Shutterfly (SFLY) 10-Q 2 Aug 17 2017 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Jul. 31, 2017
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 Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		33,366,032
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2017

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 126,081	$ 289,224
Short-term investments	44,550	26,352
Accounts receivable, net	30,079	57,365
Inventories	8,900	11,751
Prepaid expenses and other current assets	76,370	48,084
Total current assets	285,980	432,776
Long-term investments	17,015	14,479
Property and equipment, net	252,485	284,110
Intangible assets, net	35,816	43,420
Goodwill	408,975	408,975
Other assets	21,796	11,816
Total assets	1,022,067	1,195,576
Current liabilities:
Convertible senior notes, current	286,316	0
Accounts payable	20,270	58,790
Accrued liabilities	77,527	138,869
Deferred revenue, current portion	22,747	22,929
Total current liabilities	406,860	220,588
Convertible senior notes, net	0	278,792
Other liabilities	114,870	137,035
Total liabilities	521,730	636,415
Commitments and contingencies (Note 10)
Stockholders' equity:
Common stock, $0.0001 par value; 100,000 shares authorized; 33,339 and 33,637 shares issued and outstanding on June 30, 2017 and December 31, 2016, respectively	3	3
Additional paid-in capital	973,930	949,864
Accumulated other comprehensive loss	(44)	(32)
Accumulated deficit	(473,552)	(390,674)
Total stockholders' equity	500,337	559,161
Total liabilities and stockholders' equity	$ 1,022,067	$ 1,195,576

CONDENSED CONSOLIDATED BALANCE3

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (Parenthetical) - $ / shares	Jun. 30, 2017	Dec. 31, 2016
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)	33,339,000	33,637,000
Common stock, shares outstanding (in shares)	33,339,000	33,637,000

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Statement [Abstract]
Net revenues	$ 209,032	$ 203,961	$ 401,004	$ 385,670
Cost of net revenues	118,205	109,592	234,324	218,315
Restructuring	196	0	1,436	0
Gross profit	90,631	94,369	165,244	167,355
Operating expenses:
Technology and development	39,398	41,313	85,353	79,582
Sales and marketing	42,987	47,539	85,874	93,381
General and administrative	27,511	26,592	55,306	57,281
Capital lease termination	8,098	0	8,098	0
Restructuring	4,477	0	12,213	0
Total operating expenses	122,471	115,444	246,844	230,244
Loss from operations	(31,840)	(21,075)	(81,600)	(62,889)
Interest expense	(5,955)	(5,661)	(11,919)	(11,336)
Interest and other income, net	244	128	433	249
Loss before income taxes	(37,551)	(26,608)	(93,086)	(73,976)
Benefit from income taxes	14,713	10,123	37,054	28,055
Net loss	$ (22,838)	$ (16,485)	$ (56,032)	$ (45,921)
Net loss per share - basic and diluted (in dollars per share)	$ (0.68)	$ (0.48)	$ (1.67)	$ (1.34)
Weighted-average shares outstanding - basic and diluted (in shares)	33,579	34,177	33,646	34,386
Stock-based compensation	$ 10,469	$ 10,924	$ 22,788	$ 21,074
Cost of net revenues
Stock-based compensation	1,074	1,081	2,243	2,305
Technology and development
Stock-based compensation	2,179	2,512	4,875	2,971
Sales and marketing
Stock-based compensation	2,980	3,754	6,153	8,033
General and administrative
Stock-based compensation	4,236	3,577	8,703	7,765
Restructuring
Stock-based compensation	$ 0	$ 0	$ 814	$ 0

CONDENSED CONSOLIDATED STATEME5

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Statement of Comprehensive Income [Abstract]
Net loss	$ (22,838)	$ (16,485)	$ (56,032)	$ (45,921)
Other comprehensive income (loss), net of reclassification adjustments:
Unrealized gains (losses) on investments, net	(15)	31	(28)	208
Tax benefit (expense) on unrealized gain (loss) on investments, net	6	(11)	16	(80)
Other comprehensive income (loss), net of tax	(9)	20	(12)	128
Comprehensive loss	$ (22,847)	$ (16,465)	$ (56,044)	$ (45,793)

CONDENSED CONSOLIDATED STATEME6

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash flows from operating activities:
Net loss	$ (56,032)	$ (45,921)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	45,121	46,278
Amortization of intangible assets	8,200	11,193
Amortization of debt discount and issuance costs	7,524	7,115
Stock-based compensation	21,974	21,074
Loss on disposal of property and equipment	467	324
Deferred income taxes	(7,103)	(3,567)
Tax benefit from stock-based compensation	0	4,021
Excess tax benefits from stock-based compensation	0	(5,233)
Restructuring	10,764	0
Changes in operating assets and liabilities:
Accounts receivable	27,286	26,277
Inventories	1,415	1,951
Prepaid expenses and other assets	(19,776)	(34,045)
Accounts payable	(39,949)	(18,970)
Accrued and other liabilities	(58,605)	(76,191)
Net cash used in operating activities	(58,714)	(65,694)
Cash flows from investing activities:
Purchases of property and equipment	(8,176)	(33,067)
Capitalization of software and website development costs	(17,058)	(18,083)
Purchases of investments	(39,805)	(15,936)
Proceeds from the maturities of investments	19,033	17,890
Proceeds from sale of property and equipment	11,678	10,247
Net cash used in investing activities	(34,328)	(38,949)
Cash flows from financing activities:
Proceeds from issuance of common stock upon exercise of stock options	520	685
Repurchases of common stock	(50,000)	(78,172)
Excess tax benefits from stock-based compensation	0	5,233
Principal payments of capital lease and financing obligations	(20,621)	(11,404)
Payment for contingent consideration liabilities	0	(1,313)
Net cash used in financing activities	(70,101)	(84,971)
Net decrease in cash and cash equivalents	(163,143)	(189,614)
Cash and cash equivalents, beginning of period	289,224	288,863
Cash and cash equivalents, end of period	126,081	99,249
Supplemental schedule of non-cash investing / financing activities:
Net increase (decrease) in accrued purchases of property and equipment	745	(5,565)
Net increase in accrued capitalized software and website development costs	270	137
Stock-based compensation capitalized with software and website development costs	758	959
Property and equipment acquired under capital leases	6,228	0
Net increase in receivable proceeds from the sale of property and equipment	$ 9,250	$ 3,765

The Company and Summary of Sign

The Company and Summary of Significant Accounting Policies	6 Months Ended
	Jun. 30, 2017
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 online 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 professionally-bound 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 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 U.S. GAAP 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 six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 , or for any other period. The December 31, 2016 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. 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, 2016 included in the Company’s Annual Report on Form 10-K. During the second quarter of 2017, the Company took advantage of an opportunity to complete the upgrade of its color printer fleet. The benefits of the upgrade are improved quality, increased throughput and automation, and lower consumable costs. There are three pieces of this transaction as follows: • Purchase of leased equipment from an existing vendor for $21.6 million ; • Sale of the purchased leased equipment to HP, Inc. ("HP") for $20.5 million ; and • Lease of new equipment from HP. In the purchase of the existing leased equipment, the difference between the payment of $21.6 million and the fair value of the asset resulted in an $8.1 million capital lease termination charge (separate line item in the accompanying condensed consolidated statement of operations). The purchased equipment assets were recorded on the balance sheet at fair value of $12.9 million . The subsequent sale of the equipment to HP for $20.5 million , resulted in the removal of the equipment assets and a capital lease incentive of $7.9 million to be amortized over the new lease term. Lastly, the Company leased new equipment from HP which upgrades most of our remaining color fleet to HP's high-end printers. Recent Accounting Pronouncements In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 Company adopted ASU 2016-09 beginning January 1, 2017 and the impact of adoption resulted in the following: • The Company recorded approximately $23.2 million of additional deferred tax assets with the corresponding decrease to accumulated deficit related to the prior years' unrecognized excess tax benefits (adoption method was modified retrospective). • The Company recorded a tax benefit of $0.8 million as a discrete item within income tax benefit for the three months ended March 31, 2017 related to the excess tax benefit on stock options, restricted stock and performance share units. Prior to adoption this amount would have been recorded as a reduction of additional paid-in capital. This change could create volatility in the Company’s future effective tax rate. • The Company elected not to change its policy on accounting for forfeitures and will continue to estimate the total number of awards for which the requisite service period will not be rendered. • The Company no longer reclassifies the excess tax benefit from operating activities to financing activities in the statement of cash flows. The Company elected to apply this change in presentation prospectively and therefore, prior periods have not been adjusted. • The remaining provisions of ASU 2016-09 did not have a material impact on the accompanying condensed consolidated financial statements. 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. In 2016, the FASB issued several amendments to the standard, including principal versus agent considerations when another party is involved in providing goods or services to a customer, the application of identifying performance obligations, and the recognition of expected breakage amounts either proportionally in earnings as redemptions occur or when redemption is remote. As a result, the Company has engaged internal and external resources that are currently evaluating the impact of the new standard on timing and measurement of revenue recognition as well as how current systems and operations will be impacted. While the Company continues to assess all potential impacts of the standard, the Company currently believes there will be an impact related to timing and measurement of breakage revenue for the consumer business and multiple-element arrangements in connection with our Enterprise business. The standard is required to be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company continues to evaluate its transition method selection. 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 on a modified retrospective basis, and earlier adoption is permitted. The Company is evaluating the impact of adopting this new accounting guidance on the consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which requires measurement and recognition of expected credit losses for financial assets held. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Earlier adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is evaluating the impact of adopting this new accounting guidance on the consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments. The new guidance clarifies the classification of certain cash receipts and cash payments in the statement of cash flows, including debt prepayment or extinguishment costs, settlement of contingent consideration arising from a business combination, insurance settlement proceeds, and distributions from certain equity method investees. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. The Company is evaluating the impact of adopting this new accounting guidance on the consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) . The updated guidance simplifies the measurement of goodwill impairment by removing step two of the goodwill impairment test, which requires the determination of the fair value of individual assets and liabilities of a reporting unit. The new guidance requires goodwill impairment to be measured as the amount by which a reporting unit’s carrying value exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments should be applied on a prospective basis. The new standard is effective for annual or any interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019 with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is evaluating the impact this new accounting guidance will have on the consolidated financial statements.

Stock-Based Compensation

Stock-Based Compensation	6 Months Ended
	Jun. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-Based Compensation	Stock-Based Compensation Stock Option Activity A summary of the Company’s stock option activity for the six months ended June 30, 2017 is as follows (share numbers and aggregate intrinsic values in thousands): Number of Options Outstanding Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Balance as of December 31, 2016 950 $ 46.58 Granted 614 45.68 Exercised (23 ) 21.95 Forfeited, cancelled or expired — — Balance as of June 30, 2017 1,541 $ 46.60 6.1 $ 2,205 Options vested and expected to vest as of June 30, 2017 1,404 $ 46.68 6.0 $ 1,967 Options vested as of June 30, 2017 307 $ 45.02 5.2 $ 1,084 During the six months ended June 30, 2017 , the Company granted options to purchase an aggregate of 614,000 shares of common stock with an estimated weighted-average grant-date fair value of $12.23 . The total intrinsic value of options exercised during the three months ended June 30, 2017 and 2016 was $0.6 million and $0.3 million , respectively. The total intrinsic value of options exercised during the six months ended June 30, 2017 and 2016 was $0.7 million and $0.7 million , respectively. Net cash proceeds from the exercise of stock options for the three months ended June 30, 2017 and 2016 were $0.4 million and $0.2 million , respectively. Net cash proceeds from the exercise of stock options for the six months ended June 30, 2017 and 2016 were $0.5 million and $0.7 million , respectively. Valuation of Stock Options The Company estimates the fair value of each option award on the date of grant using the Black-Scholes option-pricing model. The Company calculates volatility using an average of its historical and implied volatilities as it had sufficient public trading history to cover the entire expected term. The expected term of options gives consideration to historical exercises, post-vest cancellations and the options contractual term. The risk-free rate for the expected term of the option is based on the U.S. Treasury Constant Maturity at the time of grant. The assumptions used to value options granted during the three and six months ended June 30, 2017 and 2016 are as follows: Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Dividend yield — — — — Annual risk-free rate of return 1.8 % 1.2 % 1.9 % 1.2 % Expected volatility 30.0 % 32.9 % 29.8 % 32.9 % Expected term (years) 4.1 4.1 4.1 4.1 Restricted Stock Unit Activity The Company grants restricted stock units (“RSUs”) and performance-based restricted stock units ("PBRSUs") 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 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 six months ended June 30, 2017 , is as follows (share numbers in thousands): Number of Units Outstanding Weighted Average Grant Date Fair Value Awarded and unvested as of December 31, 2016 2,834 $ 43.52 Granted 731 47.22 Vested (710 ) 43.87 Forfeited (245 ) 43.50 Awarded and unvested as of June 30, 2017 2,610 $ 44.47 RSUs expected to vest as of June 30, 2017 2,133 Employee stock-based compensation expense recognized in the three and six months ended June 30, 2017 and 2016 , 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 June 30, 2017 , the Company had $88.8 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	6 Months Ended
	Jun. 30, 2017
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 the three and six months ended June 30, 2017 and 2016 is as follows (in thousands, except per share amounts): Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Net loss per share: Numerator Net loss $ (22,838 ) $ (16,485 ) $ (56,032 ) $ (45,921 ) Denominator for basic and diluted net loss per share Weighted-average common shares outstanding 33,579 34,177 33,646 34,386 Net loss per share - basic and diluted $ (0.68 ) $ (0.48 ) $ (1.67 ) $ (1.34 ) 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 Six Months Ended June 30, June 30, 2017 2016 2017 2016 Stock options and restricted stock units 4,060 3,422 4,004 3,536

Investments

Investments	6 Months Ended
	Jun. 30, 2017
Investments, Debt and Equity Securities [Abstract]
Investments	Investments At June 30, 2017 and December 31, 2016 , the estimated fair value of short-term and long-term investments classified as available-for-sale are as follows (in thousands): June 30, 2017 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Short-term investments Corporate debt securities $ 29,719 $ 1 $ (28 ) $ 29,692 Agency securities 6,560 — (6 ) 6,554 Commercial paper 5,984 — — 5,984 U.S. Government securities 2,324 — (4 ) 2,320 Total short-term investments $ 44,587 $ 1 $ (38 ) $ 44,550 Long-term investments Corporate debt securities $ 11,209 $ 3 $ (11 ) $ 11,201 Agency securities 4,587 — (22 ) 4,565 U.S. Government securities 1,255 — (6 ) 1,249 Total long-term investments $ 17,051 $ 3 $ (39 ) $ 17,015 December 31, 2016 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Short-term investments Corporate debt securities $ 13,371 $ 2 $ (12 ) $ 13,361 Agency securities 7,957 6 — 7,963 Commercial paper 1,727 — — 1,727 U.S. Government securities 3,298 3 — 3,301 Total short-term investments $ 26,353 $ 11 $ (12 ) $ 26,352 Long-term investments Corporate debt securities $ 6,208 $ 1 $ (20 ) $ 6,189 Agency securities 5,359 — (20 ) 5,339 U.S. Government securities 2,956 1 (6 ) 2,951 Total long-term investments $ 14,523 $ 2 $ (46 ) $ 14,479 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 June 30, 2017 and 2016 and no impairments were recorded during the six months ended June 30, 2017 and 2016. The Company had no material realized gains or losses during the six months ended June 30, 2017 . The following table summarizes the contractual maturities of the Company's investments as of June 30, 2017 and December 31, 2016 (in thousands): June 30, 2017 December 31, 2016 One year or less $ 44,550 $ 26,352 One year through three years 17,015 14,479 $ 61,565 $ 40,831 Actual maturities may differ from the contractual maturities because borrowers may have certain prepayment conditions.

Fair Value Measurement

Fair Value Measurement	6 Months Ended
	Jun. 30, 2017
Fair Value Disclosures [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 June 30, 2017 . 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 June 30, 2017 December 31, 2016 Cash Equivalents Investments Cash Equivalents Investments Level 1 Securities: Money market funds $ 16,094 $ — $ 808 $ — Level 2 Securities: Corporate debt securities 1,000 40,892 2,309 19,550 Agency securities — 11,120 — 13,302 Commercial Paper 7,272 5,984 6,694 1,727 U.S. Government securities — 3,569 — 6,252 Total cash equivalents and investments $ 24,366 $ 61,565 $ 9,811 $ 40,831 Convertible Senior Notes As of June 30, 2017 , 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 June 30, 2017 December 31, 2016 Convertible senior notes $ 294,948 $ 290,436 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	6 Months Ended
	Jun. 30, 2017
Balance Sheet Related Disclosures [Abstract]
Balance Sheet Components	Balance Sheet Components Prepaid Expenses and Other Current Assets June 30, 2017 December 31, 2016 (in thousands) Intra-period income tax asset $ 29,922 $ — Prepaid service contracts - current portion 12,197 11,114 Manufacturing partners receivable 599 11,739 Other prepaid expenses and current assets 33,652 25,231 $ 76,370 $ 48,084 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. Included in other prepaid expenses and current assets as of June 30, 2017 is a receivable from the sale of equipment to HP of $9.3 million . Property and Equipment, Net June 30, 2017 December 31, 2016 (in thousands) Computer equipment and software $ 179,061 $ 177,525 Manufacturing equipment 170,630 182,484 Capitalized software and website development costs 141,520 134,427 Buildings under build-to-suit leases 56,468 56,468 Leasehold improvements 19,070 22,007 Rental equipment 18,901 18,786 Furniture and fixtures 8,359 11,057 594,009 602,754 Less: Accumulated depreciation and amortization (341,524 ) (318,644 ) Net property and equipment $ 252,485 $ 284,110 Included within manufacturing equipment is approximately $78.4 million and $89.9 million of capital lease obligations for various pieces of manufacturing facility equipment as of June 30, 2017 and December 31, 2016 , respectively. Accumulated depreciation of assets under capital lease totaled $26.5 million at June 30, 2017 compared to $25.1 million at December 31, 2016 . 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 $22.1 million and $23.3 million for the three months ended June 30, 2017 and 2016 , respectively. Depreciation and amortization expense totaled $45.1 million and $46.3 million for the six months ended June 30, 2017 and 2016 , respectively. Included in property and equipment is approximately $15.3 million and $14.3 million of assets in construction as of June 30, 2017 and December 31, 2016 , respectively, the majority of which relates to internal-use software. Accrued Liabilities June 30, 2017 December 31, 2016 (in thousands) Accrued compensation $ 24,018 $ 17,066 Capital lease obligations, current portion 14,512 16,092 Accrued production costs 11,921 38,755 Accrued marketing expenses 6,259 23,839 Accrued consulting 4,798 8,643 Accrued income and sales tax 3,737 19,846 Accrued other 12,282 14,628 $ 77,527 $ 138,869 Other Liabilities June 30, 2017 December 31, 2016 (in thousands) Financing obligations $ 54,570 $ 55,355 Capital lease obligations, non-current portion 40,679 50,213 Deferred revenue, non-current portion 6,460 7,303 Deferred tax liability — 20,446 Other liabilities 13,161 3,718 $ 114,870 $ 137,035 Financing obligations relate to the Company's 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	6 Months Ended
	Jun. 30, 2017
Debt 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 June 30, 2017 , the Notes are not yet convertible. During the second quarter of 2017, the Notes were reclassified from long-term liabilities to current as these are now within one year of maturity. The Company is currently evaluating a number of alternatives and expects to complete a financing before the end of fiscal 2017. 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. The unamortized issuance costs balance attributable to the liability component was $1.3 million as of June 30, 2017. 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): June 30, 2017 December 31, 2016 Liability component: Principal $ 300,000 $ 300,000 Less: debt issuance costs, debt discount, net of amortization (13,684 ) (21,208 ) Net carrying amount $ 286,316 $ 278,792 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 Six Months Ended June 30, June 30, 2017 2016 2017 2016 0.25% coupon $ 188 $ 188 $ 375 $ 375 Amortization of debt issuance costs 347 327 688 650 Amortization of debt discount 3,442 3,256 6,836 6,465 $ 3,977 $ 3,771 $ 7,899 $ 7,490 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	6 Months Ended
	Jun. 30, 2017
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. As of June 30, 2017 , the Company's Board of Directors has approved increases to the program on the following dates: • On February 6, 2014, the Company's Board of Directors approved an increase of $100.0 million in addition to any amounts repurchased as of that date. • On February 9, 2015, the Company's Board of Directors approved an increase of $300.0 million in addition to any amounts repurchased as of that date. • On April 21, 2016, the Company's Board of Directors approved an increase of $100.0 million in addition to any amounts repurchased as of that date. • On April 18, 2017, the Company's Board of Directors approved an increase of $140.0 million 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 , 2016 , and 2017 : 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 2,524,752 $44.55 $112,488 2017 Repurchases to date (3) 1,033,038 $48.40 $50,000 (1) All shares were purchased pursuant to the publicly announced share repurchase program described above. Shares are reported in a period based on the settlement date of the applicable repurchase. All repurchased shares of common stock have been retired. (2) The Company entered into an accelerated share repurchase ("ASR") in the second quarter of 2015 under which a prepayment of $75.0 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 six months ended June 30, 2017 .

Segment Reporting

Segment Reporting	6 Months Ended
	Jun. 30, 2017
Segment Reporting [Abstract]
Segment Reporting	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 at which direct costs associated with the performance of the segment are monitored. Cost of net revenues for the Consumer segment consists of costs incurred to produce personalized products for all of the Company's brands. These costs include direct materials (the majority of which consists of paper, ink, and photo book covers), shipping charges, packing supplies, distribution and fulfillment activities, third-party costs for photo-based merchandise, payroll and related expenses for direct labor and customer service, rent for production facilities, and depreciation of production equipment (primarily digital printing presses and binders) and manufacturing facilities. Cost of net revenues also includes amortization of capitalized website and software development costs, primarily related to adding features and functionality to our website and apps to facilitate product purchases and improve the customer shopping experience. These costs include amortization of third-party software and acquired developed technology as well as patent royalties. Cost of net revenues also includes inventory markdowns that are part of restructuring activities. Cost of net revenues for the SBS segment consists of costs which are direct and incremental to the SBS business. 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 a variety of products, such as greeting and stationery cards, professionally-bound photo books, personalized calendars, home décor, personalized gifts, high quality prints, and other photo-based merchandise, and the related shipping revenues as well as rental revenue from its BorrowLenses brand. Revenue from advertising displayed on the Company's websites is also included in Consumer revenues. SBS - Includes revenues generated from the printing and shipping of marketing and variable data print products and formats. 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. The Company’s segment results for the three and six months ended June 30, 2017 and 2016 were as follows (dollars in thousands): Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Consumer Net revenues $ 179,090 $ 176,617 $ 339,735 $ 331,998 Cost of net revenues 92,049 85,276 181,903 171,613 Restructuring 196 — 1,436 — Gross profit $ 86,845 $ 91,341 $ 156,396 $ 160,385 Gross profit as a percentage of net revenues 48 % 52 % 46 % 48 % Shutterfly Business Solutions (SBS) Net revenues $ 29,942 $ 27,344 $ 61,269 $ 53,672 Cost of net revenues 23,900 21,810 47,738 41,520 Gross profit $ 6,042 $ 5,534 $ 13,531 $ 12,152 Gross profit as a percentage of net revenues 20 % 20 % 22 % 23 % Corporate Net revenues $ — $ — $ — $ — Cost of net revenues 2,256 2,506 4,683 5,182 Gross profit $ (2,256 ) $ (2,506 ) $ (4,683 ) $ (5,182 ) Consolidated Net revenues $ 209,032 $ 203,961 $ 401,004 $ 385,670 Cost of net revenues 118,205 109,592 234,324 218,315 Restructuring 196 — 1,436 — Gross profit $ 90,631 $ 94,369 $ 165,244 $ 167,355 Gross profit as a percentage of net revenues 43 % 46 % 41 % 43 %

Commitments and Contingencies

Commitments and Contingencies	6 Months Ended
	Jun. 30, 2017
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, U.S. Bank and Citibank, N.A. (“the Banks”). The Credit Agreement was subsequently amended on May 10, 2013. As part of the expansion in May 2013, Bank of America, N.A. and Morgan Stanley Bank, N.A. joined the syndicate. Details regarding the Credit Agreement is discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. On June 10, 2016, the Company renewed the Credit Agreement with the Banks. As part of this renewal, Fifth Third Bank, Silicon Valley Bank, U.S. Bank and Citibank, N.A. left the syndicate and SunTrust Bank and BMO Harris Bank N.A. joined the syndicate. The Credit Agreement is for five years and provides for a $200.0 million senior secured revolving credit facility. As part of the renewal, the Company amended the Credit Agreement by and among the Company and the Banks to increase the Leverage Ratio (as defined in the Credit Agreement) to be maintained by the Company to be at or below 3.50 to 1.00 for the fiscal quarter ended June 30, 2016 through March 31, 2017, at or below 3.25 to 1.00 for the fiscal quarter ending June 30, 2017 through March 31, 2018, and at or below 3.00 to 1.00 for the fiscal quarter ended June 30, 2018 and thereafter. 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 June 30, 2017 , 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 cases, it is not possible to estimate the possible loss or losses from each of these cases. The final resolution of these lawsuits, 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 Shutterfly for alleged violations of the Delaware False Claims and Reporting Act, 6 Del C. § 1203(b)(2). The complaint asserts that Shutterfly 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. Monroy v. Shutterfly, Inc. On November 30 2016, Alejandro Monroy on behalf of himself and all others similarly situated, filed a complaint against the Company in the U.S. District Court for the Northern District of Illinois. The complaint asserts that the Company violated the Illinois Biometric Information Privacy Act by extracting his and others’ biometric identifiers from photographs and seeks statutory damages and an injunction. The Company believes the suit is without merit and intends to vigorously defend against it. 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.

Restructuring

Restructuring	6 Months Ended
	Jun. 30, 2017
Restructuring and Related Activities [Abstract]
Restructuring	Restructuring 2017 Restructuring Plan To reiterate, during the first quarter of 2017, the Board of Directors approved, committed to and initiated a plan to significantly simplify the Consumer business during 2017 ("2017 Restructuring Plan"). As part of the plan, the Company is reinvesting in Tiny Prints as its premium cards & stationery brand and is creating a Tiny Prints boutique on a dedicated tab on Shutterfly.com. The new Shutterfly Wedding Store will be the focus of the Company’s wedding strategy, including a premium Wedding Paper Divas-branded stationery collection. The MyPublisher brand will be retired in favor of the industry leading Shutterfly Photo Books category and BorrowLenses will undertake a strategic review for possible sale. The Company expects these actions will be completed by the end of third quarter of 2017, and the Tiny Prints, Wedding Paper Divas, and MyPublisher legacy websites will shut down. The Company seeks to retain as many customers and as much revenue as possible while migrating customers from the legacy websites to Shutterfly.com. During the second quarter of 2017, the Company progressed with the 2017 Restructuring Plan as we created a Tiny Prints boutique on a dedicated tab on Shutterfly.com and the MyPublisher brand was retired in favor of the industry leading Shutterfly Photo Books category. As a result, the Tiny Prints and MyPublisher legacy websites were shut down during the second quarter of 2017. The Company expects the remaining actions under the 2017 Restructuring Plan will be completed by the end of third quarter of 2017, and the legacy Wedding Paper Divas website will shut down. The total estimated restructuring costs associated with the 2017 Restructuring Plan will range from $15.0 to $17.5 million and will impact our restructuring expense line items within cost of net revenues and operating expenses in our condensed consolidated statement of operations as these costs are incurred. Any changes to the estimates of executing the 2017 Restructuring Plan will be reflected in our future results of operations. 2015 Restructuring Plan During 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 ("2015 Restructuring Plan"). Actions pursuant to the 2015 Restructuring Plan were substantially complete as of the first quarter of 2016. Restructuring Activity The following table summarizes the restructuring costs recognized during the six months ended June 30, 2017 : 2017 Restructuring 2015 Restructuring Property and equipment Employee costs Inventory Other costs Property and equipment Total Balance as of January 1, 2017 [1] $ — $ — $ — $ — $ 1,602 $ 1,602 Restructuring and other charges 6,435 5,154 1,436 443 181 13,649 Cash payments (7 ) (2,348 ) — (342 ) (188 ) (2,885 ) Non-cash adjustments [2] (6,194 ) (814 ) (1,436 ) (23 ) — (8,467 ) Balance as of June 30, 2017 [1] $ 234 $ 1,992 $ — $ 78 $ 1,595 $ 3,899 [1] The balances as of June 30, 2017 and December 31, 2016 are recorded in accrued liabilities. [2] Non-cash adjustments include depreciation and amortization of property and equipment (primarily capitalized software development costs and manufacturing equipment) and intangible assets, inventory markdowns, stock-based compensation, and other non-cash costs incurred as part of the restructuring.

The Company and Summary of Si18

The Company and Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2017
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 U.S. GAAP 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 six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 , or for any other period. The December 31, 2016 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. 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, 2016 included in the Company’s Annual Report on Form 10-K.
Recent Accounting Pronouncements	Recent Accounting Pronouncements In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 Company adopted ASU 2016-09 beginning January 1, 2017 and the impact of adoption resulted in the following: • The Company recorded approximately $23.2 million of additional deferred tax assets with the corresponding decrease to accumulated deficit related to the prior years' unrecognized excess tax benefits (adoption method was modified retrospective). • The Company recorded a tax benefit of $0.8 million as a discrete item within income tax benefit for the three months ended March 31, 2017 related to the excess tax benefit on stock options, restricted stock and performance share units. Prior to adoption this amount would have been recorded as a reduction of additional paid-in capital. This change could create volatility in the Company’s future effective tax rate. • The Company elected not to change its policy on accounting for forfeitures and will continue to estimate the total number of awards for which the requisite service period will not be rendered. • The Company no longer reclassifies the excess tax benefit from operating activities to financing activities in the statement of cash flows. The Company elected to apply this change in presentation prospectively and therefore, prior periods have not been adjusted. • The remaining provisions of ASU 2016-09 did not have a material impact on the accompanying condensed consolidated financial statements. 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. In 2016, the FASB issued several amendments to the standard, including principal versus agent considerations when another party is involved in providing goods or services to a customer, the application of identifying performance obligations, and the recognition of expected breakage amounts either proportionally in earnings as redemptions occur or when redemption is remote. As a result, the Company has engaged internal and external resources that are currently evaluating the impact of the new standard on timing and measurement of revenue recognition as well as how current systems and operations will be impacted. While the Company continues to assess all potential impacts of the standard, the Company currently believes there will be an impact related to timing and measurement of breakage revenue for the consumer business and multiple-element arrangements in connection with our Enterprise business. The standard is required to be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company continues to evaluate its transition method selection. 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 on a modified retrospective basis, and earlier adoption is permitted. The Company is evaluating the impact of adopting this new accounting guidance on the consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which requires measurement and recognition of expected credit losses for financial assets held. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Earlier adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is evaluating the impact of adopting this new accounting guidance on the consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments. The new guidance clarifies the classification of certain cash receipts and cash payments in the statement of cash flows, including debt prepayment or extinguishment costs, settlement of contingent consideration arising from a business combination, insurance settlement proceeds, and distributions from certain equity method investees. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. The Company is evaluating the impact of adopting this new accounting guidance on the consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) . The updated guidance simplifies the measurement of goodwill impairment by removing step two of the goodwill impairment test, which requires the determination of the fair value of individual assets and liabilities of a reporting unit. The new guidance requires goodwill impairment to be measured as the amount by which a reporting unit’s carrying value exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments should be applied on a prospective basis. The new standard is effective for annual or any interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019 with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is evaluating the impact this new accounting guidance will have on the consolidated financial statements.

Stock-Based Compensation (Table

Stock-Based Compensation (Tables)	6 Months Ended
	Jun. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Summary of the status of the company's stock option plan	A summary of the Company’s stock option activity for the six months ended June 30, 2017 is as follows (share numbers and aggregate intrinsic values in thousands): Number of Options Outstanding Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Balance as of December 31, 2016 950 $ 46.58 Granted 614 45.68 Exercised (23 ) 21.95 Forfeited, cancelled or expired — — Balance as of June 30, 2017 1,541 $ 46.60 6.1 $ 2,205 Options vested and expected to vest as of June 30, 2017 1,404 $ 46.68 6.0 $ 1,967 Options vested as of June 30, 2017 307 $ 45.02 5.2 $ 1,084
Summary of valuation assumptions for stock options	The assumptions used to value options granted during the three and six months ended June 30, 2017 and 2016 are as follows: Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Dividend yield — — — — Annual risk-free rate of return 1.8 % 1.2 % 1.9 % 1.2 % Expected volatility 30.0 % 32.9 % 29.8 % 32.9 % Expected term (years) 4.1 4.1 4.1 4.1
Summary of company restricted stock unit activity	A summary of the Company’s RSU activity for the six months ended June 30, 2017 , is as follows (share numbers in thousands): Number of Units Outstanding Weighted Average Grant Date Fair Value Awarded and unvested as of December 31, 2016 2,834 $ 43.52 Granted 731 47.22 Vested (710 ) 43.87 Forfeited (245 ) 43.50 Awarded and unvested as of June 30, 2017 2,610 $ 44.47 RSUs expected to vest as of June 30, 2017 2,133

Net Loss Per Share (Tables)

Net Loss Per Share (Tables)	6 Months Ended
	Jun. 30, 2017
Earnings Per Share [Abstract]
Net loss per share	A summary of the net loss per share for the three and six months ended June 30, 2017 and 2016 is as follows (in thousands, except per share amounts): Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Net loss per share: Numerator Net loss $ (22,838 ) $ (16,485 ) $ (56,032 ) $ (45,921 ) Denominator for basic and diluted net loss per share Weighted-average common shares outstanding 33,579 34,177 33,646 34,386 Net loss per share - basic and diluted $ (0.68 ) $ (0.48 ) $ (1.67 ) $ (1.34 )
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 Six Months Ended June 30, June 30, 2017 2016 2017 2016 Stock options and restricted stock units 4,060 3,422 4,004 3,536

Investments (Tables)

Investments (Tables)	6 Months Ended
	Jun. 30, 2017
Investments, Debt and Equity Securities [Abstract]
Fair value of short and long-term investments classified as available for sale	At June 30, 2017 and December 31, 2016 , the estimated fair value of short-term and long-term investments classified as available-for-sale are as follows (in thousands): June 30, 2017 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Short-term investments Corporate debt securities $ 29,719 $ 1 $ (28 ) $ 29,692 Agency securities 6,560 — (6 ) 6,554 Commercial paper 5,984 — — 5,984 U.S. Government securities 2,324 — (4 ) 2,320 Total short-term investments $ 44,587 $ 1 $ (38 ) $ 44,550 Long-term investments Corporate debt securities $ 11,209 $ 3 $ (11 ) $ 11,201 Agency securities 4,587 — (22 ) 4,565 U.S. Government securities 1,255 — (6 ) 1,249 Total long-term investments $ 17,051 $ 3 $ (39 ) $ 17,015 December 31, 2016 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Short-term investments Corporate debt securities $ 13,371 $ 2 $ (12 ) $ 13,361 Agency securities 7,957 6 — 7,963 Commercial paper 1,727 — — 1,727 U.S. Government securities 3,298 3 — 3,301 Total short-term investments $ 26,353 $ 11 $ (12 ) $ 26,352 Long-term investments Corporate debt securities $ 6,208 $ 1 $ (20 ) $ 6,189 Agency securities 5,359 — (20 ) 5,339 U.S. Government securities 2,956 1 (6 ) 2,951 Total long-term investments $ 14,523 $ 2 $ (46 ) $ 14,479
Estimated fair values of short and long-term investments classified by date of contractual maturity	The following table summarizes the contractual maturities of the Company's investments as of June 30, 2017 and December 31, 2016 (in thousands): June 30, 2017 December 31, 2016 One year or less $ 44,550 $ 26,352 One year through three years 17,015 14,479 $ 61,565 $ 40,831

Fair Value Measurement (Tables)

Fair Value Measurement (Tables)	6 Months Ended
	Jun. 30, 2017
Fair Value Disclosures [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 June 30, 2017 December 31, 2016 Cash Equivalents Investments Cash Equivalents Investments Level 1 Securities: Money market funds $ 16,094 $ — $ 808 $ — Level 2 Securities: Corporate debt securities 1,000 40,892 2,309 19,550 Agency securities — 11,120 — 13,302 Commercial Paper 7,272 5,984 6,694 1,727 U.S. Government securities — 3,569 — 6,252 Total cash equivalents and investments $ 24,366 $ 61,565 $ 9,811 $ 40,831
Fair value, liabilities measured on a recurring basis	As of June 30, 2017 , 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 June 30, 2017 December 31, 2016 Convertible senior notes $ 294,948 $ 290,436

Balance Sheet Components (Table

Balance Sheet Components (Tables)	6 Months Ended
	Jun. 30, 2017
Balance Sheet Related Disclosures [Abstract]
Schedule of prepaid expenses and other current assets	Prepaid Expenses and Other Current Assets June 30, 2017 December 31, 2016 (in thousands) Intra-period income tax asset $ 29,922 $ — Prepaid service contracts - current portion 12,197 11,114 Manufacturing partners receivable 599 11,739 Other prepaid expenses and current assets 33,652 25,231 $ 76,370 $ 48,084
Schedule of property and equipment	Property and Equipment, Net June 30, 2017 December 31, 2016 (in thousands) Computer equipment and software $ 179,061 $ 177,525 Manufacturing equipment 170,630 182,484 Capitalized software and website development costs 141,520 134,427 Buildings under build-to-suit leases 56,468 56,468 Leasehold improvements 19,070 22,007 Rental equipment 18,901 18,786 Furniture and fixtures 8,359 11,057 594,009 602,754 Less: Accumulated depreciation and amortization (341,524 ) (318,644 ) Net property and equipment $ 252,485 $ 284,110
Schedule of accrued liabilities	Accrued Liabilities June 30, 2017 December 31, 2016 (in thousands) Accrued compensation $ 24,018 $ 17,066 Capital lease obligations, current portion 14,512 16,092 Accrued production costs 11,921 38,755 Accrued marketing expenses 6,259 23,839 Accrued consulting 4,798 8,643 Accrued income and sales tax 3,737 19,846 Accrued other 12,282 14,628 $ 77,527 $ 138,869
Schedule of other noncurrent liabilities	Other Liabilities June 30, 2017 December 31, 2016 (in thousands) Financing obligations $ 54,570 $ 55,355 Capital lease obligations, non-current portion 40,679 50,213 Deferred revenue, non-current portion 6,460 7,303 Deferred tax liability — 20,446 Other liabilities 13,161 3,718 $ 114,870 $ 137,035

Convertible Senior Notes (Table

Convertible Senior Notes (Tables)	6 Months Ended
	Jun. 30, 2017
Debt Disclosure [Abstract]
Schedule of long-term debt instruments	The Notes consist of the following (in thousands): June 30, 2017 December 31, 2016 Liability component: Principal $ 300,000 $ 300,000 Less: debt issuance costs, debt discount, net of amortization (13,684 ) (21,208 ) Net carrying amount $ 286,316 $ 278,792 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 Six Months Ended June 30, June 30, 2017 2016 2017 2016 0.25% coupon $ 188 $ 188 $ 375 $ 375 Amortization of debt issuance costs 347 327 688 650 Amortization of debt discount 3,442 3,256 6,836 6,465 $ 3,977 $ 3,771 $ 7,899 $ 7,490

Share Repurchase Program (Table

Share Repurchase Program (Tables)	6 Months Ended
	Jun. 30, 2017
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 , 2016 , and 2017 : 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 2,524,752 $44.55 $112,488 2017 Repurchases to date (3) 1,033,038 $48.40 $50,000 (1) All shares were purchased pursuant to the publicly announced share repurchase program described above. Shares are reported in a period based on the settlement date of the applicable repurchase. All repurchased shares of common stock have been retired. (2) The Company entered into an accelerated share repurchase ("ASR") in the second quarter of 2015 under which a prepayment of $75.0 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 six months ended June 30, 2017 .

Segment Reporting (Tables)

Segment Reporting (Tables)	6 Months Ended
	Jun. 30, 2017
Segment Reporting [Abstract]
Segment Reporting Information	The Company’s segment results for the three and six months ended June 30, 2017 and 2016 were as follows (dollars in thousands): Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Consumer Net revenues $ 179,090 $ 176,617 $ 339,735 $ 331,998 Cost of net revenues 92,049 85,276 181,903 171,613 Restructuring 196 — 1,436 — Gross profit $ 86,845 $ 91,341 $ 156,396 $ 160,385 Gross profit as a percentage of net revenues 48 % 52 % 46 % 48 % Shutterfly Business Solutions (SBS) Net revenues $ 29,942 $ 27,344 $ 61,269 $ 53,672 Cost of net revenues 23,900 21,810 47,738 41,520 Gross profit $ 6,042 $ 5,534 $ 13,531 $ 12,152 Gross profit as a percentage of net revenues 20 % 20 % 22 % 23 % Corporate Net revenues $ — $ — $ — $ — Cost of net revenues 2,256 2,506 4,683 5,182 Gross profit $ (2,256 ) $ (2,506 ) $ (4,683 ) $ (5,182 ) Consolidated Net revenues $ 209,032 $ 203,961 $ 401,004 $ 385,670 Cost of net revenues 118,205 109,592 234,324 218,315 Restructuring 196 — 1,436 — Gross profit $ 90,631 $ 94,369 $ 165,244 $ 167,355 Gross profit as a percentage of net revenues 43 % 46 % 41 % 43 %

Restructuring (Tables)

Restructuring (Tables)	6 Months Ended
	Jun. 30, 2017
Restructuring and Related Activities [Abstract]
Restructuring and Related Costs	The following table summarizes the restructuring costs recognized during the six months ended June 30, 2017 : 2017 Restructuring 2015 Restructuring Property and equipment Employee costs Inventory Other costs Property and equipment Total Balance as of January 1, 2017 [1] $ — $ — $ — $ — $ 1,602 $ 1,602 Restructuring and other charges 6,435 5,154 1,436 443 181 13,649 Cash payments (7 ) (2,348 ) — (342 ) (188 ) (2,885 ) Non-cash adjustments [2] (6,194 ) (814 ) (1,436 ) (23 ) — (8,467 ) Balance as of June 30, 2017 [1] $ 234 $ 1,992 $ — $ 78 $ 1,595 $ 3,899 [1] The balances as of June 30, 2017 and December 31, 2016 are recorded in accrued liabilities. [2] Non-cash adjustments include depreciation and amortization of property and equipment (primarily capitalized software development costs and manufacturing equipment) and intangible assets, inventory markdowns, stock-based compensation, and other non-cash costs incurred as part of the restructuring.

The Company and Summary of Si28

The Company and Summary of Significant Accounting Policies - Purchase and Sale of Leased Equipment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Property, Plant and Equipment [Line Items]
Purchase of leased equipment	$ 21,600
Proceeds from sale of purchased leased equipment	20,500
Capital lease termination	(8,098)	$ 0	$ (8,098)	$ 0
Purchased equipment assets, fair value	594,009		594,009		$ 602,754
Capital lease incentive	7,900		7,900
HP, Inc. (HP)
Property, Plant and Equipment [Line Items]
Proceeds from sale of purchased leased equipment	20,500
Purchased equipment assets, fair value	$ 12,900		$ 12,900

The Company and Summary of Si29

The Company and Summary of Significant Accounting Policies - Impact of Adoption of Accounting Standards (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Jun. 30, 2017
New Accounting Pronouncements or Change in Accounting Principle
Tax benefit recorded as a discrete item	$ 0.8
Accounting Standards Update 2016-09
New Accounting Pronouncements or Change in Accounting Principle
Deferred tax assets		$ 23.2
Retained earnings | Accounting Standards Update 2016-09
New Accounting Pronouncements or Change in Accounting Principle
Decrease to accumulated deficit		$ 23.2

Stock-Based Compensation - Stoc

Stock-Based Compensation - Stock Option Activity (Details) - Employee Stock Option $ / shares in Units, shares in Thousands, $ in Thousands	6 Months Ended
	Jun. 30, 2017USD ($)$ / sharesshares
Number of options outstanding [Roll forward]
Balances (in shares) | shares	950
Granted (in shares) | shares	614
Exercised (in shares) | shares	(23)
Forfeited, cancelled or expired (in shares) | shares	0
Balances (in shares) | shares	1,541
Options vested and expected to vest (in shares) | shares	1,404
Options vested (in shares) | shares	307
Weighted Average Exercise Price
Balances (in dollars per share) | $ / shares	$ 46.58
Granted (in dollars per share) | $ / shares	45.68
Exercised (in dollars per share) | $ / shares	21.95
Forfeited, cancelled or expired (in dollars per share) | $ / shares	0
Balances (in dollars per share) | $ / shares	46.60
Options vested and expected to vest (in dollars per share) | $ / shares	46.68
Options vested (in dollars per share) | $ / shares	$ 45.02
Weighted Average Remaining Contractual Term (Years)
Ending balance (in years)	6 years 1 month 6 days
Options vested and expected to vest at end of period (in years)	6 years
Options vested at end of period (in years)	5 years 2 months 12 days
Aggregate Intrinsic Value
Ending balance | $	$ 2,205
Options vested and expected to vest at end of period | $	1,967
Options vested at end of period | $	$ 1,084

Stock-Based Compensation - St31

Stock-Based Compensation - Stock-Based Compensation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Share-based Compensation
Net cash proceeds from the exercise of stock options			$ 520	$ 685
Unrecognized compensation expense	$ 88,800		$ 88,800
Weighted average period of unrecognized compensation expense (in years)			3 years
Employee Stock Option
Share-based Compensation
Options granted to purchase (in shares)			614
Estimated weighted-average grant-date fair value (usd per share)			$ 12.23
Total intrinsic value of options exercised	600	$ 300	$ 700	700
Net cash proceeds from the exercise of stock options	$ 400	$ 200	$ 500	$ 700
Restricted Stock Units (RSUs) | 2015 Equity Incentive Plan
Share-based Compensation
Vesting period of restricted stock			4 years

Stock-Based Compensation - Valu

Stock-Based Compensation - Valuation of Stock Options (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Dividend yield	0.00%	0.00%	0.00%	0.00%
Annual risk-free rate of return	1.80%	1.20%	1.90%	1.20%
Expected volatility	30.00%	32.90%	29.80%	32.90%
Expected term (years)	4 years 1 month 6 days	4 years 1 month 6 days	4 years 1 month 6 days	4 years 1 month 6 days

Stock-Based Compensation - Rest

Stock-Based Compensation - Restricted Stock Unit Activity (Details) - Restricted Stock Units (RSUs) shares in Thousands	6 Months Ended
	Jun. 30, 2017$ / sharesshares
Restricted Stock Units & Awards [Roll forward]
Awarded and unvested, beginning of period (in shares)	2,834
Granted (in shares)	731
Vested (in shares)	(710)
Forfeited (in shares)	(245)
Awarded and unvested, ending period (in shares)	2,610
Restricted stock units expected to vest, ending period (in shares)	2,133
Weighted Average Grant Date Fair Value]
Awarded and unvested, beginning period (in dollars per share) | $ / shares	$ 43.52
Granted (in dollars per share) | $ / shares	47.22
Vested (in dollars per share) | $ / shares	43.87
Forfeited (in dollars per share) | $ / shares	43.50
Awarded and unvested, ending period (in dollars per share) | $ / shares	$ 44.47

Net Loss Per Share (Details)

Net Loss Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Earnings Per Share [Abstract]
Net loss	$ (22,838)	$ (16,485)	$ (56,032)	$ (45,921)
Weighted-average shares outstanding - basic and diluted (in shares)	33,579	34,177	33,646	34,386
Net loss per share - basic and diluted (in dollars per share)	$ (0.68)	$ (0.48)	$ (1.67)	$ (1.34)
Antidilutive securities excluded from computation of earnings per share (in shares)	4,060	3,422	4,004	3,536

Investments - Schedule of Estim

Investments - Schedule of Estimated Fair Value (Details) - USD ($)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Available-for-sale Securities
Estimated fair value	$ 61,565,000		$ 40,831,000
Impairments recorded on available-for-sale investments	0	$ 0
Short-term Investments
Available-for-sale Securities
Gross amortized cost	44,587,000		26,353,000
Gross unrealized gains	1,000		11,000
Gross unrealized losses	(38,000)		(12,000)
Estimated fair value	44,550,000		26,352,000
Short-term Investments | Corporate Debt Securities
Available-for-sale Securities
Gross amortized cost	29,719,000		13,371,000
Gross unrealized gains	1,000		2,000
Gross unrealized losses	(28,000)		(12,000)
Estimated fair value	29,692,000		13,361,000
Short-term Investments | Agency Securities
Available-for-sale Securities
Gross amortized cost	6,560,000		7,957,000
Gross unrealized gains	0		6,000
Gross unrealized losses	(6,000)		0
Estimated fair value	6,554,000		7,963,000
Short-term Investments | Commercial Paper
Available-for-sale Securities
Gross amortized cost	5,984,000		1,727,000
Gross unrealized gains	0		0
Gross unrealized losses	0		0
Estimated fair value	5,984,000		1,727,000
Short-term Investments | US Treasury and Government
Available-for-sale Securities
Gross amortized cost	2,324,000		3,298,000
Gross unrealized gains	0		3,000
Gross unrealized losses	(4,000)		0
Estimated fair value	2,320,000		3,301,000
Long-term Investments
Available-for-sale Securities
Gross amortized cost	17,051,000		14,523,000
Gross unrealized gains	3,000		2,000
Gross unrealized losses	(39,000)		(46,000)
Estimated fair value	17,015,000		14,479,000
Long-term Investments | Corporate Debt Securities
Available-for-sale Securities
Gross amortized cost	11,209,000		6,208,000
Gross unrealized gains	3,000		1,000
Gross unrealized losses	(11,000)		(20,000)
Estimated fair value	11,201,000		6,189,000
Long-term Investments | Agency Securities
Available-for-sale Securities
Gross amortized cost	4,587,000		5,359,000
Gross unrealized gains	0		0
Gross unrealized losses	(22,000)		(20,000)
Estimated fair value	4,565,000		5,339,000
Long-term Investments | US Treasury and Government
Available-for-sale Securities
Gross amortized cost	1,255,000		2,956,000
Gross unrealized gains	0		1,000
Gross unrealized losses	(6,000)		(6,000)
Estimated fair value	$ 1,249,000		$ 2,951,000

Investments - Summary of Contra

Investments - Summary of Contractual Maturities (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Investments, Debt and Equity Securities [Abstract]
Available-for-sale securities, less than one year	$ 44,550	$ 26,352
Available-for-sale securities, between one and three years	17,015	14,479
Available-for-sale securities	$ 61,565	$ 40,831

Fair Value Measurement - Fair V

Fair Value Measurement - Fair Value Measurement of Cash Equivalents and Investments (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities
Cash Equivalents, Fair Value	$ 24,366	$ 9,811
Investments, Fair Value	61,565	40,831
Money Market Funds | Level 1 Inputs
Fair Value, Assets and Liabilities
Cash Equivalents, Fair Value	16,094	808
Investments, Fair Value	0	0
Corporate Debt Securities | Level 2 Inputs
Fair Value, Assets and Liabilities
Cash Equivalents, Fair Value	1,000	2,309
Investments, Fair Value	40,892	19,550
Agency Securities | Level 2 Inputs
Fair Value, Assets and Liabilities
Cash Equivalents, Fair Value	0	0
Investments, Fair Value	11,120	13,302
Commercial Paper | Level 2 Inputs
Fair Value, Assets and Liabilities
Cash Equivalents, Fair Value	7,272	6,694
Investments, Fair Value	5,984	1,727
US Treasury and Government | Level 2 Inputs
Fair Value, Assets and Liabilities
Cash Equivalents, Fair Value	0	0
Investments, Fair Value	$ 3,569	$ 6,252

Fair Value Measurement - Fair38

Fair Value Measurement - Fair Value Measurement of Convertible Senior Notes (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Estimate of Fair Value Measurement
Fair Value, Assets and Liabilities
Convertible senior notes, net	$ 294,948	$ 290,436

Balance Sheet Components - Prep

Balance Sheet Components - Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Prepaid Expense and Other Assets, Current [Abstract]
Intra-period income tax asset	$ 29,922		$ 0
Prepaid service contracts - current portion	12,197		11,114
Manufacturing partners receivable	599		11,739
Other prepaid expenses and current assets	33,652		25,231
Total prepaid expenses and other current assets	76,370		$ 48,084
Net increase in receivable proceeds from the sale of property and equipment	$ 9,250	$ 3,765

Balance Sheet Components - Prop

Balance Sheet Components - Property and Equipment, Net (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Property and Equipment
Gross property and equipment	$ 594,009		$ 594,009		$ 602,754
Less: Accumulated depreciation and amortization	(341,524)		(341,524)		(318,644)
Net property and equipment	252,485		252,485		284,110
Depreciation and amortization expense	22,100	$ 23,300	45,121	$ 46,278
Assets in construction	15,300		15,300		14,300
Computer equipment and software
Property and Equipment
Gross property and equipment	179,061		179,061		177,525
Manufacturing equipment
Property and Equipment
Gross property and equipment	170,630		170,630		182,484
Capital lease obligations	78,400		78,400		89,900
Accumulated depreciation of assets under capital leases	26,500		26,500		25,100
Capitalized software and website development costs
Property and Equipment
Gross property and equipment	141,520		141,520		134,427
Buildings under build-to-suit leases
Property and Equipment
Gross property and equipment	56,468		56,468		56,468
Leasehold improvements
Property and Equipment
Gross property and equipment	19,070		19,070		22,007
Rental equipment
Property and Equipment
Gross property and equipment	18,901		18,901		18,786
Furniture and fixtures
Property and Equipment
Gross property and equipment	$ 8,359		$ 8,359		$ 11,057

Balance Sheet Components - Accr

Balance Sheet Components - Accrued Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Accrued Liabilities, Current [Abstract]
Accrued compensation	$ 24,018	$ 17,066
Capital lease obligations, current portion	14,512	16,092
Accrued production costs	11,921	38,755
Accrued marketing expenses	6,259	23,839
Accrued consulting	4,798	8,643
Accrued income and sales tax	3,737	19,846
Accrued other	12,282	14,628
Total accrued liabilities	$ 77,527	$ 138,869

Balance Sheet Components - Othe

Balance Sheet Components - Other Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Other Liabilities, Noncurrent [Abstract]
Financing obligations	$ 54,570	$ 55,355
Capital lease obligations, non-current portion	40,679	50,213
Deferred revenue, non-current portion	6,460	7,303
Deferred tax liability	0	20,446
Other liabilities	13,161	3,718
Other liabilities	$ 114,870	$ 137,035

Convertible Senior Notes - Addi

Convertible Senior Notes - Additional Information (Details)	1 Months Ended	6 Months Ended	12 Months Ended
	May 31, 2013USD ($)day$ / sharesshares	Jun. 30, 2017USD ($)shares	Dec. 31, 2016USD ($)shares	Dec. 31, 2015USD ($)shares	Dec. 31, 2014USD ($)shares
Schedule of Convertible Senior Notes
Total number of shares repurchased (in shares) | shares	600,000	1,033,038	2,524,752	4,907,675	1,961,085
Total Dollar Value Spent on Repurchases (in thousands)	$ 30,000,000	$ 50,000,000	$ 112,488,000	$ 215,911,000	$ 88,815,000
Strike price of warrants (usd per share) | $ / shares	$ 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
Convertible senior notes, face amount	$ 300,000,000	$ 300,000,000	$ 300,000,000
Contractual interest rate	0.25%	0.25%
Maturity date		May 15, 2018
Conversion rate	0.0155847
Denomination amount	$ 1,000
Conversion price (usd per share) | $ / shares	$ 64.17
Number of days out of thirty that common stock price exceeded conversion price | day	20
Number of consecutive trading days in period | day	30
Holders of notes conversion percentage of conversion price	130.00%
Notes trading price percentage	98.00%
Debt issuance costs attributable to the liability component	$ 6,400,000
Debt issuance costs attributable to the equity component	1,700,000
Unamortized debt issuance costs		$ 1,300,000
Deferred tax assets	$ 600,000

Convertible Senior Notes - Sche

Convertible Senior Notes - Schedule of Convertible Senior Notes (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016	May 31, 2013
Debt Instrument
Net carrying amount	$ 0	$ 278,792
Convertible Senior Notes | Convertible Senior Notes 0.25% Due May 15, 2018
Debt Instrument
Principal	300,000	300,000	$ 300,000
Less: debt issuance costs, debt discount, net of amortization	(13,684)	(21,208)
Net carrying amount	286,316	278,792
Equity component	$ 63,510	$ 63,510

Convertible Senior Notes - Sc45

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		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	May 31, 2013
Debt Instrument
0.25% coupon	$ 188	$ 188	$ 375	$ 375
Amortization of debt issuance costs	347	327	688	650
Amortization of debt discount	3,442	3,256	6,836	6,465
Interest expense, convertible notes	$ 3,977	$ 3,771	$ 7,899	$ 7,490
Contractual interest rate	0.25%		0.25%		0.25%

Share Repurchase Program - Narr

Share Repurchase Program - Narrative (Details) - USD ($)	Aug. 03, 2015	May 31, 2013	Jun. 30, 2015	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Apr. 18, 2017	Apr. 21, 2016	Feb. 09, 2015	Feb. 06, 2014	Oct. 24, 2012
Equity, Class of Treasury Stock
Stock repurchase program, authorized amount									$ 140,000,000	$ 100,000,000	$ 300,000,000	$ 100,000,000	$ 60,000,000
Prepayment of accelerated share repurchase			$ 75,000,000
Total number of shares repurchased (in shares)		600,000		1,033,038		2,524,752	4,907,675	1,961,085
Refund of accelerated share repurchase	$ 38,200,000
Repurchases of common stock				$ 50,000,000	$ 78,172,000
Average price paid per share (in dollars per share)				$ 48.40		$ 44.55	$ 43.99	$ 45.29
Accelerated Share Repurchase Agreement [Member]
Equity, Class of Treasury Stock
Total number of shares repurchased (in shares)	800,000
Repurchases of common stock	$ 36,800,000
Average price paid per share (in dollars per share)	$ 46.49

Share Repurchase Program - Sche

Share Repurchase Program - Schedule of Repurchases of Common Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	6 Months Ended	12 Months Ended
	May 31, 2013	Jun. 30, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Share Repurchase Program [Abstract]
Total Number of Shares Purchased	600,000	1,033,038	2,524,752	4,907,675	1,961,085
Average Price Paid per Share (in dollars per share)		$ 48.40	$ 44.55	$ 43.99	$ 45.29
Total Dollar Value Spent on Repurchases (in thousands)	$ 30,000	$ 50,000	$ 112,488	$ 215,911	$ 88,815

Segment Reporting (Details)

Segment Reporting (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Segment Reporting Information
Net revenues	$ 209,032	$ 203,961	$ 401,004	$ 385,670
Cost of net revenues	118,205	109,592	234,324	218,315
Restructuring	196	0	1,436	0
Gross profit	$ 90,631	$ 94,369	$ 165,244	$ 167,355
Gross profit as a percentage of net revenues	43.00%	46.00%	41.00%	43.00%
Operating Segments | Consumer
Segment Reporting Information
Net revenues	$ 179,090	$ 176,617	$ 339,735	$ 331,998
Cost of net revenues	92,049	85,276	181,903	171,613
Restructuring	196	0	1,436	0
Gross profit	$ 86,845	$ 91,341	$ 156,396	$ 160,385
Gross profit as a percentage of net revenues	48.00%	52.00%	46.00%	48.00%
Operating Segments | Shutterfly Business Solutions (SBS)
Segment Reporting Information
Net revenues	$ 29,942	$ 27,344	$ 61,269	$ 53,672
Cost of net revenues	23,900	21,810	47,738	41,520
Gross profit	$ 6,042	$ 5,534	$ 13,531	$ 12,152
Gross profit as a percentage of net revenues	20.00%	20.00%	22.00%	23.00%
Corporate, Non-Segment
Segment Reporting Information
Net revenues	$ 0	$ 0	$ 0	$ 0
Cost of net revenues	2,256	2,506	4,683	5,182
Gross profit	$ (2,256)	$ (2,506)	$ (4,683)	$ (5,182)

Commitments and Contingencies -

Commitments and Contingencies - Syndicated Credit Facility (Details) $ in Millions	6 Months Ended	12 Months Ended
	Jun. 30, 2017USD ($)	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2017
Line of Credit Facility
Credit agreement term	5 years
Revised senior secured revolving credit facility	$ 200
Maximum ratio of consolidated total indebtedness to EBITDA allowed to prevent default				3.50
Covenant compliance, period for ratio using EBITDA to be above required threshold	1 year
Base Rate Loan | Line of Credit | Minimum
Line of Credit Facility
Covenant compliance, required ratio for debut covenant compliance	2.50
Forecast
Line of Credit Facility
Maximum ratio of consolidated total indebtedness to EBITDA allowed to prevent default		3	3.25

Restructuring - Narrative (Deta

Restructuring - Narrative (Details) - 2017 Restructuring Plan $ in Millions	Jun. 30, 2017USD ($)
Minimum
Restructuring Cost and Reserve [Line Items]
Total estimated restructuring costs	$ 15
Maximum
Restructuring Cost and Reserve [Line Items]
Total estimated restructuring costs	$ 17.5

Restructuring - Restructuring A

Restructuring - Restructuring Activity (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Restructuring Reserve [Roll Forward]
Beginning balance	$ 3,899	$ 1,602
Restructuring and other charges	13,649
Cash payments	(2,885)
Non-cash adjustments	(8,467)
Ending balance	3,899
2017 Restructuring Plan | Property and equipment
Restructuring Reserve [Roll Forward]
Beginning balance	234	0
Restructuring and other charges	6,435
Cash payments	(7)
Non-cash adjustments	(6,194)
Ending balance	234
2017 Restructuring Plan | Employee costs
Restructuring Reserve [Roll Forward]
Beginning balance	1,992	0
Restructuring and other charges	5,154
Cash payments	(2,348)
Non-cash adjustments	(814)
Ending balance	1,992
2017 Restructuring Plan | Inventory
Restructuring Reserve [Roll Forward]
Beginning balance	0	0
Restructuring and other charges	1,436
Cash payments	0
Non-cash adjustments	(1,436)
Ending balance	0
2017 Restructuring Plan | Other costs
Restructuring Reserve [Roll Forward]
Beginning balance	78	0
Restructuring and other charges	443
Cash payments	(342)
Non-cash adjustments	(23)
Ending balance	78
2015 Restructuring Plan | Property and equipment
Restructuring Reserve [Roll Forward]
Beginning balance	1,595	$ 1,602
Restructuring and other charges	181
Cash payments	(188)
Non-cash adjustments	0
Ending balance	$ 1,595