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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, 2021
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 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 July 23, 2021, 36,622,833 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, 2021
 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, are forward-looking. Examples of forward-looking statements include, but are not limited to, statements regarding guidance, industry prospects, future business, future results of operations or financial condition, future dividends, our ability to consummate acquisitions and integrate the businesses we have acquired or may acquire into our existing operations, new or planned features, products or services, management strategies, our competitive position 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,” “predict,” “project,” “seek,” “potential,” “opportunities” and other similar expressions and the negatives of such expressions. However, not all forward-looking statements contain these words. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed or implied by the forward-looking statements contained herein. 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 (the “SEC”) on February 11, 2021 (our “2020 Form 10-K”), and in our consolidated financial statements, related notes, and the other information appearing elsewhere in the 2020 Form 10-K. 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 any forward-looking statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made only as of the date hereof, and we do not intend, and, except as required by law, we undertake no obligation to update any forward-looking statements contained herein 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,” “Shutterstock Editorial,” “Asset Assurance,” “Offset,” “Bigstock,” “Rex Features,” “PremiumBeat,” “TurboSquid” 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,
20212020
ASSETS
Current assets:
Cash and cash equivalents$411,046 $428,574 
Accounts receivable, net of allowance of $2,425 and $4,942
49,756 43,846 
Prepaid expenses and other current assets23,615 16,650 
Total current assets484,417 489,070 
Property and equipment, net49,990 50,906 
Right-of-use assets36,336 39,552 
Intangible assets, net46,409 25,765 
Goodwill149,069 89,413 
Deferred tax assets, net7,867 13,566 
Other assets21,764 21,372 
Total assets$795,852 $729,644 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$5,402 $2,442 
Accrued expenses73,889 67,909 
Contributor royalties payable30,317 26,336 
Deferred revenue161,935 149,843 
Other current liabilities10,993 10,399 
Total current liabilities282,536 256,929 
Lease liabilities38,678 41,620 
Other non-current liabilities9,304 9,170 
Total liabilities330,518 307,719 
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.01 par value; 200,000 shares authorized; 39,173 and 38,803 shares issued and 36,615 and 36,245 shares outstanding as of June 30, 2021 and December 31, 2020, respectively
392 389 
Treasury stock, at cost; 2,558 shares as of June 30, 2021 and December 31, 2020
(100,027)(100,027)
Additional paid-in capital360,404 360,939 
Accumulated comprehensive loss(7,391)(7,681)
Retained earnings211,956 168,305 
Total stockholders’ equity465,334 421,925 
Total liabilities and stockholders’ equity$795,852 $729,644 
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,
 2021202020212020
Revenue$189,912 $159,230 $373,193 $320,515 
Operating expenses:
Cost of revenue67,757 63,811 129,589 132,934 
Sales and marketing45,896 35,557 87,817 78,217 
Product development11,993 12,485 22,724 25,554 
General and administrative31,041 24,832 61,720 55,484 
Total operating expenses156,687 136,685 301,850 292,189 
Income from operations33,225 22,545 71,343 28,326 
Other income / (expense), net1,323 149 (1,139)662 
Income before income taxes34,548 22,694 70,204 28,988 
Provision for income taxes5,094 3,707 11,236 5,683 
Net income$29,454 $18,987 $58,968 $23,305 
Earnings per share:
Basic$0.81 $0.53 $1.62 $0.65 
Diluted$0.79 $0.53 $1.58 $0.65 
Weighted average shares outstanding:
Basic36,57035,65236,45335,587
Diluted37,18935,90637,21835,894
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,
 2021202020212020
Net income$29,454 $18,987 $58,968 $23,305 
Foreign currency translation gain / (loss)64 254 290 (2,194)
Other comprehensive gain / (loss)64 254 290 (2,194)
Comprehensive income$29,518 $19,241 $59,258 $21,111 
 
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
Income / (Loss)		Retained
Earnings
Common StockTreasury Stock
Three Months Ended June 30, 2021SharesAmountSharesAmountTotal
Balance at March 31, 202139,010 $391 2,558 $(100,027)$357,422 $(7,455)$190,173 $440,504 
Equity-based compensation— — — — 9,686 — — 9,686 
Issuance of common stock in connection with employee stock option exercises and RSU vesting244 2 — — 490 — — 492 
Common shares withheld for settlement of taxes in connection with equity-based compensation(81)(1)— — (7,194)— — (7,195)
Cash dividends paid— — — — — — (7,671)(7,671)
Other comprehensive income— — — — — 64 — 64 
Net income— — — — — — 29,454 29,454 
Balance at June 30, 202139,173 $392 2,558 $(100,027)$360,404 $(7,391)$211,956 $465,334 
Three Months Ended June 30, 2020
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 
Six Months Ended June 30, 2021
Balance at December 31, 202038,803 $389 2,558 $(100,027)$360,939 $(7,681)$168,305 $421,925 
Equity-based compensation— — — — 17,896 — — 17,896 
Issuance of common stock in connection with employee stock option exercises and RSU vesting601 6 — — 1,795 — — 1,801 
Common shares withheld for settlement of taxes in connection with equity-based compensation(231)(3)— — (20,226)— — (20,229)
Cash dividends paid— — — — — — (15,317)(15,317)
Other comprehensive loss— — — — — 290 — 290 
Net income— — — — — — 58,968 58,968 
Balance at June 30, 202139,173 $392 2,558 $(100,027)$360,404 $(7,391)$211,956 $465,334 
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 loss— — — — — (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 
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,
 20212020
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income$58,968 $23,305 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization20,243 21,370 
Deferred taxes1,782 693 
Non-cash equity-based compensation17,896 9,396 
Bad debt expense213 1,086 
Changes in operating assets and liabilities:
Accounts receivable(6,056)(3,279)
Prepaid expenses and other current and non-current assets(5,892)49 
Accounts payable and other current and non-current liabilities6,359 (4,045)
Long-term incentives related to acquisitions— (7,759)
Contributor royalties payable1,750 (840)
Deferred revenue11,953 (3,633)
Net cash provided by operating activities$107,216 $36,343 
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures(15,337)(13,966)
Business combination, net of cash acquired(72,165)— 
Acquisition of content(3,396)(1,577)
Security deposit (payment) / release(65)105 
Net cash used in investing activities$(90,963)$(15,438)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options1,801 629 
Cash paid related to settlement of employee taxes related to RSU vesting(20,229)(3,436)
Payment of cash dividend(15,317)(12,098)
Net cash used in financing activities$(33,745)$(14,905)
Effect of foreign exchange rate changes on cash(36)(717)
Net (decrease) / increase in cash, cash equivalents and restricted cash(17,528)5,283 
Cash, cash equivalents and restricted cash, beginning of period428,574 305,874 
Cash, cash equivalents and restricted cash, end of period$411,046 $311,157 
Supplemental Disclosure of Cash Information:
Cash paid for income taxes $9,495 $927 
See Notes to Unaudited Consolidated Financial Statements.
8
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)




(1) Summary of Operations and Significant Accounting Policies
Summary of Operations
Shutterstock, Inc. (the “Company” or “Shutterstock”) is a leading global creative platform offering full-service solutions, high-quality content, and tools for brands, businesses and media companies. The Company’s platform brings together users and contributors of content by providing readily-searchable content that our customers pay to license and by compensating contributors as their content is licensed.
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.
•3D Models - following the Company’s acquisition of TurboSquid, Inc. on February 1, 2021, Shutterstock now offers 3D models, used in industries such as advertising, media & video production, gaming, retail, education, design and architecture. See Note 3 Acquisition.
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, 2021, and the Consolidated Statements of Operations, Comprehensive Income and Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020, and the Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020, are unaudited. The Consolidated Balance Sheet as of December 31, 2020, 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, 2021, and its consolidated results of operations, comprehensive income and stockholders’ equity for the three and six months ended June 30, 2021 and 2020, and its cash flows for the six months ended June 30, 2021 and 2020. 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, 2021 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2021 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, 2020 included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on February 11, 2021. 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.
9
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



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 amount 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.
Cash and Cash Equivalents
The Company’s cash and cash equivalents consist primarily of cash on hand, bank deposits, money market funds and commercial paper.
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 (i) the aging of its accounts receivable considering historical receivables loss rates, (ii) on a customer-by-customer basis, where appropriate, and (iii) the economic environments in which the Company operates.
During the six months ended June 30, 2021, the Company recorded bad debt expense of $0.2 million. As of June 30, 2021 and December 31, 2020, the Company’s allowance for doubtful accounts was approximately $2.4 million and $4.9 million, respectively. The allowance for doubtful accounts is included as a reduction of accounts receivable on the Consolidated Balance Sheets.
The Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU 2016-13”) on 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.
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, 2021 and December 31, 2020, the Company’s combined allowance for chargebacks and sales refunds was $0.5 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 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
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.
Recently Adopted 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. The Company adopted ASU 2019-12, effective January 1, 2021. The impact of adoption of this standard on the consolidated financial statements, including accounting policies, processes and systems, was not material.

(2) Fair Value Measurements and Long-term Investments
Fair Value Measurements
The Company had no assets or liabilities requiring fair value hierarchy disclosures as of June 30, 2021 or December 31, 2020, except as noted below.
Cash Equivalents
Cash equivalents includes money market accounts and are classified as a level 1 measurement based on quoted prices in active markets for identical assets that the reporting entity can access at the measurement date. As of June 30, 2021 and December 31, 2020, the Company had cash equivalent balances of $280.1 million and $250.0 million, respectively.
Other Fair Value Measurements
The carrying amounts of cash and cash equivalents, accounts receivable, 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.
Long-term Investments
As of June 30, 2021 and December 31, 2020, the Company’s long-term investments were in equity securities with no readily determinable fair value, totaled $20.0 million, and were reported within other assets on the Consolidated Balance Sheets. The Company uses the measurement alternative for these equity investments and their carrying value is reported at cost, adjusted for impairments or any observable price changes in ordinary transactions with identical or similar investments.
On a quarterly basis, the Company evaluates the carrying value of its long-term investments for impairment, which includes an assessment of revenue growth, earnings performance, working capital and general market conditions. As of June 30, 2021, no adjustments to the carrying values of the Company’s long-term investments were identified as a result of this assessment. Changes in performance negatively impacting operating results and cash flows of these investments could result in the Company recording an impairment charge in future periods.

11
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



(3) Acquisition
TurboSquid, Inc.
On February 1, 2021, the Company completed its acquisition of all of the outstanding shares of TurboSquid, Inc. (“TurboSquid”), for approximately $77.3 million. The total purchase price was paid with existing cash on hand in the three months ended March 31, 2021. The transaction was accounted for using the acquisition method and, accordingly, the results of the acquired business have been included in the Company’s results of operations from the acquisition date. In connection with the acquisition, the Company incurred approximately $1.6 million of transaction costs.
TurboSquid is a Louisiana-based company that operates a marketplace offering more than one million 3D models, a marketplace for 2D images derived from 3D objects and a digital asset management solution. The Company believes this acquisition establishes Shutterstock as the premium destination for 3D models as well as 3D models in an easy-to-use 2D format.
The fair value of consideration transferred in this business combination was allocated to the intangible and tangible assets acquired and liabilities assumed at the acquisition date, with the remaining unallocated amount recorded as goodwill.
The aggregate purchase price was allocated to the assets acquired and liabilities assumed as follows (in thousands):
Assets acquired and liabilities assumed:Fair Value at Acquisition Date
Cash and cash equivalents$5,165 
Other assets1,553 
Property and equipment472 
Intangible assets21,500 
Goodwill59,491 
Total assets acquired$88,181 
Accounts payable, accrued expenses and other liabilities(4,685)
Contributor royalties payable(2,243)
Deferred tax liability(3,923)
Total liabilities assumed(10,851)
Net assets acquired$77,330 

The identifiable intangible assets, which include customer relationships, developed technology, trade names and contributor content, have a weighted average life of approximately 8.2 years and are being amortized on a straight-line basis. The fair value of the customer relationships was determined using a variation of the income approach known as the multiple-period excess earnings method. The fair value of the trade names and developed technology were determined using the relief-from-royalty method and the fair value of the contributor content was determined using the cost-to-recreate method.
The goodwill arising from the transaction is primarily attributable to expected operational synergies and is not deductible for income tax purposes.
12
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



The following unaudited pro forma consolidated financial information (in thousands) reflects the results of operations of the Company for the three and six months ended June 30, 2021 and 2020, as if the TurboSquid acquisition had been completed on January 1, 2020, after giving effect to certain purchase accounting adjustments, primarily related to intangible assets. These pro forma results have been prepared for comparative purposes only and are not necessarily indicative of what the Company’s operating results would have been, had the acquisitions actually taken place at the beginning of the previous annual period:
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Revenue
As Reported$189,912 $159,230 $373,193 $320,515 
Pro Forma189,912 164,762 375,256 331,485 
Income before income taxes
As Reported$34,548 $22,694 $70,204 $28,988 
Pro Forma34,548 22,728 71,505 27,569 

(4) Property and Equipment
Property and equipment is summarized as follows (in thousands):
 As of June 30, 2021As of December 31, 2020
Computer equipment and software$208,018 $193,141 
Furniture and fixtures10,246 10,235 
Leasehold improvements19,380 19,382 
Property and equipment237,644 222,758 
Less accumulated depreciation(187,654)(171,852)
Property and equipment, net$49,990 $50,906 

Depreciation expense related to property and equipment was $7.9 million and $9.6 million for the three months ended June 30, 2021 and 2020, respectively, and $15.9 million and $18.9 million for the six months ended June 30, 2021 and 2020, respectively. Cost of revenues included depreciation expense of $7.1 million and $8.6 million for the three months ended June 30, 2021 and 2020, respectively, and $14.2 million and $16.8 million for the six months ended June 30, 2021 and 2020, respectively. General and administrative expense included depreciation expense of $0.8 million and $1.0 million for the three months ended June 30, 2021 and 2020, respectively, and $1.7 million and $2.1 million for the six months ended June 30, 2021 and 2020, respectively.
Capitalized Internal-Use Software
The Company capitalized costs related to the development of internal-use software of $7.2 million and $6.5 million for the three months ended June 30, 2021 and 2020, respectively, and $14.2 million and $13.1 million for the six months ended June 30, 2021 and 2020, 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 $6.6 million and $7.8 million for the three months ended June 30, 2021 and 2020, respectively, and $13.3 million and $14.9 million for the six months ended June 30, 2021 and 2020, 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, 2021 and December 31, 2020, the Company had capitalized internal-use software of $38.9 million and $38.0 million, respectively, net of accumulated depreciation, which was included in property and equipment, net.

13
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



(5) 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, 2021.
The following table summarizes the changes in the Company’s goodwill balance during the six months ended June 30, 2021 (in thousands):
 Goodwill
Balance as of December 31, 2020$89,413 
Goodwill related to acquisitions$59,491 
Foreign currency translation adjustment165 
Balance as of June 30, 2021$149,069 

Intangible Assets
Intangible assets consisted of the following as of June 30, 2021 and December 31, 2020 (in thousands):
 As of June 30, 2021As of December 31, 2020
 Gross
Carrying
Amount		Accumulated
Amortization		Net
Carrying
Amount		Weighted
Average Life
(Years)		Gross
Carrying
Amount		Accumulated
Amortization		Net
Carrying
Amount
Amortizing intangible assets:   
Customer relationships$27,282 $(12,181)$15,101 10$18,132 $(11,032)$7,100 
Trade name8,926 (6,592)2,334 86,669 (6,328)341 
Developed technology14,763 (6,131)8,632 46,930 (5,039)1,891 
Contributor content32,623 (12,416)20,207 826,669 (10,378)16,291 
Patents259 (124)135 18259 (117)142 
Total$83,853 $(37,444)$46,409  $58,659 $(32,894)$25,765 

Amortization expense was $2.3 million and $1.2 million for the three months ended June 30, 2021 and 2020, respectively, and $4.4 million and $2.5 million for the six months ended June 30, 2021 and 2020, respectively. Cost of revenue included amortization expense of $1.2 million and $0.7 million for the three months ended June 30, 2021 and 2020, respectively, and $2.3 million and $1.3 million for the six months ended June 30, 2021 and 2020, respectively. General and administrative expense included amortization expense of $1.1 million and $0.5 million for the three months ended June 30, 2021 and 2020, respectively, and $2.0 million and $1.2 million for the six months ended June 30, 2021 and 2020, respectively.
The Company determined that there was no indication of impairment of the intangible assets for any period presented. Estimated amortization expense is: $4.6 million for the remaining six months of 2021, $8.9 million in 2022, $8.6 million in 2023, $7.6 million in 2024, $4.3 million in 2025, $3.2 million in 2026 and $9.2 million thereafter.

(6) Accrued Expenses 
Accrued expenses consisted of the following (in thousands):
As of June 30, 2021As of December 31, 2020
Compensation$27,016 $31,499 
Non-income taxes20,937 17,164 
Website hosting and marketing fees12,831 9,991 
Other expenses13,105 9,255 
Total accrued expenses$73,889 $67,909 

14
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)




(7) Stockholders’ Equity and Equity-Based Compensation
Stockholders’ Equity
Common Stock
The Company issued approximately 163,000 and 126,000 shares of common stock during the three months ended June 30, 2021 and 2020, respectively, and 370,000 and 190,000 for the six months ended June 30, 2021 and 2020, respectively, related to the exercise of stock options and the vesting of Restricted Stock Units.
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, 2021 and 2020, the Company did not repurchase any shares of its common stock under the share repurchase program. As of June 30, 2021, 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 $0.21 and $0.42 per share of common stock, or $7.7 million and $15.3 million, during the three and six months ended June 30, 2021, respectively, and $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, respectively.
On July 19, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.21 per share of outstanding common stock payable on September 16, 2021 to stockholders of record at the close of business on September 2, 2021. Future declarations 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 Restricted Stock Units and Performance-based Restricted Stock Units (“PRSUs” and, collectively with Restricted Stock Units, “RSUs”) and stock options 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.

15
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



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 six months ended June 30, 2021 and 2020 (in thousands): 
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Cost of revenue$194 $99 $358 $150 
Sales and marketing926 374 1,393 834 
Product development1,799 1,068 3,028 2,193 
General and administrative6,767 2,095 13,117 6,219 
Total$9,686 $3,636 $17,896 $9,396 
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 six months ended June 30, 2021 and 2020 (in thousands):
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Stock options$177 $414 $352 $1,730 
RSUs9,509 3,222 17,544 7,666 
Total$9,686 $3,636 $17,896 $9,396 
Stock Option Awards
During the six months ended June 30, 2021, no options to purchase shares of its common stock were granted. As of June 30, 2021, there were approximately 300,000 options vested and exercisable with a weighted average exercise price of $34.43. As of June 30, 2021, the total unrecognized compensation charge related to non-vested options was approximately $1.3 million, which is expected to be recognized through 2023.
Restricted Stock Unit Awards
During the six months ended June 30, 2021, the Company had RSU grants, net of forfeitures, of approximately 382,000. As of June 30, 2021, there are approximately 1,242,000 non-vested RSUs outstanding with a weighted average grant-date fair value of $56.89. As of June 30, 2021, the total unrecognized non-cash equity-based compensation charge related to the non-vested RSUs was approximately $56.7 million, which is expected to be recognized through 2024.
During the six months ended June 30, 2021 and 2020, shares of common stock with an aggregate value of $20.2 million and $3.4 million were withheld upon vesting of RSUs and paid in connection with related remittance of employee withholding taxes to taxing authorities.

(8) Revenue
The Company distributes its content offerings through two primary channels:
E-commerce: The majority of the Company’s customers license content directly through the Company’s self-service web properties. E-commerce customers have the flexibility to purchase a subscription plan that is paid on a monthly or annual basis or to license content 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: The Company also has a base of customers with unique content, licensing and workflow needs. These customers benefit from communication with dedicated sales professionals, service and research teams which provide a number of tailored enhancements to their creative workflows including non-standard licensing rights, multi-seat access, ability to pay on credit terms, multi-brand licensing packages, increased indemnification protection and content licensed for use-cases outside of those available on the E-commerce platform.
16
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



The Company’s revenues by distribution channel for the three and six months ended June 30, 2021 and 2020 are as follows (in thousands):
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
E-commerce$120,715 $98,164 $239,115 $197,900 
Enterprise69,197 61,066 134,078 122,615 
Total Revenues$189,912 $159,230 $373,193 $320,515 
The June 30, 2021 deferred revenue balance will be earned as content is downloaded or upon the expiration of subscription-based products, and nearly all is expected to be earned within the next twelve months. $99.2 million of total revenue recognized for the six months ended June 30, 2021 was reflected in deferred revenue as of December 31, 2020.

(9) Other Income / (Loss), 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 six months ended June 30, 2021 and 2020 (in thousands):
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Foreign currency gain / (loss)$1,277 $132 $(1,233)$(466)
Interest income, net46 17 94 1,128 
Total other income / (loss)$1,323 $149 $(1,139)$662 


(10) Income Taxes
The Company’s effective tax rates yielded a net expense of 14.7% and 16.3% for the three months ended June 30, 2021 and 2020, respectively, and a net expense of 16.0% and 19.6% for the six months ended June 30, 2021 and 2020, respectively.
During the three months ended June 30, 2021, the net effect of discrete items decreased the effective tax rate by 5.3%. For the six months ended June 30, 2021, the net effect of discrete items decreased the effective tax rate by 4.0%. The discrete items for the three and six months ended June 30, 2021, primarily relate to windfall tax benefits associated with equity-based compensation. Excluding discrete items, the Company’s effective tax rate would have been 20.0% for the three and six months ended June 30, 2021.
During the three months ended June 30, 2020, the net effect of discrete items decreased the effective tax rate by 0.3%. For the six months ended June 30, 2020, the effective tax rate increased by 1.6% as a result of a loss jurisdiction with no tax benefit. Discrete items further increased the effective tax rate by 1.4%. Excluding the discrete items, the Company’s effective tax rate would have been 16.6% for the three and six months ended June 30, 2020.
The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding a loss jurisdiction with no tax benefit and the application of discrete items, if any, in the applicable period.
During the three and six months ended June 30, 2021 and 2020, uncertain tax positions recorded by the Company were not significant. 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 six months ended June 30, 2021 and 2020.
During the six months ended June 30, 2021 and 2020, the Company paid net cash taxes of $9.5 million and $0.9 million, respectively.

17
Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



(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 six months ended June 30, 2021 and 2020 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Net income$29,454 $18,987 $58,968 $23,305 
Shares used to compute basic net income per share36,570 35,652 36,453 35,587 
Dilutive potential common shares
Stock options242 39