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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Shutterfly Inc | NASDAQ:SFLY | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 50.97 | 48.98 | 52.10 | 0 | 01:00:00 |
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 second quarter ended June 30, 2019.
Second Quarter 2019 Financial Highlights
Net revenue was $473 million. Shutterfly Consumer segment net revenue totaled $170 million, a 3% year-over-year increase. Lifetouch segment GAAP net revenue was $254 million, an 11% year-over-year increase. Shutterfly Business Solutions segment net revenue remained relatively flat at $50 million. Operating loss totaled $7.9 million. Net loss was $13 million or a loss of $0.37 per share.
Lifetouch segment non-GAAP net revenue was $254 million, a 3% year-over-year decrease.
Normalized operating income, excluding restructuring and executive transition and strategic review charges was $3.5 million. Normalized net loss was $8.0 million. Adjusted EBITDA was $57 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.”
Shutterfly Acquisition by Apollo
Shutterfly announced in June 2019 that it has entered into a definitive agreement (the "Merger Agreement") with the affiliates of certain funds (the “Apollo Funds”), managed by affiliates of Apollo Global Management, LLC (together with its consolidated subsidiaries, “Apollo”) (NYSE: APO), a leading global alternative investment manager, pursuant to which affiliates of Apollo Funds will acquire all the outstanding shares of Shutterfly for $51.00 per share in cash. The transaction is expected to close by early fourth quarter 2019, pending approval by Shutterfly stockholders and satisfaction of certain other closing conditions. Early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 was granted on July 17, 2019, effective immediately.
Due to the pending acquisition by affiliates of the Apollo Funds, Shutterfly does not plan to host an earnings conference call nor provide forward-looking guidance.
Notes to the Second Quarter 2019 Financial Results and Operating Metrics
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.
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), non-GAAP operating margin, 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), operating margin, 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.
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 timing of the expected closing of our pending acquisition by the Apollo Funds. 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, the parties' inability to consummate the acquisition due to failure to satisfy conditions to the completion of the transaction, including the receipt of stockholder approval, which may not be obtained on the anticipated schedule or at all, and the outcome of lawsuits that may be brought by certain purported stockholders seeking to rescind the Merger Agreement or enjoin the consummation of the acquisition. 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.
Additional Information and Where to Find It
In connection with the proposed acquisition of Shutterfly by certain affiliates of the Apollo Funds, Shutterfly has filed and will continue to file relevant materials with the SEC, including a preliminary and definitive proxy statement. Promptly after filing the definitive proxy statement, Shutterfly will mail the definitive proxy statement and a proxy card to the stockholders of Shutterfly. SHUTTERFLY STOCKHOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) CAREFULLY WHEN IT BECOMES AVAILABLE BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED TRANSACTION BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND THE PARTIES TO THE PROPOSED TRANSACTION. Stockholders of Shutterfly will be able to obtain a free copy of these documents, when they become available, at the website maintained by the SEC at www.sec.gov or free of charge at www.shutterflyinc.com.
Additionally, Shutterfly will file other relevant materials in connection with the proposed acquisition of Shutterfly by certain affiliates of the Apollo Funds pursuant to the terms of the Merger Agreement by and such affiliates of the Apollo Funds and Shutterfly. Shutterfly and its directors, executive officers and other members of its management and employees, under SEC rules, may be deemed to be participants in the solicitation of proxies of Shutterfly stockholders in connection with the proposed transaction. Information concerning the interests of Shutterfly’s participants in the solicitation, which may, in some cases, be different than those of Shutterfly’s stockholders generally, are available in Shutterfly’s proxy statement for its 2019 annual meeting of stockholders, which was filed with the SEC on April 8, 2019. To the extent holdings of securities by Shutterfly’s directors or executive officers have changed since the amounts disclosed in its proxy statement, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC. Additional information regarding these persons and their interests in the proposed transaction will be set forth in the definitive proxy statement relating to the proposed transaction when it becomes available. These documents are available free of charge at the SEC’s web site at www.sec.gov or by going to Shutterfly’s website at www.shutterflyinc.com.
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
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
Net revenue
$
473,416
$
443,372
$
798,097
$
643,097
Cost of net revenue
240,513
233,228
450,912
359,275
Gross profit
232,903
210,144
347,185
283,822
Operating expenses:
Technology and development
49,606
44,420
97,939
82,924
Sales and marketing
135,468
130,643
254,837
168,363
General and administrative[1]
52,491
55,040
100,878
86,604
Restructuring[2]
3,274
2,952
7,247
2,952
Total operating expenses
240,839
233,055
460,901
340,843
Loss from operations
(7,936)
(22,911)
(113,716)
(57,021)
Interest expense
(13,312)
(17,769)
(31,566)
(27,402)
Interest and other income, net
1,088
1,561
2,266
3,310
Loss before income taxes
(20,160)
(39,119)
(143,016)
(81,113)
Benefit from income taxes
7,428
12,607
46,665
27,436
Net loss
$
(12,732)
$
(26,512)
$
(96,351)
$
(53,677)
Net loss per share - basic and diluted
$
(0.37)
$
(0.80)
$
(2.83)
$
(1.63)
Weighted-average shares outstanding - basic and diluted
34,254
33,234
34,089
32,970
Stock-based compensation is allocated as follows:
Cost of net revenue
$
844
$
943
$
1,736
$
1,942
Technology and development
2,268
2,571
4,566
5,001
Sales and marketing
3,574
2,941
7,039
6,445
General and administrative
4,821
5,242
10,204
10,001
$
11,507
$
11,697
$
23,545
$
23,389
Depreciation and amortization is allocated as follows:
Cost of net revenue
$
24,566
$
21,944
$
48,853
$
37,386
Technology and development
6,344
7,418
12,814
13,715
Sales and marketing
9,893
9,530
19,759
11,571
General and administrative
1,625
1,485
3,161
2,603
Restructuring
937
—
2,232
—
$
43,365
$
40,377
$
86,819
$
65,275
[1] The General and administrative expenses of $52.5 million and $100.9 million for the three and six months ended June 30, 2019, respectively, include $7.5 million and $9.7 million, respectively, of costs related to executive transition and the strategic review. The General and administrative expenses of $55.0 million and $86.6 million for the three and six months ended June 30, 2018, respectively, include $8.0 million and $12.6 million, respectively, of acquisition-related charges.
[2] The restructuring plan approved in the fourth quarter of 2018 to close four Lifetouch facilities resulted in restructuring charges of $3.3 million and $7.2 million for the three and six months ended June 30, 2019, respectively. The exit of iMemories business in the second quarter of 2018 resulted in restructuring charges of $3.0 million for the three and six months ended June 30, 2018.
Appendix 1.2
Shutterfly, Inc.
Consolidated Balance Sheets - GAAP
(In thousands, except par value amounts)
(Unaudited)
June 30, 2019
December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents
$
105,338
$
521,567
Short-term investments
19,013
34,011
Accounts receivable, net
60,433
87,023
Inventories
20,916
18,015
Assets held for sale
9,142
1,000
Prepaid expenses and other current assets
114,776
65,961
Total current assets
329,618
727,577
Long-term investments
4,872
10,808
Property and equipment, net
336,655
381,018
Intangible assets, net
291,459
316,154
Goodwill
843,698
843,607
Other assets
84,872
23,045
Total assets
$
1,891,174
$
2,302,209
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt
$
5,234
$
14,203
Accounts payable
45,129
105,407
Accrued liabilities
142,836
226,445
Operating lease liabilities, current portion
21,045
—
Deferred revenue, current portion
38,350
57,319
Total current liabilities
252,594
403,374
Long-term debt
897,985
1,090,442
Operating lease liabilities
59,301
—
Other liabilities
84,707
134,027
Total liabilities
1,294,587
1,627,843
Stockholders’ equity:
Common stock, $0.0001 par value; 100,000 shares authorized; 34,382 and 33,673 shares issued and outstanding on June 30, 2019 and December 31, 2018, respectively
3
3
Additional paid-in capital
1,090,694
1,065,531
Accumulated other comprehensive (loss) income
(1,027)
1,592
Accumulated deficit
(493,083)
(392,760)
Total stockholders' equity
596,587
674,366
Total liabilities and stockholders' equity
$
1,891,174
$
2,302,209
Appendix 1.3
Shutterfly, Inc.
Consolidated Statements of Cash Flows - GAAP
(In thousands)
(Unaudited)
Six Months Ended
June 30,
2019
2018
Cash flows from operating activities:
Net loss
$
(96,351)
$
(53,677)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
58,967
50,111
Amortization of intangible assets
25,620
15,164
Amortization of debt discount and issuance costs
5,533
7,009
Amortization of operating lease assets
11,150
—
Repayment of convertible senior notes attributable to debt discount[1]
—
(63,510)
Stock-based compensation
23,545
23,389
(Gain) loss on disposal of property and equipment
(426)
154
Deferred income taxes
3,808
17,571
Restructuring
2,301
752
Other
(57)
(272)
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable
26,605
30,767
Inventories
(2,959)
15,607
Prepaid expenses and other assets
(48,994)
(42,795)
Accounts payable
(60,267)
(69,708)
Accrued and other liabilities
(114,092)
(130,127)
Net cash used in operating activities
(165,617)
(199,565)
Cash flows from investing activities:
Acquisition of business, net of cash acquired
—
(890,052)
Purchases of property and equipment
(27,129)
(17,692)
Capitalization of software and website development costs
(30,642)
(21,392)
Purchases of investments
—
(9,523)
Proceeds from maturities of investments
21,184
174,329
Proceeds from sales of investments
—
45,106
Proceeds from sales of property and equipment
1,136
1,132
Net cash used in investing activities
(35,451)
(718,092)
Cash flows from financing activities:
Proceeds from issuance of common stock upon exercise of stock options
1,007
16,577
Principal payments of borrowings[1]
(207,292)
(239,098)
Principal payments of finance lease liabilities and financing obligations
(9,587)
(9,396)
Proceeds from borrowings, net of issuance costs
—
806,652
Net cash (used in) provided by financing activities
(215,872)
574,735
Effect of exchange rate changes on cash and cash equivalents
711
(271)
Net decrease in cash and cash equivalents
(416,229)
(343,193)
Cash and cash equivalents, beginning of period
521,567
489,894
Cash and cash equivalents, end of period
$
105,338
$
146,701
Supplemental schedule of non-cash investing / financing activities:
Net decrease in accrued purchases of property and equipment
$
(1,915)
$
(1,200)
Net increase in accrued capitalized software and website development costs
2,532
1,119
Stock-based compensation capitalized with software and website development costs
612
697
Leased assets obtained in exchange for finance lease liabilities
2,973
2,969
[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 should have been classified as cash used in operating activities instead of cash used in financing activities. Such error resulted in a $63.5 million understatement of net cash used in operating activities with a corresponding understatement of cash provided by financing activities in the statement of cash flows for the six months ended June 30, 2018. The statement of cash flows for the six months ended June 30, 2018 above has been revised to reflect the appropriate classification of such repayment between financing and operating activities.
Appendix 1.4
Shutterfly, Inc.
Shutterfly Consumer Metrics Disclosure
(Unaudited)
Three Months Ended
June 30,
2019
2018
Shutterfly Consumer Metrics
Customers [1]
3,034,584
3,140,246
year-over-year change
(3)
%
Orders
4,410,299
4,788,564
year-over-year change
(8)
%
Average order value [2]
$38.45
$34.46
year-over-year change
12
%
[1] An active customer is defined as one that has transacted in the last trailing-twelve months.
[2] Average order value is calculated using solely Shutterfly Consumer revenue.
Appendix 1.5
Shutterfly, Inc.
Shutterfly Consumer Net Revenue by Brand
(In thousands)
(Unaudited)
Three Months Ended
Mar. 31,
Jun. 30,
Sep. 30,
Dec. 31,
Mar. 31,
Jun. 30,
Dec. 31,
2018
2018
2018
2018
2019
2019
2018
Shutterfly Consumer net revenue[1]
Shutterfly Brand Core
$
111,668
$
116,041
$
85,502
$
369,016
$
105,076
$
115,583
$
682,228
Shutterfly Brand Personalized Gifts and Home Décor
30,965
38,163
30,006
110,173
34,585
44,171
209,307
Tiny Prints Boutique
2,134
1,374
1,446
39,910
1,695
1,067
44,864
Other
7,292
9,425
9,934
8,779
7,491
8,763
35,430
Total
$
152,059
$
165,003
$
126,888
$
527,878
$
148,847
$
169,584
$
971,829
[1] 2018 quarterly net revenue by brand 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 charges, executive transition and strategic review charges, and purchase accounting adjustments.
Three Months Ended
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
Shutterfly Consumer:
Net revenue
$
169,584
$
165,003
$
318,432
$
317,062
Cost of net revenue[1]
95,261
86,065
185,667
170,909
Technology and development
34,373
29,830
67,896
61,959
Sales and marketing
31,739
29,956
60,863
60,681
Credit card fees
4,346
4,349
8,501
8,548
Margin[1][2]
$
3,865
$
14,803
$
(4,495)
$
14,965
Margin %
2.3
%
9.0
%
(1.4)
%
4.7
%
Lifetouch[3]:
Net revenue[4]
$
254,174
$
261,911
$
384,126
$
261,911
Cost of net revenue[5]
98,844
91,148
177,172
91,148
Technology and development
8,021
7,109
15,994
7,109
Sales and marketing
89,847
86,960
166,141
86,960
Credit card fees
2,693
1,165
4,920
1,165
Margin[2]
$
54,769
$
75,529
$
19,899
$
75,529
Margin %
21.5
%
28.8
%
5.2
%
28.8
%
Shutterfly Business Solutions:
Net revenue
$
49,658
$
49,809
$
96,184
$
97,475
Cost of net revenue
42,941
41,610
81,092
81,519
Technology and development
3,700
3,049
6,992
6,994
Sales and marketing
1,107
1,619
2,515
3,069
Margin[2]
$
1,910
$
3,531
$
5,585
$
5,893
Margin %
3.8
%
7.1
%
5.8
%
6.0
%
Consolidated Segments:
Net revenue[4]
$
473,416
$
476,723
$
798,742
$
676,448
Cost of net revenue[1][5]
237,046
218,823
443,931
343,576
Technology and development
46,094
39,988
90,882
76,062
Sales and marketing
122,693
118,535
229,519
150,710
Credit card fees
7,039
5,514
13,421
9,713
Margin[1][2]
$
60,544
$
93,863
$
20,989
$
96,387
Margin %
12.8
%
19.7
%
2.6
%
14.2
%
[1] The six months ended June 30, 2019 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 purchase accounting adjustments, 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 six months ended June 30, 2019 and the three and six months ended June 30, 2018 due to business combination accounting requirements.
[5] Business combination accounting principles require the Company to measure acquired inventory at fair value. The fair value of inventory reflects Lifetouch's cost of manufacturing plus a portion of the expected profit margin. Segment reporting excludes this purchase accounting adjustment from cost of net revenue for the Lifetouch segment for the three and six months ended June 30, 2018.
The following table reconciles Total segment margin to operating loss, Total segment net revenue to Net revenue, and Total segment cost of net revenue to Cost of net revenue:
Three Months Ended
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
Total segment margin
$
60,544
$
93,863
$
20,989
$
96,387
Purchase accounting deferred revenue adjustment[1]
—
(33,351)
(645)
(33,351)
Purchase accounting inventory adjustment[2]
—
(10,931)
—
(10,931)
Corporate expenses[3]
(32,459)
(37,012)
(67,549)
(55,036)
Amortization of intangible assets
(12,795)
(12,831)
(25,620)
(15,164)
Stock-based compensation expense
(11,507)
(11,697)
(23,545)
(23,389)
Restructuring
(3,274)
(2,952)
(7,247)
(2,952)
Executive transition and strategic review charges
(8,445)
—
(10,099)
—
Acquisition-related charges
—
(8,000)
—
(12,585)
Operating loss
$
(7,936)
$
(22,911)
$
(113,716)
$
(57,021)
Operating margin
(1.7)
%
(5.2)
%
(14.2)
%
(8.9)
%
Total segment net revenue
$
473,416
$
476,723
$
798,742
$
676,448
Purchase accounting deferred revenue adjustment[1]
—
(33,351)
(645)
(33,351)
Net revenue
$
473,416
$
443,372
$
798,097
$
643,097
Total segment cost of net revenue
$
237,046
$
218,823
$
443,931
$
343,576
Purchase accounting inventory adjustment[2]
—
10,931
—
10,931
Stock-based compensation for cost of net revenue
844
943
1,736
1,942
Amortization of intangible assets for cost of net revenue
2,623
2,531
5,245
2,826
Cost of net revenue
$
240,513
$
233,228
$
450,912
$
359,275
[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 due to business combination accounting requirements.
[2] Business combination accounting principles require the Company to measure acquired inventory at fair value. The fair value of inventory reflects the acquired company’s cost of manufacturing plus a portion of the expected profit margin. Management reporting excludes this purchase accounting adjustment from cost of net revenue for the Lifetouch segment.
[3] 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)
Three Months Ended
Three Months Ended
June 30, 2019
June 30, 2019
GAAP Income
Normalized
Statement
Adjustments
Non-GAAP
Net revenue:
Shutterfly Consumer
$
169,584
$
169,584
Lifetouch
254,174
254,174
Shutterfly Business Solutions
49,658
49,658
Total net revenue
473,416
473,416
Cost of net revenue
240,513
240,513
Gross profit
232,903
232,903
Gross profit margin
49.2
%
49.2
%
Operating expenses:
Technology and development
49,606
49,606
Sales and marketing
135,468
(651)
[1]
134,817
General and administrative
52,491
(7,518)
[1]
44,973
Restructuring
3,274
(3,274)
[2]
—
Total operating expenses
240,839
(11,443)
229,396
Operating (loss) income
(7,936)
11,443
3,507
Operating margin
(1.7)
%
0.7
%
Interest expense
(13,312)
(13,312)
Interest and other income, net
1,088
1,088
Loss before income taxes
(20,160)
11,443
(8,717)
Benefit from income taxes
7,428
766
Net loss
$
(12,732)
$
(7,951)
Net loss per share - basic and diluted
$
(0.37)
$
(0.23)
Weighted-average shares outstanding - basic and diluted
34,254
34,254
Operating loss
$
(7,936)
$
3,507
Stock-based compensation
11,507
11,507
Amortization of intangible assets
12,795
12,795
Depreciation
30,570
(937)
[2]
29,633
Adjusted EBITDA
$
57,442
Adjusted EBITDA margin
12.1
%
The GAAP and Non-GAAP amounts presented below for the six months ended June 30, 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.
Six Months Ended
Six Months Ended
June 30, 2019
June 30, 2019
GAAP Income
Normalized
Statement
Adjustments
Non-GAAP
Net revenue:
Shutterfly Consumer
$
318,432
$
318,432
Lifetouch
383,481
645
[4]
384,126
Shutterfly Business Solutions
96,184
96,184
Total net revenue
798,097
645
798,742
Cost of net revenue
450,912
[3]
450,912
Gross profit
347,185
[3]
645
347,830
Gross profit margin
43.5
%
[3]
43.5
%
Operating expenses:
Technology and development
97,939
97,939
Sales and marketing
254,837
(1,030)
[1]
253,807
General and administrative
100,878
(9,704)
[1]
91,174
Restructuring
7,247
(7,247)
[2]
—
Total operating expenses
460,901
(17,981)
442,920
Operating loss
(113,716)
[3]
18,626
(95,090)
Operating margin
(14.2)
%
[3]
(11.9)
%
Interest expense
(31,566)
3,886
[5]
(27,680)
Interest and other income, net
2,266
2,266
Loss before income taxes
(143,016)
[3]
22,512
(120,504)
Benefit from income taxes
46,665
[3]
29,835
Net loss
$
(96,351)
[3]
$
(90,669)
Net loss per share - basic and diluted
$
(2.83)
[3]
$
(2.66)
Weighted-average shares outstanding - basic and diluted
34,089
34,089
Operating loss
$
(113,716)
$
(95,090)
Stock-based compensation
23,545
(911)
[1]
22,634
Amortization of intangible assets
25,620
25,620
Depreciation
61,199
(2,232)
[2]
58,967
Adjusted EBITDA
$
12,131
Adjusted EBITDA margin
1.5
%
[1] Charges related to executive transition and strategic review. $0.9 million of the charges was related to stock-based compensation expense for the six months ended June 30, 2019.
[2] Restructuring charges related to the planned closure of four Lifetouch facilities of which $0.9 million and $2.2 million was related to depreciation expense for the three and six months ended June 30, 2019, respectively.
[3] The six months ended June 30, 2019, 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.
[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 six months ended June 30, 2019 due to business combination accounting requirements.
[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,
Jun. 30,
Dec. 31,
2018
2018
2018
2018
2019
2019
2018
Net income (loss)
$
(27,165)
$
(26,512)
$
(73,543)
$
177,616
$
(83,619)
$
(12,732)
$
50,396
Restructuring
—
2,952
—
1,667
3,973
3,274
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
8,169
—
Debt repayment impact
—
—
—
—
3,886
—
—
Tax benefit impact of adjustments
(1,185)
(15,171)
(3,603)
5,050
(10,168)
(6,662)
(14,910)
Non-GAAP net income (loss)
$
(23,765)
$
13,551
$
(70,796)
$
187,203
$
(82,718)
$
(7,951)
$
106,191
Diluted shares outstanding
32,702
33,234
33,470
34,218
33,918
34,254
34,832
Non-GAAP diluted shares outstanding
32,702
35,775
33,470
34,218
33,918
34,254
34,832
Net income (loss) per share
$
(0.83)
$
(0.80)
$
(2.20)
$
5.19
$
(2.47)
$
(0.37)
$
1.45
Non-GAAP net income (loss) per share
$
(0.73)
$
0.38
$
(2.12)
$
5.47
$
(2.44)
$
(0.23)
$
3.05
Appendix 4.2
Shutterfly, Inc.
Reconciliation of Net Income (Loss) to Adjusted EBITDA
(In thousands)
(Unaudited)
Three Months Ended
Year Ended
Mar. 31,
Jun. 30,
Sep. 30,
Dec. 31,
Mar. 31,
Jun. 30,
Dec. 31,
2018
2018
2018
2018
2019
2019
2018
Net income (loss)
$
(27,165)
$
(26,512)
$
(73,543)
$
177,616
$
(83,619)
$
(12,732)
$
50,396
Interest expense
9,633
17,769
16,660
17,176
18,253
13,312
61,239
Interest and other income, net
(1,749)
(1,561)
(856)
(1,278)
(1,178)
(1,088)
(5,444)
Tax (benefit) provision
(14,829)
(12,607)
(28,797)
65,496
(39,237)
(7,428)
9,262
Depreciation and amortization
24,898
40,377
41,970
43,883
42,158
42,428
151,127
Stock-based compensation
11,692
11,697
11,931
12,400
11,128
11,507
47,721
Restructuring
—
2,952
—
1,667
3,973
3,274
4,618
Executive transition and strategic review charges
—
—
—
—
2,565
8,169
—
Acquisition-related charges
4,585
8,000
2,392
572
—
—
15,549
Purchase accounting adjustments
—
44,282
3,958
2,298
645
—
50,538
Adjusted EBITDA
$
7,065
$
84,397
$
(26,285)
$
319,830
$
(45,312)
$
57,442
$
385,006
Appendix 4.3
Shutterfly, Inc.
Reconciliation of Cash Flow from Operating Activities to Adjusted EBITDA
(In thousands)
(Unaudited)
Three Months Ended
Year Ended
Mar. 31,
Jun. 30,
Sep. 30,
Dec. 31,
Mar. 31,
Jun. 30,
Dec. 31,
2018
2018[1]
2018
2018
2019
2019
2018
Net cash (used in) provided by operating activities
$
(124,332)
$
(75,233)
$
27,041
$
374,450
$
(144,115)
(21,502)
$
201,926
Interest expense
9,633
17,769
16,660
17,176
18,253
13,312
61,239
Interest and other income, net
(1,749)
(1,561)
(856)
(1,278)
(1,178)
(1,088)
(5,444)
Tax (benefit) provision
(14,829)
(12,607)
(28,797)
65,496
(39,237)
(7,428)
9,262
Changes in operating assets and liabilities
142,368
53,888
(45,554)
(150,834)
128,121
71,586
(132)
Other adjustments
(8,611)
47,659
(1,129)
11,950
(12,081)
(7,927)
49,868
Cash restructuring
—
2,200
—
—
2,626
2,320
2,200
Cash executive transition and strategic review charges
—
—
—
—
1,654
8,169
—
Acquisition-related charges
4,585
8,000
2,392
572
—
—
15,549
Purchase accounting adjustments
—
44,282
3,958
2,298
645
—
50,538
Adjusted EBITDA
$
7,065
$
84,397
$
(26,285)
$
319,830
$
(45,312)
$
57,442
$
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 $63.5 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20190807005706/en/
Investor Relations: Shawn Tabak, 650-610-6026 stabak@shutterfly.com
Media Relations: Sondra Harding, 650-610-5129 sharding@shutterfly.com
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