Shutterfly 2015 Annual Report Download - page 26

In order to be successful, we must attract, engage, retain and integrate key employees and have adequate
succession plans in place, and failure to do so could have an adverse effect on our ability to manage our
business.
Our success depends, in large part, on our ability to identify, hire integrate, retain and motivate qualified
executives and other key employees throughout all areas of our business. Identifying, developing internally or
hiring externally, training and retaining highly-skilled senior management, technical, marketing and production
personnel are critical to our future, and competition for experienced employees can be intense. 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.
Failure to successfully hire executives and key employees or the loss of any executives and key employees could
have a significant impact on our operations. Further, 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.
Effective succession planning is also important to our long-term success. Failure to ensure effective transfer
of knowledge and smooth transitions involving key employees and senior executives could hinder our strategic
planning and execution. We hired a new Chief Financial Officer in October 2015. On December 1, 2015, we
announced that Jeffrey Housenbold, our President, Chief Executive Officer and member of our Board, intends to
step down from his roles to pursue other opportunities effective February 2016. Also in December 2015, Daniel
McCormick, our Senior Vice President and Chief Operating Officer, notified us of his intent to resign effective
February 19, 2016. We currently have not hired a replacement Senior Vice President and Chief Operating
Officer. Our search process, which is being led by the Board, to identify a candidate for a permanent Chief
Executive Officer and President continues, and we continue to work with an executive search firm to assist with
the process of identifying, evaluating and recruiting candidates. Our Chairman of the Board, Phil Marineau, will
serve as the interim Chief Executive Officer. There are no assurances concerning the timing or outcome of our
search for a new permanent President and Chief Executive Officer. Our ability to execute our business strategies,
ensure a cohesive management team, and attract and retain key executives may be adversely affected by the
uncertainty associated with the transition to a successor President and Chief Executive Officer.
In order to attract new personnel, we will need to grant inducement equity awards outside of our 2015 Equity
Incentive Plan, which dilutes the ownership of our existing stockholders.
Since 2007, our board of directors has approved inducement equity awards outside of our 2006 Plan to select
new employees upon hire and in connection with mergers and acquisitions without stockholder approval in
accordance with NASDAQ Listing Rule 5635(c) for an aggregate of 2,216,061 shares of our common stock. In
December 2015, we replaced the 2006 Plan with our 2015 Plan. We expect to continue making inducement
equity awards outside of the 2015 Plan as we did with the 2006 Plan. The use of inducement equity awards may
dilute the equity interest of our stockholders, which could in turn adversely affect prevailing market prices for
our common stock.
In addition, we may issue equity securities to complete an acquisition, which would dilute our existing
stockholders’ ownership, perhaps significantly depending on the terms of such acquisitions and could adversely
affect the price of our common stock. 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.
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