Shutterfly 2015 Annual Report Download - page 50

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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,
BorrowLenses and Groovebook.
We generate the majority of our Consumer 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 generate the majority of our
Enterprise revenues by printing and shipping direct marketing and other variable data print products and formats.
We manufacture most of these items in our Fort Mill, South Carolina; Shakopee, Minnesota; and Tempe, Arizona
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, magnets, pillows and blankets. 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 2015, we delivered record net revenues, which increased 15% year over year to more than $1 billion. This
increase was driven by a 10% increase in revenue in our Consumer segment and a 94% increase in revenue from
our Enterprise segment. 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 consolidated all of our locations in the greater Phoenix area in to our new production facility in
Tempe, Arizona which opened in the second quarter of 2015. This new facility offers flexibility for
future expansion.
• We closed our manufacturing operations in Elmsford, New York and transitioned the
manufacturing work done at this facility to our Fort Mill, South Carolina; Shakopee, Minnesota;
and Tempe, Arizona facilities. The small size of the Elmsford facility relative to our other facilities
limited its ability to scale and drive efficiencies.
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