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Shutterfly Falls 4% on Q4 Earnings Miss; Beats on Revenues

Shares of Shutterfly, Inc.SFLY fell 4.04% in after-market trading on Feb 3 when the company posted weaker-than-expected earnings for the fourth quarter of 2015. However, revenues beat estimates.

Earnings and Revenue Discussion

Shutterfly posted earnings of $3.45 per share, which missed the Zacks Consensus Estimate of $3.58 by 3.6%. Also, earnings were lower than the company's expected range of $3.56 to $3.74. However, it increased 34.2% from the prior-year quarter earnings of $2.57 per share. The year-over-year growth reflects higher top line and improved margin.

Shutterfly Inc. - Earnings Surprise | FindTheBest

Net revenue increased 13% year over year to $548.1 million and was at the higher end of the guided range of $528.7 million to $548.7 million. In fact, the quarter marked the 60th consecutive quarter of year-over-year net revenue growth. Revenues benefited from strong performance of both the Consumer and Enterprise segments. Further, revenues beat the Zacks Consensus Estimate of $544 million by 0.8%.

Revenues from the Consumers category were $503.3 million, up 9% year over year backed by double-digit growth at the Shutterfly flagship brand. Enterprise segment revenues surged 119% to $44.7 million.

While the total number of customers was 6.1 million, up 8% year over year, total orders generated were 10.3 million, up 7% year over year. Average order value was $48.96, up 1% from the year-ago quarter, reflecting the effect of higher list prices and a shift to premium products, offset by deeper discounts and an increase in promotional offers to first-time trial customers.

Gross margin expanded 40 basis points to 58.3% owing to higher margin in both its segments. Operating expenses totaled $167.8 million, up 7.2% year over year owing to an increase in technological and development costs and sales and marketing spending, offset by a decline in general and administrative expenses. Adjusted EBITDA income was $181.6 million that compared favorably with $164.6 million in the year-ago quarter.

Full Year 2015 Results

In 2015, earnings were 14 cents per share, which compared favorably with the Zacks Consensus Estimate of a loss 13 cents. Earnings also doubled from the prior-year quarter earnings of 7 cents per share.

Net revenue increased 15% year over year to $1.06 billion and was in line with the Zacks Consensus Estimate.

Other Financial Update

During the quarter, the company repurchased 1.1 million shares for $45 million under its share repurchase program. During the year, the company repurchased approximately 4.9 million shares for $215.9 million. The company now has $95.3 million available for repurchase under its share repurchase program at year end.

Q1 Earnings Outlook

The personalized products and service provider's business is highly seasonal and generally incurs losses in the first three quarters of the year. For the first quarter of 2016, the company expects loss per share in the range of 92 cents to $1.01, narrower than the Zacks Consensus Estimate of a loss of $1.17.

Net revenue is expected to be in the range of $173 million to $180 million, a year-over-year increase of 8.1% to 12.5%.

Adjusted gross profit margin is expected within 41.5% to 42.5% of net revenue. Adjusted EBITDA loss is expected in the range of $1.8 million to $4.8 million.

2016 Guidance

The company expects earnings of 19 to 58 cents per share in 2016. The guidance compares favorably with the current Zacks Consensus Estimate of 49 cents.

Net revenue is expected in the range of $1.120 billion to $1.160 billion, a year-over-year increase of 5.7% to 9.5%. Adjusted EBITDA is expected in the range of $203.9 to $222.9 million.

Gross profit margin is projected in the range of 52.0% to 52.6% of net revenue.

Shutterfly carries a Zacks Rank #2 (Buy).

Stocks to Consider

Investors interested in the same space may also consider Angie's List, Inc. ANGI , Bankrate, Inc. RATE and Brightcove Inc. BCOV . While Angie's List sports a Zacks Rank #1 (Strong Buy), Bankrate and Brightcove carry a Zacks Rank #2.

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SHUTTERFLY INC (SFLY): Free Stock Analysis Report

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BRIGHTCOVE (BCOV): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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