Shutterfly, Inc. (SFLY) Promises Robust Returns

Shutterfly, Inc. (NASDAQ:SFLY) recently reported its FY 2012 financial performance. The company posted robust numbers that make it a highly profitable prospect for potential investors. Total revenue grew by nearly 35% to $641 million, while Unique Users grew by 30% to 7.1 million. The exceptional growth by the company in the last few years can be attributed to active acquisitions and strong performance in the consumer segment. Shutterfly last year acquired Photoccino and Penguin Digital, which enabled the American based corporation to constantly develop on its existing operations and increase the online transactions. Shutterfly primarily competes with American Greetings Corporation (NYSE:AM), Snapfish, Cafe Press in the online printing space and Apple Inc. (NASDAQ:AAPL)in mobile apps.

Shutterfly iPhone Application

Last year, with the acquisition of Penguin Digital, Shutterfly introduced a new mobile phone application for photo prints and prints on canvas and merchandise. The mobile application is an incremental development on the app introduced by Shutterfly a few years ago. Going forward the mobile platform is expected to be the key driver for Shutterfly’s revenues. In a recent interview with

Karl Wiley, a GM at Shutterfly, describes the importance of mobile photography and how the mobile app segment will drive future revenues.

He further pointed out that by the end of 2013, roughly 40% photos taken in the US are going to be through mobile phones. Nonetheless, it can be argued that Shutterfly entered the customized mobile phone apps a little later than expected, as start-ups like Penguin Digital were already out with such apps. Nevertheless, active M&A activity to acquire technology and competences in order to provide a variety of services to consumers keeps Shutterfly ahead of its competitors.

Organic Growth Through M&A Activity

Shutterfly has grown its consumer base consistently over the years and recorded a jaw dropping 30% growth from 2011 in its unique users. In addition, investing in innovative marketing and promotional activities has enabled the company to record consistent organic growth too. Last year, Shutterfly acquired certain assets of Eastman Kodak in online photo printing, adding to the two strategic acquisitions of Tiny Prints and Photoworks in 2011. The three strategic acquisitions proved rational investments, as the consumer base grew exponentially last year. Furthermore, the acquisitions also presented an opportunity to diversify its product mix and offer both high and low end products.

Growth in the Commercial Printing Segment

Shutterfly reported strong growth in the commercial printing segment, as the revenues doubled from the previous year to $27 million. The performance was underpinned by the growth in the consumer base and increase in the number of orders from the existing customers. The revenue contribution from the commercial printing SBU to the total revenue of Shutterfly grew to 4%, up from 3% in 2011.