Shutterfly 2014 Annual Report Download - page 51

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our ability to successfully integrate acquired businesses and assets, our ability to retain and hire necessary
employees, including seasonal personnel, and appropriately staff our operations, our ability to develop
innovative, new products and services on a timely and cost-effective basis, consumer acceptance of our new
products and services, our ability to develop additional adjacent lines of business, unforeseen changes in
expense levels, and the other risks set forth below under ‘‘Risk Factors’’ in Part I, Item 1A of this report. Given
these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking
statements. We assume no obligation to update any of the forward-looking statements after the date of this
report or to compare these forward-looking statements to actual results.
Overview
We are the leading manufacturer and digital retailer of high-quality personalized products and services
offered through a family of lifestyle brands. 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 through our trusted premium lifestyle brands: Shutterfly, Tiny Prints,
Wedding Paper Divas, ThisLife, MyPublisher and BorrowLenses.
We generate the majority of our revenues by producing and selling professionally-bound photo books,
greeting and stationery cards, personalized calendars, other photo-based merchandise and high-quality
prints ranging in size from wallet-sized to jumbo-sized 20x30 enlargements. We manufacture most of these
items in our Fort Mill, South Carolina, Phoenix, Arizona, and Shakopee, Minnesota production facilities.
By controlling the production process in our own production 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 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 total
net revenues during our fiscal fourth quarter. Our operations and financial performance depend on
general economic conditions in the United States, consumer sentiment and the levels of consumer
discretionary spending. We closely monitor these economic measures as their trends are indicators of the
health of the overall economy and are some of the key external factors that impact our business.
In 2014, we delivered record net revenues, which increased 18% year over year to more than
$921 million. This increase was driven by a 14% increase in customers and a 17% increase in orders in our
Consumer segment, as well as increased revenues from new and existing customers in our Enterprise
segment. In addition, this growth was also supported by our 2014 acquisition of Groovebook and full year
results from the 2013 acquisitions of MyPublisher and BorrowLenses, which expanded our portfolio of
premium lifestyle brands, and R&R Images which added additional printing capabilities. We achieved this
growth, while simultaneously focusing on long term strategic priorities and investments in consumer facing
programs and infrastructure projects that will provide future scale and scope efficiencies. These included
the following:
• We opened our new Shakopee, Minnesota production facility, which provides us with a
production facility in the Midwest, to round out our current West and East capabilities. It also
provides a level of redundancy in our manufacturing network and supply chain. In addition,
we are currently building out a new production facility in Tempe, Arizona which will allow us
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