REDWOOD CITY, CALIF. – (January 8, 2002) — Shutterfly, the leading online photo service, today announced that it had sold more than four and a half million cards and related photo products during the Q4 holiday season, reflecting a 220% growth in revenue over Q4 2000. The company also announced that it broke even on a cash and EBITDA basis for the month of December for the first time in its history. Shutterfly has posted positive operating margins since June and expects to reach sustainable profitability by July 2002, almost a year ahead of schedule.

“Shutterfly demonstrated its full market potential this holiday season, as we offered the best variety and quality for holiday greeting cards, calendars and prints — and our customers responded,” said Andy Wood, president and CEO of Shutterfly. “In December alone, Shutterfly saw its highest print volumes for the year with over 1.2 million prints ordered. We are very excited, as we know that we have the right business formula and infrastructure to provide the quality products and services that consumers demand and expect from their online photo service provider.

“We expect to continue on our path to profitability as digital cameras increasingly penetrate the market and as more consumers become aware that online photo services provide a convenient and cost-effective option for getting high-quality prints from their digital cameras,” added Wood.

According to experts, price and the desire to keep in touch with friends and family have combined to make sales of digital cameras soar this season. According to Bizrate.com, an e-commerce research firm, digital cameras were the most popular items for which online shoppers searched on the 2000 websites it monitored. In fact, InfoTrends Research Group reported that digital camera penetration of U.S. Internet-connected households has reached 33%.

Shutterfly has become the number one choice for delivering high quality photos among consumers, and has been selected “Editor’s Choice” for best online photo site two years running with the leading trade publication PC Magazine.

About Shutterfly
Shutterfly is the leading online photo service that takes advantage of the digital world’s unique capabilities. By developing innovative, personalized digital imaging products and services, Shutterfly makes it simple for its customers to stay connected to those that matter most to them. Shutterfly enables film and digital photographers to easily enhance, personalize, store and share pictures online or through high-quality prints. Shutterfly users can transform their pictures with special effects and borders as well as create photo cards, invitations, calendars and Snapbooks™, all of which can be mailed to friends and family worldwide. Shutterfly is consistently recognized for its photo quality and features, and most recently was named “Best Online Photo Service” by PC Magazine, earning its coveted “Editors’ Choice” award for the second straight year. 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

Jenny Rees
Access Communications for Shutterfly
415-844-6251
jrees@accesspr.com

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