Shutterfly, Inc. SFLY posted narrower-than-expected loss in the first quarter of 2016. Revenues beat estimates. Shares of Shutterfly fell 0.90% on Apr 27. Quarter in Detail The personalized products and service provider’s business is highly seasonal and generally incurs losses in the first three quarters of the year. Shutterfly posted a loss of 85 cents per share, narrower than the Zacks Consensus Estimate of a loss of 97 cents per share and the company’s expectation of a loss of 92 cents to $1.01. It was also narrower than the prior-year quarter loss of $1.19 per share. The improvement came on the back of a higher top line. Shutterfly Inc. - Earnings Surprise | FindTheBest Net revenue increased 14% year over year to $181.7 million and exceeded the guided range of $173 million to $180 million. In fact, the quarter marked the 61st consecutive quarter of year-over-year net revenue growth. Further, revenues significantly beat the Zacks Consensus Estimate of $177 million by 2.7%. Revenues benefited from strong performance of both the Consumer and Enterprise segments. The company also made substantial progress on its strategic initiative, Shutterfly 3.0 in the first quarter. Weaker revenues from the Tiny Prints and Wedding Paper Divas brands partially offset the strength in Shutterfly. Revenues from the Consumers category were $155.4 million, up 4% year over year backed by double-digit growth at the Shutterfly flagship brand. The company also made progress with its mobile marketing strategy through an unlimited free prints campaign. Shutterfly Business Solutions (‘SBS’) segment revenues surged 135% to $26.3 million. While the total number of customers was 3.3 million, up 4% year over year, total orders generated were 5.5 million, up 7% year over year. Average order value was $28.04, down 3% from the year-ago quarter, reflecting an increase in promotional offers to widen its mobile footprint. Gross margin contracted 60 basis points (bps) to 40.2% due to a higher mix of SBS revenues and mobile promotional activity in the consumer business. Adjusted gross margin declined 100 basis points to 42%, within the expected range of 41.5% to 42.5%. Operating expenses totaled $114.8 million, up 3% year over year. These expenses included $3.3 million of severance related to executive departures announced in the fourth quarter. Excluding these severance costs and the $7.6 million reduction in stock-based compensation expense, operating expenses increased 8% to $102.6 million. Sales and marketing expenses and general and administrative expenses also increased in the quarter. The company continues to invest in additional customer facing enhancements with Shutterfly 3.0 and in the SBS business. Adjusted EBITDA loss was $2.55 million, wider than the prior-year loss of $0.87 million. Adjusted EBITDA loss came within the company’s expected range of $1.8 million to $4.8 million. Other Financial Update During the quarter, the company repurchased 1.1 million shares for $47.5 million under its share repurchase program. The company now has $47.8 million available for repurchase under its share repurchase program as of the end of March. In addition to it, the company’s board authorized the repurchase of up to an additional $100.0 million of the company's common stock on Apr 21, 2016. Q2 Earnings Outlook For the second quarter of 2016, the company expects loss per share in the range of 62 cents to 69 cents, narrower than the Zacks Consensus Estimate of a loss of 72 cents. Net revenue is expected to be in a range of $195 million to $202 million, a year-over-year increase of 6% to 9.9%. Gross profit margin is expected within 44.8% to 45.3% of net revenue. Adjusted EBITDA is expected in the range of $10 million to $13 million. 2016 Guidance Reiterated The company continues to expect earnings in the range of 19 to 58 cents per share in 2016. The Zacks Consensus Estimate of 49 cents is within the range. Net revenue is expected in the range of $1.120 billion to $1.160 billion, a year-over-year increase of 5.7% to 9.5%. Adjusted EBITDA is expected in the range of $203.9 to $222.9 million. Gross profit margin is now projected in the range of 50.9% to 51.7% of net revenue. Shutterfly carries a Zacks Rank #3 (Hold). Stocks to Consider Some better-ranked stocks in the Internet content and services sector include Demand Media, Inc. DMD, WebMD Health Corp. WBMD and Facebook Inc. FB. While Facebook sports a Zacks Rank #1 (Strong Buy), Demand Media and WebMD Health carry a Zacks Rank #2 (Buy). Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report SHUTTERFLY INC (SFLY): Free Stock Analysis Report WEBMD HEALTH CP (WBMD): Free Stock Analysis Report DEMAND MEDIA (DMD): Free Stock Analysis Report FACEBOOK INC-A (FB): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research