Shutterfly 2014 Annual Report Download - page 15

The public may also read and copy any materials we file with the Securities and Exchange Commission
at the Securities and Exchange Commission’s Public Reference Room at 100 F Street, NE, Washington,
DC 20549. The public may obtain information on the operation of the Public Reference Room by calling
the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission
also maintains an Internet website that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the Securities and Exchange Commission. The
Securities and Exchange Commission’s Internet website is located at http://www.sec.gov.
ITEM 1A. RISK FACTORS.
Risks Related to Our Business and Industry
Our net revenues, operating results and cash requirements are affected by the seasonal nature of our business.
Our business is highly seasonal, with a high proportion of our net revenues, net income and operating
cash flows generated during the fourth quarter. For example, we generated more than 50% of our net
revenues in the fourth quarter during each of the last three years, and the net income that we generated
during the fourth quarter of 2013 and 2012 was necessary for us to achieve profitability on an annual basis
in each of those years. In addition, we incur significant additional expenses in the period leading up to the
fourth quarter holiday season including expenses related to the hiring and training of temporary workers to
meet our seasonal needs, additional inventory and equipment purchases, and increased advertising. If we
are unable to accurately forecast and respond to consumer demand for our products during the fourth
quarter, our financial results, reputation and brands will suffer and the market price of our common stock
would likely decline.
We also base our operating expense budgets on expected net revenue trends. A portion of our
expenses, such as office, production facility, and various equipment leases and personnel costs, are largely
fixed and are based on our expectations of our peak levels of operations. We may be unable to adjust
spending quickly enough to offset any unexpected revenue shortfall. Accordingly, any shortfall in net
revenues may cause significant variation in operating results in any quarter.
Our business and operating results may be harmed if we undertake any restructuring activities.
From time to time, we may undertake to restructure our business, such as the combining our
Shutterfly, Tiny Prints and Wedding Paper Divas creation platforms, eliminating our Treat business and
closing our Elmsford facility. There are several factors that could cause a restructuring to have an adverse
effect on our business, financial condition and results of operations. These include potential disruption of
our operations, the loss of customers who are dissatisfied with the new platform, a reduction in search
engine optimization due to a reduction in search terms, and other aspects of our business. Employee
morale and productivity could also suffer and we may lose employees whom we want to keep. Loss of sales,
service and engineering talent, in particular, could damage our business.
Any restructuring would require substantial management time and attention and may divert
management from other important work. Employee reductions or other restructuring activities also cause
us to incur restructuring and related expenses such as severance expenses. Moreover, we could encounter
delays in executing any restructuring plans, which could cause further disruption and additional
unanticipated expense.
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