Takeways from Shutterfly’s third-quarter earnings

Shutterfly reveals move to AWS, will retain BorrowLenses

Christopher North, CEO, Shutterfly

Shutterfly reported its third-quarter earnings last week, and gave insight into the progress of its brand consolidation and business-solutions expansion. As reported earlier, the Redwood City, Calif-based company trimmed its brands down to just Shutterfly, TinyPrints and Weddings, while combining these on to a single technical platform. Doing so caused an expected hit on revenues, with consumer orders dropping 6% in the quarter to less than $3 million. The number of orders dropped 10 percent to 4.8 million orders, but the year order value increased 4% to $27.86 per order.

As expected, the Shutterfly Business Solutions commercial business was the big gainer, with net revenues in the quarter of $60 million, compared to $43 million last year. Gross profit took a hit, though, as margins in the group dropped from 29.7% last year to 20.8%.

In the Oct. 24 earnings conference call, CEO Christopher North explained how the brand consolidation was progressing:

“Over the course of Q3, we’ve carefully monitored how Tiny Prints and MyPublisher customers are migrating to and interacting with the single Shutterfly.com platform and are pleased with the positive trends we’re seeing both in anecdotal feedback from customers and in actual customer purchasing behavior.

“I’ll share two data points that we take as particularly positive signs. First, over the course of Q3, our first full quarter with the Tiny Prints boutique on the Shutterfly.com platform, engagement by Tiny Prints customers did not show a meaningful decline versus the same period last year…Secondly, our strategy to reposition Tiny Prints as a more premium brand shows early signs of promise, as premium products accounted for a much higher percentage of Q3 Tiny Prints revenue this year versus last year. Of course, the real test will be in the fourth quarter when Tiny Prints historically does the bulk of its business.”

In another tidbit, the CEO shared the company is migrating to AWS, which will free up developer and company resources.

Also, CFO Mike Pope revealed Shutterfly would retain its BorrowLenses business: “Earlier in the year, we announced that we would undertake a strategic review of BorrowLenses. We completed the process in the third quarter and decided to retain and operate this business. BorrowLenses is growing at a modest growth rate and generates positive cash flow for the company.”

Thanks to www.seekingalpha.com for providing the earnings conference call transcript.