Image Source: Shutterfly.

What happened 

Shares of Shutterfly Inc. (NASDAQ:SFLY) were surging higher Thursday as the online photo specialist topped estimates in its third-quarter report. As of 11:22 a.m. EDT, the stock was up 11.4%.

So what 

The company, which provides services for organizing and printing photos and photo albums and other such mementos, said its net loss per share improved from -$1.73 a year ago to -$0.86, better than estimates at -$0.96, while revenue increased 12% to $187.3 million, ahead of expectations at $183.5 million.

There were additional signs the company was moving in the right direction as Business Solutions revenue jumped 47% and gross margin improved 160 basis points to 37.1%.

CEO Christopher North said, "We delivered a solid performance in the third quarter," and noted the completion of the two significant projects-migrating its most active customers to the company's cloud management service and an update to the mobile app.

Now what

Not surprisingly, since a lot of Shutterfly's products serve as gifts, the fourth quarter is its most profitable of the year. In fact, the company operates at a loss the rest of the year, but makes up for it during the holiday season.

For the current quarter, management sees a per-share profit of $2.57 to $2.86, in line with the consensus at $2.73, and a modest increase in revenue to $557 million-$587 million. That profit is down from a year ago when it posted EPS of $3.57, but the company is on track for its best year since 2013. With Business Solutions revenue revving and its consumer-based business posting moderate growth, profits should continue to improve from here.

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