Investor Relations

<< Back
Shutterstock Reports Third Quarter 2016 Financial Results

NEW YORK, Nov. 4, 2016 /PRNewswire/ --

Third Quarter 2016 highlights as compared to Third Quarter 2015: 

Financial Highlights

  • Revenue increased 15% to $123.1 million
  • Income from operations increased 40% to $11.3 million
  • Net income increased 129% to $9.4 million
  • Adjusted EBITDA increased 17% to $23.0 million

Key Operating Metrics      

  • Paid downloads increased 8%
  • Revenue per download increased 5%
  • Image collection expanded 61% to 102.7 million images
  • Video collection expanded 64% to 5.4 million clips

 

Shutterstock Logo.

Shutterstock, Inc. (NYSE: SSTK), a leading global provider of commercial imagery and music, today announced financial results for the third quarter ended September 30, 2016.

Founder and CEO Jon Oringer said, "This was a solid quarter for Shutterstock as we continue to expand the market for high quality, digital content.  Over 160,000 contributors added more than 10 million images and 500,000 video clips to our robust library in the third quarter.  Our image library now offers more than 100 million images, giving us meaningful scale compared to our competition.  At the same time, our editorial and music capabilities continue to accelerate, providing yet another leg of growth for our business.  We also continue to dedicate considerable time and resources ensuring that our platform can handle an increasingly diverse array of content, enhancing our product offering and attracting new customers, including an expanding number of international and enterprise clients.  We believe that these efforts will translate into sustained financial growth and shareholder value."

THIRD QUARTER RESULTS

Revenue

Third quarter revenue of $123.1 million increased $15.8 million or 15% as compared to the third quarter of 2015, primarily due to an 8% increase in the number of paid downloads, mainly due to new customers, as well as continued expansion in enterprise sales as evidenced by a 5% increase in revenue per download. The negative impact of foreign currency movements versus the US dollar partially offset this growth. Excluding the impact of foreign currency movements, total Company revenue growth was approximately 17% in the third quarter.

Income from Operations

Income from operations of $11.3 million increased $3.2 million or 40% as compared to the third quarter of 2015 driven by the $15.8 million revenue growth, which was partially offset by an increase in operating expenses primarily from higher royalty costs associated with the increase in paid downloads and an increase in marketing spend year-over-year.

Net Income

Net income available to common stockholders of $9.4 million, $0.26 per diluted share, for the third quarter increased $5.3 million as compared with $4.1 million, $0.11 per diluted share, in the third quarter a year ago primarily due to the improved operating performance, lower income tax expense and a decrease in non-cash equity based compensation expense.  The lower tax expense during the current year's quarter was primarily a result of a tax benefit related to the U.S. Research and Development tax credit claimed for the tax years 2013, 2014 and 2015.

Adjusted EBITDA

Adjusted EBITDA of $23.0 million for the third quarter increased $3.3 million or 17%, as compared to the third quarter of 2015 driven primarily by revenue growth.  Adjusted EBITDA is defined as net income adjusted for foreign currency transaction gains and losses, changes in fair value of contingent consideration related to acquisitions, interest income and expense, income taxes, depreciation, amortization, disposals, and non-cash equity-based compensation.

Non-GAAP Net Income 

Non-GAAP net income, which excludes the impact of non-cash equity-based compensation, amortization of acquisition-related intangible assets, changes in fair value of contingent consideration related to acquisitions and the estimated tax impact of such adjustments was $14.3 million, or $0.40 per diluted share, for the third quarter as compared to $10.1 million or $0.28 per diluted share, in the third quarter of 2015.

LIQUIDITY

The Company's cash, cash equivalents and short term investments increased by $2.0 million to $290.4 million at September 30, 2016 as compared with $288.4 million at December 31, 2015.  This increase primarily reflects $76.7 million of cash generated from operations and $3.0 million of net cash from other sources, which were partially offset by cash used for capital expenditures and content acquisitions of $33.0 million and cash used to repurchase shares of approximately $44.9 million. 

Free cash flow was $19.9 million for the third quarter, an increase of $5.1 million from the third quarter of 2015, as the improved operating performance and working capital fluctuations were partially offset by increased spending on capital expenditures and content acquisitions.  Free cash flow is defined as cash provided by operating activities adjusted for capital expenditures and content acquisition.

STOCK REPURCHASE PROGRAM

During the third quarter of 2016, the Company did not repurchase any shares of its stock, pursuant to its existing $100 million stock repurchase program. Through September 30, 2016, the Company has repurchased 1.7 million shares of its stock for a total of $59.7 million under the stock repurchase program. The stock repurchase program, which commenced in November 2015, authorizes management to purchase shares from time to time through open market purchases or privately negotiated transactions at prevailing prices as permitted by securities laws and other legal requirements. The timing and amount of any shares repurchased will be determined by the Company's management based on its evaluation of market conditions and other factors. The repurchase program may be suspended or discontinued at any time.

 


OPERATING METRICS


















Three Months Ended September 30,


Nine Months Ended September 30,




2016


2015


2016


2015




(in millions, except revenue per download)


Number of paid downloads


41.2


38.1


125.8


107.4


Revenue per download (1)


$2.91


$2.76


$2.83


$2.83


Images in our collection (end of period) (2)


102.7


63.7


102.7


63.7











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

     (2)  Images are photographs, vectors and illustrations available on shutterstock.com at the end of the period. We exclude 
     content that is not uploaded directly to our site but is available to our customers through an application program interface and certain images that may be licensed for editorial use only.

 

FINANCIAL OUTLOOK

The Company's current expectations for the full year 2016 are as follows:

Full Year 2016


  • Revenue of $495 - $510 million (17% - 20% growth)
  • Income from operations of $43 - $51 million (5% - 24% growth)
  • Adjusted EBITDA of $95 - $100 million (12% - 18% growth)
  • Non-cash equity-based compensation expense of $28 - $33 million
  • Capital expenditures of $40 - $45 million

NON-GAAP FINANCIAL MEASURES

Shutterstock defines Adjusted EBITDA as net income adjusted for foreign currency transaction gains and losses, changes in fair value of contingent consideration related to acquisitions, interest income and expense, income taxes, depreciation, amortization, disposals and non-cash equity-based compensation; non-GAAP net income as net income excluding the impact of non-cash equity-based compensation, the amortization of acquisition-related intangible assets and changes in the fair value of contingent consideration related to acquisitions and the estimated tax impact of such adjustments; revenue growth on a fixed-currency basis (expressed as a percentage) as the increase in current period revenues over prior period revenues, utilizing fixed exchange rates for translating foreign currency revenues for both periods; and free cash flow as cash provided by/(used in) operating activities adjusted for capital expenditures and content acquisition. These figures have not been calculated in accordance with United States generally accepted accounting principles (GAAP) and should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results. In addition, Adjusted EBITDA, non-GAAP net income, revenue growth on a fixed-currency basis 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.

Shutterstock's management uses the non-GAAP financial measures adjusted EBITDA, non-GAAP net income, revenue growth on a fixed-currency basis and free cash flow, in conjunction with GAAP financial measures, as an integral part of managing the business and to, among other things: (i) monitor and evaluate the performance of Shutterstock's business operations, financial performance and overall liquidity; (ii) facilitate management's internal comparisons of the historical operating performance of its business operations; (iii) facilitate management's external comparisons of the results of its overall business to the historical operating performance of other companies that may have different capital structures and debt levels; (iv) review and assess the operating performance of Shutterstock's management team and, together with other operational objectives, as a measure in evaluating employee compensation and bonuses; (v) analyze and evaluate financial and strategic planning decisions regarding future operating investments; and (vi) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments.

Management believes that Adjusted EBITDA, non-GAAP net income and revenue growth on a fixed-currency basis are useful to investors to provide them with disclosures of Shutterstock's operating results on the same basis as that used by management. Additionally, management believes that Adjusted EBITDA and non-GAAP net income provide useful information to investors about the performance of the Company's overall business because such measures eliminate the effects of unusual or other infrequent charges that are not directly attributable to Shutterstock's underlying operating performance and, with respect to revenue growth on a fixed-currency basis, provides useful information to investors by eliminating the effect of foreign currency fluctuations that are not directly attributable to Shutterstock's business. Additionally, management believes that providing these non-GAAP financial measures enhances the comparability for investors in assessing Shutterstock's financial reporting. Management believes that free cash flow is useful for investors because it provides them with an important perspective on the cash available for strategic measures, after making necessary capital investments in property and equipment to support the Company's ongoing business operations, and provides them with the same measures that management uses as the basis for making resource allocation decisions.

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 Balance Sheets.  We do not provide a reconciliation of Adjusted EBITDA guidance to net income guidance, as the impact of net non-operating foreign currency exchange gains or losses which are excluded from Adjusted EBITDA is inherently uncertain and difficult to estimate and is unavailable without unreasonable efforts. In addition, we believe such reconciliations would imply a degree of precision that would be confusing or misleading to investors.

EARNINGS TELECONFERENCE INFORMATION

The Company will discuss its second quarter financial results during a teleconference today, November 4, 2016, at 8:30 AM ET. The conference call can be accessed in the U.S. at (844) 634-1442 or outside the U.S. at (615) 247-0239 with the conference ID# 89163942. A live audio webcast of the call will also be available simultaneously at http://investor.shutterstock.com.

Following completion of the call, a recorded replay of the webcast will be available in the investor relations section of Shutterstock's website. A telephone replay of the call will also be available until November 11, 2016 in the U.S. at (855) 859-2056 or outside the U.S. at (404) 537-3406 with the conference ID# 89163942.

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

ABOUT SHUTTERSTOCK

Shutterstock, Inc. (NYSE: SSTK), directly and through its group subsidiaries, is a leading global provider of high-quality licensed photographs, vectors, illustrations, videos and music to businesses, marketing agencies and media organizations around the world. Working with its growing community of over 160,000 contributors, Shutterstock adds hundreds of thousands of images each week, and currently has more than 100 million images and more than 5 million video clips available.

Headquartered in New York City, with offices in Amsterdam, Berlin, Chicago, Dallas, Denver, London, Los Angeles, Montreal, Paris, San Francisco, and Silicon Valley, Shutterstock has customers in more than 150 countries. The company also owns Bigstock, a value-oriented stock media agency; Offset, a high-end image collection; PremiumBeat a curated royalty-free music library; Rex Features, a premier source of editorial images for the world's media; and WebDAM, a cloud-based digital asset management service for businesses.

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


SAFE HARBOR PROVISION

Statements in this press release regarding management's future expectations, predictions, beliefs, goals, intentions, plans, prospects or strategies, including statements regarding Shutterstock's future financial and operating performance on both a GAAP and non-GAAP basis and statements regarding Shutterstock's ability to deliver sustained financial growth, may constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors including risks related to any unforeseen changes to or the effects on liabilities, financial condition, future capital expenditures, revenue, expenses, net income or loss, synergies and future prospects; our inability to continue to attract and retain customers and contributors to our online marketplace for commercial digital imagery and music; a decrease in repeat customer purchases or in content contributed to our online marketplace; our inability to successfully operate in a new and rapidly changing market and to evaluate our future prospects; competitive factors; assertions by third parties of infringement or other violations of intellectual property rights by Shutterstock; our inability to increase market awareness of Shutterstock and our services; our inability to effectively manage our growth: failure to respond to technological changes or upgrade Shutterstock's website and technology systems; Shutterstock's inability to increase the percentage of its revenues that come from larger companies; our inability to continue expansion into international markets and the additional risks associated with operating internationally, including fluctuations in currency exchange rates; general economic conditions worldwide; our ability to successfully integrate acquisitions and the associated technology and achieve operational efficiencies; and other factors and risks discussed under the heading "Risk Factors" in our most recent Annual Report on Form 10-K, as well as in other documents that may be filed by Shutterstock from time to time with the Securities and Exchange Commission.  As a result of such risks, uncertainties and factors, Shutterstock's actual results may differ materially from any future results, performance or achievements discussed in or implied by the forward-looking statements contained herein. Shutterstock is providing the information in this press release as of this date and assumes no obligation to update the information included in this press release or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

 

Shutterstock, Inc.
Consolidated Statements of Operations
(In thousands, except for per share data)
(unaudited)













Three Months Ended September 30,


Nine Months Ended September 30,



2016


2015


2016


2015










Revenue


$

123,073



$

107,260



$

364,144



$

309,147










Operating expenses:









Cost of revenue


50,184



44,512



150,492



126,582

Sales and marketing


32,977



27,393



91,636



79,927

Product development


11,604



10,827



34,800



31,700

General and administrative


17,020



16,441



54,629



44,949

Total operating expenses


111,785



99,173



331,557



283,158

Income from operations


11,288



8,087



32,587



25,989

Other income (expense), net


102



(767)



(122)



(3,386)

Income before income taxes


11,390



7,320



32,465



22,603

Provision for income taxes


1,999



3,217



9,692



9,920

Net income


$

9,391



$

4,103



$

22,773



$

12,683

Less:









Undistributed earnings to participating stockholder








2

Net income available to common stockholders


$

9,391



$

4,103



$

22,773



$

12,681



















Net income per common share available to common stockholders:









Basic


$

0.27



$

0.11



$

0.65



$

0.35

Diluted


$

0.26



$

0.11



$

0.64



$

0.35










Weighted average common shares outstanding:









Basic


35,036



36,040



35,123



35,848

Diluted


35,824



36,270



35,855



36,269

 

Shutterstock, Inc.
Consolidated Balance Sheets
(In thousands, except par value amount)
(unaudited)













September 30, 2016


December 31, 2015






ASSETS





Current assets:





Cash and cash equivalents


$

237,997



$

241,304

Short-term investments


52,407



47,078

Credit card receivables


4,230



2,811

Accounts receivable, net


34,064



25,653

Prepaid expenses and other current assets


16,553



11,713

Deferred tax assets, net


6,654



7,116

Total current assets


351,905



335,675

Property and equipment, net


49,814



32,094

Intangibles assets, net


30,763



29,781

Goodwill


50,523



50,934

Deferred tax assets, net


21,521



18,691

Other assets


2,807



1,946

Total assets


$

507,333



$

469,121






LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:





Accounts payable


$

15,303



$

6,816

Accrued expenses


39,126



30,696

Contributor royalties payable


19,286



17,822

Income taxes payable


845



953

Deferred revenue


117,877



98,239

Other liabilities


10,385



6,258

Total current liabilities


202,822



160,784

Deferred tax liability, net


2,199



3,778

Other non-current liabilities


8,967



15,994

Total liabilities


213,988



180,556

Commitment and contingencies





Stockholders' equity:





Common stock, $0.01 par value; 200,000 shares authorized; 36,854 and 36,146 shares issued and 35,115 and 35,686 shares outstanding as of September 30, 2016 and December 31, 2015, respectively


368



361

Treasury stock, at cost; 1,739 and 460 shares as of September 30, 2016 and December 31, 2015, respectively


(59,728)



(15,635)

Additional paid-in capital


244,333



213,851

Accumulated other comprehensive loss


(10,838)



(6,449)

Retained earnings


119,210



96,437

Total stockholders' equity


293,345



288,565

Total liabilities and stockholders' equity


$

507,333



$

469,121

 


Shutterstock, Inc.

Reconciliation of Non-GAAP Financial Information to GAAP

(In thousands, except per share information)

(Unaudited)


The following information is not a financial measure under United States 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 September 30,


Nine Months Ended September 30,



2016


2015


2016


2015

Net Income


$

9,391


$

4,103


$

22,773


$

12,683

Add:








Depreciation and amortization


5,176


3,869


14,181


10,363

Non-cash equity-based compensation


6,505


7,683


21,110


22,771

Other adjustments, net (1)


(102)


767


1,773


3,386

Provision for income taxes


1,999


3,217


9,692


9,920

Adjusted EBITDA(2)


$

22,969


$

19,639


$

69,529


$

59,123








Three Months Ended September 30,


Nine Months Ended September 30,



2016


2015


2016


2015

Net income


$

9,391


$

4,103


$

22,773


$

12,683

Add/(less):









Non-cash equity-based compensation


6,505


7,683


21,110


22,771

Tax effect of non-cash equity-based compensation (3)


(2,336)


(2,750)


(7,533)


(8,145)

Acquisition-related amortization expense


1,053


1,195


3,310


3,308

Tax effect of acquisition-related amortization expense (3)


(387)


(437)


(1,217)


(1,224)

Change in fair value of contingent consideration


105


540


2,600


1,440

Tax effect of change in fair value of contingent consideration (3)


(48)


(198)


(965)


(529)

Non-GAAP net income


$

14,283


$

10,136


$

40,078


$

30,304

Non-GAAP net income per diluted common share


$

0.40


$

0.28


$

1.12


$

0.84










Weighted average diluted shares


35,824


36,270


35,855


36,269








Three Months Ended September 30,


Nine Months Ended September 30,



2016


2015


2016


2015

Net cash provided by operating activities


$

35,133


$

19,350


$

76,736


$

59,449

Capital expenditures and content acquisition


(15,205)


(4,508)


(32,961)


(12,065)

Free cash flow


$

19,928


$

14,842


$

43,775


$

47,384



(1)  Included in other adjustments, net is foreign currency transaction gains and losses, changes in fair value of contingent consideration related to acquisitions, and interest income and expense.

(2)  Earnings/(loss) before foreign currency transaction gains and losses, changes in fair value of contingent consideration related to acquisitions, interest income and expense, income taxes, depreciation, amortization, disposals and non-cash equity-based compensation.

(3)  Estimated tax effect of non-GAAP net income adjustments reflects the consolidated blended tax rate as applied to the taxable portion of the adjustment.

 

Shutterstock, Inc.
Supplemental Financial Data
(In thousands)
(Unaudited)




Non-Cash Equity-Based Compensation




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











Three Months Ended September 30,



Nine Months Ended September 30,




2016



2015



2016



2015


Cost of revenue


$

498



$

496



$

1,552



$

1,444


Sales and marketing


1,524



1,364



4,072



4,110


Product development


1,580



1,743



5,732



5,863


General and administrative


2,903



4,080



9,754



11,354


Total


$

6,505



$

7,683



$

21,110



$

22,771





















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:






Three Months Ended September 30,



Nine Months Ended September 30,




2016



2015



2016



2015


Cost of revenue


$

447



$

402



$

1,308



$

1,070


General and administrative


793



867



2,453



2,405


Total


$

1,240



$

1,269



$

3,761



$

3,475




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











Three Months Ended September 30,



Nine Months Ended September 30,




2016



2015



2016



2015


Cost of revenue


$

1,765



$

1,412



$

4,767



$

3,760


General and administrative


2,171



1,188



5,653



3,128


Total


$

3,936



$

2,600



$

10,420



$

6,888





















 

Historical Operating Metrics























9/30/14


12/31/14


3/31/15


6/30/15


9/30/15


12/31/15


3/31/16


6/30/16


9/30/16


(in millions, except revenue per download)

Number of paid downloads


31.2


33.5


33.4


35.9


38.1


39.8


41.2


43.4


41.2

Revenue per download (1)


$

2.65


$

2.68


$

2.87


$

2.85


$

2.76


$

2.86


$

2.77


$

2.81


$

2.91

Images in collection (end of period) (2)


42.7


46.8


51.6


57.2


63.7


71.4


81.0


92.1


102.7






































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

(2) Images are photographs, vectors and illustrations available on shutterstock.com at the end of the period. We exclude content that is not uploaded directly to our site but is available to our customers through an application program interface and certain images that may be licensed for editorial use only.



 

Logo - http://photos.prnewswire.com/prnh/20120514/NY06418LOGO

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/shutterstock-reports-third-quarter-2016-financial-results-300357473.html

SOURCE Shutterstock, Inc.

Media Contact: Siobhan Aalders, 917 563 4991, press@shutterstock.com; Investor Contact: Rawson Daniel, 646 856 9074, ir@shutterstock.com