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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 June 30, 2020
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)
 ________________________________________________________
Delaware80-0812659
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareSSTKNew 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 filerSmaller 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 July 24, 2020, 35,695,665 shares of the registrant’s common stock, $0.01 par value per share, were outstanding.

1

Table of Contents       
Shutterstock, Inc.
FORM 10-Q
Table of Contents 
For the Quarterly Period Ended June 30, 2020
 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, future dividends, new or planned features, products or services, management strategies and the COVID-19 pandemic. You can identify many forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “aim,” “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 13, 2020, under the caption “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, which was filed with the SEC on April 28, 2020, and in our consolidated financial statements, related notes, and the other information appearing elsewhere in such Annual Report, this Quarterly 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.
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Table of Contents       
PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements.
Shutterstock, Inc.
Consolidated Balance Sheets
(In thousands, except par value amount)
(unaudited)
June 30,December 31,
20202019
ASSETS
Current assets:
Cash and cash equivalents$311,157  $303,261  
Accounts receivable, net of allowance of $3,608 and $3,579
48,744  47,016  
Prepaid expenses and other current assets26,590  26,703  
Total current assets386,491  376,980  
Property and equipment, net54,240  58,834  
Right-of-use assets42,097  45,453  
Intangible assets, net25,182  26,669  
Goodwill88,167  88,974  
Deferred tax assets, net13,727  14,387  
Other assets16,427  19,215  
Total assets$626,331  $630,512  
LIABILITIES AND STOCKHOLDERSEQUITY
Current liabilities:
Accounts payable$4,504  $6,104  
Accrued expenses51,554  53,864  
Contributor royalties payable24,248  25,193  
Deferred revenue138,229  141,922  
Other current liabilities10,347  18,811  
Total current liabilities228,882  245,894  
Lease liabilities44,280  47,313  
Other non-current liabilities9,669  9,160  
Total liabilities282,831  302,367  
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, $0.01 par value; 200,000 shares authorized; 38,245 and 38,055 shares issued and 35,687 and 35,497 shares outstanding as of June 30, 2020 and December 31, 2019, respectively
382  381  
Treasury stock, at cost; 2,558 shares as of June 30, 2020 and December 31, 2019
(100,027) (100,027) 
Additional paid-in capital319,412  312,824  
Accumulated comprehensive loss(8,414) (6,220) 
Retained earnings132,147  121,187  
Total stockholders’ equity343,500  328,145  
Total liabilities and stockholders’ equity$626,331  $630,512  
See Notes to Unaudited Consolidated Financial Statements.
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Table of Contents       
Shutterstock, Inc.
Consolidated Statements of Operations
(In thousands, except for per share data)
(unaudited)
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2020201920202019
Revenue$159,230  $161,741  $320,515  $325,073  
Operating expenses:
Cost of revenue63,811  68,526  132,934  137,744  
Sales and marketing35,557  44,488  78,217  88,934  
Product development12,485  13,594  25,554  28,580  
General and administrative24,832  32,063  55,484  58,646  
Total operating expenses136,685  158,671  292,189  313,904  
Income from operations22,545  3,070  28,326  11,169  
Other income, net149  584  662  1,480  
Income before income taxes22,694  3,654  28,988  12,649  
Provision for income taxes3,707  355  5,683  1,828  
Net income$18,987  $3,299  $23,305  $10,821  
Earnings per share:
Basic$0.53  $0.09  $0.65  $0.31  
Diluted$0.53  $0.09  $0.65  $0.30  
Weighted average shares outstanding:
Basic35,65235,23235,58735,174
Diluted35,90635,50435,89435,499
See Notes to Unaudited Consolidated Financial Statements.
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Table of Contents       
Shutterstock, Inc.
Consolidated Statements of Comprehensive Income
(In thousands)
(unaudited)
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2020201920202019
Net income$18,987  $3,299  $23,305  $10,821  
Foreign currency translation gain / (loss)254  (1,027) (2,194) (982) 
Other comprehensive gain / (loss)254  (1,027) (2,194) (982) 
Comprehensive income$19,241  $2,272  $21,111  $9,839  
 
See Notes to Unaudited Consolidated Financial Statements.
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Table of Contents       
Shutterstock, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands)
(unaudited)
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Common StockTreasury Stock
Three Months Ended June 30, 2020SharesAmountSharesAmountTotal
Balance at March 31, 202038,119  $381  2,558  $(100,027) $316,823  $(8,668) $119,218  $327,727  
Equity-based compensation—  —  —  —  3,636  —  —  3,636  
Issuance of common stock in connection with employee stock option exercises and RSU vesting180  2  —  —  627  —  —  629  
Common shares withheld for settlement of taxes in connection with equity-based compensation(54) (1) —  —  (1,674) —  —  (1,675) 
Cash dividends paid—  —  —  —  —  —  (6,058) (6,058) 
Other comprehensive loss—  —  —  —  —  254  —  254  
Net income—  —  —  —  —  —  18,987  18,987  
Balance at June 30, 202038,245  $382  2,558  $(100,027) $319,412  $(8,414) $132,147  $343,500  
Three Months Ended June 30, 2019
Balance at March 31, 201937,759  $378  2,558  $(100,027) $292,458  $(6,426) $108,601  $294,984  
Equity-based compensation—  —  —  —  7,751  —  —  7,751  
Issuance of common stock in connection with employee stock option exercises and RSU vesting83  1  —  —  4  —  —  5  
Common shares withheld for settlement of taxes in connection with equity-based compensation(26)   —  —  (1,091) —  —  (1,091) 
Other comprehensive income—  —  —  —  —  (1,027) —  (1,027) 
Net income—  —  —  —  —  —  3,299  3,299  
Balance at June 30, 201937,816  $379  2,558  $(100,027) $299,122  $(7,453) $111,900  $303,921  
Six Months Ended June 30, 2020
Balance at December 31, 201938,055  $381  2,558  $(100,027) $312,824  $(6,220) $121,187  $328,145  
Cumulative effect of accounting change (Note 1)—  —  —  —    —  (247) (247) 
Balance at January 1, 202038,055  $381  2,558  $(100,027) $312,824  $(6,220) $120,940  $327,898  
Equity-based compensation—  —  —  —  9,396  —  —  9,396  
Issuance of common stock in connection with employee stock option exercises and RSU vesting289  3  —  —  626  —  —  629  
Common shares withheld for settlement of taxes in connection with equity-based compensation(99) (2) —  —  (3,434) —  —  (3,436) 
Cash dividends paid—  —  —  —  —  —  (12,098) (12,098) 
Other comprehensive income—  —  —  —  —  (2,194) —  (2,194) 
Net income—  —  —  —  —  —  23,305  23,305  
Balance at June 30, 202038,245  $382  2,558  $(100,027) $319,412  $(8,414) $132,147  $343,500  
Six Months Ended June 30, 2019
Balance at December 31, 201837,618  $376  2,558  $(100,027) $291,710  $(6,471) $101,079  $286,667  
Equity-based compensation—  —  —  —  12,375  —  —  12,375  
Issuance of common stock in connection with employee stock option exercises and RSU vesting312  4  —  —  218  —  —  222  
Common shares withheld for settlement of taxes in connection with equity-based compensation(114) (1) —  —  (5,181) —  —  (5,182) 
Other comprehensive income—  —  —  —  —  (982) —  (982) 
Net income—  —  —  —  —  —  10,821  10,821  
Balance at June 30, 201937,816  $379  2,558  $(100,027) $299,122  $(7,453) $111,900  $303,921  
See Notes to Unaudited Consolidated Financial Statements.
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Table of Contents       
Shutterstock, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
 Six Months Ended
June 30,
 20202019
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income$23,305  $10,821  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization21,370  25,319  
Deferred taxes693  (1,312) 
Non-cash equity-based compensation9,396  12,375  
Bad debt expense1,086  (635) 
Changes in operating assets and liabilities:
Accounts receivable(3,279) (2,746) 
Prepaid expenses and other current and non-current assets49  1,944  
Accounts payable and other current and non-current liabilities(4,045) 1,899  
Long-term incentives related to acquisitions(7,759)   
Contributor royalties payable(840) 1,059  
Deferred revenue(3,633) (1,981) 
Net cash provided by operating activities$36,343  $46,743  
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures(13,966) (13,726) 
Proceeds from sale of Webdam, net  2,500  
Acquisition of content(1,577) (1,277) 
Security deposit release105  25  
Net cash used in investing activities$(15,438) $(12,478) 
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options629  218  
Cash paid related to settlement of employee taxes related to RSU vesting(3,436) (5,181) 
Payment of cash dividend(12,098)   
Net cash used in financing activities$(14,905) $(4,963) 
Effect of foreign exchange rate changes on cash(717) (1,085) 
Net increase in cash, cash equivalents and restricted cash5,283  28,217  
Cash, cash equivalents and restricted cash, beginning of period305,874  233,465  
Cash, cash equivalents and restricted cash, end of period$311,157  $261,682  
Supplemental Disclosure of Cash Information:
Cash paid for income taxes$927  $1,480  
See Notes to Unaudited Consolidated Financial Statements.
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Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)




(1) Summary of Operations and Significant Accounting Policies
Summary of Operations
Shutterstock (the “Company” or “Shutterstock”) is a global technology company offering a creative platform, which provides high-quality content, tools and services to creative professionals. The content licensed by the Company’s customers includes:
Images - consisting of photographs, vectors and illustrations. Images are typically used in visual communications, such as websites, digital and print marketing materials, corporate communications, books, publications and other similar uses.
Footage - consisting of video clips, premium footage filmed by industry experts and cinema grade video effects, available in HD and 4K formats. Footage is often integrated into websites, social media, marketing campaigns and cinematic productions.
Music - consisting of high-quality music tracks and sound effects, which are often used to complement images and footage.
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.
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 June 30, 2020, and the Consolidated Statements of Operations, Comprehensive Income and Stockholders’ Equity for the three and six months ended June 30, 2020 and 2019, and the Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019, are unaudited. The Consolidated Balance Sheet as of December 31, 2019, 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 June 30, 2020, and its consolidated results of operations, comprehensive income, stockholders’ equity for the three and six months ended June 30, 2020 and 2019, and its cash flows for the six months ended June 30, 2020 and 2019. 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 six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2020 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, 2019 included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on February 13, 2020. 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 and disclosed 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 used to calculate the lease liability.

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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 June 30, 2020 and December 31, 2019 (in thousands):
 As of June 30, 2020As of December 31, 2019
Cash and cash equivalents$311,157  $303,261  
Restricted cash  2,613  
Total cash, cash equivalents and restricted cash$311,157  $305,874  
The Company’s cash and cash equivalents consist of cash on hand and bank deposits. These assets are stated at cost, which approximates fair value.
As of March 31, 2020, the Company was no longer required to provide cash collateral for its letter of credit for its New York City headquarters, and, accordingly, these funds are no longer restricted.
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.
Historically, the Company used an incurred loss model to calculate its allowance for doubtful accounts. Upon the adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU 2016-13”) on January 1, 2020, the Company shifted to a current expected credit loss model.
During the six months ended June 30, 2020, the Company recorded bad debt expense of $1.1 million. As of June 30, 2020 and December 31, 2019, the Company’s allowance for doubtful accounts was approximately $3.6 million. The allowance for doubtful accounts is 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 June 30, 2020 and December 31, 2019, the Company’s combined allowance for chargebacks and sales refunds was $0.4 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 content. Content licenses are generally purchased on a monthly or annual 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. 
The Company recognizes revenue upon the satisfaction of performance obligations, which generally occurs when content is downloaded by a customer. The Company recognizes revenue on both its subscription-based and transaction-based products 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 estimated revenue associated with the unused licenses as digital content is downloaded and licenses are obtained for such content by the customer during 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. 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
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Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



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. 
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.
Recently Adopted Accounting Standard Updates
In June 2016, the FASB issued ASU 2016-13, which 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 was required, prospectively, for annual periods beginning after December 15, 2019, with early adoption permitted for annual periods beginning after December 15, 2018. The Company adopted ASU 2016-13, as amended, effective January 1, 2020 using the modified retrospective method and recorded a cumulative-effect adjustment of $0.2 million, net of tax, in retained earnings as of January 1, 2020.
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 was required for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted ASU 2018-13, effective January 1, 2020. The impact of adoption of this standard on the consolidated financial statements, including accounting policies, processes and systems, was not material.
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 was 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 adopted ASU 2018-15 on a prospective basis, effective January 1, 2020. The adoption of this standard is not expected to have a significant impact on our consolidated financial statements.
Recently Issued Accounting Standard Updates
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes (“ASU-2019-12”). ASU 2019-12 eliminates certain exceptions to the guidance in Topic 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes, enacted changes in tax laws or rates and clarifies the accounting transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. We are currently in the process of evaluating the effect that ASU 2019-12 will have on the Company's Consolidated 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 June 30, 2020 or December 31, 2019.
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Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



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 a 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 and its affiliates have 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 are accounted for using the measurement alternative for equity investments with no readily determinable fair value. The Preferred Shares are reported at cost, adjusted for impairments or any observable price changes in orderly transactions for identical or similar investments issued by ZCool.
On a quarterly basis, the Company evaluates the carrying value of the Preferred Shares for impairment, which includes an assessment of ZCool’s revenue growth, earnings performance, working capital and the general regional market conditions. As of June 30, 2020, no adjustments to the carrying value were identified as a result of this assessment. Changes in performance negatively impacting ZCool’s operating results and cash flows could result in the Company recording an impairment charge on the Preferred Shares in future periods.
As of June 30, 2020 and December 31, 2019, the Company’s total investment in ZCool is $15.0 million, which is reported within other assets on the Consolidated Balance Sheets.

(3) Property and Equipment
Property and equipment is summarized as follows (in thousands):
 As of June 30, 2020As of December 31, 2019
Computer equipment and software$179,580  $165,950  
Furniture and fixtures10,211  10,199  
Leasehold improvements19,260  19,203  
Property and equipment209,051  195,352  
Less accumulated depreciation(154,811) (136,518) 
Property and equipment, net$54,240  $58,834  
Depreciation expense related to property and equipment was $9.6 million and $10.5 million for the three months ended June 30, 2020 and 2019, respectively, and $18.9 million and $21.1 million for the six months ended June 30, 2020 and 2019, respectively. Cost of revenues includes depreciation expense of $8.6 million and $9.3 million for the three months ended June 30, 2020 and 2019, respectively, and $16.8 million and $18.6 million for the six months ended June 30, 2020 and 2019, respectively. General and administrative expense includes depreciation expense of $1.0 million and $1.2 million for the three months ended June 30, 2020 and 2019, respectively, and $2.1 million and $2.5 million for the six months ended June 30, 2020 and 2019, respectively.
Capitalized Internal-Use Software
The Company capitalized costs related to the development of internal-use software of $6.5 million and $5.8 million for the three months ended June 30, 2020 and 2019, respectively, and $13.1 million and $12.3 million for the six months ended June 30, 2020 and 2019, respectively. Capitalized amounts are included as a component of property and equipment under computer equipment and software on the Consolidated Balance Sheets.
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The portion of total depreciation expense related to capitalized internal-use software was $7.8 million and $7.5 million for the three months ended June 30, 2020 and 2019, respectively, and $14.9 million and $14.8 million for the six months ended June 30, 2020 and 2019, respectively. Depreciation expense related to capitalized internal-use software is included in cost of revenue in the Consolidated Statements of Operations.
As of June 30, 2020 and December 31, 2019, the Company had capitalized internal-use software of $39.9 million and $41.8 million, respectively, net of accumulated depreciation, which was included in property and equipment, net.

(4) Goodwill and Intangible Assets
Goodwill
The Company’s goodwill balance is attributable to its Content reporting unit and is tested for impairment annually on October 1 or upon a triggering event. No triggering events were identified during the six months ended June 30, 2020.
The following table summarizes the changes in the Company’s goodwill balance during the six months ended June 30, 2020 (in thousands):
 Goodwill
Balance as of December 31, 2019$88,974  
Foreign currency translation adjustment(807) 
Balance as of June 30, 2020$88,167  

Intangible Assets
Intangible assets consisted of the following as of June 30, 2020 and December 31, 2019 (in thousands):
 As of June 30, 2020As of December 31, 2019
 Gross
Carrying
Amount
Accumulated
Amortization
Weighted
Average Life
(Years)
Gross
Carrying
Amount
Accumulated
Amortization
Amortizing intangible assets:   
Customer relationships$16,982  $(9,648) 9$17,729  $(9,294) 
Trade name6,237  (5,778) 76,517  (5,941) 
Developed technology4,677  (4,368) 44,841  (4,226) 
Contributor content24,812  (7,883) 923,510  (6,626) 
Patents259  (108) 18259  (100) 
Total$52,967  $(27,785)  $52,856  $(26,187) 
Amortization expense was $1.2 million and $2.9 million for the three months ended June 30, 2020 and 2019, respectively, and $2.5 million and $4.2 million for the six months ended June 30, 2020 and 2019, respectively. Cost of revenue includes amortization expense of $0.7 million and $0.5 million for the three months ended June 30, 2020 and 2019, respectively, and $1.3 million and $0.9 million for the six months ended June 30, 2020 and 2019, respectively. General and administrative expense includes amortization expense of $0.5 million and $2.4 million for the three months ended June 30, 2020 and 2019, respectively, and $1.2 million and $3.3 million for the six months ended June 30, 2020 and 2019, respectively.
The Company determined that there was no indication of impairment of the intangible assets for any period presented. Estimated amortization expense is: $2.9 million for the remaining six months of 2020, $5.1 million in 2021, $4.8 million in 2022, $4.1 million in 2023, $3.2 million in 2024, $1.9 million in 2025 and $3.2 million thereafter.

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



(5) Accrued Expenses 
Accrued expenses consisted of the following (in thousands):
As of June 30, 2020As of December 31, 2019
Compensation$18,902  $20,776  
Non-income taxes16,316  15,332  
Website hosting and marketing fees8,343  8,657  
Other expenses7,993  9,099  
Total accrued expenses$51,554  $53,864  

(6) Stockholders’ Equity and Equity-Based Compensation
Stockholders’ Equity
Common Stock
The Company issued approximately 126,000 and 57,000 shares of common stock during the three months ended June 30, 2020 and 2019, respectively, and 190,000 and 198,000 for the six months ended June 30, 2020 and 2019, 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 six months ended June 30, 2020 and 2019, the Company did not repurchase any shares of its common stock under the share repurchase program. As of June 30, 2020, 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 share repurchase 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.
Dividends
The Company declared and paid cash dividends of $0.17 and $0.34 per share of common stock, or $6.1 million and $12.1 million, during the three and six months ended June 30, 2020.
On July 20, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.17 per share of outstanding common stock payable on September 17, 2020 to stockholders of record at the close of business on September 3, 2020. Future declaration of dividends are subject to the final determination of the Board of Directors, and will depend on, among other things, the Company’s future financial condition, results of operations, capital requirements, capital expenditure requirements, contractual restrictions, anticipated cash needs, business prospects, provisions of applicable law and other factors the Board of Directors may deem relevant.
Equity-Based Compensation
The Company recognizes stock-based compensation expense for all equity-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.
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Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)