Shutterfly Surpasses 2002 Revenue Projections

Record Holiday Sales, Strong Consumer Response And Successful Business Model Produce Second Consecutive Quarter Of Profitability

REDWOOD CITY, CALIF. - (January 14, 2003) — Shutterfly, the leading online photo service, today announced 2002 results that surpassed its aggressive net revenue projection of 15 million with actual net revenue of more than 16 million. In a year when 2002 online sales are estimated to have grown by 39 percent over 2001*, Shutterfly posted a 116 percent gain over the previous year, including a fourth quarter revenue increase of 150 percent over the previous fourth quarter.

Shutterfly has now completed two consecutive quarters of profitability on an EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) basis, and in the fourth quarter, also achieved profitability on a net income and cash basis for the first time in the company's history. The company reduced total annual expenses by 54 percent over 2001.

New and existing customer uploads increased 125 percent, and prints** sold increased 100 percent over the previous year. In the fourth quarter of 2002 over 2001, total uploads increased 180 percent and prints sold grew by 136 percent.

Card volume, a specific measure of holiday sales, increased by 150 percent in the fourth quarter of 2002 over the same period in 2001.

Shutterfly captured 86,000 new customers in December alone, exceeding its monthly average of 70,000 for the rest of 2002. More than 60 percent of those new customers uploaded images and more than 90 percent of those who uploaded then ordered products.

"While our holiday season exceeded our highest expectations, it is our year-long performance that is most satisfying. Our strong growth throughout 2002 has positioned Shutterfly for long-term sustainable success and, with favorable market conditions, an IPO in the next year," said Andy Wood, President and CEO of Shutterfly.

"Our success is a result of our winning business model, which focuses on evolving our proprietary state of the art technology to meet customer demand for innovative, personalized products and services," said Wood. "The bottom line is we listen to our customers and deliver what they want."

* According to comScore Networks (www.comscore.com).
** Single print volume represents individual prints of all sizes sold and excludes all other photo and photo-related products sold by Shutterfly.

About Shutterfly
Shutterfly, the leading online photo service, leverages its proprietary technology and understanding of its customers to develop personalized, quality photo products and services that make it simple and fun for people to stay connected to those who matter most. Film and digital photographers alike can enjoy the benefits of Shutterfly's photo services, including high-quality prints, image enhancements, personalization, free online storage and picture sharing. Customers can custom back-print and transform their pictures with special effects and borders as well as create photo cards, invitations, calendars, note cards, and Snapbooks™, all of which can be mailed anywhere in the world. Shutterfly is consistently recognized for its photo quality and innovative features, and was most recently rated best overall online photo service in a field of twelve by MacWorld in its June 2002 issue. Shutterfly is based in Redwood City, CA. For more information, visit www.shutterfly.com.

Media Contacts:
Whitney Brown
Shutterfly
650-610-3519
wbrown@shutterfly.com

Donel Young
732-295-2406
donelyoung@sprintmail.com

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Shutterfly, Shutterfly.com and Snapbook are trademarks of Shutterfly, Inc.