Shutterfly announces first quarter 2019 financial results
Shutterfly announced first-quarter 2019 financial results, coinciding with rumours from reputables sites like Bloomberg that the leading online photo personalization service has drawn acquisition interest from Apollo Global Management LLC and Cerberus Capital Management. As noted below, the company’s board is not officially commenting.
Overall, the company’s results were in line with expectations, management said. Shutterfly’s struggling Consumer segment saw a 2% drop in revenue and the business services/commercial printing segment saw a similar percentage decline. In the Consumer segment, Shutterfly saw an 11 percent drop in customers and a 19 percent drop in orders, but the average value increased 21% to $36.23 from $29.96, compared to the same quarter last year. Lifetouch first-quarter revenue was $129,952.
Highlights of the press release are reproduced below. The full release is here.
Shutterfly Announces First Quarter 2019 Financial Results
REDWOOD CITY, Calif.–(BUSINESS WIRE)–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 first quarter ended March 31, 2019.
“Our first-quarter results were solid across all three divisions, Shutterfly Consumer, Lifetouch, and SBS,” said Christopher North, President and Chief Executive Officer. “We met our expectations on revenue and exceeded our expectations on Adjusted EBITDA in the quarter. In addition, we made good progress against key initiatives across the company, including product range expansion, mobile, and personalized marketing in Shutterfly Consumer, and integration with Lifetouch. We also won a new client in SBS.”
Earlier this year, the Company announced that its Board of Directors had formed a Strategic Review Committee and retained Morgan Stanley as a financial advisor. The Committee continues its ongoing review of strategic alternatives and has no further update at this time. The Board has not set a timetable for the conclusion of its review of strategic alternatives. There can be no assurance that the review of strategic alternatives will result in a transaction or other outcome.
First Quarter 2019 Financial Highlights
GAAP net revenue was $325 million. Shutterfly Consumer segment net revenue totaled $149 million, a 2% year-over-year decrease. Shutterfly Consumer revenue was negatively impacted in the first quarter of 2019 by approximately $6.0 million primarily due to exiting the fourth quarter of 2018 with a lower year-over-year backlog. Lifetouch segment net revenue was $129 million. Shutterfly Business Solutions segment net revenue totaled $47 million, a 2% year-over-year decrease. GAAP operating loss totaled $106 million. Net loss was $84 million or a loss of $2.47 per share.
Non-GAAP net revenue, excluding purchase accounting adjustments related to the deferred revenue write-down, due to the Lifetouch acquisition, was $325 million, a 63% year-over-year increase driven by the Lifetouch acquisition. Non-GAAP Lifetouch segment net revenue was $130 million. Normalized operating loss, excluding restructuring, executive transition and strategic review charges, and purchase accounting adjustment related to the deferred revenue write-down, was $99 million. Normalized net loss was $83 million. Adjusted EBITDA loss was $45 million.
In the first quarter of 2019, the Company had an immaterial out-of-period adjustment for shipping services provided in the fourth quarter of 2018 of $2.8 million, which lowered our Adjusted EBITDA. Excluding this immaterial out-of-period adjustment, Adjusted EBITDA loss would have been $42.5 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.”
Business Outlook
The Company is revising its guidance on operating income and earnings per share due to a decrease in share-based compensation, and is updating non-GAAP guidance for the year ending December 31, 2019 to the following (in millions, except per share amounts):
|
Prior Non-GAAP Guidance |
Updated Non-GAAP |
|||||||||||||
| Low | High | Change | Low | High | ||||||||||
| Net revenue | $2,130 | $2,210 | $2,130 | $2,210 | ||||||||||
| Shutterfly Consumer net revenue | $975 | $1,025 | $975 | $1,025 | ||||||||||
| Lifetouch net revenue | $915 | $935 | $915 | $935 | ||||||||||
| SBS net revenue | $240 | $250 | $240 | $250 | ||||||||||
| Gross profit margin | 51.4 | % | 51.7 | % | 51.4 | % | 51.7 | % | ||||||
| Operating income | $76 | $101 | $4 | $80 | $105 | |||||||||
| Adjusted EBITDA | $315 | $340 | $315 | $340 | ||||||||||
| Earnings per share | $0.55 | $1.06 | $0.05 | $0.61 | $1.11 | |||||||||
| Capital Expenditures | $125 | $130 | $125 | $130 | ||||||||||
| [1] Excludes any costs related to executive transition, the strategic review and the facility closures in 2019. Also excludes any proceeds from the sale of existing facilities. |
| [2] The Company’s business outlook is composed entirely of non-GAAP measures. The Company considers it unreasonably difficult to reconcile its outlook to comparable GAAP measures. For additional information, see “Non-GAAP Information” below. |
Notes to the First Quarter 2019 Financial Results and Operating Metrics and 2019 Business Outlook
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.
The financial guidance herein replaces any of the Company’s previously issued financial guidance which should no longer be relied upon.
Selected Appendix notes
| Appendix 1.4 | |||||
| Shutterfly, Inc. | |||||
| Shutterfly Consumer Metrics Disclosure | |||||
| (Unaudited) | |||||
| Three Months Ended | |||||
| March 31, | |||||
| 2019 | 2018 | ||||
| Shutterfly Consumer Metrics | |||||
| Customers [1] | 2,872,369 | 3,220,881 | |||
| year-over-year change | (11) | % | |||
| Orders | 4,108,645 | 5,076,150 | |||
| year-over-year change | (19) | % | |||
| Average order value [2] | $36.23 | $29.96 | |||
| year-over-year change | 21 | % | |||
| [1] An active customer is defined as one that has transacted in the last trailing-twelve months. |
| [2] Average order value solely includes Shutterfly Consumer revenue. |
| Appendix 1.5 | ||||||||||||||||||
| Shutterfly, Inc. | ||||||||||||||||||
| Shutterfly Consumer Net Revenue by Brand | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||||
| Mar. 31, | Jun. 30, | Sep. 30, | Dec. 31, | Mar. 31, | Dec. 31, | |||||||||||||
| 2018 | 2018 | 2018 | 2018 | 2019 | 2018 | |||||||||||||
| Shutterfly Consumer net revenue[1] | ||||||||||||||||||
| Shutterfly Brand Core | $ | 111,668 | $ | 116,041 | $ | 85,502 | $ | 369,016 | $ | 105,076 | $ | 682,228 | ||||||
| Shutterfly Brand PGHD | 30,965 | 38,163 | 30,006 | 110,173 | 34,585 | 209,307 | ||||||||||||
| Tiny Prints Boutique | 2,134 | 1,374 | 1,446 | 39,910 | 1,695 | 44,864 | ||||||||||||
| Other | 7,292 | 9,425 | 9,934 | 8,779 | 7,491 | 35,430 | ||||||||||||
| Total | $ | 152,059 | $ | 165,003 | $ | 126,888 | $ | 527,878 | $ | 148,847 | $ | 971,829 | ||||||
| [1] This 2018 quarterly net revenue by brand table has been updated to allocate order-to-billed adjustments to each brand of Shutterfly Consumer net revenue. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Appendix 5.1 |
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| Shutterfly, Inc. | |||||||||||||
| Forward-Looking Guidance for Non-GAAP Financial Measures | |||||||||||||
| (In millions, except per share amounts) | |||||||||||||
| (Unaudited) | |||||||||||||
| Forward-Looking Guidance[1][2] | |||||||||||||
|
Three Months Ending |
Twelve Months Ending |
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| Low | High | Low | High | ||||||||||
| Net revenue | $469 | $479 | $2,130 | $2,210 | |||||||||
| Shutterfly Consumer net revenue | $166 | $170 | $975 | $1,025 | |||||||||
| Lifetouch net revenue | $255 | $258 | $915 | $935 | |||||||||
| SBS net revenue | $48 | $51 | $240 | $250 | |||||||||
| Gross profit | $239 | $244 | $1,095 | $1,143 | |||||||||
| Gross profit margin | 51.0 | % | 51.0 | % | 51.4 | % | 51.7 | % | |||||
| Operating income (loss) | $0 | $5 | $80 | $105 | |||||||||
| Operating margin | — | % | 1.1 | % | 3.8 | % | 4.8 | % | |||||
| Operating income (loss) | $0 | $5 | $80 | $105 | |||||||||
| Stock-based compensation | $13 | $13 | $50 | $50 | |||||||||
| Amortization of intangible assets | $13 | $13 | $51 | $51 | |||||||||
| Depreciation | $33 | $33 | $133 | $133 | |||||||||
| Adjusted EBITDA | $59 | $64 | $315 | $340 | |||||||||
| Adjusted EBITDA margin | 12.6 | % | 13.4 | % | 14.8 | % | 15.4 | % | |||||
| Capital Expenditures | — | — | $125 | $130 | |||||||||
| Capital expenditures as % of net revenue | — | — | 5.9 | % | 5.9 | % | |||||||
| Tax rate | 22.0 | % | 22.0 | % | 30.0 | % | 30.0 | % | |||||
| Net income (loss) per share | |||||||||||||
| Basic |
($0.27) |
($0.17) | — | — | |||||||||
| Diluted | — | — | $0.61 | $1.11 | |||||||||
| Weighted average shares | |||||||||||||
| Basic | 34.5 | 34.5 | — | — | |||||||||
| Diluted | — | — | 34.8 | 34.8 | |||||||||
| [1] Excludes any costs related to executive transition, the strategic review, the facility closures in 2019, and any non-recurring charges related to the $200 million debt repayment made in January 2019. Also excludes any proceeds from the sale of existing facilities. |
| [2] The Company’s business outlook is composed entirely of non-GAAP measures. The Company considers it unreasonably difficult to reconcile its outlook to comparable GAAP measures. |
The full release is here.