Shutterfly (NASDAQ: SFLY), the online photo company, released its Q1 2019 results late last week. The company beat market expectations for revenue as well as earnings, marking its ninth straight quarter of earnings beat while revenues also surpassed estimates after missing the last two quarters. Per Trefis estimates, the fair value for Shutterfly’s stock is $51 – roughly 15% ahead of the current market price.
Shutterfly’s net revenues totaled $324.7 million, up 62.6% year-over-year thanks to a robust performance by the Lifetouch and Business Solutions segments. This more than made up for a subpar showing by its Consumer segment. We have summarized Shutterfly’s Q1 results as well as our full-year expectations in our interactive dashboard How Did Shutterfly Fare in Q1 And What Is the Outlook for Full Year?. You can modify the key drivers to gauge the impact of changes in them on the company’s valuation. Additionally, you will find more Trefis Internet and Software company data here.
Key Takeaways From Shutterfly’s Q1 Results By Segment
- Why Is Apollo Global Management Acquiring Shutterfly?
- Lifetouch Acquisition To Continue To Drive Top-Line Growth For Shutterfly In Q1
- Breaking Down Shutterfly’s Key Revenue Drivers
- Lifetouch Acquisition Should Continue To Drive Growth For Shutterfly
- Can Lifetouch Acquisition Drive Shutterfly’s Q4?
- Why Shutterfly Is Worth $57
Shutterfly Consumer: Shutterfly Consumer provides personalized photo products and services including professionally-bound photo books, personalized gifts and home decor, as well as calendars and prints.
- Consumer segment net revenue totaled $149 million in Q1, a 2% decline year-over-year. The segment’s revenue was adversely impacted by a lower backlog of orders at the end of Q4 2018. However, the segment reported an increase in average revenue per order for the quarter, implying a more favorable product mix. This should have a positive impact on the segment’s revenues and profits going forward.
- A noteworthy highlight in Q1 was a significant uptick in mobile purchases, with the mix of mobile purchases increasing 470 basis points year-over-year to 31.7% of total Shutterfly revenue.
- For Q2, the management expects net revenue for the segment to be in the range of $166 to $170 million, likely to be driven by the launch of new products and other strategic initiatives to optimize its technology and continuous growth of mobile purchases.
Lifetouch: Lifetouch provides professional photographic services for infants, toddlers, families and business professionals, and is the market leader in school photography.
- Lifetouch segment non-GAAP net revenue stood at $129 million, relatively flat with the first quarter of 2018, primarily driven by solid performance across schools and preschools (together accounting for approximately 80% of Lifetouch revenue). However, this was partially offset by a decline in revenues for the studios and church business.
- For Q2, the management expects net revenue for the segment to be in the range of $255 to $258 million while net revenue for full year is expected to fall between $0.975 to $1.03 billion.
Shutterfly Business Solutions (SBS): SBS provides personalized direct marketing and other end-consumer communications as well as just-in-time, inventory-free printing for business customers.
- SBS segment net revenue totaled $47 million, a 2% year-over-year decrease while non-GAAP gross margin in the first quarter was 18%, an increase of 170 basis points over the first quarter of 2018 due to product mix. The management stated that they have won a large new client in SBS which is expected to deliver over $10 million annually for the next several years.
- For the second quarter of 2019, the segment’s net revenue is expected to be in the range of $48 million to $51 million while full year net revenue ranging from $240 to $250 million.
Outlook for Full-Year 2019
- For the full year, Shutterfly expects its revenues to be in the range of $2.31 to $2.21 billion with non-GAAP operating income ranging from $80 million to $105 million.
- Based on our forecast, Shutterfly’s adjusted EPS for full-year 2019 is likely to be around $1.83. Using this figure with our estimated forward P/E ratio of 28, this works out to a price estimate of $51 for Shutterfly’s shares – indicating that the company’s shares are roughly 15% undervalued.