Shutterfly, Inc. (NASDAQ:SFLY)
March 06, 2013 12:50 pm ET
Jeffrey T. Housenbold - Chief Executive Officer, President and Director
Brian M. Regan - Chief Financial Officer and Senior Vice President
Hi, everybody. Thanks again for joining us today. It's my pleasure to introduce the Shutterfly team. Since we are running a little bit behind schedule, I'm just going to pass it over to the team here. Thank you very much.
Jeffrey T. Housenbold
Good afternoon. Thank you. So I'm going to fly through a brief overview of Shutterfly and then leave ample time for Q&A. Shutterfly's vision is to make the world a better place by helping people share life's joy, and our mission is to deepen the personal connections between our customers and the people that matter most in their lives. We were founded in April of 1999, went public in September of 2006 and last year, we reported $641 million in revenue and $128 million in EBITDA. As the market leader, 50% to 52% of the market according to InfoTrends, we're well-positioned for continued growth as we move forward.
We manage a portfolio of premium lifestyle brands, Shutterfly, Tiny Prints, Wedding Paper Divas and Treat. And if you think about the life stages that people go through, we get them when they're doing -- they're engaged or save the date or wedding invitations on WPD, we then get their birth announcements on Tiny Prints and then we get their life stories on Shutterfly.
Treat is our newest brand. We launched it about 7 months ago within the 1:1 greeting card space, which is mostly birthday but it's Teacher Appreciation Day, it's St. Patrick's Day. It's a part of a market that is $6 billion and dominated by established brands like Hallmark and American Greetings. But we believe we have a stronger, more modern, relevant value proposition in the space.
Our key customer demographics, our customers are largely female. She's 25 to 55 years old. 70% have children in a household under 8 and high per capita disposable income. Household income is at $95,000. From a psychographic standpoint, our customers aren't really technologists. They're not looking for the latest whizbang photo app that's talked about in Tech Crunch or in Gadget. What they're looking for is an intuitive, easy-to-use Web interface that helps them share life's joy, stand out from the crowd, get pats on the back as they're making the Christmas book or the birth of their first child book.
Why do customers come to Shutterfly? One is that we're customer-friendly. We're the only player in this space that offers free, unlimited, non-compressed, non-down sampled, non-forced-delete storage.
We're also a design house. We have more -- between internal and external, we have more than 150 designers. We understand that our customers care about the esthetic. They want to be design forward, on trend and their personal stationery in a way they express themselves are a reflection of who they are and their style.
We also have the best quality in the industry. We're vertically integrated and own our own manufacturing, and we provide the best quality from an end-to-end customer experience.
And then lastly, our user interfaces are easy-to-use, they're up in the cloud, they're available on a Mac or a PC and our customer is able to start projects on a Sunday and finish it in the office on a Monday. We're really ubiquitous and allow them for multiple creation approaches.
The Shutterfly brand, our flagship product is our photo books, augmented by our cards and stationery line, which is a big seller in the fourth quarter. We also offer photo gifts and home decor ranging from mouse pads and mugs to 20x30 cameras prints. And we also offer obviously prints, 4x6 prints or about 5% of the business now, down from about 60% when I joined 8 years ago.
On photo books, we offer the most designs, layouts, templates, sizes and cover choices in the industry. We have over 150 different styles for our customers to choose, and we're adding 20 or 30 new styles each and every year.
On greeting cards, it really ranges from the greeting card for holiday season to babies announcement to a birthday to thank you to personal stationery.
On photo gifts, you can see it's an ever-growing array of photo gifts. Our newest, our acrylic blocks and iPhone cases are doing quite well. But it's a way to have mass personalization and take the products that we use every day and bring a little bit of you from our customers' perspective into play.
Calendars are also a popular choice. We offer them in a number of different styles and designs. From prints, we go from 4x6 prints all the way to jumbo 20x30 enlargement, wall decals, acrylic and canvas for our customers to be able to decorate and adorn their homes with their memories.
The Tiny Prints brand is an elevated brand. It's a cards and stationery brand that started out as birth announcements, has then moved into more of life's occasions.
Wedding Paper Divas, as I said, is all about wedding. It's -- we're the leading player online offering a stylish contemporary assortment and collection for that important day in our customer's life.
And then Treat is really about personal basis. So for less than $2, you could take a card and make it personal. So you can adjust the sentiments, instead of Dear Sweetheart on Valentine's Day, it could be Dear Ruth. You can add a picture, you can add a personal joke or you can just take the sentiments that we offer, versus going into Duane Reade and paying $4 for a generic card, we'll ship it anywhere in the U.S. for $2. And we also have iPhone application that will allow you to store all your friends' birthdays and connect through Facebook so that you'll never miss another important day.
On the Treat brand and the Treat experience, we also allow you to put a gift card into right -- printed right into the card. And today, we announced the launch of new gifts on Treat so that you have a solution for that friend's birthday.
We've been the innovator in this space. As I mentioned, we launched in 1999 and pioneered the space of online photo sharing, and we continued to invest meaningful amounts in R&D to stay ahead of the competition, to offer a broader, more robust value proposition to our customers. We have 56 patents and more than 50 pending, protecting both our front-end and our back-end processes. And we continue to use the balance sheet to augment both from a technology tuck-in but also from a customer acquisition and consolidation standpoint. Last year, we did 6 transactions. Most notably, we purchased Kodak Gallery and Fuji SeeHere as customers, along within the past, Sony, Yahoo! and American Greetings have folded their properties and we purchased those customers and put them onto our platform. Highly accretive transactions for us that reduce the competitive landscape and also drives higher margins because of our owned and operated manufacturing. Then last year, we bought Penguin Digital, a New York-based mobile team that has been developing our iPhone applications; Photoccino, an Israel-based team that's offering proprietary algorithms that help customers lay out their photo books and calendars in a much more intuitive and algorithmic-driven way; and then lastly, on December 27, we purchased ThisLife, which is a core component of our new Shutterfly cloud service.
We continue to innovate in mobile and social. Here are some screenshots of our iPhone app, if you haven't played with it. It's amazing. With the snap of one button, you can take a picture and put it on any of our products, put it in the cart and check out. So you can make one of our products in less than 10 seconds.
Our smart product creation powered by Photoccino. So we'll look at your pictures, we'll infer which ones are in focus, which ones have a person in it, are they smiling, are their eyes open, and we'll help go through your assortment of pictures, take out the best and then use Shutterfly's smart product creation and lay out a photo book for you. Again, reducing the friction points for our customers and increasing sales and throughput.
We talked about Treat. We're offering it across many different occasions, Father's Day, Mother's Day, Valentine's Day, most notably, birthday, which is about $3 billion in the U.S. of cards each year sold around birthdays.
Our Treat app, as I mentioned, you can pick a card, add a photo, change the sentiment, add a gift card and check out, all under 30 seconds.
We also offer Share sites, which are our password-protected private social network. It's interoperable with Facebook, but it defaults to closed, and it's a great way to manage your family. Youth Sports, we have relationships with people like American Youth Soccer Organization. And also classrooms, we have hundreds of thousands of classrooms are using our platform to manage the class.
So for sports, we offer, for example, Snack modules, who's bringing the snacks, maps to where the game is, pictures of the game, players of the game and all the families who are taking pictures have a central place to load up those pictures in a high-resolution way, and then our smart product creation helps make that special yearbook or gift for the coach at the end of the season. We have more than 5 million of these. We're growing 25,000 to 30,000 a week.
Our enhanced cloud service that we'll be launching later this year will take advantage of our 18-plus billion images already stored up in our cloud, plus our smart product creation and the ability to use facial recognition, social tagging and the aggregation of your photos regardless of where they're sitting, Instagram, Flickr, Picasa, Facebook, Shutterfly, your iPhone, your Android device. So as the proliferation of photos continue to challenge customers, we'll take them from all over, put them up into our cloud and layer on top our smart product creation and our storage capabilities, adding a new unique solution into the marketplace that's agnostic of the device, of the ecosystem or the output.
I talked a little bit about manufacturing. We have 2 facilities, 100,000 square feet in Phoenix, Arizona; 100,000 square feet in Charlotte, North Carolina. Last year, we announced we're moving the Charlotte plant to South Carolina and tripling its space for about the same operating costs. Owning our own manufacturing confers us a number of advantages, including better product quality, better throughput, better margins, better innovation cycles and ultimately, higher lifetime values for our customers.
We also offer an Enterprise business solution. This helps to utilize our available capacity in the lower seasonal demand quarters for us, and it allows us to get greater throughput on the machines we already own, the people that we already have on payroll. The only incremental cost is the variable cost of paper and ink. Our partners include AT&T, Dell, Toyota, UnitedHealth Group, MGM Grand. What we're doing in this offering is taking the power of the 1:1 marketing that e-mail provides and transferring it over to direct mail that you receive in your mailbox. So no longer do you have to get the same exact offer from MGM. They pick their database, they know if you're slots or baccarat or poker player, they know which properties you come in, they know your age, they change the style of the piece, the content, the pictures they offer and they're driving higher open rates, higher conversion rates and ultimately, higher return on their invested marketing dollars. And we're leveraging the capabilities of our Shutterfly in-house CRM and analytics team, along with our printing and manufacturing capabilities.
Some examples of our Enterprise products. They range from brochures to single 5x7 mail pieces, and you could see they're elegant, they're beautiful, they leverage our unique capabilities around photo and quality, as well as timeliness into the market.
We think the global market for personal publishing is about $100 billion. You could see it breaks down about -- in the U.S., it's about $30 billion. It breaks down to about $8 billion in greeting cards; $8 billion in photo books, yearbooks and scrapbooks; prints are $5 billion; photo gifts are $1 billion; calendars, $5 billion; and the stationery market is $5 billion. Less than 10% of this market is online today. So one of the key investment thesis here is playing the secular trend of offline to online, from static and generic content to dynamic and personalized content and with Shutterfly's 4 premium lifestyle brands, a leading market position, our strong balance sheet and the capabilities on both the front-end and the back-end technology, we think we're well-poised for continued growth and momentum. You could see our market share according to InfoTrends, the next leader would be Hewlett-Packard Snapfish, followed by Walgreens and Wal-Mart, and you could see we've been competing with folks like Apple since 1999, who has about 3% of the market.
We also have robust partners who are helping to co-market, build awareness and drive trials of our products, and they range from Target and Coca-Cola to P&G and Disney, The Knot and David's Bridal. All the places you would expect our affluent, female demographic to be interacting and purchasing from and we're getting the halo effect of associating with other premium brands.
If you look at a 10-year perspective, our transacting customers have had a 30% compound annual growth rate. Last year, we had 7.1 million transacting customers. Those were unique customers who are paying us. They drove $641 million in revenue. Our guidance this year were $740 million to $746 million. You can see 80% of our total revenue, company's history, were driven in just the last 4 years alone, representing 40% compound annual growth rate. And then from an EBITDA standpoint, we continue to get leverage out of the model, reporting a record $128 million last year and guidance implied around $142 million in EBITDA this year.
Capital expenditures over the last few years range between 7% and 8%. Our guidance was higher last year and this year as we build out the Fort Mill facility in South Carolina and as we acquire the Kodak Gallery customers, you should start to see that renormalize in 2014. And if you're modeling on a long-term basis, 3 or 4 years, I think that 7% to 8% is an appropriate place to be.
As we move forward in 2013, we're going to continue to focus on growing our core brands of Shutterfly and Tiny Prints; leveraging and driving value out of our most recent investments in Wedding Paper Divas, and Enterprise, and Treat and our new cloud service; expanding and driving enhancements in our brand equity; continuing to attract, retain and grow our world-class team that has delivered quarter-after-quarter, 48 consecutive quarters of year-on-year growth; and continue to build the business that drives not only top line revenue growth but also profitability and free cash flow for our shareholders.
With that, if you think about the investment highlights, if you want exposure to a growing and leading e-commerce brand, playing in a key secular space of photos, driving the offline to online adoption and doing it profitably, Shutterfly is the place you should take a closer look.
With that, let me open it up to questions.
So I guess to start off, I think you're still in the pretty sort of early stages with Treat. I think you've said in the past that you're first trying to get the user experience there right and the positioning right first, and then once you get that, you'll start to push more sort of on the advertising side. Can you talk a little bit more about that? And when you expect to really sort of push down on sort of the advertising piece? And then as a follow-up, a little bit more about sort of your full vision for that business going forward?
Jeffrey T. Housenbold
Sure. We see Treat more than a greeting card business. Otherwise, we would've just called it Shutterfly Greetings. Treat implies and has ostensibility beyond just cards, and with our press release this morning and our e-mails, adding gifts is really about -- it's a social gifting and greeting card business. So we're still adding components of the service, and we're also changing consumer behavior. For 108 years, they've been used to going into their local retailer, drugstore, general store and purchasing a card from American Greetings or Hallmark. So consumer behavior doesn't change overnight. We want to get the application, the positioning and the brand correct, and then, we're going to market it to what we call inside the tent or existing Shutterfly customers, those 7.1 million transacting customers last year. Once we start to get some momentum and traction and scale there, then we'll spend hard dollars outside of the tent trying to acquire new customers. What we're seeing is at $1.99, the rack rate is $3.29, $3.49, but you can get it as low as $1.99 with our card plans, we're seeing people come to Treat and try it. And then keep in mind, we get that user information. We have their credit card, we have their e-mail address and that allows us to cross market our other brands to those customers. We also see it attracting a slightly younger demographic than our core brands, which allows us to expand our offering, and it's also largely a mobile play today with the convenience of our app. So there's a series of interesting experiments we're running on the brand. We're pleased by the progress to date, but it's very early in the life cycle of evolution.
I was just curious if you could describe the impact of the recent M&A from a technology standpoint to enhance the user experience, and maybe even some of the internal efforts to improve the user rates resulted in conversion improvements or time to check out? You provided an example earlier, which I thought was great. Now I'm just curious, are we still in the early innings of that? What's the impact then? And how should we expect that to impact performance going forward?
Jeffrey T. Housenbold
Yes. I see this as a portfolio of initiatives, right? So if you go back to last year, we redid the entire homepage of Shutterfly. Not only did we rebrand it with a new logo and design and -- but also the flow for customers, and that drove increased conversion rates and we saw some of the benefits of that in the fourth quarter. We're undergoing a similar approach on Tiny Prints and Wedding Paper Divas this year. We tried different pricing and promotional strategies, trying to find the elasticity and to create a [ph] efficient frontier in where we price without discounting what our sell-through is. On Photoccino, that helped drive -- we exposed that to about 1 million customers in the fourth quarter. So people have never made a calendar, we made one for them. We've been doing that with photo books through our Simple Path, but we had never done it with calendars, and we saw a higher conversion rate and first-time calendar buyer numbers go up as well. On Penguin Digital, we took a team of 10 dedicated folks here in New York City, who had an app called MoPho, mobile photos, then we combined that with the Shutterfly app, which didn't have the ability to transact. You couldn't buy anything on the Shutterfly app, it was largely an upload, share and view experience. And within 12 weeks, we combined that and we launched in late November the ability to purchase, and we're seeing nice uptick there. With ThisLife, we bought that at the very end of the year, and that's going to be a cornerstone of our new cloud service, and we're taking Photoccino plus ThisLife plus Shutterfly's product creation plus some new stuff that's internally developed. So we're constantly optimizing and iterating the user experience to drive higher funnel conversion rates from awareness without TV campaigns, to transaction, to repeat rates. And so it's a portfolio of experiences, and we're seeing the benefits of that and I think that showed up in the fourth quarter numbers.
And you've touched on now a couple of different sort of times and places, but can you talk a little bit more about what prompted the cloud -- the new cloud service? What impact do you see sort of going forward as well?
Jeffrey T. Housenbold
Yes. About 3 years ago, I started talking about our vision and desire to open up the Shutterfly platform, all right? We realized that all of our customers' photos aren't going just to reside on Shutterfly. They're going to be on Facebook, and they're going to be on Instagram, and Flickr and Picasa. They're going to be stuck in your capture devices, like your camera and your smartphone. And we said we're agnostic as to where your images reside. And so 3 years ago, in our photo book creation path, we opened it up for you to be able to pull pictures from any one of those sources, including your hard drive, where the vast majority of people's images reside. This is just a continuation, our evolution of that vision and philosophy that says, we have tens and tens of millions of customers who love our free unlimited storage. And they're facing the same problem than I am, and I know, I'm an outlier today with nearly 250,000 photos. But in a couple of years, most customers will have that because the cost of taking a photo is essentially 0 today. And the problem went from, how do I print a digital photo, to now, how do I manage the ever-growing array of digital content? And so our vision is that we're in a unique place to provide an unstructured and structured search capability on top of this personal library of digital content. So imagine being able to sort through my 250,000 pictures and do it by my -- any of my 3 sons' names or by location or by the tags or how popular that image was. Did you print it? Did you make an enlargement? Did you put it in a photo book? Was it a full-page spread? Was it a 2-page spread? Was it a cover photo? How often did you interact in that? And so we're providing essentially a photo ranking system. Not dissimilar from what Google did with websites, we're going to be able to help customers go from those 10 pictures that are essentially the same, you took at the soccer game, and through technology, tell you which one is great. Alleviate that burden and the time sorting through that so that you could get the product creation and sharing and enjoyment in a much quicker and in a more delightful way. And so that's part of the vision. We'll continue to push on that thread. And as I said over the last few weeks, you'll see that launch sometime this year, and we're playing with, is it a subscription? Is it free? Is it a hybrid model? Is it a freemium model? And we'll iterate on that business model as we launch it.
Brian M. Regan
The one that [indiscernible] is that with the smart product creation [indiscernible] beautiful product apps with some more product [indiscernible] no matter what strategy you employ or subscription [indiscernible] I think [indiscernible] monetize [indiscernible] through the production creation path.
Jeffrey T. Housenbold
In addition, our storage costs are extremely low, right? When I joined 8 years ago, we were on EMC and NetApp heavy iron. We then moved to DDN and Hitachi, and now we're building our own storage in China with a proprietary file system. So our storage cost is lower than Amazon's S3. So we have the ability to monetize in different ways, as Brian was saying, but we also have the benefit of scale and storage.
Year, a year and a little ago, the competitive environment posed a pretty good headwind for you guys, and then you talked about it being elevated throughout the course the whole year and yet you manage to have fabulous year, your best year. That looks like a lot of the issues that you had seemed to be in the rearview mirror. I guess, could you just give us some examples as to how you managed to perform so well in what seems like it was still a very elevated competitive environment, I guess, number one. And then number two, you talked a lot about HP in the past, how irrational they were being and people had surmised perhaps taking them out or acquiring them would be a way to alleviate some of these issues, and is that -- and on the call, you talked about that really not being something that was top of mind, a large acquisition, at least. Is that -- I mean, if you kind of gotten to the point now where your brand and the power of your business is so strong that the competitive environment, what other people are doing, really doesn't even matter to you that much anymore?
Jeffrey T. Housenbold
Yes, it's a great question. I think if you go back to Q4 2011, it was one of expectation and perspective, right? We raised guidance throughout the year 3x by about $40 million, and then we missed it by about $7 million in the fourth quarter due to -- what surprised us was pretty irrational pricing, 70% to 90% off doesn't seem like a sustainable business bundle to us. So we were surprised. We thought people were just testing or trying to pull forward demand early in the quarter. They decided to do that throughout the fourth quarter. Our best intelligence suggests that wasn't a terribly profitable nor a successful strategy. We went into 2012 saying, "Let's assume that our competitors will continue down that path. What can we do as the scale and the market leader in the space, with the strongest brand equity do that is just beyond price as we have done for the last 13 years?" So we continue to invest in innovation, in design, in quality, in the timeliness in which the packages arrive to our customers' doorsteps, to our customer service, which we made a strategic decision to take in house in America versus outsourced to places like Costa Rica and India. So there was no one thing that we did. It was really we got into our war room, and it is called the war room, and in the beginning of 2012, and said, "What are the levers we have that no one else in the industry has and how do we push on that?" And that proved to be fruitful throughout 2012. We ended up having 4 very strong quarters, capped off by a very, very strong fourth quarter. I think your comments are right in that we've always been interested. My philosophy, they haven't see this in many spaces. I used to run all this for the biggest search engine at the time. I was an executive at eBay. Early on in the industry formation, if you can reduce the competitive landscape, it often is a good thing, right? And you get the benefits of scale. And so 3 or 4 years ago, we looked at ways to get that scale. We acquired Sony, and Yahoo! and American Greetings, PhotoWorks customers, and then we looked at, well, is it possible to align ourselves, emerge with either Snapfish or Kodak? And we were able to do that with the Kodak asset, which was having a meaningful decline, topped out about $178 million in 2007. By the time we purchased, it was sub $70 million. So we are already stealing share and pulling away from the competition. And in my recent comments about HP is, I had the pleasure of working with Meg for 4 years. I think she's an incredibly talented leader. I think Snapfish is a very, very small part of HP and really not a focus. And now that we're 5, 6, 7x its size, it's kind of a nice to have, not a must-have, as we've kind of executed on our own and consolidated other parts of the industry. While we're always mindful of competition, if Nokia or Motorola cuts the price on their latest phone or BlackBerry, it doesn't mean that Apple iPhone does the same, right? The equity and the brand, the user experience and the ecosystem that they built allows them to maintain a price umbrella, and in a different scale, we're doing the same thing in our industry. And so I feel very good about where we are today and the investments that we're making for the future.
Brian M. Regan
One additional point on the first part of your question, in the competitive environment in Q4 I think was integral to our success. This Q4, this past Q4 was our integrated marketing campaigns, where the competitive environment, not only was it the easier marketing lever of price that many of the competitors pulled, keyword bidding, as an example, was incredibly inflated. And so based on the success of multiple channels that we had in the market between a TV cable campaign, e-mail marketing, Facebook Exchange, display advertising, affiliate networks, partnerships, that integrated approach allowed us to step back for a period of time and actually work through other marketing channels, and so that integrated campaign was another way that we successfully navigated in another highly competitive part of this past Q4 and that was very crucial to our success.
I guess to that, to the Enterprise business. I think in the past you've said, you see that as sort of being potentially $100 million business with sort of 30% type margins. I think -- what gets you there? What are sort of the competitive advantages? Because clearly, it's been a business that's been a nice source of upside for us over now over the past couple of quarters growing meaningfully versus sort of the industry, and that's single-digit type growth. So just a little bit more color there would be great.
Jeffrey T. Housenbold
Sure. We delivered $27 million last year in Enterprise. It's a 5-year-old initiative for us. It went from 2 to 4 to 8 to 13 to 27. It's not going to keep doubling right, the law of large numbers at some point will slow you down. But it's a huge market we're going after. Printing in and of itself is $800 billion, $900 billion worldwide. When you look at four-colored digital, that's 60 -- digital is $60 billion, four-color is about $6 billion to $7 billion, so we're really focused on that $6 billion to $7 billion market, which is the only part of the entire printing industry that's growing. We're the largest single installation of digital presses in the world, and we also have the highest quality and highest accuracy because our consumers demand that. We take that capability and we provide that to Global Fortune 1000 companies, and we're seeing a very nice uptake. Everyone is intrigued by how do we market as a consumer-facing brand? How do we get greater conversion rates? And how can we take that knowledge and help them differentiate themselves in their respective marketplaces? And so we continue to expand the Dell relationship this year to a worldwide relationship, we picked up additional work from AT&T, UnitedHealth Group, but it's an Enterprise sale, right? So it's going to be lumpy, the cycles are longer, but our solution is resonating very well in the marketplace. Our current capacity, this could be $100 million business. They'll have about a 30% flow through to free cash. It'll generally have lower EBITDA margins than the Consumer business, so it's margin dilutive but it's free cash flow accretive. It also confers other subtle benefits to us to the Consumer business. I'm able to have more full-time trained employees throughout the whole year, where we hired 2,000 to 3,000 temporaries in the fourth quarter. So if I get more supervisors and managers throughout the year who are busy and more qualified. It also gets me lower shipping rates and lower ink and paper rates because we have additional volume and scale. And also, these machines, they are like Ferraris, they like to be driven, all right? And so we're able to run them more frequently throughout the year. So a lot of advantages to us. And then as we head into the fourth quarter, we were able to train our temporary employees on commercial business. The accuracy rate in commercial is about 95%. The accuracy rate at Shutterfly, we make a mistake 1 in every 10,000, right? And so if we make 3 mistakes in 10,000 on Commercial, it's fine to our clients, and we're able to train people, where in the past, we would just make dummy products up and then throw it away. So we've been able to reduce our waste and scrap rates as well. So we're excited about the business. It's not going to keep going in a linear fashion. It'll be lumpy, but we're now -- where we used to make outbound calls, we're now getting inbound calls from large companies. And what's different from us, for Shutterfly, than most other printers is we're not going into the procurement office. CMOs are calling us and saying, "Wow! You're doing really well in your space. Can you help me do the same in my space?" So I'm excited about the conversations that we're currently having in the pipeline.
[indiscernible] Are there any sort of occasions/holidays that you think maybe you're of under-indexed currently that could present sort of new opportunities for growth going forward?
Jeffrey T. Housenbold
I'd say all of them, right? In the greeting card space, less than 5%, 1:1 it's less than 1%, right? So in birthday, less than 1% happening online. So from a -- the big Holy Grail here is changing consumer behavior from doing this in retail to doing it online, right? And every quarter, Mother's Day gets bigger, Father's Day gets bigger, Valentine's Day gets bigger, Teacher Appreciation, graduation, Bar Mitzvah, Sweet 16, they're all getting bigger and bigger. Yet it has still single-digit penetration. And that's the key here. And you hit some inflection point in the consumer adoption curve, usually it's 25%, 30%, 35%, and then you kind of -- the slope of the curve changes. We're not there yet. And that's what gives us excitement every Monday morning to show up at work, is that we're clearly on our path to generating up from $50 million when I joined 8 years ago, generating over $1 billion in revenue in the near future, and we see Shutterfly has the potential to be a multibillion dollar company offering a unique value proposition across life's most important milestones and building a trusted brand. That there are many great brands out there, but they often stand for their consumer electronics or phone brands. We think memories is something different. And our customers reward us with incredible repeat rates, high Net Promoter Scores and ever-increasing lifetime values.
Jeffrey T. Housenbold
Thank you, everyone.
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: firstname.lastname@example.org. Thank you!