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Shutterstock Reports Third Quarter 2014 Financial Results

- Third quarter revenue increased 41% from prior year to $83.7 million
- Adjusted EBITDA increased 36% to $17.3 million
- Quarterly paid downloads increased 23% to 31.2 million
- Revenue per download increased 13% to $2.65
- Image collection grew 44%; currently exceeds 44 million images and 2.1 million video clips

NEW YORK, Nov. 6, 2014 /PRNewswire/ -- Shutterstock, Inc. (NYSE: SSTK), a leading global provider of commercial digital imagery and music, today announced financial results for the third quarter ended September 30, 2014.  

"In the third quarter, we achieved strong growth due to our continued focus on providing an intuitive and efficient marketplace for businesses and creative professionals," said Founder and CEO Jon Oringer.

Operating Metrics


Three Months Ended
September 30, 


Nine Months Ended
September 30, 




2014


2013


2014


2013


(in millions, except revenue per download)


(in millions, except revenue per download)

Number of paid downloads

31.2


25.4


92.4


72.1

Revenue per download(1)

$          2.65


$          2.35


$          2.54


$          2.32

Images in our collection (end of period)

42.7


29.7


42.7


29.7









(1)  Revenue per download metric excludes the impact of revenue not associated with content downloads.









Revenue

Revenue for the third quarter of 2014 was $83.7 million, a 41% increase from $59.6 million in the third quarter of 2013. 

Net Income

Net income for the third quarter of 2014 was $5.3 million, as compared to $6.2 million in the third quarter of 2013. Net income available to common stockholders for the third quarter of 2014 was $5.3 million or $0.15 per share on a fully diluted basis, as compared to $6.2 million or $0.18 per share on a fully diluted basis in the third quarter of 2013.

Non-GAAP net income for the third quarter of 2014 was $9.5 million or $0.26 per share, as compared to $7.3 million or $0.21 per share in the third quarter of 2013.  Non-GAAP net income is defined as net income excluding the after tax impact of non-cash equity-based compensation.

Adjusted EBITDA

Adjusted EBITDA for the third quarter of 2014 was $17.3 million, as compared to $12.8 million in the third quarter of 2013.  Adjusted EBITDA is defined as net income adjusted for interest income/(expense), income taxes, depreciation, amortization, disposals and non-cash equity-based compensation.

Cash

The Company's cash and cash equivalents and short term investments balance was $260.5 million at September 30, 2014, as compared to $209.8 million as of December 31, 2013.  The Company generated $22.7 million of cash from operations in the third quarter, as compared to $14.6 million in the third quarter of 2013.

Also, during the third quarter, the Company incurred planned capital expenditures related primarily to the purchase of computer servers and networking equipment in the amount of $1.9 million.

Free cash flow for the third quarter of 2014 was $20.9 million, as compared to $12.8 million in the third quarter of 2013.  Free cash flow is defined as cash provided by/(used in) operating activities adjusted for capital expenditures and interest income/(expense).

Financial Outlook

The Company's current financial and operating expectations for the fourth quarter of 2014, full year 2014 and full year 2015 are as follows:

Fourth Quarter 2014

  • Revenue of $90 - $92 million
  • Adjusted EBITDA of $19.5 - $21.5 million
  • Non-cash equity-based compensation expense of approximately $7 million
  • An effective tax rate of approximately 40%
  • Capital expenditures of approximately $3 million

Full Year 2014

  • Revenue of $326 - $329 million
  • Adjusted EBITDA of  $68.0 - $69.5 million
  • Non-cash equity-based compensation expense of approximately $23 million
  • An effective tax rate of approximately 40%
  • Capital expenditures of approximately $20 million

Full Year 2015

  • Revenue of $430 - $435 million
  • Adjusted EBITDA of  $94 - $98 million
  • Non-cash equity-based compensation expense of approximately $30 million
  • Capital expenditures of approximately $16 million

Earnings Teleconference Information

The Company will discuss its third quarter 2014 financial results during a teleconference today, November 6, 2014, at 5:00 PM ET.  The conference call can be accessed at (800) 591-6942 or (617) 614-4909 (outside the US), conference ID# 176 306 93.  The call will also be broadcast simultaneously at http://investor.shutterstock.com.

Following completion of the call, a recorded replay of the webcast will be available on Shutterstock's website.  To listen to the telephone replay, call toll-free (888) 286-8010 or (617) 801-6888 (outside the US), conference ID# 680 144 85. The telephone replay will be available from 9:00 PM ET November 6 through November 13, 2014. 

Additional investor information can be accessed at http://investor.shutterstock.com.

Non-GAAP Financial Measures

Shutterstock considers adjusted EBITDA, non-GAAP net income, and free cash flow to be important financial indicators of the Company's operational strength and the performance of its business. Shutterstock defines adjusted EBITDA as net income adjusted for interest income/(expense), income taxes, depreciation, amortization and non-cash equity-based compensation; non-GAAP net income as net income excluding the after tax impact of non-cash equity-based compensation; and free cash flow as cash provided by/(used in) operating activities adjusted for capital expenditures and interest income/(expense). These figures are non-GAAP financial measures and should be considered in addition to results prepared in accordance with generally accepted accounting principles (GAAP), and should not be considered as a substitute for, or superior to, GAAP results. In addition, adjusted EBITDA, non-GAAP net income, and free cash flow should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions; accordingly, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies.

A reconciliation of the differences between adjusted EBITDA, non-GAAP net income, and free cash flow, and the most comparable financial measure calculated and presented in accordance with GAAP, is presented under the heading "Reconciliation of Non-GAAP Financial Information to GAAP" immediately following the Consolidated Statements of Cash Flows included below.

Historical Operating Metrics


9/30/12

12/31/12

3/31/13

6/30/13

9/30/13

12/31/13

3/31/14

6/30/14

9/30/14

(in millions, except per download)



Number of paid downloads

18.7

21.4

22.4

24.3

25.4

28.0

29.7

31.5

31.2

Revenue per download(1)

$          2.26

$          2.30

$          2.28

$          2.33

$          2.35

$          2.43

$          2.45

$          2.52

$          2.65

Images in collection (end of period)

21.7

23.3

25.1

27.3

29.7

32.2

35.4

38.8

42.7











(1)  Revenue per download metric excludes the impact of revenue not associated with content downloads.

 

Non-Cash Equity-Based Compensation

Included in the accompanying financial results are expenses related to non-cash equity-based compensation, as follows (in thousands):


Three Months Ended


Nine Months Ended


September 30,


September 30,


2014


2013


2014


2013

Cost of revenue

$             336


$             126


$             953


$             291

Sales and marketing

819


358


2,689


865

Product development

1,805


406


4,529


990

General and administrative

3,374


962


7,557


2,276

   Total

$           6,334


$           1,852


$         15,728


$           4,422

 

Amortization of Intangible Assets and Depreciation of Property and Equipment

Included in the accompanying financial results are expenses related to the amortization of intangible assets, as follows (in thousands):


Three Months Ended


Nine Months Ended


September 30,


September 30,


2014


2013


2014


2013

Cost of revenue

$               29


$                 8


$               70


$               23

General and administrative

138


49


314


146

   Total

$             167


$               57


$             384


$             169

 

Included in the accompanying financial results are expenses related to the depreciation of property and equipment, as follows (in thousands):


Three Months Ended


Nine Months Ended


September 30,


September 30,


2014


2013


2014


2013

Cost of revenue

$           1,135


$             623


$           3,138


$           1,576

General and administrative

823


333


2,235


993

   Total

$           1,958


$             956


$           5,373


$           2,569

 

About Shutterstock

Shutterstock, Inc. (NYSE: SSTK) is a leading global provider of high-quality licensed photographsvectorsillustrationsvideo footage and music to businesses, marketing agencies and media organizations around the world. Working with its growing community of over 60,000 contributors, Shutterstock adds hundreds of thousands of images each week, and currently has available more than 44 million images and 2.1 million video clips.

Headquartered in New York City, with offices in Amsterdam, Berlin, Chicago, Denver, London, Paris and San Francisco, Shutterstock has customers in more than 150 countries. The Company owns Bigstock, a value-oriented stock media agency; Offset, a high-end image collection; Skillfeed, an online marketplace for learning; and WebDAM, a leading provider of hosted digital asset management tools.

For more information, please visit http://www.shutterstock.com, and follow Shutterstock on Twitter and on Facebook.

Safe Harbor Provision

The statements contained in this press release that are not purely historical are forward looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, including statements regarding the Company's expectations, predictions, beliefs, hopes, intentions or strategies regarding the future.  Forward looking statements include statements regarding the Company's business strategy, timing of, and plans for, the introduction of new products and enhancements, future sales, market growth and direction, competition, market share, revenue growth, operating margins and profitability.  All forward looking statements included in this document are based upon information available to the Company as of the date hereof.  Actual events or results could differ materially from those contained in the Company's current projections or forward-looking statements. It is routine for internal projections and expectations to change as the quarter progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which the Company bases its expectations may change prior to the end of the quarter. Although these expectations may change, the Company assumes no obligation to update any such forward looking statement, whether as a result of new information, future developments or otherwise.  Factors that could cause or contribute to such differences include the Company's inability to continue to attract customers and contributors to its online marketplace for commercial digital imagery; a decrease in repeat customer purchases or in content contributed to our online marketplace; the Company's inability to successfully operate in a new and rapidly changing market and to evaluate its future prospects; competitive factors; the Company's inability to prevent the misuse of its imagery; assertions by third parties of infringement or other violations of intellectual property rights by the Company; the Company's inability to increase market awareness of the Company and its services; the Company's inability to effectively manage its growth; the Company's inability to increase the percentage of its revenues that come from larger companies; the Company's inability to continue expansion into international markets; various income tax and other tax liabilities; failure to respond to technological changes or upgrade the Company's website and technology systems; failure to adequately protect the Company's intellectual property; general economic conditions worldwide; and other factors and risks discussed under the heading "Risk Factors" in the Company's latest Annual Report on Form 10K filed on February 28, 2014, and other reports filed by the Company from time to time with the Securities and Exchange Commission.  Forward-looking statements in this release are made pursuant to the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995.

 


Shutterstock, Inc.


Consolidated Balance Sheets


(In thousands, except par value amount)


(unaudited)
















September 30, 2014


December 31, 2013










ASSETS







Current assets:






Cash and cash equivalents

$                  210,760


$                  155,355



Short-term investments

49,720


54,429



Credit card receivables

3,758


2,083



Accounts receivable, net

12,938


6,081



Prepaid expenses and other current assets

14,462


19,809



Deferred tax assets, net

4,951


5,431


Total current assets

296,589


243,188


Property and equipment, net

26,422


20,256


Intangibles assets, net

4,710


853


Goodwill


10,186


1,423


Deferred tax assets, net

16,193


10,720


Other assets

1,903


2,048


Total assets

$                  356,003


$                  278,488










LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:






Accounts payable

$                      5,686


$                      4,164



Accrued expenses

22,394


23,638



Contributor royalties payable

12,239


9,180



Deferred revenue

71,850


52,100



Other liabilities

1,901


2,846


Total current liabilities

114,070


91,928


Other non-current liabilities

11,700


3,961


Total liabilities

125,770


95,889











Commitment and contingencies





Stockholders' equity:






Common stock, $0.01 par value; 200,000 shares authorized; 35,430 and 35,071 shares outstanding as of September 30, 2014 and December 31, 2013, respectively

354


351



Additional paid-in capital

160,099


127,443



Accumulated comprehensive (loss) income

(72)


9



Retained earnings

69,852


54,796


Total stockholders' equity

230,233


182,599


Total liabilities and stockholders' equity

$                  356,003


$                  278,488

 

Shutterstock, Inc.

Consolidated Statements of Operations

(In thousands, except for share and per share data)

(unaudited)




















Three Months Ended


Nine Months Ended







September 30,


September 30,







2014


2013


2014


2013














Revenue




$               83,730


$               59,558


$             236,745


$             167,484














Operating expenses:










Cost of revenue


33,260


22,936


94,419


64,525


Sales and marketing


21,122


14,947


60,890


40,240


Product development


9,870


5,685


26,922


15,300


General and administrative


10,588


6,076


28,095


16,590

Total operating expenses


74,840


49,644


210,326


136,655

Income from operations


8,890


9,914


26,419


30,829

Other (expense) income, net


(50)


20


(48)


29

Income before income taxes


8,840


9,934


26,371


30,858

Provision for income taxes


3,562


3,740


11,315


12,238

Net income



$                 5,278


$                 6,194


$               15,056


$               18,620

Less:













Undistributed earnings to participating stockholder


9


18


31


59

Net income available to common stockholders


$                 5,269


$                 6,176


$               15,025


$               18,561














Net income per basic share available to common stockholders:









Undistributed


$                   0.15


$                   0.18


$                   0.43


$                   0.55

Basic




$                   0.15


$                   0.18


$                   0.43


$                   0.55














Net income per diluted share available to common stockholders:









Undistributed


$                   0.15


$                   0.18


$                   0.42


$                   0.55

Diluted




$                   0.15


$                   0.18


$                   0.42


$                   0.55














Weighted average shares outstanding:










Basic




35,304,066


33,692,876


35,161,644


33,522,289


Diluted



35,931,454


34,280,656


35,883,202


34,043,573

 


Shutterstock, Inc.

Reconciliation of Non-GAAP Financial Information to GAAP

(In thousands, except for share and per share information)

(Unaudited)

























Unaudited Supplemental Data









The following information is not a financial measure under generally accepted accounting principles (GAAP). In addition, it should not be construed as an alternative to any other measures of performance determined in accordance with GAAP, or as an indicator of our operating performance, liquidity or cash flows generated by operating, investing and financing activities as there may be significant factors or trends that it fails to address. We present this financial information because we believe that it is helpful to some investors as one measure of our operations. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions; accordingly, its use can make it difficult to compare our results with our results from other reporting periods and with the results of other companies.


















Three Months Ended


Nine Months Ended






September 30,


September 30,






2014


2013


2014


2013













Net income 


$          5,278


$          6,194


$        15,056


$        18,620


Add/(less):









(a)

Depreciation and amortization

2,125


1,013


5,757


2,738


(b)

Write-off of property and equipment

-


-


367


-


(c)

Non-cash equity based compensation

6,334


1,852


15,728


4,422


(d)

Other expense (income), net

50


(20)


48


(29)


(e)

Provision for income taxes

3,562


3,740


11,315


12,238

Adjusted EBITDA (1)

$        17,349


$        12,779


$        48,271


$        37,989

Adjusted EBITDA per diluted common share

$            0.48


$            0.37


$            1.35


$            1.12













Weighted average diluted shares

35,931,454


34,280,656


35,883,202


34,043,573


















Three Months Ended


Nine Months Ended






September 30,


September 30,






2014


2013


2014


2013

Net income


$          5,278


$          6,194


$        15,056


$        18,620


(a)

Non-cash equity based compensation

6,334


1,852


15,728


4,422


(b)

Non-cash equity based compensation tax benefit

(2,142)


(697)


(5,255)


(1,754)

Non-GAAP net income

$          9,470


$          7,349


$        25,529


$        21,288

Non-GAAP net income per diluted common share 

$            0.26


$            0.21


$            0.71


$            0.63













Weighted average diluted shares 

35,931,454


34,280,656


35,883,202


34,043,573


















Three Months Ended


Nine Months Ended






September 30,


September 30,






2014


2013


2014


2013

Net cash provided by operating activities

$        22,712


$        14,647


$        59,499


$        32,461


Other (expense) income, net

(50)


20


(48)


29


Capital expenditures and content acquisition

(1,885)


(1,802)


(16,665)


(4,788)

Free cash flow

$        20,877


$        12,825


$        42,882


$        27,644













Adjusted EBITDA

$        17,349


$        12,779


$        48,271


$        37,989


Add/(less):









(a)

Changes in operating assets and liabilities

11,723


(10,693)


36,200


(5,853)


(b)

Provision for income taxes

(3,562)


(3,740)


(11,315)


(12,238)


(c)

Deferred income taxes

(1,707)


18,213


(4,181)


15,086


(d)

Excess tax benefit from exercise of stock options

(1,503)


(2,217)


(10,224)


(3,226)


(e)

Provision for doubtful accounts/chargeback/sales refund reserves

392


285


686


549


(f)

Other (expense) income, net

(50)


20


(48)


29


(g)

Amortization of financing fees

-


-


-


125


(h)

Change in fair value of contingent consideration

70


-


110


-

Net cash provided by operating activities

$        22,712


$        14,647


$        59,499


$        32,461













(1)  Earnings/(loss) before interest income/(expense), income taxes, depreciation, amortization, disposals, non-cash equity

       based compensation and other non-cash charges.


 

SOURCE Shutterstock, Inc.

Investor Contact: Denise Garcia, ICR, denise.garcia@icrinc.com; Media Contact: Jennifer Bewley, Shutterstock, Inc., 917 563 4991, press@shutterstock.com