Shutterfly Inc. (SFLY) filed Quarterly Report for the period ended 2009-09-30.
Shutterfly Inc. is an Internet-based social expression and personal publishing service. Shutterfly provides a range of products and services that make it easy convenient and fun for consumers to upload edit enhance organize find share create print and preserve their digital photos in a creative and thoughtful manner. Shutterfly Shutterfly.com and Collections are trademarks of Shutterfly Inc. Its primary focus is on helping consumers manage their memories through the powerful medium of photos. We provide a full range of products and services that make it easy convenient and fun for consumers to upload edit enhance organize find share create print and preserve their digital photos in a creative and thoughtful manner. Consumers use its products and services to stay connected to their friends and family to organize their memories in a single location to tell stories and to preserve their memories for themselves and their children. Shutterfly Inc. has a market cap of $359 million; its shares were traded at around $14.1 with a P/E ratio of 352.5 and P/S ratio of 1.8.
Highlight of Business Operations:
Personalized Products and Services Revenues as Percentage of Net Revenues. We continue to innovate and improve our personalized products and services and expect the net revenues from these products and services to increase as percentage of net revenues as we continue to diversify our product offerings. Personalized products and services as a percentage of total net revenue was 51% in 2006, 56% in 2007 and 61% in 2008. In addition, as a percentage of total net revenues, revenues from 4x6 prints have been declining; from 28% in 2006, to 22% in 2007, and to 19% in 2008.
Net revenues increased $4.5 million, or 13%, for the three months ended September 30, 2009, as compared to the same period in 2008. Revenue growth was attributable to an increase in personalized products and services revenues and revenue from our commercial print initiative, offset by a decrease in print revenue. Personalized products and services (“PPS”) revenues increased $5.5 million, or 28%, to $24.9 million for the three months ended September 30, 2009 as compared to the same period in 2008. The increase in PPS is primarily a result of increased sales of photo books and stationery cards. PPS represented 61% of revenue compared to 54% in the same period in 2008. Revenue from our commercial print initiative totaled $1.2 million, and represented 3% of our total net revenues. Print revenue decreased $0.9 million, or 6%, to $15.6 million for the three months ended September 30, 2009, as compared to the same period in 2008. Print revenue represented 39% of revenue compared to 46% in the same period in 2008. The decrease in overall print revenue is primarily due to a lower average sales price for 4x6 prints which is a result of our price change in September 2008 offset partially by continued stable growth in unit volumes. In the third quarter of 2009, 4x6 print revenues represented 24% of total net revenues versus 29% in the third quarter of 2008.
Cost of net revenues increased $3.0 million, or 16%, for the three months ended September 30, 2009 as compared to the same period in 2008. As a percentage of net revenues, cost of net revenues increased from 51% to 53% for the same comparable period, which decreased gross margin from 49% in the third quarter of 2008 to 47% in the third quarter of 2009. The decrease in our gross margin percentage is primarily due to cost increases from the transition of our Hayward manufacturing facility to our new Phoenix manufacturing facility and higher equipment rental expenses compared to the same period in 2008. However, these factors were partially offset by favorable improvements from product mix and continued savings in shipping and materials costs due to operational efficiencies and negotiated cost reductions.
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