutterfly Business Solutions net revenues totaled $29.9 million, a 10% year-over-year increase.

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

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

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

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

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

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

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