Amended Current Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 8-K/A
 
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of report (Date of earliest event reported):  October 28, 2009
 
Shutterfly, Inc.
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
(State or Other Jurisdiction of Incorporation)

001-33031
 
99-3330068
(Commission File Number)
 
(IRS Employer Identification No.)
   
2800 Bridge Parkway, Suite 101, Redwood City, California
 
94065
(Address of Principal Executive Offices)
 
(Zip Code)

(650) 610-5200
(Registrant’s Telephone Number, Including Area Code)
 
(Former Name or Former Address, If Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

[   ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[   ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[   ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2)

[   ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


 

 
 
 


 
Explanatory Note

This Amendment to the Current Report on Form 8-K filed by Shutterfly, Inc. on October 28, 2009 is being filed to correct typographical errors within the Business Outlook Section of the Exhibit.  The eighth and ninth bullets under Fourth Quarter 2009 should read "net income per share".  This Amendment is being filed solely to correct the error in this section.  All other information included in the original filing is unchanged.

Item 2.02.  Results of Operations and Financial Condition.

On October 28, 2009, Shutterfly, Inc. (“Shutterfly”) issued a press release announcing its financial results for the third quarter ended September 30, 2009.

This press release is being furnished as Exhibit 99.01 to this Current Report on Form 8-K and is incorporated herein by this reference.

The information in this report, including the exhibit hereto, is furnished and is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section.  The information contained herein and in the accompanying exhibit is not incorporated by reference in any filing of Shutterfly under the Securities Act of 1933 or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

 
Use of Non-GAAP Financial Information
 
Shutterfly has supplemented the financial measures contained in the attached press release that are provided in accordance with generally accepted accounting principles (“GAAP”) with non-GAAP financial measures. Shutterfly believes that these non-GAAP financial measures provide useful information about its core operating results and thus are appropriate to enhance the overall understanding of its past financial performance and its prospects for the future. These adjustments to Shutterfly’s GAAP results are made with the intent of providing both management and investors a more complete understanding of Shutterfly’s underlying operational results and trends and performance. Management uses these non-GAAP measures to evaluate Shutterfly’s financial results, develop budgets and manage expenditures. The method Shutterfly uses to produce non-GAAP financial results may differ from the methods used by other companies.  Shutterfly’s reference to these non-GAAP financial results should be considered in addition to results that are prepared under current accounting standards but should not be considered as a substitute for, or superior to, the financial results that are presented as consistent with GAAP.  Reconciliation to the nearest GAAP financial measures of the non-GAAP financial measures is included in the press release attached hereto as Exhibit 99.01.


Item 9.01.  Financial Statements and Exhibits.

(d)   Exhibits.

Number
 
 
Description
 
99.01
 
Press release, dated October 28, 2009.


 
 

 
 
 


 

 

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
SHUTTERFLY, INC.
   
By:
 
/s/ Mark J. Rubash
Mark J. Rubash
Senior Vice President & Chief Financial Officer
 
Date:  October 28, 2009

 
 

 
 
 


 

 

EXHIBIT INDEX


Number
 
 
Description
 
99.01
 
Press release, dated October 28, 2009

 


 
 
 

Exhibit 99.01
  
Shutterfly Announces Third Quarter 2009 Financial Results

 
●
Net revenues increase 13% year-over-year to $40.5 million
 
●
35 th consecutive quarter of year-over year net revenue growth
 
●
GAAP net loss of ($0.25) per diluted share
 
●
Adjusted EBITDA 1 of $2.0 million

 REDWOOD CITY, October 28, 2009 -- Shutterfly, Inc. (NASDAQ:SFLY), the leading Internet-based social expression and personal publishing service, today announced financial results for the three months ended September 30, 2009.
 
“Shutterfly delivered very solid third quarter results with better than expected revenue and EBITDA growth, despite an increasingly tough macro-economic environment,” said President and Chief Executive Officer Jeffrey Housenbold.  “During the quarter we launched the innovative Simple Path photo book creation experience, enhanced our cards and stationery offering and acquired Tiny Pictures.  We also made strong progress on our commercial printing initiative and prepared our manufacturing facilities in Charlotte and Phoenix for the seasonally busy fourth quarter.”
 
Third Quarter 2009 Financial Highlights
 
●
Net revenues totaled $40.5 million, a 13% year-over-year increase.
●
Third quarter 2009 represents the 35 th consecutive quarter of year-over-year net revenue growth.
●
Personalized Products & Services 2 net revenues totaled $23.6 million, a 22% year-over-year increase.
●
Personalized Products & Services net revenues represented 58% of total net revenues.
●
Net revenues from prints declined 6% year-over-year, to $15.6 million.
●
Commercial print net revenues totaled $1.2 million.
●
Existing customers generated 76% of total net revenues.
●
Gross profit margin was 47% of net revenues, compared to 49% 3 in the third quarter of 2008.
●
Operating expenses, excluding $4.0 million of stock-based compensation, totaled $24.1 million.
●
GAAP net loss was ($6.3) million, compared to a net loss of ($2.8) 3 million in the third quarter of 2008.
●
GAAP net loss per diluted share was ($0.25), compared to ($0.11) 3 in the third quarter of 2008.
●
Adjusted EBITDA was $2.0 million, compared to $0.1 million in the third quarter of 2008.
●
At September 30, 2009, the Company had $111.6 million of cash, cash equivalents and short-term investments.

Third Quarter 2009 Operating Metrics
 
●
Transacting customers totaled 982,000, a 7% increase over the third quarter of 2008.
●
Orders totaled 1.7 million, a 3% increase over the third quarter of 2008.
●
Average order value 4 was $23.03, a 6% increase over the third quarter of 2008.
 
Recent Operating Highlights
 
●
Introduced Shutterfly Simple Path creation experience that automatically makes photo books.
●
Acquired Tiny Pictures, a leading developer of mobile and social applications.
●
Launched our 2009 holiday cards and stationery collection including Shutterfly Support-a-Cause cards from organizations like LiveSTRONG and Special Olympics.
●
Enhanced Share Sites to include a solution for Youth Sports and announced partnerships with national and regional youth sports organizations.
●
Launched next generation of Shutterfly Video and iPhone application.
●
Named Brian Swette to the Board of Directors.

 
 
 
Business Outlook
 
The Company's current financial expectations for the fourth quarter and the full year 2009 are as follows:
 
Fourth Quarter 2009:
 
●
Net revenues to range from $102.6 million to $112.6 million, a year-over-year change of (4%) to 5%.
●
GAAP gross profit margins to range from 55% to 59% of net revenues.
●
Non-GAAP gross profit margins to range from 56% to 60% of net revenues.
●
GAAP operating income to range from $21 million to $27 million.
●
Non-GAAP operating income to range from $26 million to $32 million.
●
GAAP effective tax rate to range from 30% to 35%.
●
Non-GAAP effective tax rate to range from 30% to 35%.
●
GAAP diluted net income per share to range from $0.55 to $0.66.
●
Non-GAAP diluted net income per share to range from $0.68 to $0.78.
●
Weighted average diluted shares of approximately 27.2 million.
●
Adjusted EBITDA to range from $33 million to $39 million.
 
Full Year 2009:
 
●
Net revenues to range from $218 million to $228 million, a year-over-year change of 2% to 7%.
●
GAAP gross profit margins to range from 51% to 53% of net revenues.
●
Non-GAAP gross profit margins to range from 52% to 54% of net revenues.
●
GAAP operating loss to range from ($7) million to $0 million.
●
Non-GAAP operating income to range from $10 million to $16 million.
●
GAAP effective tax rate to range from 25% to 40%.
●
Non-GAAP effective tax rate to range from 30% to 35%.
●
GAAP diluted net income (loss) per share to range from a net loss of ($0.14) to net income of $0.01.
●
Non-GAAP diluted net income per share to range from $0.27 to $0.40.
●
Weighted average diluted shares of 25.8 million in net loss scenario to 26.8 million in net income scenario.
●
Adjusted EBITDA to range from 16% to 18% of net revenues.
●
Capital expenditures to range from $19 million to $21 million.
 
The foregoing financial guidance replaces any of the Company’s previously issued guidance and all such previous guidance should no longer be relied upon.
 
 
 
 
Third Quarter 2009 Conference Call
 
Management will review the third quarter 2009 financial results and its expectations for the fourth quarter and full year 2009 on a conference call on Wednesday, October 28, 2009 at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time).  To listen to the call and view the accompanying slides, please visit http://www.shutterfly.com . In the Investor Relations area, found in the "About Us" section, click on the link provided for the webcast, or dial 719-325-4880.  The webcast, as well as a podcast, will be archived and available at http://www.shutterfly.com .  A replay of the conference call will be available through Wednesday, November 11, 2009. To hear the replay, please dial 719-457-0820, replay passcode 2471402.
 
About Non-GAAP Financial Information
 
The accompanying press release dated October 28, 2009, contains certain non-GAAP financial measures.  Tables are provided in the press release that reconcile the non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP).  These non-GAAP financial measures include non-GAAP gross margins, non-GAAP operating income (loss) and the related operating income (loss) margins, non-GAAP income (loss) per share, adjusted EBITDA and free cash flow.   When used in connection with historical results and forward-looking guidance, the non-GAAP financial measure Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and stock-based compensation while free cash flow is defined as Adjusted EBITDA less purchases of property and equipment and capitalization of software and website development costs. For more information, please see Shutterfly's SEC Filings.
 
To supplement the Company's consolidated financial statements presented on a GAAP basis, we believe 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 net income (loss) or net income (loss) per share determined in accordance with GAAP.
  
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, which involve risks and uncertainties. These forward-looking statements include all statements regarding the Company's financial expectations for the fourth quarter and full year 2009 set forth under the caption "Business Outlook." The Company's actual results may differ materially from those anticipated in these forward-looking statements. Factors that might contribute to such differences include, among others, economic downturns and the general state of the economy, our ability to expand our customer base; our ability to retain and hire necessary employees, including seasonal personnel, and appropriately staff our operations; the impact of seasonality on our business; our ability to develop on a timely basis, as well as consumer acceptance of, new products and services; our ability to develop additional adjacent lines of business;  unforeseen changes in expense levels; and competition, which could lead to pricing pressure. 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 our business in general, we refer you to the "Risk Factors" sections of the Company's Form 10-K for the year ended December 31, 2008, and the Company's other filings, which are available on the Securities and Exchange Commission's Web site at www.sec.gov . These forward-looking statements are based on current expectations and the Company assumes no obligation to update this information.

 
 
 
# # #

About Shutterfly
Founded in 1999, Shutterfly, Inc. is an Internet-based social expression and personal publishing service.  Shutterfly provides high quality products and world class services that make it easy, convenient and fun for consumers to preserve their digital photos in a creative and thoughtful manner.  Shutterfly's flagship product is its award-winning photo book line, which helps consumers celebrate memories and tell their stories in professionally bound coffee table books.  More information about Shutterfly (NASDAQ:SFLY) is available at www.shutterfly.com .  Shutterfly and Shutterfly.com are trademarks of Shutterfly, Inc.

Contacts
Media Relations:
Gretchen Sloan, 650-610-5276
gsloan@shutterfly.com
 
 
Investor Relations:
John Kaelle, 650-610-3541
jkaelle@shutterfly.com
 

 

1  Adjusted EBITDA is a non-GAAP financial measure that the Company defines as earnings before interest, taxes, depreciation, amortization and stock-based compensation.
 
2  Personalized Products and Services revenues primarily include photo books, stationery and folded greeting cards, calendars, photo-based merchandise.  Commercial printing revenues are excluded from personalized products and services revenues.

3 As restated.  See Form 8-K dated October 23, 2009 for details of restatement which recorded an additional $1.1 million of stock-based compensation in FY 2008, of which $0.2 million related to third quarter 2008.
 
4 Average order value excludes commercial printing revenue.

 
 

 
 
 

Shutterfly, Inc.
                       
Condensed Consolidated Statements of Operations
                       
(In thousands, except per share amounts)
                       
(Unaudited)
                       
   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
   
September 30,
 
   
2009
   
2008
   
2009
   
2008
 
                         
         
(As restated)
         
(As restated)
 
Net revenues
  $ 40,495     $ 35,953     $ 115,365     $ 105,738  
Cost of net revenues (1)
    21,420       18,451       61,161       53,777  
        Gross profit
    19,075       17,502       54,204       51,961  
Operating expenses (1):
                               
   Technology and development
    11,390       9,689       33,347       28,796  
   Sales and marketing
    9,377       10,138       26,075       26,936  
   General and administrative
    7,363       6,901       22,642       22,299  
Total operating expenses
    28,130       26,728       82,064       78,031  
Loss from operations
    (9,055 )     (9,226 )     (27,860 )     (26,070 )
Interest expense
    (22 )     (100 )     (136 )     (185 )
Interest and other income, net
    74       455       681       2,514  
Loss before income taxes
    (9,003 )     (8,871 )     (27,315 )     (23,741 )
Benefit from income taxes
    2,657       6,071       9,083       13,032  
Net loss
  $ (6,346 )   $ (2,800 )   $ (18,232 )   $ (10,709 )
                                 
                                 
Net loss per share - basic and diluted
  $ (0.25 )   $ (0.11 )   $ (0.72 )   $ (0.43 )
                                 
Weighted-average shares outstanding - basic and diluted
    25,517       25,067       25,303       25,020  
 
                               
                                 
(1) Stock-based compensation is allocated as follows:
                               
                                 
Cost of net revenues
  $ 119     $ 109     $ 297     $ 301  
Technology and development
    1,077       654       2,292       1,693  
Sales and marketing
    955       696       2,428       1,733  
General and administrative
    2,005       1,216       4,778       3,327  
    $ 4,156     $ 2,675     $ 9,795     $ 7,054  

 
 
 
 

Shutterfly, Inc.
           
Condensed Consolidated Balance Sheets
           
(In thousands, except par value amounts)
           
(Unaudited)
           
             
   
September 30,
   
December 31,
 
   
2009
   
2008
 
             
         
(As restated)
 
ASSETS
           
Current assets:
           
   Cash and cash equivalents
  $ 63,250     $ 88,164  
   Short-term investments
    48,375       -  
   Accounts receivable, net
    3,607       5,992  
   Inventories
    3,316       3,610  
   Deferred tax asset, current portion
    1,030       1,194  
   Prepaid expenses and other current assets
    15,703       4,749  
              Total current assets
    135,281       103,709  
Long-term investments
    -       52,250  
Property and equipment, net
    43,217       48,108  
Goodwill and intangible assets, net
    13,872       14,547  
Deferred tax asset, net of current portion
    11,759       12,266  
Other assets
    4,719       2,417  
              Total assets
  $ 208,848     $ 233,297  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
   Accounts payable
  $ 6,265     $ 11,214  
   Accrued liabilities
    11,442       24,712  
   Deferred revenue
    8,916       9,461  
   Current portion of capital lease obligations
    9       90  
              Total current liabilities
    26,632       45,477  
Other liabilities
    1,613       1,001  
Capital lease obligations, less current portion
    8       17  
              Total liabilities
    28,253       46,495  
                 
Stockholders' equity
               
   Common stock, $0.0001 par value; 100,000 shares authorized; 25,651 and
               
        25,138 shares issued and outstanding on September 30, 2009 and
               
        December 31, 2008, respectively
    3       2  
   Additional paid-in-capital
    215,926       203,902  
   Accumulated deficit
    (35,334 )     (17,102 )
              Total stockholders' equity
    180,595       186,802  
              Total liabilities and stockholders' equity
  $ 208,848     $ 233,297  


 
 
 

Shutterfly, Inc.
           
Condensed Consolidated Statements of Cash Flows
           
(In thousands)
           
(Unaudited)
           
   
Nine Months Ended
 
   
September 30,
 
   
2009
   
2008
 
             
         
(As restated)
 
Cash flows from operating activities:
           
Net loss
  $ (18,232 )   $ (10,709 )
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    18,844       17,463  
Amortization of intangible assets
    1,491       1,370  
Stock-based compensation
    9,795       7,054  
Loss on disposal of property and equipment
    79       308  
Deferred income taxes
    703       (10,123 )
Changes in operating assets and liabilities:
               
Accounts receivable, net
    2,389       1,336  
Inventories
    294       1,518  
Prepaid expenses and other current assets
    (10,700 )     (3,553 )
Other assets
    (2,421 )     352  
Accounts payable
    (5,083 )     (2,758 )
Accrued and other liabilities
    (14,737 )     (6,086 )
Deferred revenue
    (546 )     468  
Net cash used in operating activities
    (18,124 )     (3,360 )
                 
Cash flows from investing activities:
               
Acquisition of business and intangibles, net of cash acquired
    (796 )     (10,098 )
Purchases of property and equipment
    (8,272 )     (16,760 )
Capitalization of software and website development costs
    (3,032 )     (3,239 )
Proceeds from sale of short term investments
    -       3,002  
Proceeds from sale of equipment
    -       6  
Purchase of auction rate securities
    -       (52,250 )
Proceeds from the sale of auction rate securities
    3,875       -  
Net cash used in investing activities
    (8,225 )     (79,339 )
                 
Cash flows from financing activities:
               
Principal payments of capital lease obligations
    (90 )     (378 )
Proceeds from issuance of common stock upon exercise of stock options
    2,139       1,130  
Shares withheld for payment of employee's withholding tax liability
    (1,041 )     -  
Tax benefit of stock options recorded in additional paid-in capital
    427       -  
Net cash provided by financing activities
    1,435       752  
                 
Net increase in cash and cash equivalents
    (24,914 )     (81,947 )
Cash and cash equivalents, beginning of period
    88,164       122,582  
Cash and cash equivalents, end of period
  $ 63,250     $ 40,635  
                 
                 
Supplemental schedule of non-cash investing activities
               
Accrued property and equipment liability
    1,524       -  
Escrow liability from acquisition of business
    150       -  

 
 
 


Shutterfly, Inc.
           
User Metrics Disclosure
           
             
   
Three Months Ended
 
   
September 30,
 
   
2009
   
2008
 
             
User Metrics
           
             
Customers
    981,670       916,195  
   year-over-year growth
    7 %     9 %
                 
Orders
    1,704,591       1,656,050  
   year-over-year growth
    3 %     0 %
                 
Average order value(1)
  $ 23.03     $ 21.71  
   year-over-year growth
    6 %     11 %
                 
Average orders per customer
    1.7 x     1.8 x
                 
(1) Average order value excludes commercial print revenue
 

 
 
 
 

Shutterfly, Inc.
                         
Reconciliation of Forward-Looking Guidance for Non-GAAP Financial Measures to GAAP Measures
(In millions, except per share amounts)
                         
                             
                             
     
Forward-Looking Guidance
     
GAAP
           
Non-GAAP
     
Range of Estimate
 
Adjustments
   
Range of Estimate
     
From
 
To
 
From
 
To
   
From
 
To
                             
 
Three Months Ending December 31, 2009
                     
                             
 
   Net revenues
 
$102.6
 
$112.6
 
       -
 
       -
   
$102.6
 
$112.6
 
   Gross profit margin
 
55%
 
59%
 
1%
[a]
 
56%
 
60%
 
   Operating income
 
$21
 
$27
 
$5
[b]
 
$26
 
$32
 
   Operating margin
 
20%
 
24%
 
5%
 
4%
[b]
 
25%
 
28%
                             
 
   Stock-based compensation
 
$4.5
 
$4.5
 
$4.5
 
$4.5
   
              -
 
              -
 
   Amortization of intangible assets
 
$0.6
 
$0.6
 
$0.6
 
$0.6
   
              -
 
              -
                             
 
   Adjusted EBITDA*
                   
$33.0
 
$39.0
                             
 
   Diluted income per share
 
$0.55
 
$0.66
 
$0.13
 
$0.12
[c]
 
$0.68
 
$0.78
 
   Diluted shares
 
27.2
 
27.2
 
       -
 
       -
   
27.2
 
27.2
 
   Effective tax rate
 
30%
 
35%
 
0%
 
0%
[d]
 
30%
 
35%
                             
                             
 
Twelve Months Ending December 31, 2009
                     
                             
 
   Net revenues
 
$218.0
 
$228.0
 
       -
 
       -
   
$218.0
 
$228.0
 
   Gross profit margin
 
51%
 
53%
 
1%
[e]
 
52%
 
54%
 
   Operating income (loss)
 
($7)
 
$0
 
$17.0
 
$16.0
[f]
 
$10
 
$16
 
   Operating margin
 
(3%)
 
0%
 
8%
 
7%
[f]
 
5%
 
7%
                             
 
   Stock-based compensation
 
$14.3
 
$14.3
 
$14.3
 
$14.3
   
              -
 
              -
 
   Amortization of intangible assets
 
$2.1
 
$2.1
 
$2.1
 
$2.1
   
              -
 
              -
                             
 
   Adjusted EBITDA*
                   
$35
 
$41
 
   Adjusted EBITDA* margin
                   
16%
 
18%
                             
 
   Diluted earnings (loss) per share
 
($0.14)
 
$0.01
 
$0.41
 
$0.39
[g]
 
$0.27
 
$0.40
 
   Diluted shares
 
25.8
 
26.8
 
     1.0
 
       -
   
26.8
 
26.8
 
   Effective tax rate
 
40%
 
25%
 
(10%)
 
10%
[h]
 
30%
 
35%
                             
 
   Capital expenditures
 
$19.0
 
$21.0
           
$19.0
 
$21.0
                             
                             
                             
                             
*
Adjusted EBITDA is a non-GAAP financial measure defined as earnings before interest, taxes, depreciation, amortization and stock-based compensation.
[a]
Reflects estimated adjustments for stock-based compensation expense of approximately $100k and amortization of purchased intangible assets of approximately $600k.
[b]
Reflects estimated adjustments for stock-based compensation expense of approximately $4.5 million and amortization of purchased intangible assets of approximately $600k.
[c]
Reflects the estimated adjustments in item [b] and the income tax impact related to these adjustments.
[d]
Reflects the estimated adjustments to the effective tax rate based on the adjustments in item [b].
[e]
Reflects estimated adjustments for stock-based compensation expense of approximately $400k and amortization of purchased intangible assets of approximately $2.1 million.
[f]
Reflects estimated adjustments for stock-based compensation expense of approximately $14.3 million and amortization of purchased intangible assets of approximately $2.1 million.
[g]
Reflects the estimated adjustments in item [f] and the income tax impact related to these adjustments.
[h]
Reflects the estimated adjustments to the effective tax rate based on the adjustments in item [f].
 

 
 
 
 
 
Shutterfly, Inc.
                                               
Reconciliation of GAAP Gross Profit Margin to Non-GAAP Gross Profit Margin
             
(In thousands)
                                               
(Unaudited)
                                               
* As restated
                                           
Year Ended
 
   
Mar. 31,
   
Jun. 30,
   
Sep. 30,
   
Dec. 31,
   
Mar. 31,
   
Jun. 30,
   
Sep. 30,
   
Dec. 31,
 
    2008*     2008*     2008*     2008*     2009     2009     2009     2008*  
GAAP gross profit
  $ 16,401     $ 18,058     $ 17,502     $ 65,306     $ 16,340     $ 18,789     $ 19,075     $ 117,267  
Stock-based compensation expense within cost of net revenues
    92       101       109       70       95       82       119       372  
Amortization of intangible assets within cost of net revenues
    367       367       367       368       367       394       460       1,469  
Non-GAAP gross profit
  $ 16,860     $ 18,526     $ 17,978     $ 65,744     $ 16,802     $ 19,265     $ 19,654     $ 119,108  
                                                                 
Non-GAAP gross profit margin
    49 %     52 %     50 %     61 %     47 %     50 %     49 %     56 %


Shutterfly, Inc.
                                           
Reconciliation of GAAP Operating Margin to Non-GAAP Operating Margin
             
(In thousands)
                                               
(Unaudited)
                                               
* As restated
                                           
Year Ended
 
   
Mar. 31,
   
Jun. 30,
   
Sep. 30,
   
Dec. 31,
   
Mar. 31,
   
Jun. 30,
   
Sep. 30,
   
Dec. 31,
 
    2008*     2008*     2008*     2008*     2009     2009     2009     2008*  
GAAP operating income (loss)
  $ (8,672 )   $ (8,172 )   $ (9,226 )   $ 28,676     $ (9,396 )   $ (9,408 )   $ (9,055 )   $ 2,606  
Stock-based compensation expense
    2,058       2,321       2,676       2,695       2,804       2,834       4,156       9,750  
Amortization of intangible assets
    457       457       457       456       457       484       550       1,827  
Non-GAAP operating income (loss)
  $ (6,157 )   $ (5,394 )   $ (6,093 )   $ 31,827     $ (6,135 )   $ (6,090 )   $ (4,349 )   $ 14,183  
                                                                 
Non-GAAP operating margin
    (18 %)     (15 %)     (17 %)     30 %     (17 %)     (16 %)     (11 %)     7 %


Shutterfly, Inc.
                                               
Reconciliation of GAAP Net Income to Non-GAAP Net Income
             
(In thousands)
                                               
(Unaudited)
                                               
* As restated
                                           
Year Ended
 
   
Mar. 31,
   
Jun. 30,
   
Sep. 30,
   
Dec. 31,
   
Mar. 31,
   
Jun. 30,
   
Sep. 30,
   
Dec. 31,
 
    2008*     2008*     2008*     2008*     2009     2009     2009     2008*  
GAAP net income (loss)
  $ (3,763 )   $ (4,146 )   $ (2,800 )   $ 14,369     $ (6,232 )   $ (5,654 )   $ (6,346 )   $ 3,660  
Stock-based compensation expense
    2,058       2,321       2,676       2,695       2,804       2,834       4,156       9,750  
Amortization of intangible assets
    457       457       457       456       457       484       550       1,827  
Income taxes associated with certain non-GAAP entries
    (1,703 )     (1,523 )     (3,202 )     3,068       (1,168 )     (1,190 )     (1,255 )     (3,360 )
Non-GAAP net income (loss)
  $ (2,951 )   $ (2,891 )   $ (2,869 )   $ 20,588     $ (4,139 )   $ (3,526 )   $ (2,895 )   $ 11,877  
                                                                 
Diluted net income per share:
                                                               
GAAP
  $ (0.15 )   $ (0.17 )   $ (0.11 )   $ 0.56     $ (0.25 )   $ (0.22 )   $ (0.25 )   $ 0.14  
Non-GAAP
  $ (0.12 )   $ (0.12 )   $ (0.11 )   $ 0.81     $ (0.16 )   $ (0.14 )   $ (0.11 )   $ 0.46  
                                                                 
Shares used in GAAP and non-GAAP diluted net income per-share calculation
    24,949       25,045       25,067       25,455       25,148       25,246       25,517       25,787  

 
 
 

Shutterfly, Inc.
                                               
Reconciliation of GAAP to Non-GAAP Effective Tax Rate
       
(In thousands)
                                               
(Unaudited)
                                               
* As restated
                                           
Year Ended
 
   
Mar. 31,
   
Jun. 30,
   
Sep. 30,
   
Dec. 31,
   
Mar. 31,
   
Jun. 30,
   
Sep. 30,
   
Dec. 31,
 
    2008*     2008*     2008*     2008*     2009     2009     2009     2008*  
GAAP benefit (provision) for income taxes
  $ 3,590     $ 3,371     $ 6,071     $ (14,604 )   $ 2,928     $ 3,497     $ 2,657     $ (1,572 )
Income taxes associated with certain non-GAAP entries
    (1,703 )     (1,523 )     (3,202 )     3,068       (1,168 )     (1,190 )     (1,255 )     (3,360 )
Non-GAAP benefit (provision) for income taxes
  $ 1,887     $ 1,848     $ 2,869     $ (11,536 )   $ 1,760     $ 2,307     $ 1,402     $ (4,932 )
                                                                 
GAAP income (loss) before income taxes
  $ (7,353 )   $ (7,517 )   $ (8,871 )   $ 28,973     $ (9,160 )   $ (9,152 )   $ (9,003 )   $ 5,232  
Stock-based compensation expense
    2,058       2,321       2,676       2,695       2,804       2,834       4,156       9,750  
Amortization of intangible assets
    457       457       457       456       457       484       550       1,827  
                                                                 
Non-GAAP income (loss) before income taxes
  $ (4,838 )   $ (4,739 )   $ (5,738 )   $ 32,124     $ (5,899 )   $ (5,834 )   $ (4,297 )   $ 16,809  
                                                                 
GAAP Effective tax rate
    49 %     45 %     68 %     50 %     32 %     38 %     30 %     30 %
                                                                 
Non-GAAP effective tax rate
    39 %     39 %     50 %     36 %     30 %     40 %     33 %     29 %

Shutterfly, Inc.
                                             
Reconciliation of Non-GAAP Adjusted EBITDA
             
(In thousands)
                                               
(Unaudited)
                                               
 * As restated
                                           
Year Ended
 
   
Mar. 31,
   
Jun. 30,
   
Sep. 30,
   
Dec. 31,
   
Mar. 31,
   
Jun. 30,
   
Sep. 30,
   
Dec. 31,
 
    2008*     2008*     2008*     2008*     2009     2009     2009     2008*  
Income (loss) from Operations
  $ (8,672 )   $ (8,172 )   $ (9,226 )   $ 28,676     $ (9,396 )   $ (9,408 )   $ (9,055 )   $ 2,606  
Add back:
                                                               
Depreciation and amortization
    5,885       6,266       6,682       7,205       6,706       6,779       6,850       26,038  
Stock-based compensation expense
    2,058       2,321       2,676       2,695       2,804       2,834       4,156       9,750  
Non-GAAP Adjusted EBITDA
  $ (729 )   $ 415     $ 132     $ 38,576     $ 114     $ 205     $ 1,951     $ 38,394  

Shutterfly, Inc.
                                               
Reconciliation of Non-GAAP Adjusted EBITDA to Free Cash Flows
           
(In thousands)
                                               
(Unaudited)
                                               
* As restated
                                           
Year Ended
 
   
Mar. 31,
   
Jun. 30,
   
Sep. 30,
   
Dec. 31,
   
Mar. 31,
   
Jun. 30,
   
Sep. 30,
   
Dec. 31,
 
    2008*     2008*     2008*     2008*     2009     2009     2009     2008*  
Non-GAAP Adjusted EBITDA
  $ (729 )   $ 415     $ 132     $ 38,576     $ 114     $ 205     $ 1,951     $ 38,394  
Less: Purchases of property and equipment
    (7,930 )     (3,840 )     (4,990 )     (1,460 )     (4,158 )     (1,826 )     (3,811 )     (18,220 )
Less: Capitalized technology & development costs
    (848 )     (1,410 )     (981 )     (1,288 )     (824 )     (1,114 )     (1,094 )     (4,527 )
Free cash flows
  $ (9,507 )   $ (4,835 )   $ (5,839 )   $ 35,828     $ (4,868 )   $ (2,735 )   $ (2,954 )   $ 15,647