Shutterfly 2010 Annual Report Download - page 5

PART I
Except for historical financial information contained herein, the matters discussed in this Form 10-K may be considered forward-
looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934,
as amended, and subject to the safe harbor created by the Securities Litigation Reform Act of 1995. Such
statements include declarations
regarding our intent, belief, or current expectations and those of management. Prospective investors are cautioned that any such forward-
looking statements are not guarantees of future performance and involve a
number of risks, uncertainties and other factors, some of which are
beyond our control; actual results could differ materially from those indicated by such forward-
looking statements. Important factors that could
cause actual results to differ materially from those indicated by such forward-looking statements include,
but are not limited to: (i) that the
information is of a preliminary nature and may be subject to further adjustment; (ii) those risks and uncertainties identified under “
Risk
Factors;
” and (iii) the other risks detailed from time-to-time in our reports and registration statements filed with the
Securities and Exchange
Commission, or SEC. Except as required by law, we undertake no obligation to revise or update publicly any forward-
looking statements,
whether as a result of new information, future events or otherwise.
ITEM 1. BUSINESS.
Overview
Shutterfly, Inc. was incorporated in Delaware in 1999. In September 2006, we completed our initial public offering and our common stock
is listed on the Nasdaq Global Market under the symbol “SFLY.” Our principal corporate offices are located in Redwood City, California.
We are an Internet-
based social expression and personal publishing service that enables consumers to share, print and preserve their
memories by leveraging our technology, manufacturing, web-
design and merchandising capabilities. Our vision is to make the world a better
place by helping people share life’
s joy. Our mission is to build an unrivaled service that enables deeper, more personal relationships between
our customers and those who matter most in their lives. Our primary focus is on helping consumers manage their memories through the
powerful medium of photography. We provide a full range of personalized photo-
based products and services that make it easy, convenient and
fun for consumers to upload, edit, enhance, organize, find, share, create, print and preserve their memories in a creative and thoughtful manner.
We generate the majority of our revenues by producing and selling professionally-
bound photo books, greeting cards and stationery,
personalized calendars, other photo-based merchandise and high-quality prints ranging in size from wallet-sized to jumbo-
sized 20x30
enlargements. We currently manufacture these items in our Charlotte, North Carolina and Phoenix, Arizona manufacturing facilities. Our new
manufacturing and production facility in Phoenix, Arizona began operations in April 2009, and replaced our Hayward, California facility, which
ceased operations in January 2009. By controlling the production process in our own manufacturing facilities, we are able to produce high-
quality products, innovate rapidly, maintain a favorable cost structure and ensure timely shipment to customers, even during peak periods of
demand. Additionally, we sell a variety of print and photo-
based merchandise that is currently manufactured for us by third parties, such as
calendars, mugs, canvas prints, mouse pads, magnets and puzzles. We generate substantially all of our revenue from sales originating in the
United States and our sales cycle has historically been highly seasonal as we generate more than 50% of our revenue during our fiscal fourth
quarter. During fiscal year 2009, we fulfilled 7.9 million orders, to 3.3 million customers, at an average order value of $30.74 per order.
Our high-
quality products and services and the compelling online experience we create for our customers, combined with our focus on
continuous innovation, have allowed us to establish a premium brand. We realize the benefits of a premium brand through high customer loyalty,
low customer acquisition costs and premium pricing.
Our customers are a central part of our business model. They generate most of the content on our service by uploading their photos and
storing their memories. In addition, they share their photos electronically with their friends and families, extending and endorsing our brand and
creating a sense of community. Finally, by giving Shutterfly-
branded products to colleagues, friends and loved ones throughout the year,
customers reinforce the Shutterfly brand. Through these various activities, our customers create a viral network of new users and customers.
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