q1 2009 earning report of shutterfly inc

Download Q1 2009 Earning Report of Shutterfly Inc

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  • 1. Q1 2009 Earnings Conference Callg April 29, 2009Jeff Housenbold, CEO Mark Rubash, CFO

2. Safe Harbor DisclaimerThis presentation contains quot;forward-lookingquot; 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 statements about our business outlook and strategy, and statements about strategy historical results that may suggest trends for our business. You can identify these statements by the use of terminology such as guidance, believe, expect, will, or similar forward-looking terms. You should not rely on these forward- looking statements as they involve risks and uncertainties and may cause actual results to vary materially from the forward- looking statements. Factors that might contribute to such differences include, among others, economic downturns and the g general state of the economy, our ability to expand our customer base; our ability to retain and hire necessary employees, y y yy y 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 Ri k F t sections of th companys SEC fili ft th Risk Factors ti f the filings, which are available on th Shi hil bl the Securities and E h itid Exchange Commissions 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.This presentation includes non-GAAP financial measures, including Adjusted EBITDA, and non-GAAP EPS, and Free Cash Flows. Flows The method we use to produce non-GAAP financial measures is not computed according to GAAP and may differ non GAAP from the methods used by other companies. We believe that these non-GAAP measures better reflect 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 and manage expenditures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for or superior to comparable financial measures prepared in accordance with GAAP. 2 3. Earnings Conference Call Agenda Key Q1 accomplishments Financial performance review Guidance for Q2 / FY 20093 4. Todays Key Messages 5% increase in Q1 total net revenues; and 19% increaseSolid in personalized products & services net revenues ppQ1-09 Break-even Adjusted EBITDA* of $0.1 million ResultsBetter than expected gross and operating margins Photo Books: launched personalized 8x8 soft coverFocus onedition, and continued to improve experience ThreeCards & Stationery: Launched coordinated cards,Strategic announcements, note pads & gift tagsttdift t ImperativesShare Sites: enhancements to drive creation, engagementand conversion; ended quarter with 920k + sites Successfully opened new Phoenix, AZ plant on scheduleBuildingPromoted Peter Elarde to SVP & CMO and for theDan McCormick to VP & GM of Products & Services units FutureContinued focus on initiatives to increase net revenues,free cash flows and long-term shareholder value*Adjusted EBITDA is a non-GAAP financial measure defined as earnings before interest, taxes, depreciation, amortization and stock-based compensation. 4For more information, please see Shutterflys First Quarter 2009 Press Release dated April 29, 2009 and other SEC Filings. 5. New Soft Cover Photo Books Key Features Expanded photo book choice set with new 8x8 soft cover books Priced at $ $19.99 to compliment hard cover edition at $ $29.99 New option will encourage trial, increase gift giving and expand consideration to more causal use occasions5 6. Expanded Card & Stationery Collection Personal Stationery Coordinated Invitation SuitesInvitationThank You CardGift Tag Address Label 6 7. CenterStage Puzzles 7 8. Improvements to Share sites Enhanced share site permissions and notifications Optimized ability to order prints and photo books Improved ability to share to favorite social networking and blogging sites 8 9. Shutterfly for iPhone Key Features Access & view Shutterfly albums Upload photos to Shutterfly account from iPhone Post photos to Shutterfly Share sitesResults #1 free photo app Top 100 overall free apps9 10. Q1 Site & User Experience Changes Homepage redesign:improved registration,abandonment, conversionrates and natural searchrankings Updated registration page:improved conversion rates Updated promotion engine:improved segmentation andtargeting 10 11. Letter to Customers 11 12. Enhanced Adobe Integration Announced default print solution into Adobe Photoshop Elements 6 & 7, Photoshop Album Starter Edition and Photoshop.com Changes allow Adobe users to create photo books, cards, calendars and prints in just a few clicks 12 13. Target Wedding and Baby Registries 13 14. Shutterfly Baby Solutions PageFind announcementsthat complimentsyour babys nameTips on photography,announcements andmore 14 15. Recent Awards 15 16. Leverage Manufacturing AssetsRedwood City, CACorporate HQ Charlotte, NC ManufacturingPhoenix, AZ Manufacturing 16 17. Strong Management TeamPeter Elarde Senior Vice President and Chief Marketing Officer Dan McCormick D MCik Vice President & General Manager, Products and Services 17 18. In SummaryDriving Key Initiatives Lead in photo books, cards & stationery and memory sharing Revenue, free cash flow and long term shareholder value Market Leaders Best products, services and brand Track record of profitability since 2003 Strong balance sheet Talented Managers History of executing in good and bad economic cycles Commitment to financial discipline18 19. Financial Review Mark Rubash, CFO 20. Financial Topics Q1 Performance Key Metrics Q1 Operating Results Q2 and Full Year 2009 Guidance 20 21. Q1 2009 User Engagement Metrics User engagement metrics continued to show trends experienced in 2008 Lower activity during non-seasonal periodsnon seasonalStronger performance during days surrounding traditional gift-giving periodsUp slightly year over year with fairly consistent growthyear-over-year, Site Visitsrates across the quarter Accelerated significantly from Q4, with double-digit User Registrationsyear-over-year growthUp only slightly year-over-year, but strong double-digitUnique Uploadersgrowth in images uploadedDouble-digit year-over-year growth Image Shares Sent21 22. Q1 2009 Key MetricsYear-Over-Q1 2008 Q1 2009Year Growth(1%)Customers895,000 888,000 Orders1,617,000 1,471,000(9%)15%Average Order Value $21.23$24.48 22 23. Q1 2009 Revenue Customer Mix $36.0 M $34.3 M 1% Y-o-Y 21% 22% GrowthNew Customers Existing Customers79% 78% 6% Y-o-YYoY GrowthQ1 08 Q1 09 23 24. Q1 2009 Revenue Product Mix $36.0 $36 0 M $34.3 M19% 61% 54% Personalized Products & Y-o-Y YoY Services Growth (photo books, stationery & folded greeting cards, calendars, photo merchandise, etc.) (12%) 46% Photo Prints 39% Y-o-Y DeclineQ1 08 Q1 09 24 25. GAAP Operating Results Gross Profit MarginsQ1 2008Q1 2009 Q1 2008 Q1 2009 2007 Net Revenue$34.3 M % of Total Revenues $36.0 M48% $16.3 MGross Profit/Margins45% $16.4 M Year-over-year margin decline due to planned manufacturing transition from Hayward, CA to Phoenix, AZ Stronger-than-expected margin performance from improvements in shipping and materials costs and improved product mix 25 26. GAAP Operating Results Technology & Development ExpensesQ1 2008Q1 2009 Q1 2008 Q1 2009 2007 Net Revenue$34.3 M % of Total Revenues $36.0 M48% $16.3 MGross Profit/Margins45% $16.4 MOperating ExpensesTechnology & Devt$9.2 M $11.0 M27% 31% Increases in depreciation, amortization and stock-based compensation and increases in power, co-location space and bandwidth costs 26 27. GAAP Operating Results Sales & Marketing ExpensesQ1 2008Q1 2009 Q1 2008 Q1 2009 2007 Net Revenue$34.3 M % of Total Revenues $36.0 M48% $16.3 MGross Profit/Margins45% $16.4 MOperating ExpensesTechnology & Devt$9.2 M $11.0 M27% 31%Sales & Marketingg $$8.1 M$$7.8 M23% 22% Q1 customer acquisition costs decreased by 4% from prior year, year reflecting improved performance from our search engine optimization efforts and greater promotional efficiency 27 28. GAAP Operating Results General andAdministrative Expenses Q1 2008 Q1 2009 Q1 2008 Q1 2009 2007 Net Revenue $34.3 M % of Total Revenues $36.0 M 48% $16.3 MGross Profit/Margins45%$16.4 MOperating ExpensesTechnology & Devt $9.2 M$11.0 M 27%31%Sales & Marketingg$ $8.1 M $$7.8 M 23%22%General & Admin. $7.6 M $6.9 M 22%19% Year-over-year decrease attributed primarily to headcount reductions and lower use of outside consultants and contractors G&A savings partially offset by increased costs for office space 28 29. Adjusted EBITDA Q1 2008Q1 2009 Q1 2008 Q1 20092007 Net Revenue $34.3 M % of Total Revenues $36.0 M48% $16.3 MGross Profit/Margins 45% $16.4 MOperating Expenses Technology & Devt $9.2 M $11.0 M27%31% Sales & M