Shutterfly Inc.
(
SFLY
) has reported a loss of 29 cents per share for the third-quarter
of 2012 which is narrower than the Zacks Consensus Estimate of a
loss of 41 cents per share. The loss per share came at par with
the year-ago level.
In the quarter under review, net revenue increased 29% year over
year to $98.5 million which was significantly ahead of the Zacks
Consensus Estimate of $91.0 million, induced by the sturdy sales
from the Consumer category.
Healthy customer and transaction growth across all four of
lifestyle brands, sustained growth in enterprise revenue and some
contribution from new Kodak customers drove revenue in the
quarter.
Behind the Headline Numbers
Revenues from the Consumers' category were $90.4 million in the
quarter, up 24% over the prior-year quarter. Net Enterprise
revenues nearly doubled to $8.1 million in this quarter.
The total number of customers was 2.2 million in the quarter,
reflecting an increase of 40% from the prior-year quarter. Total
orders generated were 3.6 million, up 40% year over year. Average
order value was $25.06, down 11% year over year.
Gross profit margin declined 150 basis points to 44.1% from the
prior-year quarter mainly due to a lease termination fee related
to the pending move of the East Coast production facility and
higher customer service costs owing to the Kodak Gallery
migration.
Liquidity
Shutterfly exited the quarter with cash and cash equivalents of
$89.9 million. The total shareholders' equity remains around
$630.6 million in the reported quarter.
Outlook
For the fourth quarter of 2012, Shutterfly expects net revenue in
the range of $300.0 million to $310.0 million. The company
expects GAAP diluted earnings of 94 cents to $1.02 per share.
For fiscal 2012, Shutterfly expects net revenue to range between
$589-$599 million ($582-$592 million predicted earlier).
Management, in its preceding two quarters as well, had boosted
its full-year revenue guidance.
On GAAP basis, earnings are estimated to be in between 14 cents
and 24 cents per share (11 cents and 21 cents estimated
previously). Prior to this quarter, it raised full-year earnings
guidance from 11-21 cents.
Our Take
Shutterfly has recently been very active on inorganic expansion.
Some of Shutterfly's recently clinched deals like the takeover of
the online photo services from FujiFilm and Eastman Kodak, along
with the acquisition of Penguin digital and Photoccino will
likely prove beneficial for the company over the long-term. The
company announced that it would triple the East Coast
manufacturing operations by opening a new unit at South Carolina.
This move also affirms the company's strong growth trajectory.
Management sees several opportunities ahead as the social
expression and personal publishing markets are still blooming.
Additionally, with the holiday season on the way, the upcoming
quarter is seasonally the strongest.
However, challenging economic conditions as well as competitive
pressures pose a threat to the company's margin expansion.
Shutterfly Inc. competes with companies like
LookSmart Ltd.
(
LOOK
), Snapfish owned by
Hewlett-Packard Co.
(
HPQ
) and Photoworks and Webshots brands of
American Greetings Corp.
(
AM
). Shutterfly currently retains a Zacks #2 Rank, which translates
into a short-term 'Buy' rating.
AMER GREETINGS (AM): Free Stock Analysis
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HEWLETT PACKARD (HPQ): Free Stock Analysis
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LOOKSMART LTD (LOOK): Free Stock Analysis
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SHUTTERFLY INC (SFLY): Free Stock Analysis
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