shutterfly earnings 1q 2014 powerpoint slide deck

Download Shutterfly Earnings 1Q 2014 Powerpoint Slide Deck

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Shutterfly Earnings for 1Q 2014 released after market close today. Released in tandem with their conference call - which starts in about 20 minutes: http://www.media-server.com/m/p/o42tycb9 Looks like they beat by $0.05 and gave updated guidance more or less in-line with consensus. Note that Goldman upgraded the stock 2 weeks ago...

TRANSCRIPT

PowerPoint Presentation

Q1 2014 Earnings Conference Call APRIL 30, 2014

Jeff Housenbold, CEO Brian Regan, CFO

2

Safe Harbor Disclaimer This presentation 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 statements about our plans for 2014 and beyond and our business outlook for the second quarter and full year 2014 and statements about 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, 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, economic downturns and the general state of the economy; the loss of sales partners for our products; our ability to expand our customer base, increase sales to existing customers and meet production requirements; our ability to successfully integrate acquired businesses and assets; 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 innovative, new products and services on a timely and cost-effective basis; consumer acceptance of our products and services; unforeseen changes in expense levels; and competition and the pricing strategies of our competitors, 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 section of tour SEC filings, including our most recent Form 10-K and 10-Q, which are available on the Securities and 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 non-GAAP gross margin, adjusted EBITDA, and non-GAAP net loss per share. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is provided at the end of this presentation. The method we use to produce non-GAAP financial measures is not computed according to GAAP and may differ from the methods used by other companies. To supplement our consolidated financial statements presented on a GAAP basis, we believe that these non-GAAP measures provide useful information about our core operating results and thus are appropriate to enhance the overall understanding of our past financial performance and our prospects for the future. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of our underlying operational results and trends and performance. Management uses these non-GAAP measures to evaluate our 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 comparable financial measures determined in accordance with GAAP. Management strongly encourages review of our financial statements and publicly-filed reports in their entirety and to not rely on any single financial measure.

3

Conference Call Agenda

Key Q1 accomplishments

Q1 financial performance Q2 / FY2014 outlook

4

Q1 Financial Results

Net Revenue

Operating Loss

Adjusted EBITDA *

Net Loss per Share (GAAP)

Net Loss per Share (Non-GAAP)**

Q1 FY13 Q1 FY14 Guidance Provided

(on 2/5/14)

$116.7

($24.0)

$3.3

($0.33)

($0.33)

$137.1

($38.6)

$0.2

($0.89)

($0.82)

$132.0 to $135.0

($41.5) to ($43.5)

($1.5) to $0.5

($0.93) to ($0.99)

($0.86) to ($0.92)

($ in millions except per share amounts)

Strong growth in customers and orders combined with healthy increases in Average Order Value (AOV) resulted in Q1 results that were at or above the high-end of our guidance ranges for revenue, EBITDA, net loss and EPS

* Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and stock-based compensation. ** Non-GAAP Net Loss normalizes for the impact our Convertible Note offering has on Net Loss and earnings per share. A non-GAAP to GAAP reconciliation is provided at the end of this presentation.

5

Q1 Consumer Metrics

Improvements in brand awareness and customer engagement resulting from our integrated marketing campaigns and pricing and promotional initiatives resulted in strong customer and order growth and record Q1 AOV

Y/Y Growth

Customers

Orders

Average Order Value (AOV)

2,557,245

3,869,201

$33.76

2,248,858

3,417,312

$32.13

14%

13%

5%

Q1 FY14 Q1 FY13

6

Enhancements to ThisLife Beta

Personal Ratings Hide and Filter

Advanced Search Multi-platform

7

Continued Innovation in Our Core Businesses

Foil Stamped Collection

Belly Bands

Circle Stickers

Wrap Around Address Labels

8

Continued Innovation in Our Core Businesses

Luggage Tags Hallmark Photo Inserts

Make My Book Service Photo Story app

9

Partnerships with Leading Brands and Designers

10

Scale and Operational Infrastructure Initiatives

Las Vegas Datacenter Shakopee Production Facility

11

Q1 FY14 Financial Results Review

Brian Regan, CFO

12

Q1 Financial Results Summary

Net Revenue

Adjusted EBITDA *

Net Loss per Share (GAAP)

Net Loss per Share (Non-GAAP)**

Q1 FY13 Q1 FY14 Change (Y/Y)

$116.7

$3.3

($0.33)

($0.33)

$137.1

$0.2

($0.89)

($0.82)

$20.4

($3.1)

($0.56)

($0.49)

($ in millions except per share amounts)

* Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and stock-based compensation. ** Non-GAAP Net Loss normalizes for the impact our Convertible Note offering has on Net Loss and earnings per share. A non-GAAP to GAAP reconciliation is provided at the end of this presentation.

13

Net Revenues by Category

Net Revenues

Consumer Enterprise

Q1 FY13 Q1 FY14 Y/Y Growth

$116.7

$109.8 $6.9

$137.1

$130.6 $6.5

17%

19% (6%)

($ in millions)

Q1 FY13 Q1 FY14 Revenue Mix by Category

94%

6%

93%

7%

Consumer Enterprise

95%

5%

94%

6%

14

Q1 Consumer Metrics

Strong customer and order growth and continued improvements in AOV reflect improvements in brand awareness and customer engagement resulting from our integrated marketing campaigns and pricing and promotional initiatives

Y/Y Growth

Customers

Orders

Average Order Value (AOV)

2,557,245

3,869,201

$33.76

2,248,858

3,417,312

$32.13

14%

13%

5%

Q1 FY14 Q1 FY13

15

GAAP Gross Profit/Margin ($ in millions except per share amounts)

Net Revenue

Gross Profit / Margins

Gross Profit / Margins (Non-GAAP)*

of Total Net Revenues

Q1 FY13 Q1 FY14 Q1 FY13 Q1 FY14

$116.7

$54.9

$57.8

$137.1

$60.8

$64.6

44%

47%

47%

50%

Q1s lower GAAP gross margin was largely driven by: higher depreciation and equipment and customer service expenses related

to our new Fort Mill facility unfavorable shift in product mix to lower gross margin products that are

typically outsourced partially offset by lower material costs related to our increased scale and

insourcing, as well as lower overall shipping rates resulting from certain cost-savings initiatives

* Non-GAAP Gross Profit/Margins excludes stock-based compensation and amortization of intangible assets. A non-GAAP to GAAP reconciliation is provided at the end of this presentation.

16

Q1 operating expense levels reflect increased headcount, the increased cost structure from acquisitions and purchase accounting amortization

GAAP Total Operating Expenses

($ in millions except per share amounts)

Net Revenue

Gross Profit / Margins

Operating Expenses

Operating Expenses (excl. SBC)

of Total Net Revenues

Q1 FY13 Q1 FY14 Q1 FY13 Q1 FY14

$116.7

$54.9

$78.8

$67.8

$137.1

$60.8

$99.4

$84.4

44%

72%

62%

47%

68%

58%

17

The increase in Technology and Development expenses was driven by: incremental costs associated with our recent ac

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