Shutterstock(SSTK) - 2024 Q2 - Quarterly Results

Executive Summary This section provides a high-level overview of Shutterstock's Q2 2024 financial performance and key strategic initiatives Q2 2024 Performance Highlights Shutterstock exceeded Q2 2024 revenue and adjusted EBITDA expectations, driven by exceptional growth in Data, Distribution, and Services. However, net income and adjusted net income per diluted share decreased compared to Q2 2023 Q2 2024 Financial Highlights (YoY) | Metric | Q2 2024 ($ millions) | Q2 2023 ($ millions) | Change ($ millions) | Change (%) | | :----------------------------------- | :----------- | :----------- | :---------- | :--------- | | Revenues | 220.1 | 208.8 | 11.3 | 5% | | Net income | 3.6 | 50.0 | (46.4) | (92.8%) | | Net income per diluted common share | 0.10 | 1.37 | (1.27) | (92.7%) | | Adjusted net income | 35.9 | 39.1 | (3.2) | (8.2%) | | Adjusted net income per diluted share| 1.00 | 1.07 | (0.07) | (6.5%) | | Adjusted EBITDA | 62.1 | 60.1 | 2.0 | 3% | Strategic Developments Shutterstock completed the acquisition of Envato Pty Ltd. for $250 million, enhancing its Content business with an unlimited subscription offering. The company also continues its innovation in GenAI with the launch of Gen3D and ImageAI models - Completed the acquisition of Envato Pty Ltd. on July 22, 2024, for an aggregate consideration of $250 million, aiming to enhance the Content business with an unlimited subscription[2][3] - Launched Gen3D and ImageAI models, trained exclusively on Shutterstock data, demonstrating continued innovation in Generative AI[2] Second Quarter Financial Performance This section details Shutterstock's financial results for Q2 2024, covering revenue and profitability metrics Revenue Overview Total revenue increased by 5% year-over-year, primarily driven by significant growth in the Data, Distribution, and Services segment, which offset a decline in Content revenue Total Revenue This section details the company's total revenue performance for Q2 2024 year-over-year Q2 2024 Total Revenue (YoY) | Metric | Q2 2024 ($ millions) | Q2 2023 ($ millions) | Change ($ millions) | Change (%) | | :----------------- | :----------- | :----------- | :---------- | :--------- | | Reported Revenue | 220.1 | 208.8 | 11.3 | 5% | | Constant Currency | - | - | - | 6% | Revenue by Product Offering This section presents revenue breakdown by product offering, highlighting segment performance Q2 2024 Revenue by Product Offering (YoY) | Product Offering | Q2 2024 ($ millions) | Q2 2023 ($ millions) | Change ($ millions) | Change (%) | Q2 2024 % of Total | | :------------------------------- | :----------- | :----------- | :---------- | :--------- | :----------------- | | Content | 170.0 | 187.0 | (17.0) | (9%) | 77% | | Data, Distribution, and Services | 50.1 | 21.9 | 28.2 | 129% | 23% | - The decline in Content revenues was primarily driven by weakness in new customer acquisition[4] Profitability Analysis Net income and adjusted net income saw declines due to the absence of a prior-year bargain purchase gain and ongoing expenses related to the Giphy workforce. Adjusted EBITDA, however, increased slightly due to higher revenue Net Income and EPS This section analyzes net income and earnings per diluted share trends Q2 2024 Net Income and EPS (YoY) | Metric | Q2 2024 ($ millions) | Q2 2023 ($ millions) | Change ($ millions) | Change (%) | | :----------------------------------- | :----------- | :----------- | :---------- | :--------- | | Net income | 3.6 | 50.0 | (46.4) | (92.8%) | | Net income per diluted common share | 0.10 | 1.37 | (1.27) | (92.7%) | - The significant decline in net income was primarily driven by a $41.9 million bargain purchase gain related to the Giphy acquisition recognized in Q2 2023, and expenses associated with reimbursable costs paid to the Giphy workforce in Q2 2024[5] Adjusted Net Income and Adjusted EPS This section reviews adjusted net income and adjusted earnings per diluted share Q2 2024 Adjusted Net Income and Adjusted EPS (YoY) | Metric | Q2 2024 ($ millions) | Q2 2023 ($ millions) | Change ($ millions) | Change (%) | | :----------------------------------- | :----------- | :----------- | :---------- | :--------- | | Adjusted net income | 35.9 | 39.1 | (3.2) | (8.2%) | | Adjusted net income per diluted share| 1.00 | 1.07 | (0.07) | (6.5%) | - Adjusted net income was unfavorably impacted by expenses associated with reimbursable costs paid to the Giphy workforce[6] Adjusted EBITDA and Margins This section examines adjusted EBITDA and associated margins Q2 2024 Adjusted EBITDA and Margins (YoY) | Metric | Q2 2024 ($ millions) | Q2 2023 ($ millions) | Change ($ millions) | Change (%) | | :--------------------- | :----------- | :----------- | :---------- | :--------- | | Adjusted EBITDA | 62.1 | 60.1 | 2.0 | 3% | | Net income margin | 1.6% | 23.9% | (22.3 pp) | - | | Adjusted EBITDA margin | 28.2% | 28.8% | (0.6 pp) | - | - Adjusted EBITDA increased primarily due to higher revenue, partially offset by increased expenses related to reimbursable costs paid to the Giphy workforce[7] Liquidity and Capital Allocation This section examines Shutterstock's cash position, cash flow activities, and capital allocation strategies for Q2 2024 Second Quarter Liquidity Cash and cash equivalents increased to $74.9 million at June 30, 2024, driven by operating and investing activities, partially offset by financing activities Cash and Cash Equivalents | Metric | June 30, 2024 ($ millions) | March 31, 2024 ($ millions) | Change ($ millions) | | :-------------------------- | :----------------- | :------------------ | :---------- | | Cash and cash equivalents | 74.9 | 71.8 | 3.1 | Cash Flow Activities Operating activities provided $28.0 million in cash, while investing activities provided $8.3 million, largely due to Giphy Retention Compensation. Financing activities used $32.1 million, primarily for share repurchases and dividends Operating Activities This section outlines cash flows generated from operating activities Q2 2024 Net Cash Provided by Operating Activities | Metric | Q2 2024 ($ millions) | | :-------------------------------------- | :----------- | | Net cash provided by operating activities | 28.0 | - Operating cash flows were unfavorably impacted by payments made to the Giphy workforce[9] Investing Activities This section details cash flows from investing activities Q2 2024 Net Cash Provided by Investing Activities | Metric | Q2 2024 ($ millions) | | :-------------------------------------- | :----------- | | Net cash provided by investing activities | 8.3 | - Cash provided by investing activities included $18.1 million from Giphy Retention Compensation, partially offset by $9.9 million in capital expenditures and content acquisition[9] Financing Activities This section presents cash flows used in financing activities Q2 2024 Net Cash Used in Financing Activities | Metric | Q2 2024 ($ millions) | | :------------------------------------ | :----------- | | Net cash used in financing activities | 32.1 | - Financing activities included $20.6 million for common stock repurchases, $10.7 million for quarterly cash dividends, and $0.9 million for tax withholding obligations related to employee stock-based compensation awards[9] Adjusted Free Cash Flow Adjusted free cash flow for Q2 2024 increased by $2.8 million year-over-year Q2 2024 Adjusted Free Cash Flow (YoY) | Metric | Q2 2024 ($ millions) | Q2 2023 ($ millions) | Change ($ millions) | | :---------------------- | :----------- | :----------- | :---------- | | Adjusted free cash flow | 36.2 | 33.4 | 2.8 | Quarterly Cash Dividend The company declared and paid a cash dividend of $0.30 per common share in Q2 2024, totaling $10.7 million, and declared another $0.30 dividend payable in September 2024 Q2 2024 Cash Dividend | Metric | Q2 2024 | | :----------------------------------- | :------ | | Dividend per common share | $0.30 | | Total cash dividend paid | $10.7 M | - A dividend of $0.30 per share was declared on July 22, 2024, payable on September 12, 2024[10] Operating Metrics This section presents key operational indicators and content collection growth for Shutterstock in Q2 2024 Key Operating Indicators Subscribers and paid downloads decreased year-over-year, while average revenue per customer (ARPC) and revenue per download increased, indicating a shift towards higher-value engagements Q2 2024 Key Operating Indicators (YoY) | Metric | Q2 2024 | Q2 2023 | Change | Change (%) | | :----------------------------------- | :----------- | :----------- | :----------- | :--------- | | Subscribers (end of period) | 490,000 | 556,000 | (66,000) | (11.9%) | | Subscriber revenue ($ millions) | 80.3 | 87.4 | (7.1) | (8.1%) | | Average revenue per customer (LTM) | $434 | $374 | $60 | 16.0% | | Paid downloads (millions) | 33.4 | 38.5 | (5.1) | (13.2%) | | Revenue per download | $5.09 | $4.71 | $0.38 | 8.1% | Content Collection Growth Shutterstock's content library continued to expand, with significant increases in both images and footage clips year-over-year Content in Collection (YoY) | Content Type | Q2 2024 (millions) | Q2 2023 (millions) | Change (millions) | Change (%) | | :------------ | :---------- | :---------- | :--------- | :--------- | | Images | 837 | 734 | 103 | 14.0% | | Footage clips | 58 | 50 | 8 | 16.0% | 2024 Financial Outlook This section provides Shutterstock's updated financial guidance for the full year 2024 Updated 2024 Guidance Shutterstock updated its full-year 2024 guidance, projecting revenue growth of 6% to 7% and providing ranges for adjusted net income per diluted share and adjusted EBITDA Updated 2024 Guidance | Metric | 2024 Guidance Range | | :----------------------------------- | :------------------ | | Adjusted net income per diluted share| $4.18 to $4.32 | | Revenue | $927M to $936M | | Revenue Growth (YoY) | 6% to 7% | | Adjusted EBITDA | $245M to $248M | Non-GAAP Financial Measures This section defines Shutterstock's non-GAAP financial measures and provides detailed reconciliations to their GAAP equivalents Non-GAAP Definitions and Rationale Shutterstock uses several non-GAAP financial measures, including adjusted EBITDA, adjusted net income, and adjusted free cash flow, to provide investors with a clearer view of its operating results and to facilitate comparisons, excluding the impact of unusual or non-recurring items like the Giphy acquisition-related expenses - Non-GAAP measures (adjusted EBITDA, adjusted net income, adjusted free cash flow, etc.) are used to supplement GAAP results, providing management and investors with a consistent basis for analyzing operating performance[15][16] - Adjustments primarily exclude non-cash equity-based compensation, amortization of acquisition-related intangibles, bargain purchase gain, and non-recurring Giphy Retention Compensation Expense, which is considered unusual and not an ongoing expense[15] Reconciliation of Non-GAAP to GAAP Detailed reconciliations are provided for key non-GAAP metrics, illustrating the adjustments made from their most directly comparable GAAP measures for both quarterly and year-to-date periods Adjusted Net Income Reconciliation This section provides a reconciliation of adjusted net income to its GAAP equivalent Q2 2024 Adjusted Net Income Reconciliation | Metric | Q2 2024 ($ millions) | Q2 2023 ($ millions) | | :--------------------------------------------------------------- | :----------- | :----------- | | Net income | 3.6 | 50.0 | | Non-cash equity-based compensation | 15.0 | 14.9 | | Tax effect of non-cash equity-based compensation | 2.8 | (3.5) | | Acquisition-related amortization expense | 9.2 | 8.4 | | Tax effect of acquisition-related amortization expense | (2.2) | (2.0) | | Bargain purchase gain | — | (41.9) | | Giphy Retention Compensation Expense - non-recurring | 4.7 | 17.2 | | Tax effect of Giphy Retention Compensation Expense - non-recurring | (1.1) | (4.0) | | Other (unrealized gains/losses, severance) | 3.9 | — | | Tax effect of other | (0.1) | — | | Adjusted net income | 35.9 | 39.1 | Adjusted EBITDA Reconciliation This section reconciles adjusted EBITDA to net income Q2 2024 Adjusted EBITDA Reconciliation | Metric | Q2 2024 ($ millions) | Q2 2023 ($ millions) | | :--------------------------------------------------------------- | :----------- | :----------- | | Net income | 3.6 | 50.0 | | Interest (income) / expense, net | (0.8) | (0.2) | | Provision for income taxes | 12.9 | 1.4 | | Depreciation and amortization | 21.4 | 19.2 | | EBITDA | 37.2 | 70.4 | | Non-cash equity-based compensation | 15.0 | 14.9 | | Bargain purchase gain | — | (41.9) | | Giphy Retention Compensation Expense - non-recurring | 4.7 | 17.2 | | Foreign currency loss / (gain) | 1.3 | (0.6) | | Unrealized loss / (gain) on investment | 3.6 | — | | Workforce optimization - severance | 0.3 | — | | Adjusted EBITDA | 62.1 | 60.1 | Revenue Growth Reconciliation This section reconciles reported revenue growth to constant currency growth Q2 2024 Revenue Growth (Reported vs. Constant Currency) | Metric | Q2 2024 Growth | Q2 2023 Growth | | :--------------------------------------------------------------- | :------------- | :------------- | | Total Revenue growth | 5% | 1% | | Total Revenue growth on a constant currency basis | 6% | 1% | | Content revenue growth | (9)% | (7)% | | Content revenue growth on a constant currency basis | (9)% | (7)% | | Data, Distribution, and Services revenue growth | 129% | 228% | | Data, Distribution, and Services revenue growth on a constant currency basis | 129% | 228% | Adjusted Free Cash Flow Reconciliation This section reconciles adjusted free cash flow to net cash provided by operating activities Q2 2024 Adjusted Free Cash Flow Reconciliation | Metric | Q2 2024 ($ millions) | Q2 2023 ($ millions) | | :-------------------------------------- | :----------- | :----------- | | Net cash provided by operating activities | 28.0 | 29.8 | | Capital expenditures | (9.1) | (10.5) | | Content acquisitions | (0.8) | (1.7) | | Cash received related to Giphy Retention Compensation | 18.1 | 15.8 | | Adjusted Free Cash Flow | 36.2 | 33.4 | Billings Reconciliation This section reconciles total billings to total revenue Q2 2024 Total Billings | Metric | Q2 2024 ($ millions) | Q2 2023 ($ millions) | | :----------------------------------- | :----------- | :----------- | | Total revenue | 220.1 | 208.8 | | Change in total deferred revenue | (11.5) | 26.8 | | Total billings | 208.5 | 235.6 | Company Information and Disclosures This section provides essential company information, including an overview, forward-looking statements, and investor contacts About Shutterstock Shutterstock is a leading global creative platform providing high-quality content, including 3D models, videos, music, photographs, vectors, and illustrations, for brands and media companies, driven by a global creator network, data engine, and AI innovation - Shutterstock is a global creative platform offering high-quality content (3D models, videos, music, photos, vectors, illustrations) for transformative brands and media companies[18] - The platform is fueled by millions of creators, a growing data engine, and dedication to product innovation, including AI-generated content[18] Forward-Looking Statements This section contains standard forward-looking statements, particularly regarding 2024 guidance, and cautions that actual results may differ materially due to various known and unknown risks and uncertainties, as detailed in SEC filings - The press release contains forward-looking statements, especially concerning 2024 guidance, which are subject to known and unknown risks and uncertainties that could cause actual results to differ materially[19] - Readers are advised to refer to the 'Risk Factors' in the company's most recent Annual Report on Form 10-K and other SEC filings for a comprehensive understanding of these risks[19] Investor Relations Contact information for investor relations and press inquiries is provided Contact Information | Role | Name | Email | Phone | | :----------------- | :---------- | :----------------- | :----------- | | Investor Relations | Rik Powell | ir@shutterstock.com| 646-257-4825 | | Press Contact | Lori Rodney | press@shutterstock.com| 917-563-4991 | Consolidated Financial Statements (GAAP) This section presents Shutterstock's unaudited consolidated GAAP financial statements for Q2 2024 Consolidated Statements of Operations The consolidated statements of operations present the company's revenues, operating expenses, and net income for the three and six months ended June 30, 2024, and 2023, showing a significant decrease in net income year-over-year for Q2 2024 Consolidated Statements of Operations (Q2 2024 vs Q2 2023) | Metric | Q2 2024 ($ thousands) | Q2 2023 ($ thousands) | | :-------------------------- | :----------- | :----------- | | Revenue | 220,053 | 208,840 | | Total operating expenses | 199,387 | 200,125 | | Income from operations | 20,666 | 8,715 | | Bargain purchase gain | — | 41,940 | | Income before income taxes | 16,560 | 51,381 | | Provision for income taxes | 12,935 | 1,368 | | Net income | 3,625 | 50,013 | | Diluted EPS | 0.10 | 1.37 | Consolidated Balance Sheets The consolidated balance sheets provide a snapshot of the company's assets, liabilities, and stockholders' equity as of June 30, 2024, compared to December 31, 2023, showing a decrease in total assets and total liabilities Consolidated Balance Sheets (June 30, 2024 vs Dec 31, 2023) | Metric | June 30, 2024 ($ thousands) | Dec 31, 2023 ($ thousands) | | :--------------------------- | :----------------- | :---------------- | | Total current assets | 240,847 | 292,573 | | Total assets | 1,003,866 | 1,036,015 | | Total current liabilities | 432,331 | 452,386 | | Total liabilities | 483,454 | 508,921 | | Total stockholders' equity | 520,412 | 527,094 | Consolidated Statements of Cash Flows The consolidated statements of cash flows detail the cash generated from or used in operating, investing, and financing activities for the three and six months ended June 30, 2024, and 2023, showing a net increase in cash and cash equivalents for Q2 2024 Consolidated Statements of Cash Flows (Q2 2024 vs Q2 2023) | Metric | Q2 2024 ($ thousands) | Q2 2023 ($ thousands) | | :-------------------------------------- | :----------- | :----------- | | Net cash provided by operating activities | 27,965 | 29,814 | | Net cash provided by / (used in) investing activities | 8,301 | (50,191) | | Net cash (used in) / provided by financing activities | (32,149) | 12,738 | | Net increase / (decrease) in cash and cash equivalents | 3,060 | (8,686) | | Cash and cash equivalents, end of period| 74,871 | 87,146 | Supplemental Financial Data This section offers additional financial and operating data, including historical trends and expense breakdowns Historical Operating Metrics This section provides a historical trend of key operating metrics over several quarters Historical Operating Metrics (Quarterly Trends) | Metric | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 | | :----------------------------------- | :------ | :------ | :------ | :------ | :------ | | Subscribers (end of period, in thousands) | 490 | 499 | 523 | 551 | 556 | | Subscriber revenue (in millions) | $80.3 | $83.9 | $85.2 | $88.3 | $87.4 | | Average revenue per customer (LTM) | $434 | $418 | $412 | $401 | $374 | | Paid downloads (in millions) | 33.4 | 35.0 | 35.4 | 36.4 | 38.5 | | Revenue per download | $5.09 | $4.97 | $5.02 | $4.76 | $4.71 | | Images (in millions) | 837 | 832 | 771 | 757 | 734 | | Footage clips (in millions) | 58 | 56 | 54 | 52 | 50 | Equity-Based Compensation by Expense Category This table breaks down non-cash equity-based compensation expenses across various operating categories for recent quarters Equity-Based Compensation by Expense Category (Q2 2024) | Expense Category | Q2 2024 ($ thousands) | Q1 2024 ($ thousands) | Q2 2023 ($ thousands) | | :------------------------- | :----------- | :----------- | :----------- | | Cost of revenue | 300 | 224 | 306 | | Sales and marketing | 3,167 | 2,011 | 2,487 | | Product development | 4,171 | 2,285 | 4,221 | | General and administrative | 7,338 | 6,630 | 7,929 | | Total | 14,976 | 11,150 | 14,943 | Depreciation and Amortization by Expense Category This table presents the breakdown of depreciation and amortization expenses by cost of revenue and general and administrative categories for recent quarters Depreciation and Amortization by Expense Category (Q2 2024) | Expense Category | Q2 2024 ($ thousands) | Q1 2024 ($ thousands) | Q2 2023 ($ thousands) | | :-------------------------------- | :----------- | :----------- | :----------- | | Cost of revenue | 20,087 | 19,874 | 18,134 | | General and administrative | 1,346 | 1,389 | 1,070 | | Total depreciation and amortization | 21,433 | 21,263 | 19,204 |