Shutterfly's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Shutterfly (SFLY)

Q4 2011 Earnings Call

February 01, 2012 5:00 pm ET

Executives

Michael Look -

Jeffrey Housenbold - Chief Executive Officer, President and Director

Mark J. Rubash - Chief Financial Officer, Senior Vice President and Secretary

Analysts

James H. Friedland - Cowen and Company, LLC, Research Division

Youssef H. Squali - Jefferies & Company, Inc., Research Division

Mark May - Barclays Capital, Research Division

Heath P. Terry - Goldman Sachs Group Inc., Research Division

Shawn C. Milne - Janney Montgomery Scott LLC, Research Division

Aaron M. Kessler - Raymond James & Associates, Inc., Research Division

Mitchell Barlett - Craig-Hallum Capital Group LLC, Research Division

Greg Lazard

Unknown Analyst

Presentation

Operator

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Good day, ladies and gentlemen, and welcome to Shutterfly's Fourth Quarter and Full Year 2011 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to turn the conference over to Mr. Mike Look, Vice President of Investor Relations. Sir, you may begin.

Michael Look

Thank you, operator, and good afternoon, everyone. Welcome to Shutterfly's Fourth Quarter and Full Year 2011 Conference Call. With us today are Jeff Housenbold, Chief Executive Officer of Shutterfly; Mark Rubash, Chief Financial Officer; and Brian Manca, Chief Accounting Officer.

By now, you should have received a copy of our earnings press release, which crossed the wire approximately one hour ago. If you need a copy of the press release, you can can go to shutterfly.com under the Investor Relations link to find an electronic copy. We have also released the presentation that we will use as we go through this call. Call participants are advised that the audio of this conference call is being recorded for playback purposes and that a recording of this call, both in streaming online format and to a downloadable podcast, will be made available on our website within a few hours. You can access all of these formats through the Investor Relations section of our website at shutterfly.com.

Before we begin, I'd like to note that our discussion today will include forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. These forward-looking statements include statements about our business outlook and strategy and statements about historical results that may suggest trends for our business. For more information regarding these and other 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 section entitled Risk Factors in the company's most recent Annual Report on Form 10-K and its other filings with the SEC.

I would also like to note that that any forward-looking statements made on this call reflect information and analysis as of today. This presentation contains certain financial performance measures that are different from financial measures calculated in accordance with GAAP and may be different from the calculations or measures made by other companies. A quantitative reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is available on our fourth quarter and full year 2011 earnings press release, which is posted under the Investor Relations section of our website at shutterfly.com.

Now I'd like to turn the call over to Shutterfly's CEO, Jeff Housenbold. Jeff?

Jeffrey Housenbold

Thanks, Mike, and good afternoon, everyone. I'll start today's discussion with an overview of our fourth quarter and full year 2011 results, followed by some initial thoughts on our strategy for the coming year. I will then turn the call over to Mark for a detailed review of our fourth quarter and full year 2011 financial results, as well as our initial financial guidance for 2012. We will then open up the call for your questions.

Let's start with a brief review of our Q4 financial metrics. We delivered solid financial results despite unprecedented levels of competitive discounting throughout the holiday season. Total net revenues for the fourth quarter were $264 million, up 59% year-over-year and just below the guidance range we originally provided during our Q3 conference call back in October. And equally important, fourth quarter adjusted EBITDA was $89 million, an increase of $29 million or 48% from the same period last year. This performance marks the 44th consecutive quarter of year-over-year growth for Shutterfly, and reflects the on-time shipments of more than 140 million greeting cards, photo books, calendars and photo gifts to more than 3.25 million customers.

Moving on to our full year performance. 2011 was another highly successful year for Shutterfly as we continued to expand our market leadership, enhance the richness of our customer experience, expand our customer base and further improve our operational efficiency.

Let me take a moment to highlight some of 2011's key accomplishments. First, we delivered very strong growth from our Personalized Products & Services, our largest and most important source of revenue; maintained solid revenue contributions from print; and made meaningful progress on our Commercial Print initiative. Net revenues for 2011 totaled $473 million, a reported 54% year-over-year increase. Organically, total net revenues for the Shutterfly brand, excluding Tiny Prints, grew 24% year-over-year versus our initial 2011 net revenue guidance of 18% to 21.2%.

Our continued commitment to innovation, outstanding product quality, stylish design, exceptional customer service and overall value enabled Shutterfly to serve approximately 5.5 million unique customers in 2011.

Second, we believe we have improved our ability to increase market share as the multiple billion-dollar social expression and personal publishing markets continue to transition from offline and generic content to online and personalized content. Through our acquisition of Tiny Prints, we established a multi-brand online platform that offers the broadest and deepest line of products, design and style at multiple price points.

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