B2B sales now account for 16% of total sales for the manufacturer of digital and printed materials.

Business-to-business sales took an increasing share of Shutterfly Inc.’s revenue and accounted for its greatest growth rate in fiscal 2017.

Full-year growth in the Shutterfly Business Solutions, or SBS, reached 41% for the manufacturer and marketer of digital and printed materials used in marketing and communications, which conducts its sales through Shutterfly.com and other websites.

SBS growth was driven by the major multi-year deal we signed in Q3 with an existing technology client.
Christopher North, president and CEO
Shutterfly Inc.

“SBS growth was driven by the major multi-year deal we signed in Q3 with an existing technology client,” Christopher North, president and CEO, told analysts Tuesday on the company’s earnings call. “We successfully onboarded programs and ramped volumes with the customer more quickly than expected. As we discussed in Q3, the early phases of this deal are lower-margin than we typically deliver, but we have clear opportunities to improve on these margins in 2018,” he told analysts, according to a transcript of the call from Seeking Alpha.

North did not identify the client.

Total growth for the year was offset by anticipated revenue declines “due to the platform consolidation and the brand shutdowns over the course of the past year,” chief financial officer Mike Pope said on the earnings call. Last year, Shutterfly rolled its Tiny Prints personalized stationery website and photo prints business into Shutterfly.com and shut down two underperforming websites for Wedding Paper Divas and MyPublisher.

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Shutterfly’s sales to businesses are composed mostly of digital image files and products imprinted with photos, graphics and data to customers in the direct marketing industry. Its consumer business includes sales through Shutterfly.com and its sister e-commerce sites BorrowLenses.com, where customers can rent or purchase photographic equipment, and GrooveBook.com, where customers pay $2.99 per month for an online service that downloads photos from their mobile phones to make physical photo books.

For the full year ended Dec. 31, 2017, Shutterfly, No. 142 in the 2018 B2B E-Commerce 300 reported:

  • Shutterfly Business Solutions sales of $193.2 million, up 41.3% from $136.7 million a year earlier, as B2B sales accounted for 16.2% of revenue, up from 12.1%;
  • SBS gross profit of $39.1 million, up 8.3% from $36.1 million, resulting in a gross profit margin of 20.2%, down from 26.4%;
  • Consumer sales of $996.96 million, down less than .1% from $997.56 million;
  • Consumer gross profit of $538.8 million, down 0.62% from $542.2 million, resulting in a gross profit margin of 54.2%, down from 54.4%;
  • Total net revenue of $1.19 billion, up 5.3% from $1.13 billion;
  • Net income of $30.1 million, compared with year-earlier net income of $15.9 million.

For the fourth quarter ended Dec. 31, 2017, Shutterfly reported:

  • Shutterfly Business Solutions sales of $71.9 million, up 81.1% from $39.7 million a year earlier.
  • SBS gross profit of $13.1 million, up 18.0% from $11.1 million, resulting in a gross profit margin of 18.2%, down from 27.9% a year earlier.
  • Consumer sales of $521.8 million, flat compared with $521.5 million.
  • Consumer gross profit of $328.5 million, up 1.9% from $322.5 million, resulting in a gross profit margin of 63.0%, up from 61.8%.
  • Total net revenue of $593.8 million, up 5.8% from $561.2 million.
  • Net income of $111.7 million, compared with net income of $91.0 million in the prior year quarter.

Shutterfly also announced Tuesday an agreement to acquire Lifetouch, a company that specializes in school photography, for $825 million in cash.

The company photographs more than 25 million children in 50,000 schools annually during traditional fall school picture days. Privately-held Lifetouch’s revenue for the fiscal year ended June 30, 2017, was $963.9 million, Shutterfly reports.

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North says the acquisition will “bring together Lifetouch’s unique access to millions of families who value high-quality photographic portraits with Shutterfly’s cloud photo management, product breadth and product creation capabilities.”

The companies expect the acquisition to close in the second quarter of 2018.

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