Shutterfly, Inc. (SFLY)
Q4 2008 Earnings Call Transcript
February 04, 2009 at 5:00 pm ET
Jeffrey T. Housenbold - President & Chief Executive Officer
Mark J. Rubash - Chief Financial Officer
John A. Kaelle - Vice President of Finance
Kristine Koerber - JMP Securities LLC
Imran Khan - JP Morgan
Youssef Squali - Jefferies & Co.
James Friedland - Cowen & Company
Alan Gould - Natixis Bleichroeder
Mario Cibelli - Marathon Partners
Elizabeth Lilly - Gabelli
Previous Statements by SFLY
» Shutterfly, Inc. Q3 2009 Earnings Call Transcript
» Shutterfly, Inc. Q2 2009 Earnings Call Transcript
» Shutterfly Inc. Q1 2009 Earnings Call Transcript
John A. Kaelle
Thank you, operator. Good afternoon everyone and welcome to Shutterfly’s fourth quarter and full year 2008 conference call. With us today are Jeff Housenbold, Chief Executive Officer of Shutterfly and Mark Rubash, Chief Financial Officer. A press release detailing our results is available on Shutterfly.com and an archived copy will be kept on our site. We have also released some visuals that we will use as we get through the call.
Additionally, within a few hours we will release the recording of this call both in a streaming online format and through a downloadable podcast. You can access all of this through the Investor Relations section of our website at Shutterfly.com. Before we begin, I would 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 which include risks and uncertainties. These forward-looking statements include statements about our business outlook and strategy and statements about historical results that may suggest trends for our business.
The Company's actual results may differ materially from those anticipated in the forward-looking statements due to various risk factors. For more information regarding these 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 latest quarterly report on Form 10-Q and its other filings with the SEC. I would also like to note that any forward-looking statements made on this call reflect 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 calculations of measures made by other companies. The presentation of non-GAAP financial information is not meant to be considered in isolation or to substitute for or superior to GAAP financial measures. A quantitative reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is available in our Q4 and full year 2008 earnings press release which is posted on the Investor Relations section of our website at Shutterfly.com.
Now I would like to turn the call over to Shutterfly’s CEO, Jeff Housenbold.
Jeffrey T. Housenbold
Thanks John and welcome everyone. Our agenda today will start with a review of 2008 and then some comments regarding 2009. Then I will turn the call over to Mark's review of our financial performance for Q4 2008 and full year 2008 in detail and provide financial guidance for Q1 and full year 2009. We will then open up the call for questions and answers.
As you listen to our remarks today, I would like you to keep in mind three key messages. First, I am proud of the Shutterfly team as they delivered a very solid Q4 and full year results despite an increasingly tough macroeconomic environment. Q4 marked our 32nd consecutive quarter of year-over-year revenue growth and we delivered a top line with better-than-expected gross and net margins.
While revenue growth continues to be dampened by the financial crisis and the macroeconomic recession, we believe that our compelling suite of products and services and our continued innovation positions us well in these early and large markets for personal publishing and social expression.
Second, the entire Company is focused on improving free cash flows in both the short and long term. Evidence of our execution can be seen in our Q4 and full year results.
Third, given the size of the market opportunity, the early penetration rates and our leadership position, we will continue to build for the future even during this economic slowdown. We will continue to strengthen our brand and franchise, introduce new products and services to delight our customers and increase their loyalty to Shutterfly.
Our focus will remain on growing the personalized products and services components of the business where we lead the industry in sales and innovation. We are also making appropriately sized investments in incubating new businesses that leverage our manufacturing assets and our active customer base. Our primary focus will be on building a successful commercial printing business and secondarily, on incubating a sponsorship and advertising program. These initiatives have the potential to deliver new revenue streams, higher margins and increased free cash flow during 2009 and beyond.
During 2008, we focused on enhancing our products, services and user experience strengthening our branded franchise through a differentiated and integrated marketing, manufacturing high quality, high engagement products and incubating new businesses that leverage our manufacturing assets and our active customer base. Consistent execution against these strategic initiatives, our relentless customer focus and our financial discipline resulted in record financial results. We grew our transacting customers by 18%, orders by 7% and average order value by 7%. This translated into revenues of $213.5 million representing a 14% increase over 2007, a 17% increase in EBITDA and a meaningful improvement in free cash flow of $17.7 million.