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Table of Contents                            

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ___________________________________________________________ 
FORM 10-Q
 ___________________________________________________________ 
(Mark One)
   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended September 30, 2019
or
         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from          to         
Commission File Number: 001-35669
 ___________________________________________________________
SHUTTERSTOCK, INC.
(Exact name of registrant as specified in its charter)
 ________________________________________________________
Delaware
 
80-0812659
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
350 Fifth Avenue, 21st Floor
New York, NY 10118
(Address of principal executive offices, including zip code)
(646) 710-3417
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
 ______________________________________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
SSTK
New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes    No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer 
 
 
 
Non-accelerated filer 
 
Smaller reporting company 
 
 
 
 
 
 
Emerging growth company 
 
 
 
 
 
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
As of November 1, 2019, 35,456,596 shares of the registrant’s common stock, $0.01 par value per share, were outstanding.
 


Table of Contents                            

Shutterstock, Inc.
FORM 10-Q
Table of Contents 
For the Quarterly Period Ended September 30, 2019
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2

Table of Contents                            

FORWARD-LOOKING STATEMENTS
 
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, particularly in the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All statements other than statements of historical fact, including statements regarding guidance, industry prospects or future results of operations or financial position, are forward-looking. Examples of forward-looking statements include, but are not limited to, statements regarding future business, future results of operations or financial condition, new or planned features, products or services, or management strategies. You can identify many forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan” and other similar expressions. However, not all forward-looking statements contain these words. Forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements. Such risks and uncertainties include, among others, those discussed under the caption “Risk Factors” in our most recently filed Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission, or the SEC, on February 26, 2019, and in our consolidated financial statements, related notes, and the other information appearing elsewhere in such report, this report on Form 10-Q and our other filings with the SEC. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. We do not intend, and, except as required by law, we undertake no obligation, to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances.
Unless the context otherwise indicates, references in this Quarterly Report on Form 10-Q to the terms “Shutterstock,” “the Company,” “we,” “our” and “us” refer to Shutterstock, Inc. and its subsidiaries. “Shutterstock,” “Offset,” “Bigstock,” “Rex Features,” “PremiumBeat” and “Shutterstock Editor” and their logos are registered trademarks and are the property of Shutterstock, Inc. or one of our subsidiaries. All other trademarks, service marks and trade names appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

3

Table of Contents                            

PART I.     FINANCIAL INFORMATION
Item 1.        Financial Statements.
Shutterstock, Inc.
Consolidated Balance Sheets
(In thousands, except par value amount)
(unaudited)
 
September 30,
 
December 31,
 
2019
 
2018
 
 
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
285,396

 
$
230,852

Accounts receivable, net
46,872

 
41,028

Prepaid expenses and other current assets
31,709

 
34,841

Total current assets
363,977

 
306,721

Property and equipment, net
63,155

 
76,188

Right-of-use assets
43,960

 

Intangible assets, net
25,679

 
29,540

Goodwill
88,034

 
88,576

Deferred tax assets, net
13,787

 
12,375

Other assets
18,645

 
18,088

Total assets
$
617,237

 
$
531,488

LIABILITIES AND STOCKHOLDERSEQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
4,186

 
$
7,212

Accrued expenses
63,185

 
51,385

Contributor royalties payable
25,237

 
22,971

Deferred revenue
137,511

 
139,604

Other current liabilities
17,739

 
2,131

Total current liabilities
247,858

 
223,303

Deferred tax liability, net

 
77

Lease liabilities
46,042

 

Other non-current liabilities
7,084

 
21,441

Total liabilities
300,984

 
244,821

Commitments and contingencies (Note 14)

 

Stockholders’ equity:
 
 
 
Common stock, $0.01 par value; 200,000 shares authorized; 38,006 and 37,618 shares issued and 35,448 and 35,060 shares outstanding as of September 30, 2019 and December 31, 2018, respectively
380

 
376

Treasury stock, at cost; 2,558 shares as of September 30, 2019 and December 31, 2018
(100,027
)
 
(100,027
)
Additional paid-in capital
307,815

 
291,710

Accumulated comprehensive loss
(8,749
)
 
(6,471
)
Retained earnings
116,834

 
101,079

Total stockholders’ equity
316,253

 
286,667

Total liabilities and stockholders’ equity
$
617,237

 
$
531,488

See Notes to Unaudited Consolidated Financial Statements.

4

Table of Contents                            

Shutterstock, Inc.
Consolidated Statements of Operations
(In thousands, except for per share data)
(unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Revenue
$
159,079

 
$
151,575

 
$
484,152

 
$
461,178

 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Cost of revenue
68,635

 
66,461

 
206,379

 
198,842

Sales and marketing
45,614

 
41,028

 
134,548

 
123,414

Product development
13,533

 
14,032

 
42,113

 
47,208

General and administrative
28,114

 
23,355

 
86,760

 
74,901

Total operating expenses
155,896

 
144,876

 
469,800

 
444,365

Income from operations
3,183

 
6,699

 
14,352

 
16,813

Gain on Sale of Webdam

 

 

 
38,613

Other income / (expense), net
465

 
217

 
1,945

 
(6,000
)
Income before taxes
3,648

 
6,916

 
16,297

 
49,426

(Benefit) / Provision for income taxes
(1,286
)
 
(531
)
 
542

 
9,652

Net income
$
4,934

 
$
7,447

 
$
15,755

 
$
39,774

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.14

 
$
0.21

 
$
0.45

 
$
1.14

Diluted
$
0.14

 
$
0.21

 
$
0.44

 
$
1.12

 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
35,309

 
34,991

 
35,219

 
34,897

Diluted
35,541

 
35,570

 
35,512

 
35,420

See Notes to Unaudited Consolidated Financial Statements.

5

Table of Contents                            

Shutterstock, Inc.
Consolidated Statements of Comprehensive Income
(In thousands)
(unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Net income
$
4,934

 
$
7,447

 
$
15,755

 
$
39,774

Foreign currency translation (loss) / gain
(1,296
)
 
1,724

 
(2,278
)
 
(1,382
)
Other comprehensive loss
(1,296
)
 
1,724

 
(2,278
)
 
(1,382
)
Comprehensive income
$
3,638

 
$
9,171

 
$
13,477

 
$
38,392

 
See Notes to Unaudited Consolidated Financial Statements.

6

Table of Contents                            

Shutterstock, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands)
(unaudited)
 
 
 
 
 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
 
 
Common Stock
 
Treasury Stock
 
 
 
 
 
Three Months Ended September 30, 2019
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Total
Balance at June 30, 2019
37,816

 
$
379

 
2,558

 
$
(100,027
)
 
$
299,122

 
$
(7,453
)
 
$
111,900

 
$
303,921

Equity-based compensation

 

 

 

 
5,509

 

 

 
5,509

Issuance of common stock in connection with employee stock option exercises and RSU vesting
222

 
2

 

 

 
4,372

 

 

 
4,374

Common shares withheld for settlement of taxes in connection with equity-based compensation
(32
)
 
(1
)
 

 

 
(1,188
)
 

 

 
(1,189
)
Other comprehensive loss

 

 

 

 

 
(1,296
)
 

 
(1,296
)
Net income

 

 

 

 

 

 
4,934

 
4,934

Balance at September 30, 2019
38,006

 
$
380

 
2,558

 
$
(100,027
)
 
$
307,815

 
$
(8,749
)
 
$
116,834

 
$
316,253

Nine Months Ended September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
37,618

 
$
376

 
2,558

 
$
(100,027
)
 
$
291,710

 
$
(6,471
)
 
$
101,079

 
$
286,667

Equity-based compensation

 

 

 

 
17,884

 

 

 
17,884

Issuance of common stock in connection with employee stock option exercises and RSU vesting
534

 
6

 

 

 
4,590

 

 

 
4,596

Common shares withheld for settlement of taxes in connection with equity-based compensation
(146
)
 
(2
)
 

 

 
(6,369
)
 

 

 
(6,371
)
Other comprehensive loss

 

 

 

 

 
(2,278
)
 

 
(2,278
)
Net income

 

 

 

 

 

 
15,755

 
15,755

Balance at September 30, 2019
38,006

 
$
380

 
2,558

 
$
(100,027
)
 
$
307,815

 
$
(8,749
)
 
$
116,834

 
$
316,253

Three Months Ended September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at June 30, 2018
37,510

 
$
375

 
2,558

 
$
(100,027
)
 
$
281,584

 
$
(6,663
)
 
$
183,644

 
$
358,913

Equity-based compensation

 

 

 

 
5,959

 

 

 
5,959

Issuance of common stock in connection with employee stock option exercises and RSU vesting
85

 
1

 

 

 
575

 

 

 
576

Common shares withheld for settlement of taxes in connection with equity-based compensation
(22
)
 

 

 

 
(1,096
)
 

 

 
(1,096
)
Payment of Special Dividend

 

 

 

 

 

 
(104,925
)
 
(104,925
)
Other comprehensive income

 

 

 

 

 
1,724

 

 
1,724

Net income

 

 

 

 

 

 
7,447

 
7,447

Balance at September 30, 2018
37,573

 
$
376

 
2,558

 
$
(100,027
)
 
$
287,022

 
$
(4,939
)
 
$
86,166

 
$
268,598

Nine Months Ended September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
37,270

 
$
373

 
2,558

 
$
(100,027
)
 
$
272,657

 
$
(3,557
)
 
$
145,139

 
$
314,585

Equity-based compensation

 

 

 

 
17,994

 

 

 
17,994

Issuance of common stock in connection with employee stock option exercises and RSU vesting
427

 
4

 

 

 
2,437

 

 

 
2,441

Common shares withheld for settlement of taxes in connection with equity-based compensation
(124
)
 
(1
)
 

 

 
(6,066
)
 

 

 
(6,067
)
Payment of Special Dividend

 

 

 

 

 

 
(104,925
)
 
(104,925
)
Other comprehensive loss

 

 

 

 

 
(1,382
)
 

 
(1,382
)
Net income

 

 

 

 

 

 
39,774

 
39,774

Balance at September 30, 2018
37,573

 
$
376

 
2,558

 
$
(100,027
)
 
$
287,022

 
$
(4,939
)
 
$
86,166

 
$
268,598

See Notes to Unaudited Consolidated Financial Statements.


7

Table of Contents                            

Shutterstock, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
 
Nine Months Ended
September 30,
 
2019
 
2018
 
 
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
 

 
 

Net income
$
15,755

 
$
39,774

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
37,311

 
33,934

Deferred taxes
(1,480
)
 
(6,249
)
Non-cash equity-based compensation
17,884

 
17,994

Gain on Sale of Webdam

 
(38,613
)
Loss on impairment of long-term investment asset

 
5,881

Bad debt expense
(486
)
 
911

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(5,598
)
 
(1,811
)
Prepaid expenses and other current and non-current assets
(655
)
 
6,941

Accounts payable and other current and non-current liabilities
13,284

 
1,438

Contributor royalties payable
2,348

 
3,351

Deferred revenue
(1,343
)
 
4,966

Net cash provided by operating activities
$
77,020

 
$
68,517

 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Capital expenditures
(19,547
)
 
(29,546
)
Acquisition of businesses, net of cash acquired

 
(845
)
Proceeds from Sale of Webdam, net
2,500

 
41,804

Other investments / advances

 
(15,000
)
Acquisition of digital content
(1,896
)
 
(2,822
)
Security deposit release

 
(43
)
Net cash used in investing activities
$
(18,943
)
 
$
(6,452
)
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Proceeds from exercise of stock options
4,596

 
2,454

Cash paid related to settlement of employee taxes related to RSU vesting
(6,371
)
 
(6,060
)
Cash paid for Special Dividend

 
(104,925
)
Net cash used in financing activities
$
(1,775
)
 
$
(108,531
)
 
 
 
 
Effect of foreign exchange rate changes on cash
(1,758
)
 
(553
)
Net increase in cash, cash equivalents and restricted cash
54,544

 
(47,019
)
 
 
 
 
Cash, cash equivalents and restricted cash, beginning of period
233,465

 
256,041

Cash, cash equivalents and restricted cash, end of period
$
288,009

 
$
209,022

 
 
 
 
Supplemental Disclosure of Cash Information:
 
 
 
Cash paid for income taxes
$
1,487

 
$
364

See Notes to Unaudited Consolidated Financial Statements.

8

Table of Contents
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)





(1) Summary of Operations and Significant Accounting Policies
Summary of Operations
Shutterstock, Inc., together with its subsidiaries (collectively, the “Company” or “Shutterstock”), is a global technology company offering a creative platform, which provides high-quality digital content, tools and services to creative professionals. The digital content licensed by the Company’s customers includes: (a) imagery, consisting of licensed photographs, vectors, illustrations and video clips, which is used in visual communications, such as websites, digital and print marketing materials, corporate communications, books, publications and video content; and (b) music, consisting of high-quality music tracks and sound effects, which is often used to complement digital imagery. The Company licenses content to its customers. Contributors upload their content to the Company’s web properties in exchange for royalty payments based on customer download activity. The Company also offered digital asset management services through its cloud-based digital asset management platform (“Webdam”). As discussed in Note 3, on February 26, 2018, the Company completed a sale transaction, pursuant to which the buyer in the transaction acquired certain assets and assumed certain contracts and liabilities which constituted the Company’s digital asset management business (the “Sale of Webdam”).
Basis of Presentation
The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all information and footnotes required by GAAP for complete financial statements.
The interim Consolidated Balance Sheet as of September 30, 2019, Consolidated Statements of Operations, Comprehensive Income and Stockholders’ Equity for the three and nine months ended September 30, 2019 and 2018, and Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018, are unaudited. The Consolidated Balance Sheet as of December 31, 2018, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures required by GAAP. These unaudited interim financial statements have been prepared on a basis consistent with the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, which include all normal recurring adjustments necessary to fairly state the Company’s financial position as of September 30, 2019, its consolidated results of operations, comprehensive income and stockholders’ equity for the three and nine months ended September 30, 2019 and 2018, and its cash flows for the nine months ended September 30, 2019 and 2018. The financial data and the other financial information disclosed in the notes to the financial statements related to these periods are also unaudited. The results of operations for the nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2019 or for any other future annual or interim period.
These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on February 26, 2019. The unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain immaterial changes in presentation have been made to conform the prior period presentation to current period reporting.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Such estimates include, but are not limited to, the determination of the allowance for doubtful accounts, the volume of expected unused licenses for our subscription-based products, the assessment of recoverability of property and equipment, the fair value of acquired goodwill and intangible assets, the grant-date fair value of non-cash equity-based compensation, the assessment of recoverability of deferred tax assets, the measurement of income tax and contingent non-income tax liabilities and the determination of the incremental borrowing rate to calculate the lease liability.

9

Table of Contents
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)




Cash, Cash Equivalents and Restricted Cash
The following represents the Company’s cash and cash equivalents and restricted cash balances as of September 30, 2019 and December 31, 2018 (in thousands):
 
As of September 30, 2019
 
As of December 31, 2018
Cash and cash equivalents
$
285,396

 
$
230,852

Restricted cash
2,613

 
2,613

Total cash, cash equivalents and restricted cash
$
288,009

 
$
233,465


The Company’s cash and cash equivalents consist primarily of (i) cash on hand and bank deposits and (ii) money market accounts. These assets are stated at cost, which approximates fair value.
The Company’s restricted cash relates to security deposits related to the lease for its headquarters in New York City, which expires in 2029. The carrying value of restricted cash approximates fair value. Restricted cash is included as a component of other assets on the Consolidated Balance Sheets.
Allowance for Doubtful Accounts
The Company’s accounts receivable consists of customer obligations due under normal trade terms, carried at their face value less an allowance for doubtful accounts, if required. The Company determines its allowance for doubtful accounts based on an evaluation of the aging of its accounts receivable and on a customer-by-customer basis where appropriate. The Company’s reserve analysis contemplates the Company’s historical loss rate on receivables, specific customer situations and the economic environments in which the Company operates. During the nine months ended September 30, 2019, the Company reduced its allowance for doubtful accounts which included a $0.5 million benefit recorded to bad debt expense and $1.1 million related to write-offs and other adjustments. As of September 30, 2019 and December 31, 2018, the Company’s allowance for doubtful accounts was approximately $3.1 million and $4.7 million, respectively, which was included as a reduction of accounts receivable on the Consolidated Balance Sheets.
Chargeback and Sales Refund Allowance
The Company establishes a chargeback allowance and sales refund reserve allowance based on factors surrounding historical credit card chargeback trends, historical sales refund trends and other information. As of September 30, 2019 and December 31, 2018, the Company’s combined allowance for chargebacks and sales refunds was $0.3 million, which was included as a component of other current liabilities on the Consolidated Balance Sheets.
Revenue Recognition
The majority of the Company’s revenue is earned from the license of digital content. Digital content licenses are generally purchased on a monthly or annual subscription basis, whereby a customer pays for a predetermined quantity of content that may be downloaded over a specific period of time, or, on a transactional basis, whereby a customer pays for individual content licenses at the time of download. Prior to the Sale of Webdam, the Company also earned revenue from licensing hosted software services through Webdam’s cloud-based tools for businesses, which were purchased as part of a subscription.
The Company recognizes revenue upon the satisfaction of performance obligations, which occurs when (i) digital content is downloaded by a customer or (ii) hosted software services are provisioned and available to a customer. For digital content licenses, the Company recognizes revenue on both its subscription-based and transaction-based sales when content is downloaded, at which time the license is provided. In addition, management estimates expected unused licenses for subscription-based products and recognizes the revenue associated with the unused licenses throughout the subscription period. The estimate of unused licenses is based on historical download activity and future changes in the estimate could impact the timing of revenue recognition of the Company’s subscription products. Revenue associated with hosted software services is recognized ratably over the term of the license. The Company expenses contract acquisition costs as incurred, to the extent that the amortization period would otherwise be one year or less.
Collectability is reasonably assured at the time the electronic order or contract is entered. The majority of the Company’s customers purchase products by making an electronic payment with a credit card at the time of a transaction. Customer payments received in advance of revenue recognition are contract liabilities and are recorded as deferred revenue. Customers that do not pay in advance are invoiced and are required to make payments under standard credit terms. Collectability for customers who pay on credit terms allowing for payment beyond the date at which service commences is based on a credit evaluation for certain new customers and transaction history with existing customers. 

10

Table of Contents
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)




The Company recognizes revenue gross of contributor royalties because the Company is the principal in the transaction as it is the party responsible for the performance obligation and it controls the product or service before transferring it to the customer. The Company also licenses content to customers through third-party resellers. Third-party resellers sell the Company’s products directly to customers as the principal in those transactions. Accordingly, the Company recognizes revenue net of costs paid to resellers.
The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standard Update (“ASU”) 2014-09, as amended (“ASU 2014-09”), on January 1, 2018 using the modified retrospective approach, and prior period amounts were not restated. The effect of adoption of this new guidance on the Consolidated Balance Sheet as of January 1, 2018 was to reduce (i) prepaid expenses and other current assets by $3.7 million and (ii) deferred revenues by $9.9 million, with an offsetting $6.2 million increase in 2018 opening retained earnings.
Leasing
The Company records rent expense on a straight-line basis over the term of the related lease. Prior to the adoption of FASB ASU 2016-02, Leases (Topic 842), as amended (“ASC 842”), the difference between the rent expense recognized and the actual payments made in accordance with the operating lease agreement was recognized as a deferred rent liability on the Company’s Consolidated Balance Sheets. As of December 31, 2018, the Company had deferred rent of $11.3 million, which is included in other non-current liabilities on the Consolidated Balance Sheet.

Effective January 1, 2019, the Company adopted ASC 842. In accordance with ASC 842, the Company first determines if an arrangement contains a lease and the classification of that lease, if applicable, at inception. This standard requires the recognition of right-of-use (“ROU”) assets and lease liabilities for the Company’s operating leases. For contracts with lease and non-lease components, the Company has elected not to allocate the contract consideration, and to account for the lease and non-lease components as a single lease component. The Company has also elected not to recognize a lease liability or ROU asset for leases with a term of 12 months or less, and recognize lease payments for those short-term leases on a straight-line basis over the lease term in the Consolidated Statements of Operations. Operating leases are included in ROU assets, other current liabilities and lease liabilities (net of current portion) on the Consolidated Balance Sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments under the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The implicit rate within the Company’s leases is generally not determinable and therefore the incremental borrowing rate at the lease commencement date is utilized to determine the present value of lease payments. The determination of the incremental borrowing rate requires judgment. Management determines the incremental borrowing rate for each lease using the Company’s estimated borrowing rate, adjusted for various factors including level of collateralization, term and currency to align with the terms of the lease. The ROU asset also includes any lease prepayments, offset by lease incentives. Certain of the Company’s leases include options to extend or terminate the lease. An option to extend the lease is considered in connection with determining the ROU asset and lease liability when the Company is reasonably certain that the option will be exercised. An option to terminate is considered unless the Company is reasonably certain the option will not be exercised.
Recently Adopted Accounting Standard Updates
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires that the rights and obligations created by leases with a duration greater than 12 months be recorded as assets and liabilities on the balance sheet of the lessee. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company has adopted this standard as of January 1, 2019 using the modified retrospective approach for all leases entered into before the effective date. The Company has also elected the option, as permitted in ASU 2018-11, Leases (Topic 842): Targeted Improvements, whereby initial application of the new lease standard would occur at the adoption date and a cumulative-effect adjustment, if any, would be recognized to the opening balance of retained earnings in the period of adoption. For comparability purposes, the Company will continue to comply with previous disclosure requirements in accordance with existing lease guidance for all periods presented in the year of adoption.
The Company has elected the practical expedients permitted under the transition guidance which enabled the Company: (1) to carry forward the historical lease classification; (2) not to reassess whether expired or existing contracts are or contain leases; and (3) not to reassess the treatment of initial direct costs for existing leases. In addition, the Company has made an accounting policy election to keep leases with an initial term of 12 months or less off the balance sheet. Upon adoption of this standard on January 1, 2019, the Company recognized a total lease liability in the amount of $58.0 million, representing the

11

Table of Contents
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)




present value of the minimum rental payments remaining as of the adoption date and a right-of-use asset in the amount of $46.7 million.
Recently Issued Accounting Standard Updates
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU 2016-13”). ASU 2016-13, as amended, replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. The ASU is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. Adoption of this guidance is required, prospectively, for annual periods beginning after December 15, 2019, with early adoption permitted for annual periods beginning after December 15, 2018. The Company is evaluating the impact of adopting this new accounting standard on its financial statements.
In August 2018, the FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements (“ASU 2018-13”), which eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of the FASB’s disclosure framework project. Adoption of this guidance is required for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. The Company is evaluating the impact of adopting this new standard on its financial statements.
In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting For Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”), which aligns the requirements for capitalizing implementation costs in a cloud computing arrangement with the requirements for capitalizing implementation costs incurred for an internal-use software license. Adoption of this guidance is required for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years and early adoption is permitted. Entities are permitted to choose to adopt the new guidance (1) prospectively for eligible costs incurred on or after the date this guidance is first applied or (2) retrospectively. The Company is evaluating the impact of this new accounting standard on its financial statements.

(2) Fair Value Measurements and Other Long-term Investments
Fair Value Measurements
The Company had no assets or liabilities requiring fair value hierarchy disclosures as of September 30, 2019 or December 31, 2018.
Other Fair Value Measurements
The carrying amounts of cash, accounts receivable, restricted cash, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments. The Company’s non-financial assets, which include property and equipment, intangible assets and goodwill, are not required to be measured at fair value on a recurring basis. However, if the Company is required to evaluate the non-financial asset for impairment, whether due to certain triggering events or because annual impairment testing is required, a resulting asset impairment would require that the non-financial asset be recorded at fair value.
Other Long-term Investments
Investment in ZCool Technologies Limited (“ZCool”)
On January 4, 2018, the Company invested $15.0 million in convertible preferred shares issued by ZCool (the “Preferred Shares”), which is equivalent to a 25% fully diluted equity ownership interest. ZCool’s primary business is the operation of an e-commerce platform in China whereby customers can pay to license content contributed by creative professionals. ZCool has been the exclusive distributor of Shutterstock creative content in China since 2014.
ZCool is a variable interest entity that is not consolidated because the Company is not the primary beneficiary. The Preferred Shares are not deemed to be in-substance common stock and will be accounted for using the measurement alternative for equity investments with no readily determinable fair value. The Preferred Shares will be reported at cost, adjusted for impairments or any observable price changes in ordinary transactions with identical or similar investments issued by ZCool. As of September 30, 2019 and December 31, 2018, the Company’s total investment in ZCool is approximately $15.0 million, which is reported within other assets on the Consolidated Balance Sheet.


12

Table of Contents
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)




(3) Sale of Digital Asset Management Business
On February 26, 2018, the Company completed the Sale of Webdam for an aggregate purchase price of $49.1 million. Total cash received, net of $4.6 million transaction costs paid, was $44.3 million, inclusive of $2.5 million received during the nine months ended September 30, 2019, from the release of funds from escrow. During the three months ended March 31, 2018, the Company recognized a pre-tax gain on sale of approximately $38.6 million, which represents the excess of the net purchase price over the net assets transferred, less transaction costs.

(4) Property and Equipment
Property and equipment is summarized as follows (in thousands):
 
As of September 30, 2019
 
As of December 31, 2018
Computer equipment and software
$
158,527

 
$
148,104

Furniture and fixtures
10,136

 
10,020

Leasehold improvements
18,868

 
18,822

Property and equipment
187,531

 
176,946

Less accumulated depreciation
(124,376
)
 
(100,758
)
Property and equipment, net
$
63,155

 
$
76,188


Depreciation expense related to property and equipment was $10.8 million and $10.3 million for the three months ended September 30, 2019 and 2018, respectively, and $31.9 million and $29.7 million for the nine months ended September 30, 2019 and 2018, respectively. Cost of revenues includes depreciation expense of $9.6 million and $8.7 million for three months ended September 30, 2019 and 2018, respectively, and $28.2 million and $25.1 million for the nine months ended September 30, 2019 and 2018, respectively. General and administrative expense includes depreciation expense of $1.2 million and $1.6 million for three months ended September 30, 2019 and 2018, respectively, and $3.7 million and $4.6 million for the nine months ended September 30, 2019 and 2018, respectively.
Capitalized Internal-Use Software
The Company capitalized costs related to the development of internal-use software of $5.6 million and $6.4 million for the three months ended September 30, 2019 and 2018, respectively, and $17.8 million and $22.3 million for the nine months ended September 30, 2019 and 2018, respectively. Capitalized amounts are included as a component of property and equipment under computer equipment and software on the Consolidated Balance Sheets.
The portion of total depreciation expense related to capitalized internal-use software was $7.7 million and $6.6 million for the three months ended September 30, 2019 and 2018, respectively, and $22.5 million and $18.0 million for the nine months ended September 30, 2019 and 2018, respectively. Depreciation expense related to capitalized internal-use software is included in cost of revenue in the Consolidated Statements of Operations.
As of September 30, 2019 and December 31, 2018, the Company had capitalized internal-use software of $43.8 million and $48.5 million, respectively, net of accumulated depreciation, which was included in property and equipment, net.

(5) Goodwill and Intangible Assets
Goodwill
In 2018, the Company’s goodwill balance was allocated to four reporting units: Bigstock, Editorial, Images and Music. During the second quarter of 2019, due to changes in the Company’s reporting structure, which resulted in a change in the way management monitors the business, as well as key milestones achieved in the continued integration of the Company’s operations and technology platform, management concluded that the Company now operates with a single reporting unit. The Company evaluated its goodwill immediately prior and subsequent to the change in reporting units and concluded that no adjustment to the carrying value of goodwill was necessary. The aggregate goodwill for the legacy reporting units was assigned to the single content business reporting unit. The Company’s goodwill balance will continue to be tested for impairment annually on October 1 or upon a triggering event.

13

Table of Contents
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)




The following table summarizes the changes in the Company’s goodwill balance during the nine months ended September 30, 2019 (in thousands):
 
Goodwill
Balance as of December 31, 2018
$
88,576

Foreign currency translation adjustment
(542
)
Balance as of September 30, 2019
$
88,034



Intangible Assets
Intangible assets consisted of the following as of September 30, 2019 and December 31, 2018 (in thousands):
 
As of September 30, 2019
 
 
 
As of December 31, 2018
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Weighted
Average Life
(Years)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
Amortizing intangible assets:
 

 
 

 
 
 
 
 
 
Customer relationships
$
16,861

 
$
(8,379
)
 
9
 
$
17,360

 
$
(7,135
)
Trade name
6,192

 
(5,556
)
 
7
 
6,372

 
(3,719
)
Developed technology
4,652

 
(3,883
)
 
4
 
4,940

 
(3,712
)
Contributor content
21,640

 
(6,011
)
 
10
 
19,912

 
(4,653
)
Patents
259

 
(96
)
 
18
 
259

 
(84
)
Total
$
49,604

 
$
(23,925
)
 
 
 
$
48,843

 
$
(19,303
)

Amortization expense was $1.2 million and $1.4 million for the three months ended September 30, 2019 and 2018, respectively, and $5.4 million and $4.2 million for the nine months ended September 30, 2019 and 2018, respectively. Cost of revenue includes amortization expense of $0.5 million and $0.5 million for three months ended September 30, 2019 and 2018, respectively, and $1.4 million and $1.3 million for the nine months ended September 30, 2019 and 2018, respectively. General and administrative expense includes amortization expense of $0.7 million and $0.9 million for three months ended September 30, 2019 and 2018, respectively, and $4.0 million and $2.9 million for the nine months ended September 30, 2019 and 2018, respectively.
The Company determined that there was no indication of impairment of the intangible assets for any period presented. Estimated amortization expense is: $1.6 million for the remaining three months of 2019, $5.6 million in 2020, $4.8 million in 2021, $4.1 million in 2022, $2.8 million in 2023, $2.7 million in 2024 and $4.1 million thereafter.

(6) Accrued Expenses 
Accrued expenses consisted of the following (in thousands):
 
As of September 30, 2019
 
As of December 31, 2018
Compensation
$
18,761

 
$
15,153

Non-income taxes
10,038

 
7,885

Royalty tax withholdings
4,305

 
5,618

Other expenses
30,081

 
22,729

Total accrued expenses
$
63,185

 
$
51,385




14

Table of Contents
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)




(7) Stockholders’ Equity and Equity-Based Compensation
Stockholders’ Equity
Common Stock
During the nine months ended September 30, 2019 and 2018, the Company issued approximately 389,000 and 303,000 shares of common stock, respectively, primarily related to the exercise of stock options and the vesting of Restricted Stock Units (“RSUs”).
Treasury Stock
In October 2015, the Company’s Board of Directors approved a share repurchase program, authorizing the Company to purchase up to $100 million of its common stock. In February 2017, the Company’s Board of Directors approved an increase to the share repurchase program, authorizing the Company to repurchase up to an additional $100 million of its outstanding common stock. During the nine months ended September 30, 2019 and 2018, the Company did not repurchase any shares of its common stock under the share repurchase program. As of September 30, 2019, the Company had $100 million of remaining authorization for purchases under the share repurchase program.
The Company expects to fund future repurchases, if any, through a combination of cash on hand, cash generated by operations and future financing transactions, if appropriate. Accordingly, the share repurchase program is subject to the Company having available cash to fund repurchases. Under the program, management is authorized to purchase shares of the Company’s common stock from time to time through open market purchases or privately negotiated transactions at prevailing prices as permitted by securities laws and other legal requirements, and subject to market conditions and other factors.
Special Dividend
On August 1, 2018, the Company’s Board of Directors declared a special cash dividend of $3.00 per share (the “Special Dividend”), which was paid on August 29, 2018 to stockholders of record at the close of business on August 15, 2018. The aggregate payment made in connection with the Special Dividend was $104.9 million.
Equity-Based Compensation
The Company recognizes stock-based compensation expense for all share-based payment awards, including employee stock options and RSUs granted under the Company’s Amended and Restated 2012 Omnibus Equity Incentive Plan (the “2012 Plan”), based on the fair value of each award on the grant date.
The following table summarizes non-cash equity-based compensation expense, net of forfeitures, by financial statement line item included in the accompanying Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (in thousands): 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Cost of revenue
$
55

 
$
116

 
$
245

 
$
430

Sales and marketing
366

 
404

 
1,623

 
1,546

Product development
1,395

 
1,295

 
3,822

 
4,510

General and administrative
3,693

 
4,144

 
12,194

 
11,508

Total
$
5,509

 
$
5,959

 
$
17,884

 
$
17,994

The following table summarizes non-cash equity-based compensation expense, net of forfeitures, by award type included in the accompanying Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Stock options
$
1,327

 
$
1,521

 
$
4,394

 
$
4,487

RSUs
4,182

 
4,438

 
13,490

 
13,507

Total
$
5,509

 
$
5,959

 
$
17,884

 
$
17,994



15

Table of Contents
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)




Stock Option Awards
During the nine months ended September 30, 2019, the Company granted 83,102 options to purchase shares of its common stock with a weighted average exercise price of $39.07. As of September 30, 2019, there were approximately 313,000 options vested and exercisable with a weighted average exercise price of $34.82. As of September 30, 2019, the total unrecognized compensation charge related to non-vested options was approximately $2.3 million, which is expected to be recognized through 2023.
Restricted Stock Unit Awards
On March 26, 2019, the Compensation Committee of the Board of Directors (the “Compensation Committee”) of the Company approved a performance-based restricted stock unit award (“PRSU”) under the 2012 Plan. On April 1, 2019, the Company awarded approximately 202,000 PRSUs, each with a grant date fair value of $46.69 and corresponding to one target share, to certain of the Company’s officers. The number of shares that may eventually vest will be between 0% and 150% of a recipient’s target shares, depending on both the recipient’s continued service with the Company and the extent to which performance goals will have been achieved.
The value of the PRSUs is based on the Company’s stock price on the date of grant. Based upon the expected levels of achievement, stock-based compensation related to PRSUs is recognized on a straight-line basis over the requisite service period. The expected levels of achievement are reassessed over the requisite service period and, to the extent that the expected levels of achievement change, stock-based compensation is adjusted and recorded in the Consolidated Statements of Operations and the remaining unrecognized stock-based compensation is recognized over the remaining requisite service period.
During the nine months ended September 30, 2019, the Company had RSU grants (including PRSUs), net of forfeitures, of approximately 481,000. As of September 30, 2019, there are approximately 1,163,000 non-vested RSUs (including PRSUs) outstanding with a weighted average grant-date fair value of $45.25. As of September 30, 2019, the total unrecognized non-cash equity-based compensation charge related to the non-vested RSUs was approximately $29.9 million, which is expected to be recognized through 2022.
During the nine months ended September 30, 2019, shares of common stock with an aggregate value of $6.4 million were withheld upon vesting of RSUs and in connection with related remittance of employee withholding taxes to taxing authorities.

(8) Revenue
The Company distributes its digital content offerings through two primary channels:
E-commerce: The majority of customers purchase content licenses directly through the Company’s e-commerce platforms. E-commerce customers have the flexibility to purchase a subscription plan that is paid on a monthly or annual basis or to purchase content licenses on a transactional basis. These customers generally license content under the Company’s standard or enhanced licenses, with additional licensing options available to meet customers’ individual needs. E-commerce customers typically pay the full amount of the purchase price in advance or at the time of license, generally with a credit card.
Enterprise: Enterprise customers are mainly composed of creative professionals and organizations with unique content, licensing and workflow needs. These customers benefit from dedicated sales, service and research teams which provide a number of enhancements to their creative workflows including non-standard licensing rights, multi-seat access, invoicing and the ability to pay on credit terms, increased indemnification protection, multi-brand licensing packages and content licensed for use-cases outside of those available on the e-commerce platform.
In addition to the Company’s digital content offerings, the Company has historically generated revenue through other channels:
Other: The Company’s other sales channel includes revenue from Webdam’s digital asset management offerings which included tools to help organizations manage, search, distribute and collaborate on creative and other brand-building activities. Effective February 26, 2018, the Company completed the Sale of Webdam. See Note 3 for further information on the Sale of Webdam.

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Table of Contents
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)




The Company’s revenues by distribution channel for the three and nine months ended September 30, 2019 and 2018 are as follows (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
E-commerce
$
96,233

 
$
88,713

 
$
291,339

 
$
270,166

Enterprise
62,846

 
62,862

 
192,813

 
188,301

Other (1)

 

 

 
2,711

Total Revenues
$
159,079

 
$
151,575

 
$
484,152

 
$
461,178


(1)
On February 26, 2018, the Company completed the Sale of Webdam. 2018 amounts include revenue earned during the period from January 1, 2018 through February 26, 2018.
The September 30, 2019 deferred revenue balance will be earned as digital content is downloaded or upon the expiration of subscription-based products, and nearly all is expected to be earned within the next twelve months. $117.5 million of total revenue recognized for the nine months ended September 30, 2019 was reflected in deferred revenue as of December 31, 2018.

(9) Other Income / (Expense), net
The following table presents a summary of the Company’s other income and expense activity included in the accompanying Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Foreign currency loss
$
(626
)
 
$
(659
)
 
$
(1,356
)
 
$
(2,122
)
Impairment of long-term investment asset

 

 

 
(5,881
)
Interest income
1,091

 
876

 
3,301

 
2,003

Total other income / (expense)
$
465

 
$
217

 
$
1,945

 
$
(6,000
)


(10) Income Taxes
The Company’s effective tax rates yielded a net benefit of 35.3% and 7.7% for the three months ended September 30, 2019 and 2018, respectively, and a net expense of 3.3% and 19.5% for the nine months ended September 30, 2019 and 2018, respectively.
In the three and nine months ended September 30, 2019, the impact of discrete tax items decreased the effective tax rate by 51.6% and 13.0%, respectively. In the three and nine months ended September 30, 2019, the Company incurred a discrete tax benefit related primarily to the release of reserves for uncertain tax positions due to a lapse in the statute of limitations and the effect of the foreign-derived intangible income deduction claimed on the Company’s 2018 tax return, which was substantially completed in the third quarter of 2019.
In the three months ended September 30, 2018, the Company incurred a discrete tax benefit related primarily to the release of reserves for uncertain tax positions due to a lapse in the statute of limitations and the effect of the U.S. Research and Development tax credit claimed on the Company’s 2017 tax return, which was substantially completed in the third quarter of 2018. In the nine months ended September 30, 2018, the Company incurred a net discrete tax expense relating primarily to the gain on the Sale of Webdam, partially offset by a discrete tax benefit related to the impairment of a long-term investment asset. The net effect of these discrete items increased the effective tax rate for the three and nine months ended September 30, 2018 by 22.0% and 5.2%, respectively.
The Company has computed the provision for income taxes based on the estimated annual effective tax rate and the application of discrete items, if any, in the applicable period. The estimated annual effective tax rate differs from the statutory tax rate due primarily to the international provisions enacted as part of the Tax Cuts and Jobs Act and the U.S. Research and Development tax credit.

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Table of Contents
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)




During the three months ended September 30, 2019 and 2018 and during the nine months ended September 30, 2018, uncertain tax positions recorded by the Company were not significant. During the nine months ended September 30, 2019, uncertain tax positions recorded by the Company resulted in an expense of $1.0 million. To the extent the remaining uncertain tax positions are ultimately recognized, the Company’s effective tax rate may be impacted in future periods.
The Company recognizes interest expense and tax penalties related to unrecognized tax benefits in income tax expense in the Consolidated Statements of Operations. The Company’s accrual for interest and penalties related to unrecognized tax benefits was not significant for the three and nine months ended September 30, 2019 and 2018.
During the nine months ended September 30, 2019 and 2018, the Company paid net cash taxes of $1.5 million and $0.4 million, respectively.

(11) Net Income Per Share
Basic net income per share is computed using the weighted average number of shares of common stock outstanding for the period, excluding unvested RSUs and stock options. Diluted net income per share is based upon the weighted average shares of common stock outstanding for the period plus dilutive potential shares of common stock, including unvested RSUs and stock options using the treasury stock method.
The following table sets forth the computation of basic and diluted net income per share for the three and nine months ended September 30, 2019 and 2018 (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
4,934

 
$
7,447

 
$
15,755

 
$
39,774

Shares used to compute basic net income per share
35,309

 
34,991

 
35,219

 
34,897

Dilutive potential common shares
 
 
 
 
 
 
 
Stock options
65

 
148

 
91

 
125

Unvested restricted stock awards
167

 
431

 
202

 
398

Shares used to compute diluted net income per share
35,541

 
35,570

 
35,512

 
35,420

Basic net income per share
$
0.14

 
$
0.21

 
$
0.45

 
$
1.14

Diluted net income per share
$
0.14

 
$
0.21

 
$
0.44

 
$
1.12

 
 
 
 
 
 
 
 
Dilutive securities included in the calculation
844

 
1,477

 
942

 
1,403

Anti-dilutive securities excluded from the calculation
1,322

 
774

 
1,222

 
924



(12) Geographic Information
The following table presents the Company’s revenue based on customer location (in thousands): 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
North America
$
56,151

 
$
57,078

 
$
171,322

 
$
170,092

Europe
51,683

 
49,033

 
160,815

 
154,258

Rest of the world
51,245

 
45,464

 
152,015

 
136,828

Total revenue
$
159,079


$
151,575


$
484,152


$
461,178

 
The United States, included in North America in the above table, accounted for 32% and 34% of consolidated revenue for the three and nine months ended September 30, 2019 and 2018, respectively. No other country accounts for more than 10% of the Company’s revenue in any period presented.

18

Table of Contents
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)




The Company’s long-lived tangible assets were located as follows (in thousands