Shutterfly Posts Narrower Q1 Loss on Higher Revs - Analyst Blog

Personalized products and service provider, Shutterfly Inc.'s SFLY first-quarter 2014 loss per share of 82 cents was narrower than the Zacks Consensus Estimate of a loss of 93 cents, owing to the better-than-expected top line.
 
The company's first-quarter loss was also narrower than management's expectation of a loss of 86–92 cents per share. However, earnings were wider than the prior-year quarter loss of 33 cents, mainly due to higher expenses.

In the quarter under review, net revenue increased 17.5% year over year to $137.1 million and was ahead of the Zacks Consensus Estimate of $135.0 million by approximately 1.6%. Revenues benefited from the strong performance of the Consumer segment. Revenues also beat management's guidance range of $132.0–$135.0 million.

Behind the Headline Numbers

Revenues from the Consumers category were $130.6 million in the quarter, up 19.0% year over year. The category received a boost from increased selling across all of its brands as well as core products like photo books and cards.

Enterprise segment revenues declined 6.0% to $6.5 million in the quarter, as some Enterprise projects were delayed into the second quarter.

In the quarter, the total number of customers was 2.6 million, reflecting an increase of 13.7% from the prior-year quarter. Total orders generated were 3.9 million, up 13.0% year over year. Average order value was $33.76, up 5.0% year over year driven by promotional strategies and integrated marketing campaigns adopted by the company.

Excluding stock-based compensation and amortization, sales and marketing expense increased 20.7% year over year to $42.1 million due to increased investments in integrated marketing campaigns and a modest increase in headcount.

Adjusted EBITDA was $186.0 million, down 94.4% year over year, driven by higher annualized cost from previous acquisitions and costs associated with the larger Fort Mill, SC facility, partially offset by continued operational efficiency gains.

Second-Quarter Guidance

Shutterfly's business is highly seasonal and the company posts losses in the first three quarters of the year.

For the second quarter of 2014, Shutterfly expects net revenue in the range of $154.0–$158.0 million, up 15.4% to 18.4% year over year. The company expects loss per share in the range of 65–68 cents per share in the upcoming quarter.

2014 Outlook

For full-year 2014, Shutterfly expects net revenue in the range of $903.0–$920.0 million, up 15.2% to 17.4% year over year. The company expects loss of 8 cents to earnings of 13 cents for 2014, representing a decline from 2013 levels.

Depreciation, labor and equipment costs incurred for expansion and acquisition of manufacturing facilities are also expected to adversely impact profitability in 2014.

Other Stocks to Consider

Shutterfly currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the sector include Global Eagle Entertainment Inc. (ENT), Taomee Holdings Ltd. TAOM and TripAdvisor Inc. TRIP. While Global Eagle Entertainment and Taomee Holdings sport a Zacks Rank #1 (Strong Buy), TripAdvisor carries a Zacks Rank #2 (Buy).