Shutterfly (SFLY) 10-Q 4 May 16 2016 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 02, 2016
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		34,460,351
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 145,915	$ 288,863
Short-term investments	23,620	22,918
Accounts receivable, net	30,085	55,222
Inventories	12,010	13,466
Prepaid expenses and other current assets	58,387	31,828
Total current assets	270,017	412,297
Long-term investments	24,832	29,005
Property and equipment, net	272,728	281,779
Intangible assets, net	56,534	62,323
Goodwill	408,975	408,975
Other assets	10,046	10,948
Total assets	1,043,132	1,205,327
Current liabilities:
Accounts payable	14,436	35,329
Accrued liabilities	67,222	149,134
Deferred revenue, current portion	25,969	27,329
Total current liabilities	107,627	211,792
Convertible senior notes, net	267,893	264,361
Other liabilities	121,524	123,112
Total liabilities	$ 497,044	$ 599,265
Commitments and contingencies (Note 10)
Stockholders' equity:
Common stock, $0.0001 par value; 100,000 shares authorized; 34,428 and 34,777 shares issued and outstanding on March 31, 2016 and December 31, 2015, respectively	$ 3	$ 4
Additional paid-in capital	917,033	900,218
Accumulated other comprehensive income (loss)	41	(68)
Accumulated deficit	(370,989)	(294,092)
Total stockholders' equity	546,088	606,062
Total liabilities and stockholders' equity	$ 1,043,132	$ 1,205,327

CONDENSED CONSOLIDATED BALANCE3

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2016	Dec. 31, 2015
Stockholders' equity:
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	34,428,000	34,777,000
Common stock, shares outstanding (in shares)	34,428,000	34,777,000

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Statement [Abstract]
Net revenues	$ 181,709	$ 159,978
Cost of net revenues	108,723	94,707
Gross profit	72,986	65,271
Operating expenses:
Technology and development	38,269	37,360
Sales and marketing	45,842	44,530
General and administrative	30,689	29,605
Total operating expenses	114,800	111,495
Loss from operations	(41,814)	(46,224)
Interest expense	(5,675)	(4,736)
Interest and other income, net	121	102
Loss before income taxes	(47,368)	(50,858)
Benefit from income taxes	17,932	5,755
Net loss	$ (29,436)	$ (45,103)
Net loss per share - basic and diluted (in dollars per share)	$ (0.85)	$ (1.19)
Weighted-average shares outstanding - basic and diluted	34,596	37,968
Cost of net revenues
Stock-based compensation	$ 1,224	$ 1,192
Technology and development
Stock-based compensation	459	1,992
Sales and marketing
Stock-based compensation	4,279	6,219
General and administrative
Stock-based compensation	$ 4,188	$ 8,357

CONDENSED CONSOLIDATED STATEME5

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME/(LOSS) (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Statement of Comprehensive Income [Abstract]
Net loss	$ (29,436)	$ (45,103)
Unrealized gains on investments, net	177	126
Tax expense on unrealized gain on investments, net	(69)	(48)
Other comprehensive income, net of tax	108	78
Comprehensive loss	$ (29,328)	$ (45,025)

CONDENSED CONSOLIDATED STATEME6

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash flows from operating activities:
Net loss	$ (29,436)	$ (45,103)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	22,995	19,909
Amortization of intangible assets	6,119	7,684
Amortization of debt discount and transaction costs	3,532	3,340
Stock-based compensation	10,150	17,760
Loss on disposal of property and equipment	218	463
Deferred income taxes	3,637	1,539
Tax benefit from stock-based compensation	5,638	17,891
Excess tax benefits from stock-based compensation	(6,859)	(18,139)
Changes in operating assets and liabilities:
Accounts receivable	25,137	10,928
Inventories	1,457	1,012
Prepaid expenses and other assets	(26,607)	(28,492)
Accounts payable	(17,080)	(18,015)
Accrued and other liabilities	(82,824)	(78,508)
Net cash used in operating activities	(83,923)	(107,731)
Cash flows from investing activities:
Purchases of property and equipment	(10,131)	(11,059)
Capitalization of software and website development costs	(8,639)	(3,798)
Purchases of investments	(8,026)	(3,150)
Proceeds from the maturities of investments	11,615	11,700
Proceeds from sale of property and equipment	39	13
Net cash used in investing activities	(15,142)	(6,294)
Cash flows from financing activities:
Proceeds from issuance of common stock upon exercise of stock options	491	1,168
Repurchases of common stock	(47,461)	(45,195)
Excess tax benefits from stock-based compensation	6,859	18,139
Principal payments of capital lease and financing obligations	(3,772)	(2,466)
Net cash used in financing activities	(43,883)	(28,354)
Net decrease in cash and cash equivalents	(142,948)	(142,379)
Cash and cash equivalents, beginning of period	288,863	380,543
Cash and cash equivalents, end of period	145,915	238,164
Supplemental schedule of non-cash investing / financing activities:
Net increase (decrease) in accrued purchases of property and equipment	(4,634)	2,919
Net increase (decrease) in accrued capitalized software and website development costs	(471)	274
Stock-based compensation capitalized with software and website development costs	537	357
Increase in estimated fair market value of buildings under build-to-suit leases	0	8,459
Property and equipment acquired under capital leases	$ 0	$ 9,803

The Company and Summary of Sign

The Company and Summary of Significant Accounting Policies	3 Months Ended
	Mar. 31, 2016
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 provides Enterprise services: printing and shipping of direct marketing and other variable data print products and formats. The Company's Enterprise brand is called Shutterfly Business Solutions ("SBS") and is referred to as such in this document. 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 months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 , or for any other period. The December 31, 2015 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, 2015 included in the Company’s Annual Report on Form 10-K. Recent Accounting Pronouncements In April 2015, the FASB issued new guidance related to presentation of debt issuance 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 Company adopted this guidance beginning January 1, 2016. This guidance requires retrospective application to all prior periods presented. The effect of this change was to reduce the previously reported amounts within the accompanying condensed consolidated balance sheets as of December 31, 2015 for prepaid expenses and other current assets, other assets, and convertible senior notes, net by $1.3 million , $1.9 million , and $3.3 million , respectively. Adoption of this guidance did not affect the Company's condensed consolidated statements of operations and condensed consolidated statements of cash flows. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). The updated guidance changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The amendments in this update are effective for reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the financial statement and disclosure impact of the pronouncement and has not early adopted. In 2014, the FASB issued new accounting guidance related to revenue recognition. This new standard will replace all current GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition guidance 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 can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. In 2015, the FASB issued guidance to defer the effective date to fiscal years beginning after December 15, 2017 with early adoption for fiscal years. The Company is evaluating the impact, if any, of adopting this new accounting guidance on its financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new guidance requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is evaluating the impact, if any, of adopting this new accounting guidance on its financial statements.

Stock-Based Compensation

Stock-Based Compensation	3 Months Ended
	Mar. 31, 2016
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 months ended March 31, 2016 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, 2015 206 $ 27.08 Granted — — Exercised (21 ) 22.70 Forfeited, cancelled or expired (1 ) 25.42 Balances, March 31, 2016 184 $ 27.60 3.4 $ 3,666 Options vested and expected to vest at March 31, 2016 184 $ 27.60 3.4 $ 3,663 Options vested at March 31, 2016 179 $ 27.55 3.4 $ 3,589 During the three months ended March 31, 2016, the Company did not grant any options. The total intrinsic value of options exercised during the three months ended March 31, 2016 and 2015 was $0.4 million and $1.6 million , respectively. Net cash proceeds from the exercise of stock options were $0.5 million and $1.2 million , respectively, for the three months ended March 31, 2016 and 2015. Restricted Stock Unit Activity The Company grants restricted stock units (“RSUs”) to its employees under the provisions of the 2015 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 months ended March 31, 2016, is as follows (share numbers in thousands): Number of Units Outstanding Weighted Average Grant Date Fair Value Awarded and unvested, December 31, 2015 3,150 $ 44.28 Granted 919 39.17 Vested (767 ) 44.12 Forfeited (114 ) 46.11 Awarded and unvested, March 31, 2016 3,188 $ 42.78 RSUs expected to vest, March 31, 2016 2,502 Included in the RSU grants for the three months ended March 31, 2016, are 185,000 RSUs that have both performance criteria tied to the Company’s 2016 financial performance and four year service criteria. Compensation cost associated with these performance-based RSUs ("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 months ended March 31, 2016 and 2015 , 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 March 31, 2016, the Company had $93.1 million of total unrecognized stock-based compensation expense, net of estimated forfeitures, related to stock options, RSUs and PBRSUs that will be recognized over a weighted-average period of approximately three years.

Net Loss Per Share

Net Loss Per Share	3 Months Ended
	Mar. 31, 2016
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 RSUs 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 and three months ended March 31, 2016 and 2015 is as follows (in thousands, except per share amounts): Three Months Ended March 31, 2016 2015 Net loss per share: Numerator Net loss $ (29,436 ) $ (45,103 ) Denominator for basic and diluted net loss per share Weighted-average common shares outstanding 34,596 37,968 Net loss per share - basic and diluted $ (0.85 ) $ (1.19 ) The following weighted-average outstanding stock options and restricted stock units were excluded from the computation of diluted net loss per common share for the periods presented because including them would have had an anti-dilutive effect (in thousands): Three Months Ended March 31, 2016 2015 Stock options and restricted stock units 3,649 3,650

Investments

Investments	3 Months Ended
	Mar. 31, 2016
Investments [Abstract]
Investments	Investments At March 31, 2016 and December 31, 2015 , the estimated fair value of short-term and long-term investments classified as available for sale are as follows (in thousands): March 31, 2016 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Short-term investments Corporate debt securities $ 14,119 $ 12 $ (4 ) $ 14,127 Agency securities 6,613 6 — 6,619 Commercial paper 2,523 — — 2,523 US Government securities 350 1 — 351 Total short-term investments $ 23,605 $ 19 $ (4 ) $ 23,620 Long-term investments Corporate debt securities $ 8,368 $ 15 $ (2 ) $ 8,381 Agency securities 10,239 25 (1 ) 10,263 US Government securities 6,173 15 — 6,188 Total long-term investments $ 24,780 $ 55 $ (3 ) $ 24,832 December 31, 2015 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Short-term investments Corporate debt securities $ 16,187 $ 2 $ (14 ) $ 16,175 Agency securities 6,246 — (2 ) 6,244 Commercial paper 499 — — 499 Total short-term investments $ 22,932 $ 2 $ (16 ) $ 22,918 Long-term investments Corporate debt securities $ 10,132 $ — $ (37 ) $ 10,095 Agency securities 13,421 1 (43 ) 13,379 US Government securities 5,549 — (18 ) 5,531 Total long-term investments $ 29,102 $ 1 $ (98 ) $ 29,005 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 March 31, 2016 and no impairments were recorded in the period. The Company had no material realized gains or losses during the three months ended March 31, 2016 . The following table summarizes the contractu al maturities of the Company's investments as of March 31, 2016 and December 31. 2015 (in thousands): March 31, 2016 December 31, 2015 One year or less $ 23,620 $ 22,918 One year through three years 24,832 29,005 $ 48,452 $ 51,923 Actual maturities may differ from the contractual maturities because borrowers may have certain prepayment conditions.

Fair Value Measurement

Fair Value Measurement	3 Months Ended
	Mar. 31, 2016
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 March 31, 2016 . 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 March 31, 2016 December 31, 2015 Cash Equivalents Investments Cash Equivalents Investments Level 1 Securities: Money market funds $ 17,929 $ — $ 24,577 $ — Level 2 Securities: Agency securities — 16,882 — 19,623 Corporate debt securities 540 22,508 850 26,270 US Government securities — 6,539 — 5,531 Commercial Paper 8,322 2,523 — 499 Total cash equivalents and investments $ 26,791 $ 48,452 $ 25,427 $ 51,923 Convertible Senior Notes As of March 31, 2016 , 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 March 31, 2016 December 31, 2015 Convertible senior notes $ 281,589 $ 270,192 The carrying value of other financial instruments, including accounts receivable, accounts payable and other payables, approximates fair value due to their short maturities.

Balance Sheet Components

Balance Sheet Components	3 Months Ended
	Mar. 31, 2016
Balance Sheet Related Disclosures [Abstract]
Balance Sheet Components	Balance Sheet Components Prepaid Expenses and Other Current Assets March 31, December 31, (in thousands) Intra-period income tax asset $ 27,405 $ — Prepaid service contracts 11,196 12,539 Other prepaid expenses and current assets 19,786 19,289 $ 58,387 $ 31,828 Intra-period income 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. Property and Equipment, Net March 31, December 31, (in thousands) Computer equipment and software $ 175,336 $ 172,048 Manufacturing equipment 150,381 148,820 Capitalized software and website development costs 116,887 108,837 Buildings under build-to-suit leases 56,468 56,468 Leasehold improvements 21,661 21,519 Rental equipment 17,511 17,414 Furniture and fixtures 11,451 11,351 549,695 536,457 Less: Accumulated depreciation and amortization (276,967 ) (254,678 ) Net property and equipment $ 272,728 $ 281,779 Included within manufacturing equipment is approximately $72.9 million of capital lease obligations for various pieces of manufacturing facility equipment as of March 31, 2016 and December 31, 2015. Accumulated depreciation of assets under capital lease totaled $17.4 million at March 31, 2016 compared to $14.1 million at December 31, 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 $23.0 million and $19.9 million for the three months ended March 31, 2016 and 2015 , respectively. Included in property and equipment is approximately $16.0 million and $17.2 million of assets in construction as of March 31, 2016 and December 31, 2015, respectively. Accrued Liabilities March 31, December 31, (in thousands) Capital lease obligations $ 14,139 $ 14,090 Accrued compensation 13,307 20,703 Accrued production costs 10,519 44,825 Accrued marketing expenses 8,235 26,793 Accrued income and sales tax 3,194 17,843 Accrued other 17,828 24,880 $ 67,222 $ 149,134 Other Liabilities March 31, December 31, (in thousands) Financing obligations $ 56,444 $ 56,771 Capital lease obligations 40,878 44,428 Deferred tax liability 15,475 12,447 Deferred revenue 6,256 6,564 Other liabilities 2,471 2,902 $ 121,524 $ 123,112 Financing obligations represents the build-to-suit leases for the Company's manufacturing facilities in Fort Mill, South Carolina; Shakopee, Minnesota; and Tempe, Arizona.

Convertible Senior Notes

Convertible Senior Notes	3 Months Ended
	Mar. 31, 2016
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 March 31, 2016, 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): March 31, 2016 December 31, 2015 Liability component: Principal $ 300,000 $ 300,000 Less: debt issuance costs, debt discount, net of amortization (1) (32,107 ) (35,639 ) Net carrying amount $ 267,893 $ 264,361 Equity component (2) $ 63,510 $ 63,510 (1) In April 2015, the FASB issued new guidance related to presentation of debt issuance costs. Effective January 1, 2016 the Company has adopted the guidance and applied it on a retrospective basis. (2) 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 March 31, 2016 2015 0.25% coupon $ 188 $ 187 Amortization of debt issuance costs 323 305 Amortization of debt discount 3,209 3,035 $ 3,720 $ 3,527 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	3 Months Ended
	Mar. 31, 2016
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. The following table provides information about our repurchase of shares of our common stock for fiscal years 2014, 2015, and 2016: Period (1) Total Number of Shares Purchased Average Price Paid per Share Total Dollar Value Spent on Repurchases (in thousands) 2014 Repurchases 1,961,085 $ 45.29 $ 88,815 2015 Repurchases (2) 4,907,675 $ 43.99 $ 215,911 2016 Repurchases to date (3) 1,138,461 $ 41.69 $ 47,461 (1) All shares were purchased pursuant to the publicly announced share repurchase program described in footnote (2) below. Shares are reported in a period based on the settlement date of the applicable repurchase. (2) The Company entered into an accelerated share repurchase ("ASR") in the second quarter of 2015 under which a prepayment of $75 million was made. Final settlement of the ASR occurred on August 3, 2015, resulting in the delivery to the Company of 0.8 million shares of the Company’s common stock and 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. (3) Represents repurchases for the three months ended March 31, 2016.

Segment Reporting

Segment Reporting	3 Months Ended
	Mar. 31, 2016
Segment Reporting [Abstract]
Segment Reporting Disclosure	Segment Reporting The Company reports segment information based on its internal reporting used by management for making decisions and assessing performance as the source of its reportable segments. The Chief Operating Decision Maker ("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 SBS segment consists of costs which are direct and incremental to the SBS segment. These include production costs of SBS 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. SBS - Includes revenues primarily from variable, 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 expense and amortization of intangible assets. Three Months Ended March 31, 2016 2015 Consumer Net revenues $ 155,381 $ 148,788 Cost of net revenues 86,337 80,778 Gross profit $ 69,044 $ 68,010 Gross profit as a percentage of net revenues 44 % 46 % Shutterfly Business Solutions (SBS) Net revenues $ 26,328 $ 11,190 Cost of net revenues 19,710 9,888 Gross profit $ 6,618 $ 1,302 Gross profit as a percentage of net revenues 25 % 12 % Corporate Net revenues $ — $ — Cost of net revenues 2,676 4,041 Gross profit $ (2,676 ) $ (4,041 ) Consolidated Net revenues $ 181,709 $ 159,978 Cost of net revenues 108,723 94,707 Gross profit $ 72,986 $ 65,271 Gross profit as a percentage of net revenues 40 % 41 %

Commitments and Contingencies

Commitments and Contingencies	3 Months Ended
	Mar. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies 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 March 31, 2016 , 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 March 31, 2016 , 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.

Subsequent Event

Subsequent Event	3 Months Ended
	Mar. 31, 2016
Subsequent Events [Abstract]
Subsequent Events	Subsequent Event On April 21, 2016, the Company's Board of Directors approved an increase to repurchase up to $100.0 million in addition to amounts authorized to date. The share repurchase authorization, which is 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. The share repurchase program is subject to prevailing market conditions and other considerations; does not require Shutterfly to repurchase any dollar amount or number of shares; and may be suspended or discontinued at any time.

The Company and Summary of Si18

The Company and Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2016
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 months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 , or for any other period. The December 31, 2015 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, 2015 included in the Company’s Annual Report on Form 10-K.
Recent Accounting Pronouncements	Recent Accounting Pronouncements In April 2015, the FASB issued new guidance related to presentation of debt issuance 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 Company adopted this guidance beginning January 1, 2016. This guidance requires retrospective application to all prior periods presented. The effect of this change was to reduce the previously reported amounts within the accompanying condensed consolidated balance sheets as of December 31, 2015 for prepaid expenses and other current assets, other assets, and convertible senior notes, net by $1.3 million , $1.9 million , and $3.3 million , respectively. Adoption of this guidance did not affect the Company's condensed consolidated statements of operations and condensed consolidated statements of cash flows. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). The updated guidance changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The amendments in this update are effective for reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the financial statement and disclosure impact of the pronouncement and has not early adopted. In 2014, the FASB issued new accounting guidance related to revenue recognition. This new standard will replace all current GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition guidance 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 can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. In 2015, the FASB issued guidance to defer the effective date to fiscal years beginning after December 15, 2017 with early adoption for fiscal years. The Company is evaluating the impact, if any, of adopting this new accounting guidance on its financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new guidance requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is evaluating the impact, if any, of adopting this new accounting guidance on its financial statements.

Stock-Based Compensation (Table

Stock-Based Compensation (Tables)	3 Months Ended
	Mar. 31, 2016
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 months ended March 31, 2016 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, 2015 206 $ 27.08 Granted — — Exercised (21 ) 22.70 Forfeited, cancelled or expired (1 ) 25.42 Balances, March 31, 2016 184 $ 27.60 3.4 $ 3,666 Options vested and expected to vest at March 31, 2016 184 $ 27.60 3.4 $ 3,663 Options vested at March 31, 2016 179 $ 27.55 3.4 $ 3,589
Summary of company restricted stock unit activity	A summary of the Company’s RSU activity for the three months ended March 31, 2016, is as follows (share numbers in thousands): Number of Units Outstanding Weighted Average Grant Date Fair Value Awarded and unvested, December 31, 2015 3,150 $ 44.28 Granted 919 39.17 Vested (767 ) 44.12 Forfeited (114 ) 46.11 Awarded and unvested, March 31, 2016 3,188 $ 42.78 RSUs expected to vest, March 31, 2016 2,502

Net Loss Per Share (Tables)

Net Loss Per Share (Tables)	3 Months Ended
	Mar. 31, 2016
Earnings Per Share [Abstract]
Net loss per share	A summary of the net loss per share for and three months ended March 31, 2016 and 2015 is as follows (in thousands, except per share amounts): Three Months Ended March 31, 2016 2015 Net loss per share: Numerator Net loss $ (29,436 ) $ (45,103 ) Denominator for basic and diluted net loss per share Weighted-average common shares outstanding 34,596 37,968 Net loss per share - basic and diluted $ (0.85 ) $ (1.19 )
Schedule of antidilutive securities excluded from computation of earnings per share	The following weighted-average outstanding stock options and restricted stock units were excluded from the computation of diluted net loss per common share for the periods presented because including them would have had an anti-dilutive effect (in thousands): Three Months Ended March 31, 2016 2015 Stock options and restricted stock units 3,649 3,650

Investments (Tables)

Investments (Tables)	3 Months Ended
	Mar. 31, 2016
Investments [Abstract]
Fair value of short and long-term investments classified as available for sale	At March 31, 2016 and December 31, 2015 , the estimated fair value of short-term and long-term investments classified as available for sale are as follows (in thousands): March 31, 2016 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Short-term investments Corporate debt securities $ 14,119 $ 12 $ (4 ) $ 14,127 Agency securities 6,613 6 — 6,619 Commercial paper 2,523 — — 2,523 US Government securities 350 1 — 351 Total short-term investments $ 23,605 $ 19 $ (4 ) $ 23,620 Long-term investments Corporate debt securities $ 8,368 $ 15 $ (2 ) $ 8,381 Agency securities 10,239 25 (1 ) 10,263 US Government securities 6,173 15 — 6,188 Total long-term investments $ 24,780 $ 55 $ (3 ) $ 24,832 December 31, 2015 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Short-term investments Corporate debt securities $ 16,187 $ 2 $ (14 ) $ 16,175 Agency securities 6,246 — (2 ) 6,244 Commercial paper 499 — — 499 Total short-term investments $ 22,932 $ 2 $ (16 ) $ 22,918 Long-term investments Corporate debt securities $ 10,132 $ — $ (37 ) $ 10,095 Agency securities 13,421 1 (43 ) 13,379 US Government securities 5,549 — (18 ) 5,531 Total long-term investments $ 29,102 $ 1 $ (98 ) $ 29,005
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 March 31, 2016 and December 31. 2015 (in thousands): March 31, 2016 December 31, 2015 One year or less $ 23,620 $ 22,918 One year through three years 24,832 29,005 $ 48,452 $ 51,923

Fair Value Measurement (Tables)

Fair Value Measurement (Tables)	3 Months Ended
	Mar. 31, 2016
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 March 31, 2016 December 31, 2015 Cash Equivalents Investments Cash Equivalents Investments Level 1 Securities: Money market funds $ 17,929 $ — $ 24,577 $ — Level 2 Securities: Agency securities — 16,882 — 19,623 Corporate debt securities 540 22,508 850 26,270 US Government securities — 6,539 — 5,531 Commercial Paper 8,322 2,523 — 499 Total cash equivalents and investments $ 26,791 $ 48,452 $ 25,427 $ 51,923
Fair value, liabilities measured on a recurring basis	As of March 31, 2016 , 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 March 31, 2016 December 31, 2015 Convertible senior notes $ 281,589 $ 270,192

Balance Sheet Components (Table

Balance Sheet Components (Tables)	3 Months Ended
	Mar. 31, 2016
Balance Sheet Related Disclosures [Abstract]
Schedule of prepaid expenses and other current assets	Prepaid Expenses and Other Current Assets March 31, December 31, (in thousands) Intra-period income tax asset $ 27,405 $ — Prepaid service contracts 11,196 12,539 Other prepaid expenses and current assets 19,786 19,289 $ 58,387 $ 31,828
Schedule of property and equipment	Property and Equipment, Net March 31, December 31, (in thousands) Computer equipment and software $ 175,336 $ 172,048 Manufacturing equipment 150,381 148,820 Capitalized software and website development costs 116,887 108,837 Buildings under build-to-suit leases 56,468 56,468 Leasehold improvements 21,661 21,519 Rental equipment 17,511 17,414 Furniture and fixtures 11,451 11,351 549,695 536,457 Less: Accumulated depreciation and amortization (276,967 ) (254,678 ) Net property and equipment $ 272,728 $ 281,779
Schedule of accrued liabilities	Accrued Liabilities March 31, December 31, (in thousands) Capital lease obligations $ 14,139 $ 14,090 Accrued compensation 13,307 20,703 Accrued production costs 10,519 44,825 Accrued marketing expenses 8,235 26,793 Accrued income and sales tax 3,194 17,843 Accrued other 17,828 24,880 $ 67,222 $ 149,134
Schedule of other noncurrent liabilities	Other Liabilities March 31, December 31, (in thousands) Financing obligations $ 56,444 $ 56,771 Capital lease obligations 40,878 44,428 Deferred tax liability 15,475 12,447 Deferred revenue 6,256 6,564 Other liabilities 2,471 2,902 $ 121,524 $ 123,112

Convertible Senior Notes (Table

Convertible Senior Notes (Tables)	3 Months Ended
	Mar. 31, 2016
Convertible Senior Notes Disclosure [Abstract]
Schedule of long-term debt instruments	The Notes consist of the following (in thousands): March 31, 2016 December 31, 2015 Liability component: Principal $ 300,000 $ 300,000 Less: debt issuance costs, debt discount, net of amortization (1) (32,107 ) (35,639 ) Net carrying amount $ 267,893 $ 264,361 Equity component (2) $ 63,510 $ 63,510 (1) In April 2015, the FASB issued new guidance related to presentation of debt issuance costs. Effective January 1, 2016 the Company has adopted the guidance and applied it on a retrospective basis. (2) 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 March 31, 2016 2015 0.25% coupon $ 188 $ 187 Amortization of debt issuance costs 323 305 Amortization of debt discount 3,209 3,035 $ 3,720 $ 3,527

Share Repurchase Program (Table

Share Repurchase Program (Tables)	3 Months Ended
	Mar. 31, 2016
Share Repurchase Program [Abstract]
Share Repurchase Program	The following table provides information about our repurchase of shares of our common stock for fiscal years 2014, 2015, and 2016: Period (1) Total Number of Shares Purchased Average Price Paid per Share Total Dollar Value Spent on Repurchases (in thousands) 2014 Repurchases 1,961,085 $ 45.29 $ 88,815 2015 Repurchases (2) 4,907,675 $ 43.99 $ 215,911 2016 Repurchases to date (3) 1,138,461 $ 41.69 $ 47,461 (1) All shares were purchased pursuant to the publicly announced share repurchase program described in footnote (2) below. Shares are reported in a period based on the settlement date of the applicable repurchase. (2) The Company entered into an accelerated share repurchase ("ASR") in the second quarter of 2015 under which a prepayment of $75 million was made. Final settlement of the ASR occurred on August 3, 2015, resulting in the delivery to the Company of 0.8 million shares of the Company’s common stock and 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. (3) Represents repurchases for the three months ended March 31, 2016.

Segment Reporting (Tables)

Segment Reporting (Tables)	3 Months Ended
	Mar. 31, 2016
Segment Reporting Information
Segment Reporting Information	Three Months Ended March 31, 2016 2015 Consumer Net revenues $ 155,381 $ 148,788 Cost of net revenues 86,337 80,778 Gross profit $ 69,044 $ 68,010 Gross profit as a percentage of net revenues 44 % 46 % Shutterfly Business Solutions (SBS) Net revenues $ 26,328 $ 11,190 Cost of net revenues 19,710 9,888 Gross profit $ 6,618 $ 1,302 Gross profit as a percentage of net revenues 25 % 12 % Corporate Net revenues $ — $ — Cost of net revenues 2,676 4,041 Gross profit $ (2,676 ) $ (4,041 ) Consolidated Net revenues $ 181,709 $ 159,978 Cost of net revenues 108,723 94,707 Gross profit $ 72,986 $ 65,271 Gross profit as a percentage of net revenues 40 % 41 %

The Company and Summary of Si27

The Company and Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
New Accounting Pronouncements or Change in Accounting Principle
Other assets	$ 10,046	$ 10,948
Convertible senior notes, net	267,893	264,361
Prepaid expenses and other current assets	$ 58,387	31,828
Accounting Standards Update 2015-04 [Member]
New Accounting Pronouncements or Change in Accounting Principle
Other assets		(1,900)
Convertible senior notes, net		(3,300)
Prepaid expenses and other current assets		$ (1,300)

Stock-Based Compensation - Stoc

Stock-Based Compensation - Stock Option Activity (Details) - Employee Stock Option $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016USD ($)$ / sharesshares
Number of options outstanding [Roll forward]
Balances (in shares) | shares	206
Granted (in shares) | shares	0
Exercised (in shares) | shares	(21)
Forfeited, cancelled or expired (in shares) | shares	(1)
Balances (in shares) | shares	184
Options vested and expected to vest (in shares) | shares	184
Options vested (in shares) | shares	179
Weighted Average Exercise Price
Balances (in dollars per share) | $ / shares	$ 27.08
Granted (in dollars per share) | $ / shares	0
Exercised (in dollars per share) | $ / shares	22.70
Forfeited, cancelled or expired (in dollars per share) | $ / shares	25.42
Balances (in dollars per share) | $ / shares	27.60
Options vested and expected to vest (in dollars per share) | $ / shares	27.60
Options vested (in dollars per share) | $ / shares	$ 27.55
Weighted Average Contractual Term (Years)
Ending balance (in years)	3 years 4 months 24 days
Options vested and expected to vest at end of period (in years)	3 years 4 months 24 days
Options vested at end of period (in years)	3 years 4 months 24 days
Aggregate Intrinsic Value
Ending balance | $	$ 3,666
Options vested and expected to vest at end of period | $	3,663
Options vested at end of period | $	$ 3,589

Stock-Based Compensation - St29

Stock-Based Compensation - Stock-Based Compensation (Details) - USD ($) shares in Thousands, $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Share-based Compensation
Unrecognized compensation expense	$ 93.1
Weighted average period of unrecognized compensation expense (in years)	3 years
Employee Stock Option
Share-based Compensation
Total intrinsic value of options exercised	$ 0.4	$ 1.6
Net cash proceeds from the exercise of stock options	$ 0.5	$ 1.2
Restricted Stock Units (RSUs)
Share-based Compensation
Granted (in shares)	919
2015 Equity Incentive Plan | Performance Based Restricted Stock
Share-based Compensation
Granted (in shares)	185
Vesting period of restricted stock	4 years
Minimum | 2015 Equity Incentive Plan | Restricted Stock Units (RSUs)
Share-based Compensation
Vesting period of restricted stock	3 years
Maximum | 2015 Equity Incentive Plan | Restricted Stock Units (RSUs)
Share-based Compensation
Vesting period of restricted stock	4 years

Stock-Based Compensation - Rest

Stock-Based Compensation - Restricted Stock Unit Activity (Details) - Restricted Stock Units (RSUs) shares in Thousands	3 Months Ended
	Mar. 31, 2016$ / sharesshares
Restricted Stock Units & Awards [Roll forward]
Awarded and unvested, beginning of period (in shares)	3,150
Granted (in shares)	919
Vested (in shares)	(767)
Forfeited (in shares)	(114)
Awarded and unvested, ending period (in shares)	3,188
Restricted stock units expected to vest, ending period (in shares)	2,502
Weighted Average Grant Date Fair Value]
Awarded and unvested, beginning period (in dollars per share) | $ / shares	$ 44.28
Granted (in dollars per share) | $ / shares	39.17
Vested (in dollars per share) | $ / shares	44.12
Forfeited (in dollars per share) | $ / shares	46.11
Awarded and unvested, ending period (in dollars per share) | $ / shares	$ 42.78

Net Loss Per Share (Details)

Net Loss Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Earnings Per Share [Abstract]
Antidilutive securities excluded from computation of earnings per share, amount	3,649	3,650
Net loss	$ (29,436)	$ (45,103)
Weighted-average shares outstanding - basic and diluted	34,596	37,968
Net loss per share - basic and diluted (in dollars per share)	$ (0.85)	$ (1.19)

Investments (Details)

Investments (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Available-for-sale Securities
Available-for-sale securities, less than one year	$ 23,620	$ 22,918
Available-for-sale securities, between one and three years	24,832	29,005
Estimated fair value	48,452	51,923
Long-term Investments
Available-for-sale Securities
Gross amortized cost	24,780	29,102
Gross unrealized gains	55	1
Gross unrealized losses	(3)	(98)
Estimated fair value	24,832	29,005
Long-term Investments | Corporate Debt Securities
Available-for-sale Securities
Gross amortized cost	8,368	10,132
Gross unrealized gains	15	0
Gross unrealized losses	(2)	(37)
Estimated fair value	8,381	10,095
Long-term Investments | Agency Securities
Available-for-sale Securities
Gross amortized cost	10,239	13,421
Gross unrealized gains	25	1
Gross unrealized losses	(1)	(43)
Estimated fair value	10,263	13,379
Long-term Investments | US Treasury and Government
Available-for-sale Securities
Gross amortized cost	6,173	5,549
Gross unrealized gains	15	0
Gross unrealized losses	0	(18)
Estimated fair value	6,188	5,531
Short-term Investments
Available-for-sale Securities
Gross amortized cost	23,605	22,932
Gross unrealized gains	19	2
Gross unrealized losses	(4)	(16)
Estimated fair value	23,620	22,918
Short-term Investments | Corporate Debt Securities
Available-for-sale Securities
Gross amortized cost	14,119	16,187
Gross unrealized gains	12	2
Gross unrealized losses	(4)	(14)
Estimated fair value	14,127	16,175
Short-term Investments | Agency Securities
Available-for-sale Securities
Gross amortized cost	6,613	6,246
Gross unrealized gains	6	0
Gross unrealized losses	0	(2)
Estimated fair value	6,619	6,244
Short-term Investments | Commercial Paper
Available-for-sale Securities
Gross amortized cost	2,523	499
Gross unrealized gains	0	0
Gross unrealized losses	0	0
Estimated fair value	2,523	$ 499
Short-term Investments | US Treasury and Government
Available-for-sale Securities
Gross amortized cost	350
Gross unrealized gains	1
Gross unrealized losses	0
Estimated fair value	$ 351

Fair Value Measurement of Cash

Fair Value Measurement of Cash Equivalents and Investments (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities
Cash and Cash Equivalents, Fair Value Disclosure	$ 26,791	$ 25,427
Investments, fair value disclosure	48,452	51,923
Money Market Funds | Level 1 Inputs
Fair Value, Assets and Liabilities
Cash and Cash Equivalents, Fair Value Disclosure	17,929	24,577
Investments, fair value disclosure	0	0
Agency Securities | Level 2 Inputs
Fair Value, Assets and Liabilities
Cash and Cash Equivalents, Fair Value Disclosure	0	0
Investments, fair value disclosure	16,882	19,623
Corporate Debt Securities | Level 2 Inputs
Fair Value, Assets and Liabilities
Cash and Cash Equivalents, Fair Value Disclosure	540	850
Investments, fair value disclosure	22,508	26,270
US Treasury and Government | Level 2 Inputs
Fair Value, Assets and Liabilities
Cash and Cash Equivalents, Fair Value Disclosure	0	0
Investments, fair value disclosure	6,539	5,531
Commercial Paper | Level 2 Inputs
Fair Value, Assets and Liabilities
Cash and Cash Equivalents, Fair Value Disclosure	8,322	0
Investments, fair value disclosure	$ 2,523	$ 499

Fair Value Measurement of Conve

Fair Value Measurement of Convertible Senior Notes (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Estimate of Fair Value Measurement
Fair Value, Assets and Liabilities
Convertible senior notes, net	$ 281,589	$ 270,192

Balance Sheet Components (Prepa

Balance Sheet Components (Prepaid Expenses and Other Current Assets) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Prepaid Expense and Other Assets, Current [Abstract]
Intra-period income tax asset	$ 27,405	$ 0
Prepaid service contracts	11,196	12,539
Other prepaid expenses and current assets	19,786	19,289
Total prepaid expenses and other current assets	$ 58,387	$ 31,828

Balance Sheet Components (Prope

Balance Sheet Components (Property and Equipment) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Property and Equipment
Property and equipment	$ 549,695		$ 536,457
Less: Accumulated depreciation and amortization	(276,967)		(254,678)
Net property and equipment	272,728		281,779
Depreciation and amortization expense	22,995	$ 19,909
Assets in construction, gross	16,000		17,200
Computer Equipment and Software
Property and Equipment
Property and equipment	175,336		172,048
Manufacturing Equipment
Property and Equipment
Property and equipment	150,381		148,820
Capital lease obligations	72,900		72,900
Capital leases, accumulated depreciation	(17,400)		(14,100)
Capitalized Software And Website Development Costs
Property and Equipment
Property and equipment	116,887		108,837
Buildings Under Build-To-Suit Leases
Property and Equipment
Property and equipment	56,468		56,468
Leasehold Improvements
Property and Equipment
Property and equipment	21,661		21,519
Rental Equipment
Property and Equipment
Property and equipment	17,511		17,414
Furniture and Fixtures
Property and Equipment
Property and equipment	$ 11,451		$ 11,351

Balance Sheet Components (Accru

Balance Sheet Components (Accrued Liabilities) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Accrued Liabilities, Current [Abstract]
Capital lease obligations	$ 14,139	$ 14,090
Accrued compensation	13,307	20,703
Accrued production costs	10,519	44,825
Accrued marketing expenses	8,235	26,793
Accrued income and sales taxes	3,194	17,843
Accrued other	17,828	24,880
Total accrued liabilities	$ 67,222	$ 149,134

Balance Sheet Components (Other

Balance Sheet Components (Other Liabilities, Non-Current) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Other Liabilities, Noncurrent [Abstract]
Financing obligations	$ 56,444	$ 56,771
Capital lease obligations	40,878	44,428
Deferred tax liability	15,475	12,447
Deferred revenue	6,256	6,564
Other liabilities	2,471	2,902
Other liabilities	$ 121,524	$ 123,112

Convertible Senior Notes Schedu

Convertible Senior Notes Schedule of Convertible Senior Notes (Details) - USD ($) $ in Thousands		Mar. 31, 2016	Dec. 31, 2015
Debt Instrument
Net carrying amount		$ 267,893	$ 264,361
Convertible Senior Notes | Convertible Senior Notes 0.25% Due May 15, 2018
Debt Instrument
Principal		300,000	300,000
Less: debt issuance costs, debt discount, net of amortization (1)	[1]	(32,107)	(35,639)
Net carrying amount		267,893	264,361
Equity component	[2]	$ 63,510	$ 63,510
[1]	In April 2015, the FASB issued new guidance related to presentation of debt issuance costs. Effective January 1, 2016 the Company has adopted the guidance and applied it on a retrospective basis.
[2]	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 Sche40

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
	Mar. 31, 2016	Mar. 31, 2015
Debt Instrument
0.25% coupon	$ 188	$ 187
Amortization of debt issuance costs	323	305
Amortization of debt discount	3,209	3,035
Interest expense, convertible notes	$ 3,720	$ 3,527

Convertible Senior Notes Additi

Convertible Senior Notes Additional Information (Details) - USD ($)	1 Months Ended	3 Months Ended		12 Months Ended
	May. 31, 2013	Mar. 31, 2016		Dec. 31, 2015		Dec. 31, 2014	[1]
Schedule of Convertible Senior Notes
Stock repurchased and retired during period, shares	600,000	1,138,461	[1],[2]	4,907,675	[1],[3]	1,961,085
Stock repurchased and retired during period, value	$ 30,000,000	$ 47,461,000	[1],[2]	$ 215,911,000	[1],[3]	$ 88,815,000
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 exceeded 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
[1]	All shares were purchased pursuant to the publicly announced share repurchase program described in footnote (2) below. Shares are reported in a period based on the settlement date of the applicable repurchase.
[2]	repurchases for the three months ended March 31, 2016.
[3]	The Company entered into an accelerated share repurchase ("ASR") in the second quarter of 2015 under which a prepayment of $75 million was made. Final settlement of the ASR occurred on August 3, 2015, resulting in the delivery to the Company of 0.8 million shares of the Company’s common stock and 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.

Share Repurchase Program (Detai

Share Repurchase Program (Details) - USD ($) $ / shares in Units, $ in Thousands

Aug. 03, 2015

May. 31, 2013

Mar. 31, 2016

Mar. 31, 2015

Dec. 31, 2015

[3]

Dec. 31, 2014

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

Stock repurchased and retired during period, shares

600,000

1,138,461

[1],[2]

4,907,675

[1]

1,961,085

[1]

Refund of accelerated share repurchase

$ 38,200

Repurchases of common stock

$ 47,461

$ 45,195

Stock repurchased and retired during period, average amount per share

[1]

$ 41.69

[2]

$ 43.99

$ 45.29

Stock repurchased and retired during period, value

$ 30,000

$ 47,461

[1],[2]

$ 215,911

[1]

$ 88,815

[1]

Accelerated Share Repurchase Agreement [Member]

Equity, Class of Treasury Stock

Stock repurchased and retired during period, shares

800,000

Repurchases of common stock

$ 36,800

Stock repurchased and retired during period, average amount per share

$ 46.49

[1]

All shares were purchased pursuant to the publicly announced share repurchase program described in footnote (2) below. Shares are reported in a period based on the settlement date of the applicable repurchase.

[2]

repurchases for the three months ended March 31, 2016.

[3]

The Company entered into an accelerated share repurchase ("ASR") in the second quarter of 2015 under which a prepayment of $75 million was made. Final settlement of the ASR occurred on August 3, 2015, resulting in the delivery to the Company of 0.8 million shares of the Company’s common stock and 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.

Segment Reporting (Details)

Segment Reporting (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Segment Reporting Information
Net revenues	$ 181,709	$ 159,978
Cost of net revenues	108,723	94,707
Gross profit	$ 72,986	$ 65,271
Gross profit as percentage of net revenue	40.00%	41.00%
Consumer
Segment Reporting Information
Net revenues	$ 155,381	$ 148,788
Cost of net revenues	86,337	80,778
Gross profit	$ 69,044	$ 68,010
Gross profit as percentage of net revenue	44.00%	46.00%
Enterprise
Segment Reporting Information
Net revenues	$ 26,328	$ 11,190
Cost of net revenues	19,710	9,888
Gross profit	$ 6,618	$ 1,302
Gross profit as percentage of net revenue	25.00%	12.00%
Corporate Segment [Member]
Segment Reporting Information
Net revenues	$ 0	$ 0
Cost of net revenues	2,676	4,041
Gross profit	$ (2,676)	$ (4,041)

Commitments and Contingencies S

Commitments and Contingencies Syndicated Credit Facility (Details) $ in Millions	3 Months Ended
	Mar. 31, 2016USD ($)
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%

Subsequent Event (Details)

Subsequent Event (Details) - USD ($) $ in Millions	Apr. 21, 2016	Feb. 09, 2015	Feb. 06, 2014	Oct. 24, 2012
Subsequent Event [Line Items]
Stock repurchase program, authorized amount		$ 300	$ 100	$ 60
Subsequent event
Subsequent Event [Line Items]
Stock repurchase program, authorized amount	$ 100