SFLY: Management Discusses Q2 Results and Outlook; Falls to New 52-Week Low
Submitted By Knobias ClipReport
By Fain Hughes, fhughes@knobias.com
Shares of Shutterfly, Inc. (SFLY) hit a new 52-week low on Thursday after the Company reported second quarter 2008 financial results for the period ended June 30, 2008. Net revenues totaled $35.4 million, a 19% year-over-year increase. GAAP net loss per diluted share was $(0.16), as compared to $(0.10) in Q2 2007.
The Company’s financial expectations for the third quarter included net revenues to range from $33 million to $36 million and GAAP diluted loss per share to range from ($0.15) to ($0.30). For FY08, the Company expects net revenues to range from $225 million to $240 million and GAAP diluted income per share to range from $0.01 to $0.20. On a non-GAAP basis, diluted income per share is expected to range from $0.30 to $0.50.
Jeffrey Housenbold, President and CEO of Shutterfly, explained in a conference last night, “Despite a tough economic enviroment, we delivered our 30th consecutive quarter of year-over-year revenue growth and better-than-expected gross and net margins. While we are not satisfied with our top line growth, we are confident that our compelling suite of products and services and continued innovation positions us well to continue leading in these early and large markets.”
“We are focused on improving free cash flow in a sustained and long term manner. During the first half of 2008, and especially Q2, we are beginning to realize leverage in our business model. This leverage and our disciplined expense management demonstrates that we can achieve sustained margin improvement in a competitive
marketplace.”
Mr. Housenbold added, “We continue to build for the future. We are strengthening our brand and franchise, and we are innovating with new products and services to increase our customers’ loyalty and evangelism of Shutterfly. We are also incubating a sponsorship in advertising and commercial printing business. If successful, both initiatives have the potential to deliver new revenue streams, higher margins and increased free cash flow.”
“we are making smart and well-considered decisions that balance both the short and long term objectives. We are building on our market leadership by investing in products, services, people and processes. We are demonstrating strong fiscal and operational discipline, and we are subjecting every aspect of the business to intense cost management scrutiny.”
Mark Rubash, CFO of Shutterfly, added, “We have been working very hard to insure that every dollar goes to its highest and best use. As evidenced by our improved profitability this quarter, these efforts are beginning to yield sustainable operating leverage. We are improving our manufacturing cost structure; increasing our use of outsourcing; implementing more efficient production techniques; and leveraging our scale across all of our materials and shipping vendors. On the technology side, we have improved our platform architecture; integrated new storage solutions; and organized for rapid innovation and development cycles. We have also optimized our sales and marketing initiatives.”
He concluded, “Although we don’t know how long these economic conditions will continue, we are confident in our strategy. We will continue to build on our long track record of industry-leading innovation, quality and execution.”
Piper Jaffray downgraded SFLY to Neutral from Buy and cut the price target to $10 from $18. The firm said it downgraded the shares to reflect slower consumer spending and the high negative operating leverage implied in Q3 guidance.
