Shutterfly Earnings 1Q 2014 Powerpoint Slide Deck

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 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.
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.
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3
Conference Call Agenda
• Key Q1 accomplishments • Q1 financial performance
• Q2 / FY2014 outlook
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4
Q1 Financial Results
Net Revenue
Operating Loss
Adjusted EBITDA *
Net Loss per Share (GAAP)
Net Loss per Share (Non-GAAP)**
Q1 FY13Q1 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
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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
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Foil Stamped Collection
Belly Bands
Circle Stickers
Wrap Around Address Labels

8
Continued Innovation in Our Core Businesses
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Luggage Tags Hallmark Photo Inserts
Make My Book Service Photo Story app

9
Partnerships with Leading Brands and Designers
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10
Scale and Operational Infrastructure Initiatives
Las Vegas Datacenter Shakopee Production Facility
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11
Q1 FY14 Financial Results Review
Brian Regan, CFO
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12
Q1 Financial Results Summary
Net Revenue
Adjusted EBITDA *
Q1 FY13Q1 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)
©

13
Net Revenues by Category
Net Revenues
Consumer
Enterprise
Q1 FY13Q1 FY14 Y/Y Growth
$116.7
$109.8
$6.9
$137.1
$130.6
$6.5
17%
19%
(6%)
($ in millions)
Q1 FY13Q1 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
Net Revenue
Gross Profit / Margins
Gross Profit / Margins (Non-GAAP)*
of Total Net Revenues
Q1 FY13Q1 FY14 Q1 FY13Q1 FY14
$116.7
$54.9
$57.8
$137.1
$60.8
$64.6
44%
47%
47%
50%
Q1’s 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
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* Non-GAAP Gross Profit/Margins excludes stock-based compensation and amortization of intangible assets.

16
Q1 operating expense levels reflect increased headcount, the increased cost structure
from acquisitions and purchase accounting amortization
GAAP – Total Operating Expenses
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Net Revenue
Operating Expenses
Operating Expenses (excl. SBC)
$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 acquisitions
• continuing strategic investments in technology and development headcount
to support core products, mobile initiatives and ThisLife
GAAP – Technology and Development Expense
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Net Revenue
Operating Expenses
Technology & Dev.
T&D (excl. SBC and deprec.)
$116.7
$54.9
$78.8
$24.0
$18.0
$137.1
$60.8
$99.4
$31.5
$22.9
44%
72%
23%
17%
47%
68%
21%
15%

18
GAAP – Sales and Marketing Expense
The increase in Sales and Marketing expense was largely driven by investments in our
integrated marketing campaigns and a modest increase in headcount
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Net Revenue
Operating Expenses
Technology & Dev.
Sales & Marketing
S&M (excl. SBC and amort.)
$116.7
$54.9
$78.8
$24.0
$34.9
$27.1
$137.1
$60.8
$99.4
$31.5
$42.1
$31.7
44%
72%
23%
31%
23%
47%
68%
21%
30%
23%

19
GAAP - General and Administrative Expense
Q1’s General and Administration expense, excluding stock-based compensation and
credit card processing fees, represented 11% of net revenues, slightly up from 10% in
Q1 of last year primarily driven by acquisition-related costs
©
Net Revenue
Operating Expenses
Technology & Dev.
Sales & Marketing
General & Admin.
G&A (excl. SBC and CC fees)
$116.7
$54.9
$78.8
$24.0
$34.9
$19.9
$11.8
$137.1
$60.8
$99.4
$31.5
$42.1
$25.8
$15.5
44%
72%
23%
31%
19%
11%
47%
68%
21%
30%
17%
10%

20
Non-GAAP Adjusted EBITDA
Q1FY14’s Adj. EBITDA results reflect higher operating costs from our new
manufacturing facilities and the annualized costs of M&A, offset by continued
operational efficiency and scale gains. Q1FY13’s Adj. EBITDA results also benefited
from a shift of costs to later quarters in 2013
* Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and stock-based compensation. A non-
GAAP to GAAP reconciliation is provided on the last slide of this presentation.
©
Net Revenue
Operating Expenses
Technology & Dev.
Sales & Marketing
General & Admin.
Operating Loss
Adjusted EBITDA *
$116.7
$54.9
$78.8
$24.0
$34.9
$19.9
($24.0)
$3.3
$137.1
$60.8
$99.4
$31.5
$42.1
$25.8
($38.6)
$0.2
44%
72%
23%
31%
19%
(28%)
0.1%
47%
68%
21%
30%
17%
(21%)
3%

21
GAAP and Non-GAAP Net Loss
Net Revenue
Operating Expenses
Operating Loss
Adjusted EBITDA*
Tax Rate
Net Loss (GAAP)
Net Loss (Non-GAAP)**
$116.7
$54.9
$78.8
($24.0)
$3.3
49%
($12.4)
($12.4)
($0.33)
($0.33)
$137.1
$60.8
$99.4
($38.6)
$0.2
19%
($34.2)
($31.5)
($0.89)
($0.82)
44%
72%
(28%)
0.1%
-
(25%)
(23%)
-
-
47%
68%
(21%)
3%
-
(11%)
(11%)
-
-
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22
12.6
3.8
5.1
Q1 FY14 CapEx:
$21.5M
Technology equipment & software
Mfg, rental equipment & building improvements
Capitalized software development costs
($ in millions)
Capital Expenditures
Annual Capital Expenditures
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CapEx
(% of Rev)
$17.7
$22.4
$33.6
$60.8
$75.0
$96.6
2009 2010 2011 2012 2013 2014e
7.2% 7.3% 7.1%
9.5% 9.6%
10.5%
9.5%
$85.8

23
Q2 FY14 Guidance (as of April 30, 2014)
Net Revenues
Year-over-year Growth
Gross Profit Margins
Operating Loss
Adjusted EBITDA *
Effective Tax Rate
Net Loss per Share
Weighted Average Shares
Q2 FY14
(GAAP)
Q2 FY14
(Non-GAAP)
($ and shares in millions, except per share components)
©
$154.0 to $158.0
15.4% to 18.4%
46.0% to 47.0%
($33.2) to ($32.9)
-
22.0% to 25.0%
($0.75) to ($0.72)
38.5
-
-
48.4% to 49.3%
($9.0) to ($8.2)
$6.0 to $7.0
-
($0.68) to ($0.65)
38.5

24
2014 Guidance (as of April 30, 2014)
Net Revenues
Year-over-year Growth
Gross Profit Margins
Operating Income / (Loss)
Adjusted EBITDA *
Effective Tax Rate
Net Income / (Loss) per Share **
Weighted Average Shares
Capital Expenditures
FY 2014
(GAAP)
FY 2014
(Non-GAAP)
($ and shares in millions, except per share components)
©
$903 to $920
15.2% to 17.4%
52.0% to 53.0%
($0.6) to $9.2
-
15% to 23%
($0.38) to ($0.15)
38.6
9.5% to 10.5%
-
-
53.6% to 54.6%
$96.7 to $109.1
$160.6 to $174.8
-
($0.08) to $0.13
38.6
-

25
Reconciliation of Non-GAAP Gross Margin
Q1 FY14 Q1 FY13
Reconciliation of Non-GAAP Gross Margin
GAAP gross profit $60.8 $54.9
Stock-based compensation 1.0 0.5
Amortization of intangible assets 2.8 2.4
Non-GAAP gross profit $64.6 $57.8
($ in millions)
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26
Reconciliation of Non-GAAP Adjusted EBITDA
Q1 FY14 Q1 FY13
Reconciliation of Non-GAAP Adjusted EBITDA
GAAP net loss ($34.2) ($12.4)
Interest expense / (income), net 3.7 0.1
Tax benefit (8.1) (11.6)
Depreciation and amortization 22.8 15.7
Stock-based compensation expense 16.0 11.5
Non-GAAP Adjusted EBITDA $0.2 $3.3
Reconciliation of Cash Flows from Operations To Non-GAAP Adjusted EBITDA
Net cash used in operations ($97.5) ($83.5)
Interest expense / (income), net 3.7 0.1
Tax benefit (8.1) (11.6)
Changes in operating assets/liabilities 106.6 101.4
Other adjustments (4.5) (3.1)
Non-GAAP Adjusted EBITDA $0.2 $3.3
($ in millions)
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27
Reconciliation of Non-GAAP Net Loss Per Share
Q1 FY14 Q1 FY13
Reconciliation of Non-GAAP Net Loss Per Share
GAAP Net loss ($34.2) ($12.4)
Add back interest expense related to:
Amortization of debt discount 2.9 0.0
Amortization of debt issuance costs 0.3 0.0
0.25% coupon 0.2 0.0
Tax effect (0.7) 0.0
Non-GAAP Net loss ($31.5) ($12.4)
GAAP Shares outstanding 38,503 37,034
Add: Dilutive effect of convertible notes 0 0
Non-GAAP Shares outstanding 38,503 37,814
GAAP Net loss per share ($0.89) ($0.33)
Non-GAAP Net loss per share ($0.82) ($0.33)
($ in millions, except per share amounts)
Share amounts in thousands
©

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