Revenue during the quarter grew 11.84 percent to $187.33 million from $167.49 million in the previous year period. Gross margin for the quarter expanded 162 basis points over the previous year period to 37.14 percent. Operating margin for the quarter stood at negative 22.31 percent as compared to a negative 29.29 percent for the previous year period.

Operating loss for the quarter was $41.79 million, compared with an operating loss of $49.07 million in the previous year period.

However, the adjusted operating loss for the quarter stood at $25.03 million compared to operating loss of $26.93 million in prior year period.

"We delivered a solid performance in the third quarter led by continued growth in the Shutterfly brand and the Shutterfly Business Solutions segment," said Christopher North, president and chief executive officer. "At the same time, we delivered two key projects for 2016: the migration of our most active customers to our fully featured cloud management service, the All-New Shutterfly Photos; and the update of the Shutterfly mobile app for iOS and Android, which adds cards & stationery to the apps and simplifies product creation dramatically. We’ve also completed extensive preparations for our peak season, including launching a number of new holiday products and installing the latest generation of high-end digital printers. All of these improvements build on 17 years of focused innovation, ensuring that Shutterfly remains the best place for consumers to preserve and share their most important memories."

For financial year 2016, Shutterfly, Inc. expects revenue to be in the range of $1,130 million to $1,160 million. The company expects operating income to be in the range of $45.90 million to $60.60 million. It company projects diluted earnings per share to be in the range of $0.40 to $0.66.

For the fourth-quarter 2016, Shutterfly, Inc. expects revenue to be in the range of $557 million to $587 million. The company expects operating income to be in the range of $150.50 million to $165.30 million . It company projects diluted earnings per share to be in the range of $2.57 to $2.86.

Operating cash flow remains negative
Shutterfly, Inc. has spent $71.89 million cash to meet operating activities during the nine month period as against cash outgo of $107.70 million in the last year period.

The company has spent $53.62 million cash to meet investing activities during the nine month period as against cash outgo of $12.84 million in the last year period. It has incurred net capital expenditure of $56.80 million on net basis during the nine month period, down 6.53 percent or $3.97 million from year ago period.

The company has spent $103.14 million cash to carry out financing activities during the nine month period as against cash outgo of $163.56 million in the last year period.

Cash and cash equivalents stood at $60.21 million as on Sep. 30, 2016, down 37.57 percent or $36.24 million from $96.45 million on Sep. 30, 2015.

Working capital drops significantly
Shutterfly, Inc. has witnessed a decline in the working capital over the last year. It stood at $110.83 million as at Sep. 30, 2016, down 27.30 percent or $41.61 million from $152.44 million on Sep. 30, 2015. Current ratio was at 1.86 as on Sep. 30, 2016, down from 2.31 on Sep. 30, 2015.

Cash conversion cycle (CCC) has decreased to 10 days for the quarter from 18 days for the last year period. Days sales outstanding went down to 17 days for the quarter compared with 20 days for the same period last year.

Days inventory outstanding has decreased to 4 days for the quarter compared with 9 days for the previous year period. At the same time, days payable outstanding was almost stable at 11 days for the quarter, when compared with the previous year period.