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Shutterfly Delivers Strong Results, But the Stock Continues to Tank

Posted on Tuesday, Sep 29th 2015

A recent IBISWorld report on the online photo printing market in the US estimated the industry to have grown 10% annually over the period 2009 to 2014 to $2 billion. Leading online photo printing player Shutterfly (Nasdaq: SFLY) reported second quarter results that were better than the market’s forecast.

Shutterfly’s Financials

Revenues grew 16% over the year to $183.9 million, ahead of the Street’s projections of $179 million. Loss per share declines from $0.63 a year ago to $0.56 for the quarter and was significantly ahead of the Street’s estimated loss of $1.05 per share.

By segment, revenues from the Consumers category grew 14% to $171.3 million and revenues from their enterprise segment grew 73% to $12.6 million. Of late, Shutterfly has been diversifying into the enterprise segment and remains hopeful of stronger growth in the coming quarters within the segment. Shutterfly’s Business Solution (SBS) unit develops and executes enterprise targeted marketing programs globally that helps marketers deliver customer-focused messages. SBS makes the whole process of making marketing communication media as simple as creating a photobook on their site. Mobile usage is gradually growing as well as they reported nearly 14% of their revenues from mobile devices.

Among other metrics, total number of customers grew 19% to 3.1 million with total orders increasing 21% to 5 million. Average order value fell 10% over the year to $32.50.

For the third quarter, Shutterfly projected revenues of $164.5 million–$167.5 million with a net loss of $1.39-$1.24 per share. They expect to end the year with revenues of $1,040 million-$1,060 million and a net loss of $0.03 to earnings of $0.20 per share. The market was looking for third quarter revenue of $161.44 million with a loss of $1.34 per share and full year revenue of $1.06 billion with a loss of $0.33 per share.

Shutterfly Continues New Offerings

During the quarter, Shutterfly continued to deliver newer categories of products. Recently, they tied up with the Alzheimer’s Association to help patients realize the benefits of using photos as therapy. The partnership began with a donation to Alzheimer’s care, support, and research programs and includes Shutterfly’s involvements in fundraising, social activations, event sponsorship, and participation. To support the patients and their families, Shutterfly recently launched a new resource page to offer photo tips for families facing the disease. The page includes research-guided suggestions on using photos as a media of reminiscence therapy for patients.

Additionally, they expanded their product and service offerings for both the consumer and enterprise segment. For the enterprise segment, Shutterfly is investing in the development of an enterprise grade platform, a new media storage platform, and migrating to a new, more sophisticated data warehouse. For consumers, they launched a new iOS travel-related photo book app TripPix, which uses photos on mobile devices to quickly convert them to a photo book. Within Shutterfly’s cards and stationery product lineup, they’ve added new wedding invitation suites and save-the-date stationery magnets besides adding new categories including jewelry, serving trays, and metal and mounted wall art.

Shutterfly is also focusing on building a new Shutterfly 3.0 platform that is expected to include several improvements such as the integration of ThisLife into the Shutterfly desktop and mobile creation path, and the creation of a next generation of back-end media platform, personalized e-commerce capabilities and a more focused mobile and desktop strategy to improve user engagement and increase monetization.

Meanwhile talk on the acquisition of Shutterfly itself appears to have died out. Investors are still skeptical of the company’s performance and their stock is trading at 52-week low levels of $35.75 with a market capitalization of $1.3 billion. It touched a 52-week high of $49.89 in September last year.

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