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Shutterfly (SFLY) Q3 Loss Narrower Than Expected, Sales Beat

Shares of Shutterfly, Inc.SFLY declined 3.6% in afterhours trading on Oct 24 despite the company's better-than-expected third-quarter 2017 results. Herein, loss incurred by the company was narrower than expected while revenues surpassed estimates.

Quarter in Detail

Mostly, this personalized products and service provider incurs losses in the first three quarters of the year because of the seasonal nature of its business. In sync with this, Shutterfly witnessed loss of 73 cents per share in the third quarter, narrower than the Zacks Consensus Estimate of a loss of 77 cents and the company's projected loss in range of 80 to 76 cents. The reported figure was also narrower than the prior-year quarter loss of 86 cents per share. Evidently, the improvement came on the back of a higher top line and expense control.

Net revenue increased 4% year over year to $195.4 million and was higher than the guided range of $187 million to $193 million. In fact, the third-quarter earnings season marked the 67th consecutive quarter of year-over-year net revenue growth.

The top line also surpassed the Zacks Consensus Estimate of $192.6 million by about 1.5%, owing to the solid performance of the company's flagship Shutterfly brand and the Shutterfly Business Solutions (SBS) segment. However, it was partially offset by revenue declines in the non-Shutterfly brands due to the platform consolidation and the brand shutdowns over the course of the first nine months of the year.

Shutterfly, Inc. Price, Consensus and EPS Surprise

Shutterfly, Inc. Price, Consensus and EPS Surprise | Shutterfly, Inc. Quote

Revenues from the Consumers category were down 6% year over year to $135.4 million due to the restructuring measures that led to brand shutdowns, partially offset by a strong performance in the mobile arena. Meanwhile, the same at the SBS segment jumped 39% to $60 million.

Also, total number of unique customers declined 6% to 2.97 million and total orders decreased 10% year over year to 4.86 million, primarily due to the platform consolidation. On the contrary, average order value increased 4% to $27.86 on the back of the product mix. Gross margin (excluding restructuring charges) decreased 420 basis points (bps) to 32.9%, chiefly due to a greater SBS mix and lower SBS gross margins.

Normalized operating expenses totaled $96.8 million (excluding restructuring charges of about $3.3 million) decreasing 13% year over year. The decline was owing to the platform consolidation and restructuring as well as strong expense control.

Notably, adjusted EBITDA (Earnings before interest, tax, depreciation and amortization) was $3 million. This reported figure was at the high end of the guided range of $0 million to $3 million backed by careful expense control.

Fourth-Quarter Earnings Outlook

For the fourth quarter of 2017, the company expects to report earnings per share in the range of $2.60 to $3.00. The Zacks Consensus Estimate of $2.94 is pegged toward the higher end of the guided range.

Net revenue is expected in the range of $538 million to $568 million, implying a year-over-year growth in the band of (4.1%) to 1.2%.

Gross profit margin is projected between 58% and 60% of net revenues. Adjusted EBITDA is expected in $191.5 million to $211.5 million band.

2017 Guidance

For the full year, the company now expects earnings in the range of 60 to 95 cents per share compared with the prior guidance of 45 to 80 cents per share. In fact, the Zacks Consensus Estimate of 56 cents is pegged below the guided range.

Net revenue is still expected in the range of $1.135 billion to $1.165 billion, a year-over-year increase of 0.4% to 3.1%. Adjusted EBITDA is anticipated to be in the band of $210 to $230 million, as expected earlier.

Gross profit margin is now projected in the range of 48% to 49% of net revenue, lower than the previous guidance of 49% to 50%.

Zacks Rank & Upcoming Peer Releases

Shutterfly carries a Zacks Rank #4 (Sell).

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Among other firms in the same space, XO Group, Inc. XOXO , Points International, Ltd. PCOM and Yelp Inc. YELP are expected to release their quarterly numbers on November 1. The Zacks Consensus Estimate for the quarter's bottom line is pegged at 11 cents for Xo Group, 5 cents for Points International and a loss of 1 cent for Yelp.

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Shutterfly, Inc. (SFLY): 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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