Shutterfly 2015 Annual Report Download - page 67

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the overall understanding of our past financial performance and our prospects for the future. These adjustments
to our GAAP results are made with the intent of providing both management and investors a more complete
understanding of our underlying operational results and trends and performance. Management uses these Non-
GAAP measures to evaluate our financial results, develop budgets, manage expenditures, and determine
employee compensation. The presentation of additional information is not meant to be considered in isolation or
as a substitute for or superior to net income (loss) or net income (loss) per share determined in accordance with
GAAP. We believe that it is important to view free cash flow as a complement to our reported consolidated
financial statements. Management strongly encourages shareholders to review our financial statements and
publicly-filed reports in their entirety and not to rely on any single financial measure.
The table below shows the trend of adjusted EBITDA and free cash flow as a percentage of net revenues and
Non-GAAP net income per share for the years ended December 31, 2015, 2014, and 2013 (in thousands):
Year Ended December 31,
2015 2014 2013
Net revenues ............................................ $ 1,059,429 $ 921,580 $ 783,642
Non-GAAP Adjusted EBITDA .............................. $ 192,000 $ 166,759 $ 150,442
EBITDA % of Net revenues ............................... 18% 18% 19%
Free cash flow ........................................... $ 110,621 $ 76,516 $ 75,472
Free cash flow % of Net revenues .......................... 10% 8% 10%
Non-GAAP net income per share ............................ $ 0.14 $ 0.07 $ 0.38
We carefully manage our operating costs and capital expenditures, in order to make the strategic investments
necessary to grow and strengthen our business, while at the same time increasing our adjusted EBITDA and
improving our free cash flows. Over the last three years, our full year adjusted EBITDA has improved to $192.0
million in 2015 from $150.4 million in 2013. This continued growth in adjusted EBITDA resulted from increased
demand for our products and services, scale efficiencies, and improvements from product and services mix. The
increase in adjusted EBITDA is also driven by higher net revenues in 2015 as compared to prior years. We also
increased our free cash flow to $110.6 million in 2015 from $75.5 million in 2013.
The following is a reconciliation of adjusted EBITDA, free cash flow, and Non-GAAP net income per share
to the most comparable GAAP measure, for the years ended December 31, 2015, 2014, and 2013 (in thousands,
except per share amounts):
Reconciliation of Net Income/(Loss) to Non-GAAP
Adjusted EBITDA Year Ended December 31,
2015 2014 2013
Net income/(loss) .......................................... $ (843) $ (7,860) $ 9,285
Add back:
Interest expense ......................................... 20,998 16,732 9,446
Interest and other income, net .............................. (744) (508) (308)
Tax (benefit)/expense ..................................... (1,146) (2,119) 3,635
Depreciation and amortization .............................. 113,277 98,752 74,856
Stock-based compensation expense .......................... 60,458 61,762 53,528
Non-GAAP Adjusted EBITDA .............................. $ 192,000 $ 166,759 $ 150,442
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