Shutterfly (SFLY) 10-Q 5 Nov 15 2015 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Nov. 03, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	SHUTTERFLY INC
Entity Central Index Key	1,125,920
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		35,136,469
Document Fiscal Year Focus	2,015
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2015

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 96,451	$ 380,543
Short-term investments	37,616	64,866
Accounts receivable, net	48,902	31,105
Inventories	11,610	13,016
Deferred tax asset, current portion	36,652	34,645
Prepaid expenses and other current assets	37,751	24,983
Total current assets	268,982	549,158
Long-term investments	8,718	29,928
Property and equipment, net	285,566	241,742
Intangible assets, net	68,187	87,950
Goodwill	408,975	408,975
Deferred tax asset, net of current portion	549	549
Other assets	11,992	13,976
Total assets	1,052,969	1,332,278
Current liabilities:
Accounts payable	14,904	30,086
Accrued liabilities	76,047	135,485
Deferred revenue	25,590	31,415
Total current liabilities	116,541	196,986
Convertible senior notes, net	264,452	255,218
Deferred tax liability	35,734	48,090
Other liabilities	114,672	74,178
Total liabilities	$ 531,399	$ 574,472
Commitments and contingencies (Note 11)
Stockholders' equity:
Common stock, $0.0001 par value; 100,000 shares authorized; 35,446 and 37,906 shares issued and outstanding on September 30, 2015 and December 31, 2014, respectively	$ 4	$ 4
Additional paid-in capital	901,737	838,313
Accumulated other comprehensive income/(loss)	30	(53)
Accumulated deficit	(380,201)	(80,458)
Total stockholders' equity	521,570	757,806
Total liabilities and stockholders' equity	$ 1,052,969	$ 1,332,278

CONDENSED CONSOLIDATED BALANCE3

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (Parenthetical) - $ / shares shares in Thousands, $ / shares in Thousands	Sep. 30, 2015	Dec. 31, 2014
Stockholders' equity:
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	100,000	100,000
Common stock, shares issued (in shares)	35,446	37,906
Common stock, shares outstanding (in shares)	35,446	37,906

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Income Statement [Abstract]
Net revenues	$ 167,492	$ 142,008	$ 511,349	$ 438,255
Cost of net revenues	107,991	89,726	299,345	249,404
Gross profit	59,501	52,282	212,004	188,851
Operating expenses:
Technology and development	38,066	33,488	111,928	97,102
Sales and marketing	43,052	42,082	138,028	128,695
General and administrative	27,449	25,639	85,730	77,289
Total operating expenses	108,567	101,209	335,686	303,086
Loss from operations	(49,066)	(48,927)	(123,682)	(114,235)
Interest expense	(5,613)	(4,381)	(15,334)	(12,184)
Interest and other income, net	433	102	655	383
Loss before income taxes	(54,246)	(53,206)	(138,361)	(126,036)
Benefit from/(provision for) income taxes	(8,831)	6,962	6,404	18,526
Net loss	$ (63,077)	$ (46,244)	$ (131,957)	$ (107,510)
Net loss per share - basic and diluted (in dollars per share)	$ (1.73)	$ (1.20)	$ (3.54)	$ (2.79)
Weighted-average shares outstanding - basic and diluted	36,369	38,453	37,291	38,470
Cost of net revenues
Stock-based compensation	$ 952	$ 886	$ 3,145	$ 2,782
Technology and development
Stock-based compensation	2,443	1,320	7,744	6,196
Sales and marketing
Stock-based compensation	5,329	5,591	17,202	16,837
General and administrative
Stock-based compensation	$ 7,032	$ 5,991	$ 21,740	$ 18,679

CONDENSED CONSOLIDATED STATEME5

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME/(LOSS) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Statement of Comprehensive Income [Abstract]
Net loss	$ (63,077)	$ (46,244)	$ (131,957)	$ (107,510)
Unrealized gains/(losses) on investments, net	31	(35)	134	(53)
Tax benefit/(expense) on unrealized gains/losses on investments, net	(12)	14	(51)	21
Other comprehensive income/(loss), net of tax	19	(21)	83	(32)
Comprehensive loss	$ (63,058)	$ (46,265)	$ (131,874)	$ (107,542)

CONDENSED CONSOLIDATED STATEME6

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Cash flows from operating activities:
Net loss	$ (131,957)	$ (107,510)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	63,435	46,079
Amortization of intangible assets	20,798	25,853
Amortization of debt discount and debt issuance costs	10,163	9,610
Stock-based compensation, net of forfeitures	49,831	44,494
Loss on disposal of property and equipment and rental assets	1,475	51
Deferred income taxes	(14,414)	(14,852)
Tax benefit from stock-based compensation	13,041	13,713
Excess tax benefits from stock-based compensation	(13,666)	(14,102)
Changes in operating assets and liabilities:
Accounts receivable, net	(17,797)	(4,338)
Inventories	1,406	(6,650)
Prepaid expenses and other current assets	(12,767)	(22,064)
Other assets	621	(2,391)
Accounts payable	(14,157)	(5,710)
Accrued and other liabilities	(66,401)	(62,447)
Deferred revenue	(5,825)	7,719
Other non-current liabilities	8,514	(496)
Net cash used in operating activities	(107,700)	(93,041)
Cash flows from investing activities:
Purchases of property and equipment	(46,448)	(56,872)
Capitalization of software and website development costs	(15,448)	(15,539)
Purchases of investments	(4,400)	(117,329)
Maturities and sales of investments	52,460	15,520
Proceeds from sale of property and equipment and rental assets	1,128	743
Acquisition of business and intangible assets, net of cash acquired	(127)	0
Net cash used in investing activities	(12,835)	(173,477)
Cash flows from financing activities:
Proceeds from issuance of common stock upon exercise of stock options	2,670	3,058
Repurchases of common stock	(134,084)	(50,520)
Prepayment of accelerated share repurchase	(75,000)	0
Refund of accelerated share repurchase	38,179	0
Excess tax benefits from stock-based compensation	13,666	14,102
Principal payments of capital lease and financing obligations	(8,988)	(1,541)
Net cash used in financing activities	(163,557)	(34,901)
Net decrease in cash and cash equivalents	(284,092)	(301,419)
Cash and cash equivalents, beginning of period	380,543	499,084
Cash and cash equivalents, end of period	96,451	197,665
Supplemental schedule of non-cash activities:
Net increase/(decrease) in accrued purchases of property and equipment	(154)	1,050
Net increase in accrued capitalized software and website development costs	363	981
Increase in estimated fair market value of buildings under build-to-suit leases	17,161	17,575
Property and equipment acquired under capital leases	29,097	6,831
Amount due from adjustment of net working capital from acquired business	$ 0	$ 253

The Company and Summary of Sign

The Company and Summary of Significant Accounting Policies	9 Months Ended
	Sep. 30, 2015
Accounting Policies [Abstract]
The Company and Summary of Significant Accounting Policies	The Company and Summary of Significant Accounting Policies Shutterfly, Inc., (the “Company” or “Shutterfly”) was incorporated in the state of Delaware in 1999 and began its services in December 1999. The Company is the leading manufacturer and digital retailer of high-quality personalized products and services offered through a family of lifestyle brands. The Company provides customers a full range of products and services to organize and archive digital images; share pictures; order prints and create an assortment of personalized items such as photo books, greeting cards and stationery and calendars. Shutterfly also operates a premier online marketplace for high-quality photographic and video equipment rentals. The Company also provides enterprise services; printing and shipping of direct marketing and other variable data print products and formats. The Company is headquartered in Redwood City, California. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and, accordingly, do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying unaudited condensed consolidated financial statements include the accounts of Shutterfly, Inc. and its wholly owned subsidiaries. In the opinion of management, all adjustments, consisting primarily of normal recurring accruals, considered necessary for a fair statement of the Company’s results of operations for the interim periods reported and of its financial condition as of the date of the interim balance sheet have been included. Operating results for the three and nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015 , or for any other period. The December 31, 2014 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2014 included in the Company’s Annual Report on Form 10-K. Fair Value The Company records its financial assets and liabilities at fair value. The accounting standard for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting standard establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Investments Investments, which may include agency bonds, corporate debt securities, and U.S. government securities, are classified as available-for-sale and are reported at fair value using the specific identification method. Unrealized gains and losses are excluded from earnings and reported as a component of other comprehensive income (loss), net of related estimated tax provisions or benefits. Investments whose maturity dates are less than twelve months are classified as short-term, and those with maturity dates greater than twelve months are classified as long-term. The Company assesses whether an other-than-temporary impairment loss on its investments has occurred due to declines in fair value or other market conditions. With respect to the Company's debt securities, this assessment takes into account the severity and duration of the decline in value, its intent to sell the security, whether it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, and whether it expects to recover the entire amortized cost basis of the security (that is, whether a credit loss exists). The Company did not recognize an other-than-temporary impairment loss on its investments in the three and nine months ended September 30, 2015 . Income Taxes The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized by applying the statutory tax rates in effect in the years in which the differences between the financial reporting and tax filing bases of existing assets and liabilities are expected to reverse. The Company assesses its ability to recover its deferred tax assets on an ongoing basis. Significant management judgment is required in determining any valuation allowance recorded against deferred tax assets. In evaluating the ability to recover deferred tax assets, the Company considers available positive and negative evidence including its recent cumulative losses, its ability to carry-back losses against prior taxable income and its projected financial results. The Company also considers, commensurate with its objective verifiability, the forecast of future taxable income including the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. A valuation allowance may be recorded in the event it is deemed to be more-likely-than-not that the deferred tax asset cannot be realized. If recorded, it would have an adverse impact on the Company’s operating results. The Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. The Company is required to make subjective assumptions and judgments regarding its income tax exposures. Interpretations and guidance surrounding income tax laws and regulations change over time. As such, changes in the Company's subjective assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and statements of operations. The Company's policy is to recognize interest and /or penalties related to all tax positions in income tax expense. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. No interest and penalties were accrued as of September 30, 2015 and December 31, 2014 . The Company’s analysis of the need for a valuation allowance considered that the Company has incurred a cumulative loss in the U.S. over the three year period ending September 30, 2015. A majority of the cumulative loss has been caused by non-recurring cost related to the Company’s expansions in manufacturing capacity, restructuring and integration activities in the past few years to prepare for future growth. The Company anticipates a return to full year profitability in fiscal 2016. Consideration has also been given to the Company’s history of utilizing Federal tax loss carryforwards prior to expiration, the expected reversal dates of the significant deferred tax liabilities, i.e., within the federal NOL and R&D credit carryforward periods, inclusive of any IRC Section 382 limitations. Based on the Company’s assessment, excluding the valuation allowance recorded prior to September 30, 2015 related to certain California and South Carolina deferred tax assets that are not likely to be realized, it is more likely than not that the Company’s other U.S. net deferred tax asset will be realized through future taxable earnings, and/or the reversal of existing taxable temporary differences. If necessary, the Company would pursue any possible tax planning strategies to avoid the valuation allowance. Accordingly, no additional valuation allowance has been recorded on this net asset as of September 30, 2015. The Company will continue to assess the need for a valuation allowance in the future. If future results are less than projected in the U.S. and if tax planning alternatives do not offset those effects, a valuation allowance may be required to reduce the deferred tax asset, which would impact the Company’s results of operations in the period in which it is recorded. The Company is subject to taxation in jurisdictions within the United States and Israel. Segment Reporting The Company reports as two operating segments with the Chief Executive Officer (“CEO”) acting as the Company’s chief operating decision maker. The Company defined two reportable segments based on factors such as how management manages the operations and how its chief operating decision maker views results. The Company has the following reportable segments: Consumer - Includes sales from the Company's brands and are derived from the sale of photo-based products, such as photo books, stationery and greeting cards, other photo-based merchandise, photo prints, and the related shipping revenues as well as rental revenue from its BorrowLenses brand. Enterprise - Includes revenues primarily from variable, four-color direct marketing collateral manufactured and fulfilled for business customers. In addition to the above reportable segments, the Company has a corporate category that includes activities that are not directly attributable or allocable to a specific segment. This category consists of stock-based compensation and amortization of intangible assets. Revenue Recognition The Company recognizes revenue from Consumer and Enterprise product sales, net of applicable sales tax, upon shipment of fulfilled orders, when persuasive evidence of an arrangement exists, the selling price is fixed or determinable and collection of resulting receivables is reasonably assured. Customers place Consumer product orders through the Company's websites and pay primarily using credit cards. Enterprise customers are invoiced upon fulfillment. Shipping charged to customers is recognized as revenue at the time of shipment. For camera, lenses, and video equipment rentals from its BorrowLenses brand, the Company recognizes rental revenue and the related shipping and insurance revenue, ratably over the rental period. Revenue from the sale of rental equipment is recognized upon shipment of the equipment. For gift card sales and flash deal promotions through group buying websites, the Company recognizes revenue on a gross basis, as it is the primary obligor, when redeemed items are shipped. Revenues from sales of prepaid orders on its websites are deferred until shipment of fulfilled orders or until the prepaid period expires. The Company’s share of revenue generated from its print to retail relationships, is recognized when orders are picked up by its customers at the respective retailer. In the second quarter of 2015, the Company changed its accounting estimate related to flash deal deferred revenue. Beginning in 2010, the Company began to market product offers on flash deal websites such as Groupon and LivingSocial. With limited history as to customer redemption patterns, the Company had been deferring all amounts to a flash deal deferred revenue liability until customer redemption. The Company now has sufficient relevant historical flash deal redemption data to support a change in estimate of the flash deal deferred revenue based on historical customer redemption patterns. The historical data supports the probability of redemption after two years from the issuance of a flash deal offer as remote. In addition, the Company's attempts to re-market the unredeemed flash deals over the last six months resulted in no meaningful change in customer behavior. Accordingly, flash deal breakage revenue is now recognized based upon its historical redemption patterns and represents the unredeemed flash deal offers for which the Company believes customer redemption is remote and it is not probable that the Company has an obligation to escheat the value of the flash deal revenue under unclaimed property laws. In the second quarter of 2015, the Company recognized a revenue catch-up of $7.5 million associated with this change. The Company provides its customers with a 100% satisfaction guarantee whereby products can be returned within a 30 -day period for a reprint or refund. The Company maintains an allowance for estimated future returns based on historical data. The provision for estimated returns is included in accrued expenses. The Company periodically provides incentive offers to its customers in exchange for setting up an account and to encourage purchases. Such offers include free products and percentage discounts on current purchases. Discounts, when accepted by customers, are treated as a reduction to the purchase price of the related transaction and are presented in net revenues. Production costs related to free products are included in cost of revenues upon redemption. Recent Accounting Pronouncements No new accounting standards have been adopted since the Company filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2014 . In May 2014, the Financial Accountings Standards Board ("FASB") issued new accounting guidance related to revenue recognition. This new standard will replace all current U.S. GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. This guidance will be effective for the Company beginning January 1, 2018 and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is evaluating the impact, if any, of adopting this new accounting guidance on its financial statements. In August 2014, the FASB issued new guidance related to the disclosures around going concern. The new standard provides guidance around management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company's financial statements. In April 2015, the FASB issued new guidance related to presentation of debt issue costs. The new standard requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The adoption of this guidance will be effective for the Company beginning January 1, 2016, and is not expected to have a material impact on the Company's financial statements. In April 2015, the FASB issued new guidance related to accounting for fees paid in a cloud computing arrangement. The new standard provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The adoption of this guidance will be effective for the Company beginning January 1, 2016, and is not expected to have a material impact on the Company's financial statements. In July 2015, the FASB issued ASU 2015-11, Inventory - Simplifying the Measurement of Inventory (Topic 330) . ASU 2015-11 requires inventory to be subsequently measured using the lower of cost and net realizable value, thereby eliminating the market value approach. Net realizable value is defined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” ASU 2015-11 is effective for reporting periods beginning after December 15, 2016 and is applied prospectively. Early adoption is permitted. The Company is evaluating the impact, if any, of adopting this new accounting guidance on its financial statements. In September 2015, the FASB issued new guidance related to business combinations. The new guidance requires that adjustments made to provisional amounts recognized in a business combination be recorded in the period such adjustments are determined, rather than retrospectively adjusting previously reported amounts. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. We are evaluating the impact, if any, of adopting this new accounting guidance on our consolidated financial statements.

Stock-Based Compensation

Stock-Based Compensation	9 Months Ended
	Sep. 30, 2015
Share-based Compensation [Abstract]
Stock-Based Compensation	Stock-Based Compensation Stock Option Activity A summary of the Company’s stock option activity for the three and nine months ended September 30, 2015 is as follows (share numbers and aggregate intrinsic values in thousands): Number of Options Outstanding Weighted Average Exercise Price Weighted Average Contractual Term (Years) Aggregate Intrinsic Value Balances, December 31, 2014 402 $ 25.42 Granted — — Exercised (60 ) 19.56 Forfeited, cancelled or expired (5 ) 46.45 Balances, March 31, 2015 337 $ 26.15 4.4 $ 6,771 Granted — — Exercised (54 ) 21.31 Forfeited, cancelled or expired (8 ) 39.87 Balances, June 30, 2015 275 $ 26.67 4.1 $ 5,992 Granted — — Exercised (24 ) 14.72 Forfeited, cancelled or expired (7 ) 39.64 Balances, September 30, 2015 244 $ 27.48 3.7 $ 2,889 Options vested and expected to vest at September 30, 2015 243 $ 27.48 3.7 $ 2,886 Options vested at September 30, 2015 230 $ 27.40 3.5 $ 2,794 During the three and nine months ended September 30, 2015 , the Company did not grant any options. The total intrinsic value of options exercised during the three and nine months ended September 30, 2015 was $0.7 million and $3.6 million , respectively. Net cash proceeds from the exercise of stock options were $0.4 million and $2.7 million for the three and nine months ended September 30, 2015 , respectively. Restricted Stock Unit Activity The Company grants restricted stock units (“RSUs”) to its employees under the provisions of the 2006 Plan and inducement awards to certain new employees upon hire in accordance with NASDAQ Listing Rule 5635(c)(4). The cost of RSUs is determined using the fair value of the Company’s common stock on the date of grant. RSUs typically vest and are settled annually, based on a three or four year total vesting term. Compensation cost associated with RSUs is amortized on a straight-line basis over the requisite service period. A summary of the Company’s RSU activity for the three and nine months ended September 30, 2015 , is as follows (share numbers in thousands): Number of Units Outstanding Weighted Average Grant Date Fair Value Awarded and unvested, December 31, 2014 3,704 $ 42.17 Granted 1,459 45.03 Vested (926 ) 38.18 Forfeited (206 ) 45.22 Awarded and unvested, March 31, 2015 4,031 $ 43.96 Granted 275 46.74 Vested (195 ) 34.96 Forfeited (137 ) 43.97 Awarded and unvested, June 30, 2015 3,974 $ 44.60 Granted 206 42.40 Vested (122 ) 40.85 Forfeited (112 ) 45.06 Awarded and unvested, September 30, 2015 3,946 $ 44.58 RSUs expected to vest, September 30, 2015 3,450 Included in the RSU grants for the nine months ended September 30, 2015 , are 681,000 RSUs that have both performance criteria tied to the Company’s 2015 financial performance and four year service criteria, as well as grants made to the CEO that vest upon the achievement of 2015 financial performance and two-year shareholder return-based goals (“PBRSUs”). Compensation cost associated with these PBRSUs is recognized on an accelerated attribution model and ultimately based on whether or not satisfaction of the performance criteria is probable. If in the future, situations indicate that the performance criteria are not probable, then no further compensation cost will be recorded and any previous costs will be reversed. Employee stock-based compensation expense recognized in the three and nine months ended September 30, 2015 and 2014 , was calculated based on awards ultimately expected to vest and has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. At September 30, 2015 , the Company had $103.4 million of total unrecognized compensation expense, net of estimated forfeitures, related to stock options, RSUs and PBRSUs that will be recognized over a weighted-average period of approximately two years.

Net Loss Per Share

Net Loss Per Share	9 Months Ended
	Sep. 30, 2015
Earnings Per Share [Abstract]
Net Loss Per Share	Net Loss Per Share Basic net loss per share attributed to common shares is computed by dividing the net loss attributable to common shares for the period by the weighted average number of common shares outstanding during the period. Diluted net loss per share attributed to common shares is computed by dividing the net loss attributable to common shares for the period by the weighted average number of common and potential common shares outstanding during the period, if the effect of each class of potential common shares is dilutive. Potential common shares include restricted stock units and incremental shares of common stock issuable upon the exercise of stock options, conversion of warrants, and the impact of convertible senior notes. A summary of the net loss per share for the three and nine months ended September 30, 2015 and 2014 is as follows (in thousands, except per share amounts): Three Months Ended Nine Months Ended September 30, September 30, 2015 2014 2015 2014 Net loss per share: Numerator Net loss $ (63,077 ) $ (46,244 ) $ (131,957 ) $ (107,510 ) Denominator for basic and diluted net loss per share Weighted-average common shares outstanding 36,369 38,453 37,291 38,470 Net loss per share — basic and diluted $ (1.73 ) $ (1.20 ) $ (3.54 ) $ (2.79 )

Investments

Investments	9 Months Ended
	Sep. 30, 2015
Investments [Abstract]
Investments	Investments At September 30, 2015 and December 31, 2014 , the estimated fair value of short-term and long-term investments classified as available for sale are as follows (in thousands): September 30, 2015 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Short-term investments Corporate debt securities $ 31,335 $ 5 $ (4 ) $ 31,336 Agency securities 6,275 5 — 6,280 Total short-term investments $ 37,610 $ 10 $ (4 ) $ 37,616 Long-term investments Corporate debt securities $ — $ — $ — $ — Agency securities 6,878 31 — 6,909 US Government securities 1,799 10 — 1,809 Total long-term investments $ 8,677 $ 41 $ — $ 8,718 December 31, 2014 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Short-term investments Corporate debt securities $ 64,922 $ 3 $ (59 ) $ 64,866 Agency securities — — — — Total short-term investments $ 64,922 $ 3 $ (59 ) $ 64,866 Long-term investments Corporate debt securities $ 14,511 $ 1 $ (30 ) $ 14,482 Agency securities 13,649 3 (7 ) 13,645 US Government securities 1,799 2 — 1,801 Total long-term investments $ 29,959 $ 6 $ (37 ) $ 29,928 The Company had no short-term or long-term investments that have been in a continuous unrealized loss position for more than 12 months as of September 30, 2015 and no impairments were recorded in the period. The Company had no material realized gains or losses during the nine months ended September 30, 2015 . The following table summarizes the contractu al maturities of the Company's investments as of September 30, 2015 (in thousands): September 30, 2015 One year or less $ 37,616 One year through three years 8,718 $ 46,334 Actual maturities may differ from the contractual maturities because borrowers may have certain prepayment conditions.

Fair Value Measurement

Fair Value Measurement	9 Months Ended
	Sep. 30, 2015
Fair Value Measurement [Abstract]
Fair Value Measurement	Fair Value Measurement Cash Equivalents and Investments The Company measures the fair value of money market funds and investments based on quoted prices in active markets for identical assets or liabilities. All other financial instruments were valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. The Company did not hold any cash equivalents or investments categorized as Level 3 as of September 30, 2015 . The following table summarizes, by major security type, the Company's cash equivalents and investments that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands): Total Estimated Fair Value as of September 30, 2015 December 31, 2014 Level 1 Securities: Money market funds $ 31,175 $ 34,480 Level 2 Securities: Agency securities 13,189 13,645 Corporate debt securities 31,336 79,348 US Government securities 1,809 1,801 Total cash equivalents and investments $ 77,509 $ 129,274 Convertible Senior Notes As of September 30, 2015 , the fair value of the convertible senior notes, which was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including our stock price, interest rates and credit spread (Level 2) were as follows (in thousands): Total Estimated Fair Value as of September 30, 2015 December 31, 2014 Convertible senior notes $ 266,706 $ 251,973

Balance Sheet Components

Balance Sheet Components	9 Months Ended
	Sep. 30, 2015
Balance Sheet Related Disclosures [Abstract]
Balance Sheet Components	Balance Sheet Components Prepaid Expenses and Other Current Assets September 30, December 31, (in thousands) Prepaid marketing $ 9,320 $ 446 Prepaid service contracts – current portion 7,748 6,754 Intra-period deferred tax asset 5,023 — Deferred costs 3,824 6,911 Other prepaid expenses and current assets 11,836 10,872 $ 37,751 $ 24,983 Intra-period deferred tax asset represents the cumulative income tax benefit recorded as of the balance sheet date, which will offset against taxes payable or become a component of deferred taxes on a full year basis. Other Assets September 30, December 31, (in thousands) Other assets $ 11,992 $ 13,976 Other assets includes the long-term portion of intellectual property prepaid royalties, the long-term portion of issuance costs related to the Company's 0.25% Convertible Senior Notes, the long-term portion of prepaid service contracts, and deposits on long-term leases and other contracts. Property and Equipment, Net September 30, December 31, (in thousands) Computer equipment and software $ 169,219 $ 159,370 Manufacturing equipment 147,336 119,495 Capitalized software and website development costs 103,819 89,311 Buildings under build-to-suit leases 56,468 39,307 Leasehold improvements 21,307 20,876 Rental equipment 17,013 14,591 Furniture and fixtures 11,795 10,683 526,957 453,633 Less: Accumulated depreciation and amortization (241,391 ) (211,891 ) Net property and equipment $ 285,566 $ 241,742 Building value of $56.5 million under build-to-suit leases represents the estimated fair market value of buildings under build-to-suit leases of which the Company is the "deemed owner" for accounting purposes only. See Note 11 - Commitments and Contingencies for further discussion of the Company's build-to-suit leases. Included within Manufacturing equipment is approximately $73.0 million of capital lease obligations. Accumulated depreciation of assets under capital lease totaled $10.8 million at September 30, 2015 . Rental equipment includes camera lenses, camera bodies, video equipment and other camera peripherals which are rented through the BorrowLenses website. Depreciation and amortization expense totaled $22.6 million and $16.9 million for the three months ended September 30, 2015 and 2014 , respectively. Depreciation and amortization expense totaled $63.4 million and $46.1 million for the nine months ended September 30, 2015 and 2014 , respectively. Accrued Liabilities September 30, December 31, (in thousands) Accrued production costs $ 17,860 $ 32,814 Capital lease obligations 14,042 8,905 Accrued compensation 12,882 16,337 Accrued marketing expenses 8,806 30,835 Accrued purchases 5,753 11,809 Accrued consulting 4,292 6,418 Accrued income, sales, and property taxes 3,909 18,149 Accrued other 8,503 10,218 $ 76,047 $ 135,485 Other Liabilities September 30, December 31, (in thousands) Financing obligations $ 57,092 $ 38,529 Capital lease obligations 47,945 32,297 Deferred revenue 5,730 — Other liabilities 3,905 3,352 $ 114,672 $ 74,178 Financing obligations relate to the Company's build-to-suit leases as further discussed in Note 11 - Commitments and Contingencies .

Convertible Senior Notes

Convertible Senior Notes	9 Months Ended
	Sep. 30, 2015
Convertible Senior Notes Disclosure [Abstract]
Convertible Senior Notes	Convertible Senior Notes 0.25% Convertible Senior Notes Due May 15, 2018 In May 2013, the Company issued $300.0 million aggregate principal amount of 0.25% convertible senior notes (the "Notes") due May 15, 2018 , unless earlier purchased by the Company or converted. Interest is payable semiannually in arrears on May 15 and November 15 of each year, commencing on November 15, 2013. The Notes are governed by an Indenture between the Company, as issuer, and Wells Fargo Bank, National Association, as trustee. The Notes are unsecured and rank senior in right of payment to the Company's future indebtedness that is expressly subordinated in right of payment to the Notes and rank equal in right of payment to the Company's existing and future liabilities that are not so subordinated and are effectively subordinated in right of payment to any of the Company's cash equal to the principal amount of the Notes, and secured indebtedness to the extent of the value of the assets securing such indebtedness and are structurally subordinated to all existing and future indebtedness and liabilities incurred by the Company's subsidiaries. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company's common stock or a combination of cash and shares of common stock, at the Company's election. The initial conversion rate is 15.5847 shares of common stock per $1,000 principal amount of Notes. The initial conversion price is $64.17 per share of common stock. Throughout the term of the Notes, the conversion rate may be adjusted upon the occurrence of certain events. Holders of the Notes will not receive any cash payment representing accrued and unpaid interest upon conversion of a Note. Accrued but unpaid interest will be deemed to be paid in full upon conversion rather than cancelled, extinguished or forfeited. Holders may convert their Notes only under the following circumstances: • during any calendar quarter commencing after the calendar quarter ending on September 30, 2013 (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; • during the five business day period after any ten consecutive trading day period (the “Notes Measurement Period”) in which the "trading price" (as the term is defined in the Indenture) per $1,000 principal amount of notes for each trading day of such Notes Measurement Period was less than 98% of the product of the last reported sale price of the Company's common stock on such trading day and the conversion rate on each such trading day; • upon the occurrence of specified corporate events; or • at any time on or after December 15, 2017 until the close of business on the second scheduled trading immediately preceding the maturity date. As of September 30, 2015 , the Notes are not yet convertible. In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the face value of the Notes as a whole. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to interest expense over the term of the Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. In accounting for the transaction costs related to the Note issuance, the Company allocated the total amount incurred to the liability and equity components based on their relative values. Issuance costs attributable to the liability component, totaling $6.4 million , are being amortized to expense over the term of the Notes, and issuance costs attributable to the equity component, totaling $1.7 million , were netted with the equity component in stockholders' equity. Additionally, the Company recorded a deferred tax asset of $0.6 million on a portion of the equity component transaction costs which are deductible for tax purposes. Concurrently with the Note issuance, the Company repurchased 0.6 million shares of common stock for approximately $30.0 million . The Notes consist of the following (in thousands): September 30, 2015 December 31, 2014 Liability component: Principal $ 300,000 $ 300,000 Less: debt discount, net of amortization (35,548 ) (44,782 ) Net carrying amount $ 264,452 $ 255,218 Equity component (1) $ 63,510 $ 63,510 (1) Recorded in the consolidated balance sheets within additional paid-in capital, net of the $1.7 million of issuance costs in equity. The following table sets forth total interest expense recognized related to the Notes (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2015 2014 2015 2014 0.25% coupon $ 188 $ 187 $ 563 $ 562 Amortization of debt issuance costs 314 297 929 878 Amortization of debt discount 3,120 2,951 9,233 8,732 $ 3,622 $ 3,435 $ 10,725 $ 10,172 Note Hedge To minimize the impact of potential economic dilution upon conversion of the Notes, the Company entered into convertible note hedge transactions with respect to its common stock (the “Note Hedge”). In May 2013, the Company paid an aggregate amount of $63.5 million for the Note Hedge. The Note Hedge will expire upon maturity of the Notes. The Note Hedge is intended to offset the potential dilution upon conversion of the Notes and/or offset any cash payments the Company is required to make in excess of the principal amount upon conversion of the Notes in the event that the market value per share of the Company's common stock, as measured under the Notes, is greater than the strike price of the Note Hedge, which initially corresponds to the conversion price of the Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the Notes. Warrant Separately, in May 2013, the Company entered into warrant transactions (the “Warrant”), whereby the Company sold warrants to acquire shares of the Company's common stock at a strike price of $83.18 per share. The Company received aggregate proceeds of $43.6 million from the sale of the Warrant. If the average market value per share of the Company's common stock for the reporting period, as measured under the Warrant, exceeds the strike price of the Warrant, the Warrant will have a dilutive effect on the Company's earnings per share. The Warrant is a separate transaction, entered into by the Company and is not part of the Notes or the Note Hedge, and has been accounted for as part of additional paid-in capital. Holders of the Notes and Note Hedge will not have any rights with respect to the Warrant.

Share Repurchase Program

Share Repurchase Program	9 Months Ended
	Sep. 30, 2015
Share Repurchase Program [Abstract]
Share Repurchase Program	Share Repurchase Program On October 24, 2012, the Company's Board of Directors conditionally authorized and the Audit Committee subsequently approved a share repurchase program for up to $60.0 million of the Company's common stock. On February 6, 2014, the Company's Board of Directors approved an increase to the program, authorizing the Company to repurchase up to $100.0 million of the Company's common stock in addition to any amounts repurchased as of that date. On February 9, 2015, the Company's Board of Director's approved an increase to the program, authorizing the Company to repurchase up to $300.0 million of the Company's common stock in addition to any amounts repurchased as of that date. The share repurchase program is subject to prevailing market conditions and other considerations; does not require the Company to repurchase any dollar amount or number of shares; and may be suspended or discontinued at any time. The share repurchase authorization, which was effective immediately, permits the Company to effect repurchases for cash from time to time through open market, privately negotiated or other transactions, including pursuant to trading plans established in accordance with Rules 10b5-1 and 10b-18 of the Securities Exchange Act of 1934, as amended, or by a combination of such methods. In May 2015, the Company entered into an accelerated share repurchase agreement (“ASR”) with a financial institution to repurchase shares of its common stock. Under the ASR, the Company prepaid $75.0 million in the second quarter of 2015. The Company accounted for the ASR as a forward contract indexed to the Company’s own common stock. The Company has determined that the forward contract, indexed to its common stock, met all of the applicable criteria for equity classification. The final settlement occurred on August 3, 2015 and approximately 0.8 million shares were delivered to the company. The Company received a return of cash for the remaining amount not settled in shares of $38.2 million .. In total, approximately 0.8 million shares of common stock were repurchased under the ASR for $36.8 million , resulting in an average price paid per share of $46.49 under the ASR. The ASR was entered into pursuant to the Company’s existing share repurchase program. In total during the first nine months of 2015, the Company repurchased 3.8 million shares of its outstanding common stock at an average price of $44.51 per share pursuant to the share repurchase program and including the shares repurchased under the ASR settled in the third quarter of 2015. In 2014, the Company repurchased 2.0 million shares of its outstanding common stock at an average price of $45.29 per share pursuant to the share repurchase program. All repurchased shares of common stock have been retired. In 2013, the Company repurchased 0.1 million shares of its outstanding common stock at an average price of $31.87 per share pursuant to the share repurchase program. All repurchased shares of common stock have been retired.

Restructuring

Restructuring	9 Months Ended
	Sep. 30, 2015
Restructuring and Related Activities [Abstract]
Restructuring	Restructuring During the first quarter of 2015, the Company decided to discontinue the Treat brand as well as close the manufacturing operations in Elmsford, New York as part of the Company's strategic initiatives. The assets related to the Treat brand were written off in the first quarter of 2015 upon discontinuation of the Treat brand. In the third quarter of 2015, the Company stopped production at the Elmsford, New York manufacturing facility and ceased-use of the manufacturing space. As a result of exiting the facility prior to the lease termination date, the Company recorded a liability of $2.1 million for the net present value of future rent payments, adjusted for potential sublease income. The Company will continue to incur employee severance and benefit expenses due to a reduction to headcount as a result of the restructuring activities. These restructuring costs will impact cost of net revenues and operating expenses through the first quarter of 2016. The following table summarizes the restructuring costs recognized during the three and nine months ended September 30, 2015 : Three Months Ended September 30, 2015 Nine Months Ended September 30, 2015 (in thousands) Employee severance and benefits $ 151 $ 927 Other associated costs 2,059 2,494 Total $ 2,210 $ 3,421 The following table summarizes the restructuring activity during the three and nine months ended September 30, 2015 : Employee Severance and Benefits Other Associated Costs Total Accrued liability as of January 1, 2015 $ — $ — $ — Charges 467 435 902 Payments — — — Other adjustments — (435 ) (435 ) Accrued liability as of March 31, 2015 $ 467 $ — $ 467 Charges 309 — 309 Payments (284 ) — (284 ) Other Adjustments — — — Accrued liability as of June 30, 2015 $ 492 $ — $ 492 Charges 151 2,059 2,210 Payment (270 ) — (270 ) Other Adjustments — — — Accrued liability as of September 30, 2015 $ 373 $ 2,059 $ 2,432

Segment Reporting

Segment Reporting	9 Months Ended
	Sep. 30, 2015
Segment Reporting [Abstract]
Segment Reporting Disclosure	Segment Reporting The Company reports segment information based on the "management" approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of its reportable segments. The Company's Chief Operating Decision Maker ("CODM") function is comprised of its chief executive officer. Effective in the fourth quarter of 2014, the Company defined two reportable segments based on factors such as how management manages the operations and how the chief operating decision maker views results. Prior to the fourth quarter of 2014, the Company reported as a single operating and reportable segment. Accordingly, the Company has recasted its financial information and disclosures for prior periods to reflect the segment disclosures as if the current operating structure had been in effect throughout all periods presented. The CODM function uses gross profit to evaluate the performance of the segments and allocate resources. Management considers gross margin to be the appropriate metric to evaluate and compare the ongoing performance of each reportable segment as it is the level which direct costs associated with the performance of the segment are monitored. Cost of revenue for the Consumer segment consists of costs directly attributable to the production of personalized products for all of the Company's brands, including direct materials, shipping charges, and payroll and related expenses for direct labor; rent for production facilities, and depreciation of production equipment and facilities where the Company is the deemed owner. Cost of net revenues for the Enterprise segment consists of costs which are direct and incremental to the Enterprise business. These include production costs of Enterprise products, such as materials, labor and printing costs and costs associated with third-party production of goods. They also include shipping costs and indirect overhead. Due to the nature of the Company's operations, a majority of its assets are utilized across all segments. In addition, segment assets are not reported to, or used by, the CODM to allocate resources or assess performance of the Company's segments. Accordingly, the Company has not disclosed asset information by segment. The Company’s segments are determined based on the products and services it provides and how the CODM evaluates the business. The Company has the following reportable segments: Consumer - Includes sales from the Company's brands and are derived from the sale of photo-based products, such as photo books, stationery and greeting cards, other photo-based merchandise, photo prints, and the related shipping revenues as well as rental revenue from its BorrowLenses brand. Enterprise - Includes revenues primarily from variable, four-color direct marketing collateral manufactured and fulfilled for business customers. In addition to the above reportable segments, the Company has a corporate category that includes activities that are not directly attributable or allocable to a specific segment. This category consists of stock-based compensation and amortization of intangible assets. Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 (in thousands) Consumer Net revenues $ 138,025 $ 127,299 $ 458,087 $ 408,072 Cost of net revenues 82,760 73,845 246,925 212,503 Gross profit $ 55,265 $ 53,454 $ 211,162 $ 195,569 Gross profit as a percentage of net revenues 40 % 42 % 46 % 48 % Enterprise Net revenues $ 29,467 $ 14,709 $ 53,262 $ 30,183 Cost of net revenues 22,566 12,173 42,699 25,651 Gross profit $ 6,901 $ 2,536 $ 10,563 $ 4,532 Gross profit as a percentage of net revenues 23 % 17 % 20 % 15 % Corporate Net revenues $ — $ — $ — $ — Cost of net revenues 2,665 3,708 9,721 11,250 Gross profit $ (2,665 ) $ (3,708 ) $ (9,721 ) $ (11,250 ) Consolidated Net revenues $ 167,492 $ 142,008 $ 511,349 $ 438,255 Cost of net revenues 107,991 89,726 299,345 249,404 Gross profit $ 59,501 $ 52,282 $ 212,004 $ 188,851 Gross profit as a percentage of net revenues 36 % 37 % 41 % 43 %

Commitments and Contingencies

Commitments and Contingencies	9 Months Ended
	Sep. 30, 2015
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies Build-to-Suit Leases During the year ended December 31, 2013, the Company executed a lease for a new 237,000 square foot production facility in Tempe, Arizona. This facility consolidated all of the Company's locations in the greater Phoenix area, including the acquired R&R Images facility, offers flexibility for future expansion, and became operational in the second quarter of 2015. Both the landlord and the Company incurred costs to construct the facility according to the Company's operating specifications, and as a result, the Company has concluded that it is the “deemed owner” of the building (for accounting purposes only) during the construction period. The Company increased the asset and financing obligation for building uplift costs incurred by the landlord during the construction period. During the nine months ended September 30, 2015 and the year ended December 31, 2014 , the landlord incurred $17.1 million and $9.1 million of building construction costs, including capitalized interest, respectively, which the Company has recorded as an asset, with a corresponding construction financing obligation, as a component of other non-current liabilities. Upon completion of the construction of the facility in Tempe, Arizona in the second quarter of 2015, the Company evaluated the de-recognition of the asset and liability under the provisions for sale-leaseback transactions. The Company concluded that it had forms of continued economic involvement in the facility, and therefore did not comply with the provisions for sale-leaseback accounting. Instead, the lease will be accounted for as a financing obligation and lease payments will be attributed to (1) a reduction of the principal financing obligation; (2) imputed interest expense; and (3) land lease expense (which is considered an operating lease and a component of cost of net revenues) representing an imputed cost to lease the underlying land of the facility. In addition, the underlying building asset will be depreciated over the building's estimated useful life of 30 years. At the conclusion of the lease term, the Company would de-recognize both the net book values of the asset and financing obligation. In conjunction with the consolidation of facilities in the greater Phoenix area to the Company's new Tempe facility, the Company incurred $1.7 million in early termination costs in the second quarter for 2015, which is included in cost of net revenues in the Company's consolidated statements of operations. Indemnifications In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves future claims that may be made against the Company, but have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations. Contingencies From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. Syndicated Credit Facility On November 22, 2011, the Company entered into a credit agreement (“Credit Agreement”) with J.P. Morgan Securities LLC, Wells Fargo Securities, LLC, Fifth Third Bank, Silicon Valley Bank, US Bank and Citibank, N.A. (“the Banks”). JPMorgan Chase Bank, N.A. acted as administrative agent in the Credit Agreement. The Credit Agreement is for five years and provides for a $125.0 million senior secured revolving credit facility (the “credit facility”) and if requested by the Company, the Banks may increase the credit facility by $75.0 million subject to certain conditions. In December 2013, the Company requested and received the entire incremental amount for a total credit facility of $200.0 million . As part of the expansion, Bank of America, N.A. and Morgan Stanley Bank, N.A. joined the syndicate. From inception through September 30, 2015 , the Company has not drawn on the credit facility. At the Company’s option, loans under the Facility will bear stated interest based on the Base Rate or Adjusted LIBO Rate, in each case plus the Applicable Rate (respectively, as defined in the Credit Agreement). The Base Rate will be, for any day, the highest of (a) 1/2 of 1% per annum above the Federal Funds Effective Rate (as defined in the Credit Agreement), (b) JPMorgan Chase Bank’s prime rate and (c) the Adjusted LIBO Rate for a term of one month plus 1.00% . Eurodollar borrowings may be for one, two, three or six months (or such period that is 12 months or less, requested by Intersil and consented to by all the Lenders) and will be at an annual rate equal to the period-applicable Eurodollar Rate plus the Applicable Rate. The Applicable Rate for all revolving loans is based on a pricing grid ranging from 0.05% to 1.25% per annum for Base Rate loans and 1.50% to 2.25% for Adjusted LIBO Rate loans based on the Company’s Leverage Ratio (as defined in the Credit Agreement). On May 10, 2013, the Company amended the Credit Agreement by and among the Company and the Banks to (i) permit the issuance of the Notes and the related Note Hedge and Warrant, (ii) amend certain of the restrictive covenants set forth in the Credit Agreement, (iii) increase the Leverage Ratio (as defined the Credit Agreement) to be maintained by the Company to be at or below 3.50 to 1.00, and (iv) add a covenant requiring that the Company not permit its Senior Secured Leverage Ratio (as defined in the Credit Agreement) to exceed 1.60 to 1.00. Unchanged from the initial credit agreement, the Credit Agreement contains customary representations and warranties, affirmative and negative covenants, and events of default. Also, the Company may not permit the ratio of its Consolidated EBITDA for any period of four consecutive fiscal quarters to its interest and rental expense and the amount of scheduled principal payments on long-term debt, for the same period, to be less than 2.50 to 1.00. As of September 30, 2015 , the Company is in compliance with these covenants. Amounts repaid under the Facility may be reborrowed. The revolving loan facility matures on the fifth anniversary of its closing and is payable in full upon maturity. The Company intends to use the new Facility from time to time for general corporate purposes, working capital and potential acquisitions. Legal Matters The Company is subject to the various legal proceedings and claims discussed below as well as certain other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. Although adverse decisions (or settlements) may occur in one or more of these proceedings, it is not possible to estimate the possible loss or losses from each of these proceedings. The final resolution of these proceedings, individually or in the aggregate, is not expected to have a material adverse effect on the Company's business, financial position or results of operations. Cases that previously were disclosed may no longer be described because of rulings in the case, settlements, changes in our business or other developments rendering them, in our judgment, no longer material to our business, financial position or results of operations. The State of Delaware v. Shutterfly, Inc. On May 1, 2014, the state of Delaware filed a complaint against the Company for alleged violations of the Delaware False Claims and Reporting Act, 6 Del C. § 1203(b)(2). The complaint asserts that the Company failed to report and remit to Delaware cash equal to the balances on unused gift cards under the Delaware Escheats Law, 12 Del. C. § 1101 et seq. The Company believes the suit is without merit. In all cases, at each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. In such cases, the Company accrues for the amount, or if a range, the Company accrues the low end of the range as a component of legal expense. The Company monitors developments in these legal matters that could affect the estimate the Company had previously accrued. There are no amounts accrued which the Company believes would be material to its financial position and results of operations.

The Company and Summary of Si18

The Company and Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2015
Accounting Policies [Abstract]
Basis of Presentation	Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and, accordingly, do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying unaudited condensed consolidated financial statements include the accounts of Shutterfly, Inc. and its wholly owned subsidiaries. In the opinion of management, all adjustments, consisting primarily of normal recurring accruals, considered necessary for a fair statement of the Company’s results of operations for the interim periods reported and of its financial condition as of the date of the interim balance sheet have been included. Operating results for the three and nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015 , or for any other period. The December 31, 2014 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2014 included in the Company’s Annual Report on Form 10-K.
Fair Value	Fair Value The Company records its financial assets and liabilities at fair value. The accounting standard for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting standard establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Investments	Investments Investments, which may include agency bonds, corporate debt securities, and U.S. government securities, are classified as available-for-sale and are reported at fair value using the specific identification method. Unrealized gains and losses are excluded from earnings and reported as a component of other comprehensive income (loss), net of related estimated tax provisions or benefits. Investments whose maturity dates are less than twelve months are classified as short-term, and those with maturity dates greater than twelve months are classified as long-term. The Company assesses whether an other-than-temporary impairment loss on its investments has occurred due to declines in fair value or other market conditions. With respect to the Company's debt securities, this assessment takes into account the severity and duration of the decline in value, its intent to sell the security, whether it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, and whether it expects to recover the entire amortized cost basis of the security (that is, whether a credit loss exists). The Company did not recognize an other-than-temporary impairment loss on its investments in the three and nine months ended September 30, 2015 .
Income Taxes	Income Taxes The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized by applying the statutory tax rates in effect in the years in which the differences between the financial reporting and tax filing bases of existing assets and liabilities are expected to reverse. The Company assesses its ability to recover its deferred tax assets on an ongoing basis. Significant management judgment is required in determining any valuation allowance recorded against deferred tax assets. In evaluating the ability to recover deferred tax assets, the Company considers available positive and negative evidence including its recent cumulative losses, its ability to carry-back losses against prior taxable income and its projected financial results. The Company also considers, commensurate with its objective verifiability, the forecast of future taxable income including the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. A valuation allowance may be recorded in the event it is deemed to be more-likely-than-not that the deferred tax asset cannot be realized. If recorded, it would have an adverse impact on the Company’s operating results. The Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. The Company is required to make subjective assumptions and judgments regarding its income tax exposures. Interpretations and guidance surrounding income tax laws and regulations change over time. As such, changes in the Company's subjective assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and statements of operations. The Company's policy is to recognize interest and /or penalties related to all tax positions in income tax expense. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. No interest and penalties were accrued as of September 30, 2015 and December 31, 2014 . The Company’s analysis of the need for a valuation allowance considered that the Company has incurred a cumulative loss in the U.S. over the three year period ending September 30, 2015. A majority of the cumulative loss has been caused by non-recurring cost related to the Company’s expansions in manufacturing capacity, restructuring and integration activities in the past few years to prepare for future growth. The Company anticipates a return to full year profitability in fiscal 2016. Consideration has also been given to the Company’s history of utilizing Federal tax loss carryforwards prior to expiration, the expected reversal dates of the significant deferred tax liabilities, i.e., within the federal NOL and R&D credit carryforward periods, inclusive of any IRC Section 382 limitations. Based on the Company’s assessment, excluding the valuation allowance recorded prior to September 30, 2015 related to certain California and South Carolina deferred tax assets that are not likely to be realized, it is more likely than not that the Company’s other U.S. net deferred tax asset will be realized through future taxable earnings, and/or the reversal of existing taxable temporary differences. If necessary, the Company would pursue any possible tax planning strategies to avoid the valuation allowance. Accordingly, no additional valuation allowance has been recorded on this net asset as of September 30, 2015. The Company will continue to assess the need for a valuation allowance in the future. If future results are less than projected in the U.S. and if tax planning alternatives do not offset those effects, a valuation allowance may be required to reduce the deferred tax asset, which would impact the Company’s results of operations in the period in which it is recorded. The Company is subject to taxation in jurisdictions within the United States and Israel.
Segment Reporting	Segment Reporting The Company reports as two operating segments with the Chief Executive Officer (“CEO”) acting as the Company’s chief operating decision maker. The Company defined two reportable segments based on factors such as how management manages the operations and how its chief operating decision maker views results. The Company has the following reportable segments: Consumer - Includes sales from the Company's brands and are derived from the sale of photo-based products, such as photo books, stationery and greeting cards, other photo-based merchandise, photo prints, and the related shipping revenues as well as rental revenue from its BorrowLenses brand. Enterprise - Includes revenues primarily from variable, four-color direct marketing collateral manufactured and fulfilled for business customers. In addition to the above reportable segments, the Company has a corporate category that includes activities that are not directly attributable or allocable to a specific segment. This category consists of stock-based compensation and amortization of intangible assets.
Revenue Recognition, Policy	Revenue Recognition The Company recognizes revenue from Consumer and Enterprise product sales, net of applicable sales tax, upon shipment of fulfilled orders, when persuasive evidence of an arrangement exists, the selling price is fixed or determinable and collection of resulting receivables is reasonably assured. Customers place Consumer product orders through the Company's websites and pay primarily using credit cards. Enterprise customers are invoiced upon fulfillment. Shipping charged to customers is recognized as revenue at the time of shipment. For camera, lenses, and video equipment rentals from its BorrowLenses brand, the Company recognizes rental revenue and the related shipping and insurance revenue, ratably over the rental period. Revenue from the sale of rental equipment is recognized upon shipment of the equipment. For gift card sales and flash deal promotions through group buying websites, the Company recognizes revenue on a gross basis, as it is the primary obligor, when redeemed items are shipped. Revenues from sales of prepaid orders on its websites are deferred until shipment of fulfilled orders or until the prepaid period expires. The Company’s share of revenue generated from its print to retail relationships, is recognized when orders are picked up by its customers at the respective retailer. In the second quarter of 2015, the Company changed its accounting estimate related to flash deal deferred revenue. Beginning in 2010, the Company began to market product offers on flash deal websites such as Groupon and LivingSocial. With limited history as to customer redemption patterns, the Company had been deferring all amounts to a flash deal deferred revenue liability until customer redemption. The Company now has sufficient relevant historical flash deal redemption data to support a change in estimate of the flash deal deferred revenue based on historical customer redemption patterns. The historical data supports the probability of redemption after two years from the issuance of a flash deal offer as remote. In addition, the Company's attempts to re-market the unredeemed flash deals over the last six months resulted in no meaningful change in customer behavior. Accordingly, flash deal breakage revenue is now recognized based upon its historical redemption patterns and represents the unredeemed flash deal offers for which the Company believes customer redemption is remote and it is not probable that the Company has an obligation to escheat the value of the flash deal revenue under unclaimed property laws. In the second quarter of 2015, the Company recognized a revenue catch-up of $7.5 million associated with this change. The Company provides its customers with a 100% satisfaction guarantee whereby products can be returned within a 30 -day period for a reprint or refund. The Company maintains an allowance for estimated future returns based on historical data. The provision for estimated returns is included in accrued expenses. The Company periodically provides incentive offers to its customers in exchange for setting up an account and to encourage purchases. Such offers include free products and percentage discounts on current purchases. Discounts, when accepted by customers, are treated as a reduction to the purchase price of the related transaction and are presented in net revenues. Production costs related to free products are included in cost of revenues upon redemption.
Recent Accounting Pronouncements	Recent Accounting Pronouncements No new accounting standards have been adopted since the Company filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2014 . In May 2014, the Financial Accountings Standards Board ("FASB") issued new accounting guidance related to revenue recognition. This new standard will replace all current U.S. GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. This guidance will be effective for the Company beginning January 1, 2018 and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is evaluating the impact, if any, of adopting this new accounting guidance on its financial statements. In August 2014, the FASB issued new guidance related to the disclosures around going concern. The new standard provides guidance around management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company's financial statements. In April 2015, the FASB issued new guidance related to presentation of debt issue costs. The new standard requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The adoption of this guidance will be effective for the Company beginning January 1, 2016, and is not expected to have a material impact on the Company's financial statements. In April 2015, the FASB issued new guidance related to accounting for fees paid in a cloud computing arrangement. The new standard provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The adoption of this guidance will be effective for the Company beginning January 1, 2016, and is not expected to have a material impact on the Company's financial statements. In July 2015, the FASB issued ASU 2015-11, Inventory - Simplifying the Measurement of Inventory (Topic 330) . ASU 2015-11 requires inventory to be subsequently measured using the lower of cost and net realizable value, thereby eliminating the market value approach. Net realizable value is defined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” ASU 2015-11 is effective for reporting periods beginning after December 15, 2016 and is applied prospectively. Early adoption is permitted. The Company is evaluating the impact, if any, of adopting this new accounting guidance on its financial statements. In September 2015, the FASB issued new guidance related to business combinations. The new guidance requires that adjustments made to provisional amounts recognized in a business combination be recorded in the period such adjustments are determined, rather than retrospectively adjusting previously reported amounts. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. We are evaluating the impact, if any, of adopting this new accounting guidance on our consolidated financial statements.

Stock-Based Compensation (Table

Stock-Based Compensation (Tables)	9 Months Ended
	Sep. 30, 2015
Share-based Compensation [Abstract]
Summary of the status of the company's stock option plan	A summary of the Company’s stock option activity for the three and nine months ended September 30, 2015 is as follows (share numbers and aggregate intrinsic values in thousands): Number of Options Outstanding Weighted Average Exercise Price Weighted Average Contractual Term (Years) Aggregate Intrinsic Value Balances, December 31, 2014 402 $ 25.42 Granted — — Exercised (60 ) 19.56 Forfeited, cancelled or expired (5 ) 46.45 Balances, March 31, 2015 337 $ 26.15 4.4 $ 6,771 Granted — — Exercised (54 ) 21.31 Forfeited, cancelled or expired (8 ) 39.87 Balances, June 30, 2015 275 $ 26.67 4.1 $ 5,992 Granted — — Exercised (24 ) 14.72 Forfeited, cancelled or expired (7 ) 39.64 Balances, September 30, 2015 244 $ 27.48 3.7 $ 2,889 Options vested and expected to vest at September 30, 2015 243 $ 27.48 3.7 $ 2,886 Options vested at September 30, 2015 230 $ 27.40 3.5 $ 2,794
Summary of company restricted stock unit activity	A summary of the Company’s RSU activity for the three and nine months ended September 30, 2015 , is as follows (share numbers in thousands): Number of Units Outstanding Weighted Average Grant Date Fair Value Awarded and unvested, December 31, 2014 3,704 $ 42.17 Granted 1,459 45.03 Vested (926 ) 38.18 Forfeited (206 ) 45.22 Awarded and unvested, March 31, 2015 4,031 $ 43.96 Granted 275 46.74 Vested (195 ) 34.96 Forfeited (137 ) 43.97 Awarded and unvested, June 30, 2015 3,974 $ 44.60 Granted 206 42.40 Vested (122 ) 40.85 Forfeited (112 ) 45.06 Awarded and unvested, September 30, 2015 3,946 $ 44.58 RSUs expected to vest, September 30, 2015 3,450

Net Loss Per Share (Tables)

Net Loss Per Share (Tables)	9 Months Ended
	Sep. 30, 2015
Earnings Per Share [Abstract]
Net loss per share	A summary of the net loss per share for the three and nine months ended September 30, 2015 and 2014 is as follows (in thousands, except per share amounts): Three Months Ended Nine Months Ended September 30, September 30, 2015 2014 2015 2014 Net loss per share: Numerator Net loss $ (63,077 ) $ (46,244 ) $ (131,957 ) $ (107,510 ) Denominator for basic and diluted net loss per share Weighted-average common shares outstanding 36,369 38,453 37,291 38,470 Net loss per share — basic and diluted $ (1.73 ) $ (1.20 ) $ (3.54 ) $ (2.79 )

Investments (Tables)

Investments (Tables)	9 Months Ended
	Sep. 30, 2015
Investments [Abstract]
Fair value of short and long-term investments classified as available for sale	At September 30, 2015 and December 31, 2014 , the estimated fair value of short-term and long-term investments classified as available for sale are as follows (in thousands): September 30, 2015 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Short-term investments Corporate debt securities $ 31,335 $ 5 $ (4 ) $ 31,336 Agency securities 6,275 5 — 6,280 Total short-term investments $ 37,610 $ 10 $ (4 ) $ 37,616 Long-term investments Corporate debt securities $ — $ — $ — $ — Agency securities 6,878 31 — 6,909 US Government securities 1,799 10 — 1,809 Total long-term investments $ 8,677 $ 41 $ — $ 8,718 December 31, 2014 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Short-term investments Corporate debt securities $ 64,922 $ 3 $ (59 ) $ 64,866 Agency securities — — — — Total short-term investments $ 64,922 $ 3 $ (59 ) $ 64,866 Long-term investments Corporate debt securities $ 14,511 $ 1 $ (30 ) $ 14,482 Agency securities 13,649 3 (7 ) 13,645 US Government securities 1,799 2 — 1,801 Total long-term investments $ 29,959 $ 6 $ (37 ) $ 29,928
Estimated fair values of short and long-term investments classified by date of contractual maturity	The following table summarizes the contractu al maturities of the Company's investments as of September 30, 2015 (in thousands): September 30, 2015 One year or less $ 37,616 One year through three years 8,718 $ 46,334

Fair Value Measurement (Tables)

Fair Value Measurement (Tables)	9 Months Ended
	Sep. 30, 2015
Fair Value Measurement [Abstract]
Fair value, assets measured on recurring basis	The following table summarizes, by major security type, the Company's cash equivalents and investments that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands): Total Estimated Fair Value as of September 30, 2015 December 31, 2014 Level 1 Securities: Money market funds $ 31,175 $ 34,480 Level 2 Securities: Agency securities 13,189 13,645 Corporate debt securities 31,336 79,348 US Government securities 1,809 1,801 Total cash equivalents and investments $ 77,509 $ 129,274
Fair value, liabilities measured on a recurring basis	As of September 30, 2015 , the fair value of the convertible senior notes, which was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including our stock price, interest rates and credit spread (Level 2) were as follows (in thousands): Total Estimated Fair Value as of September 30, 2015 December 31, 2014 Convertible senior notes $ 266,706 $ 251,973

Balance Sheet Components (Table

Balance Sheet Components (Tables)	9 Months Ended
	Sep. 30, 2015
Balance Sheet Related Disclosures [Abstract]
Schedule of prepaid expenses and other current assets	Prepaid Expenses and Other Current Assets September 30, December 31, (in thousands) Prepaid marketing $ 9,320 $ 446 Prepaid service contracts – current portion 7,748 6,754 Intra-period deferred tax asset 5,023 — Deferred costs 3,824 6,911 Other prepaid expenses and current assets 11,836 10,872 $ 37,751 $ 24,983
Schedule of other noncurrent assets	Other Assets September 30, December 31, (in thousands) Other assets $ 11,992 $ 13,976
Schedule of property and equipment	Property and Equipment, Net September 30, December 31, (in thousands) Computer equipment and software $ 169,219 $ 159,370 Manufacturing equipment 147,336 119,495 Capitalized software and website development costs 103,819 89,311 Buildings under build-to-suit leases 56,468 39,307 Leasehold improvements 21,307 20,876 Rental equipment 17,013 14,591 Furniture and fixtures 11,795 10,683 526,957 453,633 Less: Accumulated depreciation and amortization (241,391 ) (211,891 ) Net property and equipment $ 285,566 $ 241,742
Schedule of accrued liabilities	Accrued Liabilities September 30, December 31, (in thousands) Accrued production costs $ 17,860 $ 32,814 Capital lease obligations 14,042 8,905 Accrued compensation 12,882 16,337 Accrued marketing expenses 8,806 30,835 Accrued purchases 5,753 11,809 Accrued consulting 4,292 6,418 Accrued income, sales, and property taxes 3,909 18,149 Accrued other 8,503 10,218 $ 76,047 $ 135,485
Schedule of other noncurrent liabilities	Other Liabilities September 30, December 31, (in thousands) Financing obligations $ 57,092 $ 38,529 Capital lease obligations 47,945 32,297 Deferred revenue 5,730 — Other liabilities 3,905 3,352 $ 114,672 $ 74,178

Convertible Senior Notes (Table

Convertible Senior Notes (Tables)	9 Months Ended
	Sep. 30, 2015
Convertible Senior Notes Disclosure [Abstract]
Schedule of long-term debt instruments	The Notes consist of the following (in thousands): September 30, 2015 December 31, 2014 Liability component: Principal $ 300,000 $ 300,000 Less: debt discount, net of amortization (35,548 ) (44,782 ) Net carrying amount $ 264,452 $ 255,218 Equity component (1) $ 63,510 $ 63,510 (1) Recorded in the consolidated balance sheets within additional paid-in capital, net of the $1.7 million of issuance costs in equity.
Interest expense related to convertible senior notes	The following table sets forth total interest expense recognized related to the Notes (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2015 2014 2015 2014 0.25% coupon $ 188 $ 187 $ 563 $ 562 Amortization of debt issuance costs 314 297 929 878 Amortization of debt discount 3,120 2,951 9,233 8,732 $ 3,622 $ 3,435 $ 10,725 $ 10,172

Restructuring (Tables)

Restructuring (Tables)	9 Months Ended
	Sep. 30, 2015
Restructuring and Related Activities [Abstract]
Restructuring and Related Costs	The following table summarizes the restructuring costs recognized during the three and nine months ended September 30, 2015 : Three Months Ended September 30, 2015 Nine Months Ended September 30, 2015 (in thousands) Employee severance and benefits $ 151 $ 927 Other associated costs 2,059 2,494 Total $ 2,210 $ 3,421 The following table summarizes the restructuring activity during the three and nine months ended September 30, 2015 : Employee Severance and Benefits Other Associated Costs Total Accrued liability as of January 1, 2015 $ — $ — $ — Charges 467 435 902 Payments — — — Other adjustments — (435 ) (435 ) Accrued liability as of March 31, 2015 $ 467 $ — $ 467 Charges 309 — 309 Payments (284 ) — (284 ) Other Adjustments — — — Accrued liability as of June 30, 2015 $ 492 $ — $ 492 Charges 151 2,059 2,210 Payment (270 ) — (270 ) Other Adjustments — — — Accrued liability as of September 30, 2015 $ 373 $ 2,059 $ 2,432

Segment Reporting (Tables)

Segment Reporting (Tables)	9 Months Ended
	Sep. 30, 2015
Segment Reporting Information
Segment Reporting Information	Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 (in thousands) Consumer Net revenues $ 138,025 $ 127,299 $ 458,087 $ 408,072 Cost of net revenues 82,760 73,845 246,925 212,503 Gross profit $ 55,265 $ 53,454 $ 211,162 $ 195,569 Gross profit as a percentage of net revenues 40 % 42 % 46 % 48 % Enterprise Net revenues $ 29,467 $ 14,709 $ 53,262 $ 30,183 Cost of net revenues 22,566 12,173 42,699 25,651 Gross profit $ 6,901 $ 2,536 $ 10,563 $ 4,532 Gross profit as a percentage of net revenues 23 % 17 % 20 % 15 % Corporate Net revenues $ — $ — $ — $ — Cost of net revenues 2,665 3,708 9,721 11,250 Gross profit $ (2,665 ) $ (3,708 ) $ (9,721 ) $ (11,250 ) Consolidated Net revenues $ 167,492 $ 142,008 $ 511,349 $ 438,255 Cost of net revenues 107,991 89,726 299,345 249,404 Gross profit $ 59,501 $ 52,282 $ 212,004 $ 188,851 Gross profit as a percentage of net revenues 36 % 37 % 41 % 43 %

The Company and Summary of Si27

The Company and Summary of Significant Accounting Policies (Details) $ in Millions	6 Months Ended	9 Months Ended
	Jun. 30, 2015USD ($)	Sep. 30, 2015segments
Accounting Policies [Abstract]
Flash deal deferred revenue breakage | $	$ 7.5
Number of operating segments		2

Stock Option Activity (Details)

Stock Option Activity (Details) - Employee Stock Option - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015
Number of options outstanding [Roll forward]
Balances (in shares)	275	337	402
Granted (in shares)	0	0	0
Exercised (in shares)	(24)	(54)	(60)
Forfeited, cancelled or expired (in shares)	(7)	(8)	(5)
Balances (in shares)	244	275	337
Options vested and expected to vest (in shares)	243
Options vested (in shares)	230
Weighted Average Exercise Price
Balances (in dollars per share)	$ 26.67	$ 26.15	$ 25.42
Granted (in dollars per share)	0	0	0
Exercised (in dollars per share)	14.72	21.31	19.56
Forfeited, cancelled or expired (in dollars per share)	39.64	39.87	46.45
Balances (in dollars per share)	27.48	$ 26.67	$ 26.15
Options vested and expected to vest (in dollars per share)	27.48
Options vested (in dollars per share)	$ 27.40
Weighted Average Contractual Term (Years)
Ending balance (in years)	3 years 8 months 12 days	4 years 1 month 6 days	4 years 4 months 24 days
Options vested and expected to vest at end of period (in years)	3 years 8 months 12 days
Options vested at end of period (in years)	3 years 6 months
Aggregate Intrinsic Value
Ending balance	$ 2,889	$ 5,992	$ 6,771
Options vested and expected to vest at end of period	2,886
Options vested at end of period	$ 2,794

Stock-Based Compensation (Detai

Stock-Based Compensation (Details) - Employee Stock Option - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2015
Share-based Compensation
Total intrinsic value of options exercised	$ 0.7	$ 3.6
Net cash proceeds from the exercise of stock options	$ 0.4	$ 2.7

Restricted Stock Unit Activity

Restricted Stock Unit Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions	3 Months Ended
	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015
Share-based Compensation
Unrecognized compensation expense	$ 103.4
Weighted average period of unrecognized compensation expense (in years)	2 years
Restricted Stock Units (RSUs)
Restricted Stock Units & Awards [Roll forward]
Awarded and unvested, beginning of period (in shares)	3,974	4,031	3,704
Granted (in shares)	206	275	1,459
Vested (in shares)	(122)	(195)	(926)
Forfeited (in shares)	(112)	(137)	(206)
Awarded and unvested, ending period (in shares)	3,946	3,974	4,031
Restricted stock units expected to vest, ending period (in shares)	3,450
Weighted Average Grant Date Fair Value]
Awarded and unvested, beginning period (in dollars per share)	$ 44.60	$ 43.96	$ 42.17
Granted (in dollars per share)	42.40	46.74	45.03
Vested (in dollars per share)	40.85	34.96	38.18
Forfeited (in dollars per share)	45.06	43.97	45.22
Awarded and unvested, ending period (in dollars per share)	$ 44.58	$ 44.60	$ 43.96
Restricted Stock Units (RSUs) | Minimum | Equity Incentive Plan 2006
Share-based Compensation
Vesting period of restricted stock	3 years
Restricted Stock Units (RSUs) | Maximum | Equity Incentive Plan 2006
Share-based Compensation
Vesting period of restricted stock	4 years
Performance Based Restricted Stock | Equity Incentive Plan 2006
Share-based Compensation
Vesting period of restricted stock	4 years
Restricted Stock Units & Awards [Roll forward]
Granted (in shares)	681

Net Loss Per Share (Details)

Net Loss Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Earnings Per Share [Abstract]
Net loss	$ (63,077)	$ (46,244)	$ (131,957)	$ (107,510)
Weighted-average common shares outstanding (in shares)	36,369	38,453	37,291	38,470
Net loss per share - basic and diluted (in dollars per share)	$ (1.73)	$ (1.20)	$ (3.54)	$ (2.79)

Investments (Details)

Investments (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Available-for-sale Securities
Available-for-sale securities, less than one year	$ 37,616
Available-for-sale securities, between one and three years	8,718
Estimated fair value	46,334
Long-term Investments
Available-for-sale Securities
Gross amortized cost	8,677	$ 29,959
Gross unrealized gains	41	6
Gross unrealized losses	0	(37)
Estimated fair value	8,718	29,928
Long-term Investments | Corporate Debt Securities
Available-for-sale Securities
Gross amortized cost	0	14,511
Gross unrealized gains	0	1
Gross unrealized losses	0	(30)
Estimated fair value	0	14,482
Long-term Investments | Agency Securities
Available-for-sale Securities
Gross amortized cost	6,878	13,649
Gross unrealized gains	31	3
Gross unrealized losses	0	(7)
Estimated fair value	6,909	13,645
Long-term Investments | US Treasury and Government
Available-for-sale Securities
Gross amortized cost	1,799	1,799
Gross unrealized gains	10	2
Gross unrealized losses	0	0
Estimated fair value	1,809	1,801
Short-term Investments
Available-for-sale Securities
Gross amortized cost	37,610	64,922
Gross unrealized gains	10	3
Gross unrealized losses	(4)	(59)
Estimated fair value	37,616	64,866
Short-term Investments | Corporate Debt Securities
Available-for-sale Securities
Gross amortized cost	31,335	64,922
Gross unrealized gains	5	3
Gross unrealized losses	(4)	(59)
Estimated fair value	31,336	64,866
Short-term Investments | Agency Securities
Available-for-sale Securities
Gross amortized cost	6,275	0
Gross unrealized gains	5	0
Gross unrealized losses	0	0
Estimated fair value	$ 6,280	$ 0

Fair Value Measurement of Cash

Fair Value Measurement of Cash Equivalents and Investments (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities
Cash equivalents and investments, fair value disclosure	$ 77,509	$ 129,274
Money Market Funds | Level 1 Inputs
Fair Value, Assets and Liabilities
Investments, fair value disclosure	31,175	34,480
Agency Securities | Level 2 Inputs
Fair Value, Assets and Liabilities
Investments, fair value disclosure	13,189	13,645
Corporate Debt Securities | Level 2 Inputs
Fair Value, Assets and Liabilities
Investments, fair value disclosure	31,336	79,348
US Treasury and Government | Level 2 Inputs
Fair Value, Assets and Liabilities
Investments, fair value disclosure	$ 1,809	$ 1,801

Fair Value Measurement of Conve

Fair Value Measurement of Convertible Senior Notes (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Estimate of Fair Value Measurement
Fair Value, Assets and Liabilities
Convertible senior notes, net	$ 266,706	$ 251,973

Balance Sheet Components (Prepa

Balance Sheet Components (Prepaid Expenses and Other Current Assets) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Prepaid Expense and Other Assets, Current [Abstract]
Prepaid marketing	$ 9,320	$ 446
Prepaid service contracts - current portion	7,748	6,754
Intra-period deferred tax asset	5,023	0
Deferred costs	3,824	6,911
Other prepaid expenses and current assets	11,836	10,872
Total prepaid expenses and other current assets	$ 37,751	$ 24,983

Balance Sheet Components (Other

Balance Sheet Components (Other Assets, Non-Current) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Other Assets, Noncurrent [Abstract]
Other assets	$ 11,992	$ 13,976

Balance Sheet Components (Prope

Balance Sheet Components (Property and Equipment) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Property and Equipment
Property and equipment	$ 526,957		$ 526,957		$ 453,633
Less: Accumulated depreciation and amortization	(241,391)		(241,391)		(211,891)
Net property and equipment	285,566		285,566		241,742
Depreciation and amortization expense	22,555	$ 16,886	63,435	$ 46,079
Capital leases, accumulated depreciation	(10,800)		(10,800)
Computer Equipment and Software
Property and Equipment
Property and equipment	169,219		169,219		159,370
Manufacturing Equipment
Property and Equipment
Property and equipment	147,336		147,336		119,495
Capital lease obligations	73,000		73,000
Capitalized Software And Website Development Costs
Property and Equipment
Property and equipment	103,819		103,819		89,311
Buildings Under Build-To-Suit Leases
Property and Equipment
Property and equipment	56,468		56,468		39,307
Leasehold Improvements
Property and Equipment
Property and equipment	21,307		21,307		20,876
Rental Equipment
Property and Equipment
Property and equipment	17,013		17,013		14,591
Furniture and Fixtures
Property and Equipment
Property and equipment	$ 11,795		$ 11,795		$ 10,683

Balance Sheet Components (Accru

Balance Sheet Components (Accrued Liabilities) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Accrued Liabilities, Current [Abstract]
Accrued production costs	$ 17,860	$ 32,814
Capital lease obligations	14,042	8,905
Accrued compensation	12,882	16,337
Accrued marketing expenses	8,806	30,835
Accrued purchases	5,753	11,809
Accrued consulting	4,292	6,418
Accrued income and sales taxes	3,909	18,149
Accrued other	8,503	10,218
Total accrued liabilities	$ 76,047	$ 135,485

Balance Sheet Components (Oth39

Balance Sheet Components (Other Liabilities, Non-Current) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Other Liabilities, Noncurrent [Abstract]
Financing obligations	$ 57,092	$ 38,529
Capital lease obligations	47,945	32,297
Deferred revenue	5,730	0
Other liabilities	3,905	3,352
Other liabilities	$ 114,672	$ 74,178

Convertible Senior Notes Schedu

Convertible Senior Notes Schedule of Convertible Senior Notes (Details) - USD ($) $ in Thousands		Sep. 30, 2015	Dec. 31, 2014
Debt Instrument
Net carrying amount		$ 264,452	$ 255,218
Convertible Senior Notes | Convertible Senior Notes 0.25% Due May 15, 2018
Debt Instrument
Principal		300,000	300,000
Less: debt discount, net of amortization		(35,548)	(44,782)
Net carrying amount		264,452	255,218
Equity component	[1]	$ 63,510	$ 63,510
[1]	Recorded in the consolidated balance sheets within additional paid-in capital, net of the $1.7 million of issuance costs in equity.

Convertible Senior Notes Sche41

Convertible Senior Notes Schedule of Interest Expense Related to Convertible Senior Notes (Details) - Convertible Senior Notes - Convertible Senior Notes 0.25% Due May 15, 2018 - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Debt Instrument
0.25% coupon	$ 188	$ 187	$ 563	$ 562
Amortization of debt issuance costs	314	297	929	878
Amortization of debt discount	3,120	2,951	9,233	8,732
Interest expense, convertible notes	$ 3,622	$ 3,435	$ 10,725	$ 10,172

Convertible Senior Notes Additi

Convertible Senior Notes Additional Information (Details) - USD ($) $ / shares in Units, shares in Millions	1 Months Ended	9 Months Ended	12 Months Ended
	May. 31, 2013	Sep. 30, 2015	Dec. 31, 2014	Dec. 31, 2013
Schedule of Convertible Senior Notes
Stock repurchased and retired during period, shares	0.6	3.8	2	0.1
Stock repurchased and retired during period, value	$ 30,000,000
Strike price of warrants	$ 83.18
Proceeds from issuance of warrants	$ 43,600,000
Designated as Hedging Instrument | Debt
Schedule of Convertible Senior Notes
Note hedge, aggregate amount	$ 63,500,000
Convertible Senior Notes | Convertible Senior Notes 0.25% Due May 15, 2018
Schedule of Convertible Senior Notes
Contractual interest rate		0.25%
Maturity date		May 15, 2018
Conversion rate		15.5847
Denomination amount		$ 1,000
Convertible senior notes, face amount		$ 300,000,000	$ 300,000,000
Conversion price		$ 64.17
Number of days out of thirty that common stock price exeeded conversion price		20
Number of consecutive trading days in period		30 days
Holders of notes conversion percentage of conversion price		130.00%
Notes trading price percentage		98.00%
Debt issuance cost		$ 6,400,000
Deferred tax assets		600,000
Debt issuance costs attributable to the equity component		$ 1,700,000

Share Repurchase Program (Detai

Share Repurchase Program (Details) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions	Aug. 03, 2015	May. 31, 2013	Jun. 30, 2015	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014	Dec. 31, 2013	Feb. 09, 2015	Feb. 06, 2014	Oct. 24, 2012
Equity, Class of Treasury Stock
Stock repurchase program, authorized amount								$ 300,000	$ 100,000	$ 60,000
Prepayment of accelerated share repurchase			$ 75,000	$ 75,000	$ 0
Stock repurchased and retired during period, shares		0.6		3.8		2	0.1
Refund of accelerated share repurchase	$ 38,200			$ 38,179	0
Repurchases of common stock				$ 134,084	$ 50,520
Stock repurchased and retired during period, average amount per share				$ 44.51		$ 45.29	$ 31.87
Accelerated Share Repurchase Agreement [Member]
Equity, Class of Treasury Stock
Stock repurchased and retired during period, shares	0.8
Repurchases of common stock	$ 36,800
Stock repurchased and retired during period, average amount per share	$ 46.49

Restructuring - Restructuring C

Restructuring - Restructuring Costs (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Sep. 30, 2015
Restructuring Cost and Reserve
Restructuring costs	$ 2,210	$ 309	$ 902	$ 3,421
Employee severance and benefits
Restructuring Cost and Reserve
Restructuring costs	151	309	467	927
Other associated costs
Restructuring Cost and Reserve
Restructuring costs	$ 2,059	$ 0	$ 435	$ 2,494

Restructuring - Restructuring R

Restructuring - Restructuring Reserve Activity (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Sep. 30, 2015
Restructuring Cost and Reserve
Accrued liability, beginning balance	$ 492	$ 467	$ 0	$ 0
Restructuring charges (benefit)	2,210	309	902	3,421
Payments	(270)	(284)	0
Other adjustments	0	0	(435)
Accrued liability, ending balance	2,432	492	467	2,432
Employee Severance and Benefits
Restructuring Cost and Reserve
Accrued liability, beginning balance	492	467	0	0
Restructuring charges (benefit)	151	309	467	927
Payments	(270)	(284)	0
Other adjustments	0	0	0
Accrued liability, ending balance	373	492	467	373
Other Associated Costs
Restructuring Cost and Reserve
Accrued liability, beginning balance	0	0	0	0
Restructuring charges (benefit)	2,059	0	435	2,494
Payments	0	0	0
Other adjustments	0	0	(435)
Accrued liability, ending balance	$ 2,059	$ 0	$ 0	$ 2,059

Segment Reporting (Details)

Segment Reporting (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Segment Reporting Information
Net revenues	$ 167,492	$ 142,008	$ 511,349	$ 438,255
Cost of net revenues	107,991	89,726	299,345	249,404
Gross profit	$ 59,501	$ 52,282	$ 212,004	$ 188,851
Gross profit as percentage of net revenue	36.00%	37.00%	41.00%	43.00%
Consumer
Segment Reporting Information
Net revenues	$ 138,025	$ 127,299	$ 458,087	$ 408,072
Cost of net revenues	82,760	73,845	246,925	212,503
Gross profit	$ 55,265	$ 53,454	$ 211,162	$ 195,569
Gross profit as percentage of net revenue	40.00%	42.00%	46.00%	48.00%
Enterprise
Segment Reporting Information
Net revenues	$ 29,467	$ 14,709	$ 53,262	$ 30,183
Cost of net revenues	22,566	12,173	42,699	25,651
Gross profit	$ 6,901	$ 2,536	$ 10,563	$ 4,532
Gross profit as percentage of net revenue	23.00%	17.00%	20.00%	15.00%
Corporate
Segment Reporting Information
Net revenues	$ 0	$ 0	$ 0	$ 0
Cost of net revenues	2,665	3,708	9,721	11,250
Gross profit	$ (2,665)	$ (3,708)	$ (9,721)	$ (11,250)

Commitments and Contingencies B

Commitments and Contingencies Build-to-Suit Leases (Details) - Buildings Under Build-To-Suit Leases - Tempe $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2015USD ($)ft²	Dec. 31, 2014USD ($)
Commitments and Contingencies
Lease square footage | ft²	237,000
Property, Plant and Equipment, Additions	$ 17.1	$ 9.1

Commitments and Contingencies S

Commitments and Contingencies Syndicated Credit Facility (Details) $ in Millions	3 Months Ended
	Sep. 30, 2015USD ($)
Line of Credit Facility
Credit Agreement Term	5 years
Senior secured revolving credit facility	$ 125
Increase in credit facility, maximum	75
Revised senior secured revolving credit facility	$ 200
Maximum ratio of consolidated total indebtedness to EBITDA allowed to prevent default	3.50
Maximum ratio of consolidated senior secured indebtedness to EBITDA allowed to prevent default	1.60
Minimum ratio of consolidated senior secured consolidated indebtedness to EBITDA allowed to prevent default	2.50
Revolving Credit Facility | Line of Credit | Adjusted LIBO Rate
Line of Credit Facility
Debt Instrument	1.00%
Base Rate Loan | Line of Credit | Eurodollar Rate | Minimum
Line of Credit Facility
Debt Instrument	0.05%
Base Rate Loan | Line of Credit | Eurodollar Rate | Maximum
Line of Credit Facility
Debt Instrument	1.25%
Adjusted LIBO Loan | Line of Credit | Eurodollar Rate | Minimum
Line of Credit Facility
Debt Instrument	1.50%
Adjusted LIBO Loan | Line of Credit | Eurodollar Rate | Maximum
Line of Credit Facility
Debt Instrument	2.25%