Shutterfly 2014 Annual Report Download - page 24

service and in October 2013, we acquired BorrowLenses LLC, an online photography and video equipment
rental business, both of which are new business models for us and could result in operational challenges.
Failure to achieve the anticipated benefits of such acquisitions or the incurrence of debt, contingent
liabilities, amortization expenses, or write-offs of goodwill in connection with such acquisitions could harm
our operating results.
In addition, we may issue equity securities to complete an acquisition, which would dilute our existing
shareholders’ ownership, perhaps significantly depending on the terms of such acquisitions and could
adversely affect the price of our common stock. For example, in connection with our 2011 acquisition of
Tiny Prints, we issued approximately 5.4 million shares of our common stock as transaction consideration.
To finance any future acquisitions, it may also be necessary for us to raise additional funds through public
or private debt and equity financings. Additional funds may not be available on terms that are favorable to
us, and, in the case of equity financings, would result in dilution to our stockholders. Also, the value of our
stock may be insufficient to attract acquisition candidates.
The loss of key personnel and an inability to attract and retain additional personnel could affect our ability to
successfully grow our business.
We are highly dependent upon the continued service and performance of our senior management
team and key technical, marketing and production personnel. The loss of these key employees, each of
whom is ‘‘at will’’ and may terminate his or her employment relationship with us at any time, may
significantly delay or prevent the achievement of our business objectives. A lack of management continuity
could result in operational, technological, and administrative inefficiencies and added costs, which could
adversely impact our results of operations and stock price and may make recruiting for future management
positions more difficult. Changes in key management positions may temporarily affect our financial
performance and results of operations as new management becomes familiar with our business. For
example, we hired a new Chief Technology Officer in November 2014.
We believe that our future success will also depend in part on our continued ability to identify, hire,
train and motivate qualified personnel. We face intense competition for qualified individuals from
numerous technology, marketing, financial services, manufacturing and e-commerce companies. In
addition, competition for qualified personnel is particularly intense in the San Francisco Bay Area, where
our headquarters are located. We may be unable to attract and retain suitably qualified individuals who are
capable of meeting our growing operational and managerial requirements, or we may be required to pay
increased compensation in order to do so. Our failure to attract and retain qualified personnel could
impair our ability to implement our business plan.
If we do not obtain shareholder approval for the issuance of additional shares under our 2006 Equity Incentive
Plan, our ability to attract and retain key personnel may be adversely affected.
In 2013, our stockholders approved an amendment to our 2006 Equity Incentive Plan (the ‘‘2006
Plan’’) to increase the maximum number of shares of our common stock available for issuance under the
2006 Plan by 1.2 million shares on January 1, 2014 and January 1, 2015. We will need to seek stockholder
approval for the issuance of additional shares under the 2006 Plan this year as these expire, so that we can
continue to attract and retain key personnel. Although we obtained approval to increase the authorized
number of shares available for issuance under the 2006 Plan at our 2013 annual meeting, there can be no
assurances that our stockholders will approve further increases at our 2015 annual meeting. If our
stockholders do not authorize an increase to the number of shares available for issuance under the 2006
Plan, we will be significantly limited in our ability to grant equity awards to recruit new employees and to
compensate existing employees, which would put us at a significant disadvantage to other companies with
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