Shutterfly, Inc. SFLY reported better-than-expected results in the first quarter of 2019. Notably, this marked the company's ninth straight quarter o f earnings beat. Its revenues surpassed estimates after missing it for two consecutive quarters.
Adjusted loss of $2.44 per share compared favorably with the Zacks Consensus Estimate of loss of $2.53 but was wider than the prior-year quarter's recorded loss of $2.47.
Net revenues totaled $324.7 million, which improved 62.6% year over year and surpassed the consensus mark of $323 million. The sharp increase in the top line was primarily owing to robust performance by the Lifetouch and Business Solutions segment, offset by lower-than-expected Shutterfly Consumer segment revenues. Notably, first-quarter earnings marked the 73rd consecutive quarter of year-over-year net revenue growth.
Revenues at the Consumers category amounted to $148.8 million, down2.1% year over year. The segment's cost of net revenues increased 6.6% year over year in the first quarter. Margins, as a percentage of total revenues, were negative 5.6%, comparing unfavorably with the prior-year quarter's margin growth of 1%.
The Lifetouch segment generated revenues of $130 million. This segment was formed following the acquisition of Lifetouch. Revenues from the Shutterfly Business Solutions (SBS) segment declined 2.4% year over year to $46.5 million. The segment's margins in the quarter grew 7.9%, marking an improvement of 290 basis points (bps) from the first quarter of 2018.
Shutterfly, Inc. Price, Consensus and EPS Surprise
Shutterfly, Inc. Price, Consensus and EPS Surprise | Shutterfly, Inc. Quote
Expenses and Profits
Shutterfly's total operating expenses in the first quarter of 2019 were $220.1 million, up 104.2% from the year-ago quarter. Total expenses were affected by a whopping increase in sales and marketing costs. Also, higher general and administrative expenses, and costs associated with technology and development hurt overall expenses.
Net Loss in the quarter was $83.6 million, up from $27.2 million in the prior-year quarter.
Shutterfly exited the first quarter with cash and cash equivalents of $156.3 million compared with $521.6 million at the end of 2018. Accounts receivables summed $56.7 million, down from $82 million as of Dec 31, 2018. Long-term debt totaled approximately $900 million compared with $1,090 million at the end of 2018.
For second-quarter 2019, net revenues are projected between $469 million and $479 million. Gross profit margin is estimated to be 51%. Adjusted EBITDA margin is expected to be12.6-13.4%. Operating income is envisioned to be$0-$5 million.
Also, Shutterfly Consumer revenues are projected to be $166-170 million while the same from Shutterfly Business Solutions are likely to be between $48 million and $51 million. Lifetouch revenues are envisioned to be $255-$258 million.
2019 View Remains Same
Net revenues are estimated to be between $2,130 million and $2,210 million. Gross profit margin is expected to be 51.4-51.7%. Meanwhile, adjusted EBITDA is anticipated to be $315-$340 million. Operating income is envisioned to be $80-$105 million.
Also, Shutterfly Consumer revenues are projected to be $975-1,025 million, while the same from Shutterfly Business Solutions are likely to be between $240 million and $250 million. Lifetouch revenues are envisioned to be $915-$935 million.
Zacks Rank & Stocks to Consider
Shutterfly currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space areBrightcove BCOV , Tencent Music TME and Tucows TCX , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Earnings of Brightcove, Tencent and Tucows in 2019 are expected to increase 122.2%, 15.8% and 26.4% respectively.
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