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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, 2023
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, 20th 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 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 28, 2023, 36,078,720 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, 2023
 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, future stock performance, 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 and our competitive position. You can identify many forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expects,” “aims,” “anticipates,” “believes,” “estimates,” “intends,” “plans,” “predicts,” “projects,” “seeks,” “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. Such risks and uncertainties include, among others, risks related to the Giphy, Inc. transaction, such as potential litigation; potential business disruption; the impact of transaction costs; our ability to achieve the benefits of the transaction, including monetization; our ability to effectively integrate the acquired operations into our operations; our ability to retain and hire key target personnel; and the effects of any unknown liabilities; as well as those risks 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 14, 2023 (our “2022 Form 10-K”) and in our consolidated financial statements, related notes, and the other information appearing elsewhere in the 2022 Form 10-K, 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,” “PicMonkey,” “Pattern89,” “Shotzr,” “Pond5,” “Splash News,” “Giphy,” “Shutterstock Studios” 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,
20232022
ASSETS
Current assets:
Cash and cash equivalents$87,146 $115,154 
Accounts receivable, net of allowance of $5,641 and $5,830
61,715 67,249 
Prepaid expenses and other current assets124,554 33,268 
Total current assets273,415 215,671 
Property and equipment, net59,434 54,548 
Right-of-use assets17,233 17,593 
Intangible assets, net202,090 173,087 
Goodwill383,045 381,920 
Deferred tax assets, net1,609 16,533 
Other assets67,435 21,832 
Total assets$1,004,261 $881,184 
LIABILITIES AND STOCKHOLDERSEQUITY
Current liabilities:
Accounts payable$6,095 $7,183 
Accrued expenses112,231 89,387 
Contributor royalties payable40,561 38,649 
Deferred revenue207,483 187,070 
Debt30,000 50,000 
Other current liabilities11,195 11,445 
Total current liabilities407,565 383,734 
Deferred tax liability, net17,255 4,465 
Lease liabilities33,382 35,611 
Other non-current liabilities26,552 9,892 
Total liabilities484,754 433,702 
Commitments and contingencies (Note 14)
Stockholders’ equity:
Common stock, $0.01 par value; 200,000 shares authorized; 39,884 and 39,605 shares issued and 36,028 and 35,829 shares outstanding as of June 30, 2023 and December 31, 2022, respectively
398 396 
Treasury stock, at cost; 3,856 and 3,776 shares as of June 30, 2023 and December 31, 2022, respectively
(204,008)(200,008)
Additional paid-in capital402,728 391,482 
Accumulated comprehensive loss(14,131)(15,439)
Retained earnings334,520 271,051 
Total stockholders’ equity519,507 447,482 
Total liabilities and stockholders’ equity$1,004,261 $881,184 
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,
 2023202220232022
Revenue$208,840 $206,872 $424,120 $406,004 
Operating expenses:
Cost of revenue84,416 77,019 162,579 146,470 
Sales and marketing48,392 54,229 95,919 107,558 
Product development29,218 17,162 44,624 30,788 
General and administrative38,099 33,088 71,914 63,896 
Total operating expenses200,125 181,498 375,036 348,712 
Income from operations8,715 25,374 49,084 57,292 
Bargain purchase gain41,940  41,940  
Other income / (expense), net726 (2,661)1,771 (1,903)
Income before income taxes51,381 22,713 92,795 55,389 
Provision for income taxes1,368 3,268 9,939 9,372 
Net income$50,013 $19,445 $82,856 $46,017 
Earnings per share:
Basic$1.39 $0.54 $2.31 $1.27 
Diluted$1.37 $0.53 $2.27 $1.25 
Weighted average common shares outstanding:
Basic36,04736,12335,95236,213
Diluted36,40636,57836,49036,890
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,
 2023202220232022
Net income$50,013 $19,445 $82,856 $46,017 
Foreign currency translation gain / (loss)(111)(4,945)1,308 (5,831)
Other comprehensive income / (loss)(111)(4,945)1,308 (5,831)
Comprehensive income$49,902 $14,500 $84,164 $40,186 
 
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, 2023SharesAmountSharesAmountTotal
Balance at March 31, 202339,690 $396 3,776 $(200,008)$395,934 $(14,020)$294,232 $476,534 
Equity-based compensation— — — — 14,943 — — 14,943 
Issuance of common stock in connection with employee stock option exercises and RSU vesting317 3 — — (3)— —  
Common shares withheld for settlement of taxes in connection with equity-based compensation(123)(1)— — (8,146)— — (8,147)
Repurchase of treasury shares— — 80 (4,000)— — — (4,000)
Cash dividends paid— — — — — — (9,725)(9,725)
Other comprehensive income— — — — — (111)— (111)
Net income— — — — — — 50,013 50,013 
Balance at June 30, 202339,884 $398 3,856 $(204,008)$402,728 $(14,131)$334,520 $519,507 
Three Months Ended June 30, 2022
Balance at March 31, 202239,352 $394 3,214 $(165,465)$373,765 $(11,674)$247,403 $444,423 
Equity-based compensation— — — — 7,044 — — 7,044 
Issuance of common stock in connection with employee stock option exercises and RSU vesting242 2 — — 566 — — 568 
Common shares withheld for settlement of taxes in connection with equity-based compensation(112)(1)— — (10,441)— — (10,442)
Repurchase of treasury shares— — 287 (18,335)— — — (18,335)
Cash dividends paid— — — — — — (8,665)(8,665)
Other comprehensive loss— — — — — (4,945)— (4,945)
Net income— — — — — — 19,445 19,445 
Balance at June 30, 202239,482 $395 3,501 $(183,800)$370,934 $(16,619)$258,183 $429,093 
Six Months Ended June 30, 2023
Balance at January 1, 202339,605 $396 3,776 $(200,008)$391,482 $(15,439)$271,051 $447,482 
Equity-based compensation— — — — 23,586 — — 23,586 
Issuance of common stock in connection with employee stock option exercises and RSU vesting461 4 — — (2)— — 2 
Common shares withheld for settlement of taxes in connection with equity-based compensation(182)(2)— — (12,338)— — (12,340)
Repurchase of treasury shares— — 80 (4,000)— — — (4,000)
Cash dividends paid— — — — — — (19,387)(19,387)
Other comprehensive loss— — — — — 1,308 — 1,308 
Net income— — — — — — 82,856 82,856 
Balance at June 30, 202339,884 $398 3,856 $(204,008)$402,728 $(14,131)$334,520 $519,507 
Six Months Ended June 30, 2022
Balance at January 1, 202239,209 $392 2,792 $(127,196)$376,537 $(10,788)$229,537 $468,482 
Equity-based compensation— — — — 14,870 — — 14,870 
Issuance of common stock in connection with employee stock option exercises and RSU vesting503 5 — — 563 — — 568 
Common shares withheld for settlement of taxes in connection with equity-based compensation(230)(2)— — (21,036)— — (21,038)
Repurchase of treasury shares— — 709 (56,604)— — — (56,604)
Cash dividends paid— — — — — — (17,371)(17,371)
Other comprehensive loss— — — — — (5,831)— (5,831)
Net income— — — — — — 46,017 46,017 
Balance at June 30, 202239,482 $395 3,501 $(183,800)$370,934 $(16,619)$258,183 $429,093 
See Notes to Unaudited Consolidated Financial Statements.
7

Table of Contents                            
Shutterstock, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
 Six Months Ended
June 30,
 20232022
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income$82,856 $46,017 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization38,102 31,575 
Deferred taxes(146)(3,602)
Non-cash equity-based compensation23,586 14,869 
Bad debt expense1,025 620 
Bargain purchase gain(41,940) 
Changes in operating assets and liabilities:
Accounts receivable5,709 (762)
Prepaid expenses and other current and non-current assets(29,834)(1,207)
Accounts payable and other current and non-current liabilities(4,144)(28,980)
Contributor royalties payable1,822 3,713 
Deferred revenue19,553 (2,669)
Net cash provided by operating activities$96,589 $59,574 
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures(22,870)(20,797)
Business combination, net of cash acquired(53,721)(212,096)
Cash received related to Giphy Retention Compensation15,752  
Asset acquisitions (150)
Acquisition of content(5,252)(6,999)
Security deposit payment(37)(281)
Net cash used in investing activities$(66,128)$(240,323)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of treasury shares(4,000)(56,937)
Proceeds from exercise of stock options3 568 
Cash paid related to settlement of employee taxes related to RSU vesting(14,545)(21,038)
Payment of cash dividend(19,387)(17,371)
Proceeds from credit facility30,000 50,000 
Repayment of credit facility(50,000) 
Payment of debt issuance costs (619)
Net cash used in financing activities$(57,929)$(45,397)
Effect of foreign exchange rate changes on cash(540)(3,825)
Net decrease in cash and cash equivalents(28,008)(229,971)
Cash and cash equivalents, beginning of period115,154 314,017 
Cash and cash equivalents, end of period$87,146 $84,046 
Supplemental Disclosure of Cash Information:
Cash paid for income taxes $6,795 $12,700 
Cash paid for interest429 90 
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 premier partner for transformative brands, digital media and marketing 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. Contributors upload their content to the Company’s web properties in exchange for royalty payments based on customer download activity. Beyond content, customers also leverage the Company’s platform to assist with the entire creative process from ideation through creative execution.
The Company’s key content offerings include:
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.
3 Dimensional (“3D”) Models - consisting of 3D models, used in a variety of industries such as advertising, media and video production, gaming, retail, education, design and architecture.

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, 2023, and the Consolidated Statements of Operations, Comprehensive Income and Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022, and the Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 are unaudited. The Consolidated Balance Sheet as of December 31, 2022, 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, 2023, and its consolidated results of operations, comprehensive income, stockholders’ equity and cash flows for the three and six months ended June 30, 2023 and 2022. 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, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2023 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, 2022 included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on February 14, 2023. 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 bank deposits.
Accounts Receivable and 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 and credit losses 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, 2023, the Company recorded bad debt expense of $1.0 million. As of June 30, 2023 and December 31, 2022, the Company’s allowance for doubtful accounts was approximately $5.6 million and $5.8 million, respectively. The allowance for doubtful accounts is included as a reduction of accounts receivable on the Consolidated Balance Sheets.
The Company has certain customer arrangements that contain financing elements. Interest income earned from these financing receivables is recorded on the effective interest method and is included within interest income on the Consolidated Statements of Operations. As of June 30, 2023, approximately $14.6 million of financing receivables were included in Accounts receivable on the Consolidated Balance Sheets.
In addition, as of June 30, 2023 and December 31, 2022, one customer accounted for approximately 15% and 22% of the accounts receivable balance, respectively. No other customers accounted for or exceeded 10% of the accounts receivable balance at these dates.
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, 2023 and December 31, 2022, 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 also generates revenue from tools made available through the Company’s platform.
For contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation based on a relative standalone selling price. The standalone selling price is determined based on the price at which the performance obligation is sold separately, or if not observable through past transactions, is estimated taking into account available information including internally approved pricing guidelines and pricing information of comparable products.
The Company recognizes revenue upon the satisfaction of performance obligations. The Company recognizes revenue on both its subscription-based and transaction-based products when content is downloaded by a customer, at which time the license is provided. In addition, the Company estimates expected unused licenses for subscription-based products and recognizes the 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. For revenue associated with tools available through the Company’s platform, revenue is recognized on a straight-line basis over the
10

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



subscription period. The Company expenses contract acquisition costs as incurred, to the extent that the amortization period would otherwise be one year or less.
Collectability is probable at the time the electronic order or contract is entered. A significant portion of the Company’s customers purchase products by making electronic payments with a credit card at the time of the 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. 
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.

(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, 2023 or December 31, 2022, except as noted below.
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. Debt consists of principal amounts outstanding under our credit facility, which approximates fair value as underlying interest rates are reset regularly based on current market rates and is classified as Level 2. The Company’s non-financial assets, which include long-lived assets, 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, 2023 and December 31, 2022, 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, 2023, 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.

(3) Acquisitions
Giphy, Inc.
On May 22, 2023, the Company entered into a Stock Purchase Agreement with Meta Platforms, Inc. (“Meta”) dated May 22, 2023 (the “Purchase Agreement”). On June 23, 2023, the Company completed its acquisition of all of the outstanding shares of Giphy, Inc. (“Giphy”) from Meta. The consideration payable by the Company pursuant to the Purchase Agreement is $53 million in net cash, in addition to cash acquired, assumed debt and other working capital adjustments. The consideration was paid with existing cash on hand. Giphy is a New York-based company that operates a collection of GIFs and stickers that supplies casual conversational content. The Company believes its acquisition of Giphy extends Shutterstock’s audience touchpoints beyond primarily professional marketing and advertising use cases and expands into casual conversations.
11

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



In January 2023, the United Kingdom Competition and Markets Authority (the “CMA”) issued its final order requiring Meta to divest its ownership of Giphy, which Meta acquired in 2020. In connection with the closing of the acquisition, whose terms were preapproved by the CMA, the Company and Meta entered into a transitional services agreement (the “TSA”) pursuant to which Meta is responsible for certain costs related to retention of Giphy employees, including (i) recurring salary, bonus, and benefits through August 2024, which would be $35.6 million if all employees are retained through August 2024, and (ii) nonrecurring items, totaling $87.9 million, comprised of one-time employment inducement bonuses and the cash value of unvested Meta equity awards (the “Giphy Retention Compensation”).
The Giphy Retention Compensation will be paid to the individuals for being employees of the Company subsequent to the completion of the acquisition. Accordingly, it was determined that the payments by the Company are for future service requirements and will be reflected as operating expenses, less any amounts earned by the employees prior to the acquisition, in the Company’s Statements of Operations as incurred. The Giphy Retention Compensation is reflected as a reduction of the purchase price and has been funded into an escrow account.
The Giphy purchase price will result in net cash to be received by the Company, is as follows:
Purchase Price
Purchase price$53,000 
Cash acquired and other working capital adjustments4,750 
Cash paid on closing$57,750 
Fair value of Giphy Retention Compensation contingent consideration1
(98,723)
Fair value of consideration attributable to pre-combination service2
34,972 
Net purchase price$(6,001)
1 - This amount consists of $123.5 million of Giphy Retention Compensation, adjusted for $18.9 million of income tax obligations associated with the receipt of the Giphy Retention Compensation and $5.9 million for the time value of money.
2 - Relates to the cash value of replaced unvested Meta equity awards attributable to pre-combination services.
Upon closing of the acquisition, the Company also entered into an agreement with Meta whereby the Company will provide Meta with Giphy content through API services for a period of two years. The Company allocated and deferred $30 million of the business combination proceeds to this agreement, which will be recognized as revenue as services are provided.
The identifiable intangible assets, which include developed technology and the trade name have weighted average useful lives of approximately 4.0 years and 15.0 years, respectively. The fair value of the developed technology was determined using the cost to recreate method, and the fair value of the trade name was determined using the relief-from-royalty method.
The Giphy transaction was accounted for using the acquisition method and, accordingly, the results of the acquired business has been included in the Company’s results of operations from the acquisition date. The fair value of consideration transferred in this business combination has been allocated to the intangible and tangible assets acquired and liabilities assumed at the acquisition date, with the excess of the fair value of the net assets acquired over the net consideration received recorded as a bargain purchase gain. The identifiable intangible assets of these acquisitions are being amortized on a straight-line basis.
12

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



The aggregate purchase price for this acquisition has been allocated to the assets acquired and liabilities assumed as follows (in thousands):
Assets acquired and liabilities assumed:
Giphy1
Cash and cash equivalents$4,030 
Prepaid expenses and other current assets1,416 
Right of use assets1,243 
Intangible assets:
Trade name21,000 
Developed technology21,500 
Intangible assets42,500 
Other assets1,647 
Total assets acquired$50,836 
Accounts payable, accrued expenses and other liabilities(4,949)
Deferred tax liability(8,858)
Lease liability(1,090)
Total liabilities assumed(14,897)
Net assets acquired$35,939 
Net purchase price(6,001)
Bargain purchase gain$41,940 
1 - The measurement and allocation of the purchase price is preliminary and will be finalized within the allowable measurement period once the Company finalizes its assessment of fair value of intangible assets, income tax balances and other assets acquired and liabilities assumed.

The Company recognized a non-taxable bargain purchase gain of $41.9 million, representing the excess of the fair value of the net assets acquired in addition to the net consideration to be received from Meta. The bargain purchase gain is the result of the CMA’s regulatory order requiring Meta’s divestiture of Giphy and the Giphy Retention Compensation payments. In connection with the acquisition, the Company incurred approximately $3.0 million of transaction costs, which is included in general and administrative expenses on the Consolidated Statements of Operations.
As of June 30, 2023, Shutterstock’s receivable of $101.9 million, is against an escrow fully funded by Meta. $71.7 million and $30.2 million are included within Prepaid expenses and other current assets and Other assets, respectively, on the Consolidated Balance Sheet.

2022 Acquisitions
Pond5, Inc.
On May 11, 2022, the Company completed its acquisition of all of the outstanding shares of Pond5, for approximately $218.0 million. The total purchase price was paid with existing cash on hand as well as a $50 million drawdown on the Company’s revolving credit facility. In connection with the acquisition, the Company incurred approximately $4.0 million of transaction costs, which is included in general and administrative expenses on the Consolidated Statements of Operations.
Pond5 is a New York based company that operates a video-first content marketplace for royalty-free and editorial video. The Company believes its acquisition of this video-first content marketplace provides expanded offerings across footage, image and music.
The identifiable intangible assets, which include customer relationships, developed technology and trade names have weighted average useful lives of approximately 14.2 years, 5 years and 10 years, respectively. The goodwill arising from the transaction is primarily attributable to expected operational synergies and is not deductible for income tax purposes.

13

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



Splash News
On May 28, 2022, the Company completed its acquisition of all of the outstanding shares of Splash News, for approximately $6.3 million. The total purchase price was paid with existing cash on hand. In connection with the acquisition, the Company incurred approximately $0.3 million of transaction costs, which is included in general and administrative expenses on the Consolidated Statements of Operations.
Splash News is a United Kingdom based entertainment news network and is a source for image and video content across celebrity, red carpet and live events. The Company believes this acquisition expands Shutterstock Editorial’s Newsroom offering for access to premium exclusive content.
The identifiable intangible asset, developed technology, has a useful life of approximately 4 years. The goodwill arising from the transaction is primarily attributable to expected operational synergies and is not deductible for income tax purposes.
The Pond5 and Splash News transactions were accounted for using the acquisition method and, accordingly, the results of the acquired businesses have been included in the Company’s results of operations from the respective acquisition dates. The fair value of consideration transferred in these business combinations has been allocated to the intangible and tangible assets acquired and liabilities assumed at the acquisition date, with the remaining unallocated amount recorded as goodwill. The identifiable intangible assets of these acquisitions 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 name was determined using the relief-from-royalty method, and the fair value of the developed technology was determined using the relief-from-royalty and the cost to recreate methods.
The aggregate purchase price for these acquisitions has been allocated to the assets acquired and liabilities assumed as follows (in thousands):
Assets acquired and liabilities assumed:
Pond51
Splash NewsTotal
Cash and cash equivalents$11,675 $180 $11,855 
Accounts receivable1,273 500 $1,773 
Other assets1,102 525 1,627 
Right of use asset1,674  1,674 
Intangible assets:
Customer relationships34,900  34,900 
Trade name5,300  5,300 
Developed technology27,600 1,263 28,863 
Intangible assets67,800 1,263 69,063 
Goodwill158,957 5,565 164,522 
Total assets acquired$242,481 $8,033 $250,514 
— 
Accounts payable, accrued expenses and other liabilities(9,304)(1,528)(10,832)
Contributor royalties payable(3,039)(3,039)
Deferred revenue(3,705) (3,705)
Deferred tax liability(6,381)(189)(6,570)
Lease liability(2,038) (2,038)
Total liabilities assumed(24,467)(1,717)(26,184)
Net assets acquired$218,014 $6,316 $224,330 
____________________________________________________
1 During the three months ended September 30, 2022, the Company updated its preliminary allocation of the Pond5 purchase price to the assets acquired and liabilities assumed. This resulted in a (i) $4.0 million increase to goodwill, (ii) a $4.1 million decrease to intangible assets, including a $7.0 million decrease to the value of customer relationships, partially offset by a $2.3 million increase to the value of the developed technology, and (iii) other immaterial adjustments.



14

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



Pro-Forma Financial Information (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, 2023 and 2022, respectively, as if the Giphy acquisition had been completed on January 1, 2022 and as if the Pond5 and Splash News acquisitions had been completed on January 1, 2021, after giving effect to certain purchase accounting adjustments, primarily related to bargain purchase gain, Giphy Retention Compensation - non-recurring, intangible assets and transaction costs. These pro forma results have been prepared for comparative purposes only and are based on estimates and assumptions that have been made solely for purposes of developing such pro forma information 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,
2023202220232022
Revenue
As Reported$208,840 $206,872 $424,120 $406,004 
Pro Forma213,840 218,452 434,120 436,287 
Income before income taxes
As Reported$51,381 $22,713 $92,795 $55,389 
Pro Forma15,511 9,318 42,137 48,686 


(4) Property and Equipment
Property and equipment is summarized as follows (in thousands):
 As of June 30, 2023As of December 31, 2022
Computer equipment and software$284,099 $261,067 
Furniture and fixtures10,637 10,328 
Leasehold improvements18,921 18,635 
Property and equipment313,657 290,030 
Less accumulated depreciation(254,223)(235,482)
Property and equipment, net$59,434 $54,548 

Depreciation expense related to property and equipment was $9.1 million and $8.3 million for the three months ended June 30, 2023 and 2022, respectively, and $18.2 million and $16.3 million for the six months ended June 30, 2023 and 2022, respectively. Cost of revenues included depreciation expense of $8.7 million and $7.5 million for the three months ended June 30, 2023 and 2022, respectively, and $17.3 million and $14.7 million for the six months ended June 30, 2023 and 2022, respectively. General and administrative expense included depreciation expense of $0.4 million and $0.8 million for the three months ended June 30, 2023 and 2022, respectively, and $0.9 million and $1.6 million for the six months ended June 30, 2023 and 2022, respectively.
Capitalized Internal-Use Software
The Company capitalized costs related to the development of internal-use software of $11.3 million and $10.6 million for the three months ended June 30, 2023 and 2022, respectively, and $21.6 million and $20.1 million for the six months ended June 30, 2023 and 2022, 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 $8.4 million and $7.2 million for the three months ended June 30, 2023 and 2022, respectively, and $16.8 million and $14.0 million for the six months ended June 30, 2023 and 2022, respectively. Depreciation expense related to capitalized internal-use software is included in cost of revenue in the Consolidated Statements of Operations.
15

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



As of June 30, 2023 and December 31, 2022, the Company had capitalized internal-use software of $54.9 million and $50.1 million, respectively, net of accumulated depreciation, which was included in property and equipment, net.

(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, 2023.
The following table summarizes the changes in the Company’s goodwill balance during the six months ended June 30, 2023 (in thousands):
 Goodwill
Balance as of December 31, 2022$381,920 
Foreign currency translation adjustment1,125 
Balance as of June 30, 2023$383,045 

Intangible Assets
Intangible assets consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):
 As of June 30, 2023As of December 31, 2022
 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$89,952 $(23,262)$66,690 12$88,996 $(19,168)$69,828 
Trade name37,864 (8,014)29,850 1216,588 (7,209)9,379 
Developed technology117,561 (47,945)69,616 494,872 (35,288)59,584 
Contributor content59,747 (23,916)35,831 854,284 (20,098)34,186 
Patents259 (156)103 18259 (149)110 
Total$305,383 $(103,293)$202,090  $254,999 $(81,912)$173,087 

Amortization expense was $10.1 million and $8.2 million for the three months ended June 30, 2023 and 2022, respectively, and $19.9 million and $15.3 million for the six months ended June 30, 2023 and 2022, respectively. Cost of revenue included amortization expense of $9.4 million and $7.6 million for the three months ended June 30, 2023 and 2022, respectively, and $18.6 million and $14.2 million for the six months ended June 30, 2023 and 2022, respectively. General and administrative expense included amortization expense of $0.7 million and $0.6 million for the three months ended June 30, 2023 and 2022, respectively, and $1.3 million and $1.1 million for the six months ended June 30, 2023 and 2022, respectively.
The Company determined that there was no indication of impairment of the intangible assets for any period presented. Estimated amortization expense is: $23.2 million for the remaining six months of 2023, $39.6 million in 2024, $29.1 million in 2025, $26.8 million in 2026, $17.9 million in 2027, $12.6 million in 2028 and $53.0 million thereafter.

16

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



(6) Accrued Expenses 
Accrued expenses consisted of the following (in thousands):
As of June 30, 2023As of December 31, 2022
Compensation$58,246 $40,314 
Non-income taxes22,411 24,390 
Website hosting and marketing fees8,507 6,608 
Other expenses23,067 18,075 
Total accrued expenses$112,231 $89,387 


(7) Debt
On May 6, 2022, the Company entered into a five-year $100 million unsecured revolving loan facility (the “Credit Facility”) with Bank of America, N.A., as Administrative Agent and other lenders. The Credit Facility includes a letter of credit sub-facility and a swingline facility and it also permits, subject to the satisfaction of certain conditions, up to $100 million of additional revolving loan commitments with the consent of the Administrative Agent.
At the Company’s option, revolving loans accrue interest at a per annum rate based on either (i) the base rate plus a margin ranging from 0.125% to 0.500%, determined based on the Company’s consolidated leverage ratio or (ii) the Term Secured Overnight Financing Rate (“SOFR”) (for interest periods of 1, 3 or 6 months) plus a margin ranging from 1.125% to 1.5%, determined based on the Company’s consolidated leverage ratio. The Company is also required to pay an unused commitment fee ranging from 0.150% to 0.225%, determined based on the Company’s consolidated leverage ratio. In connection with the execution of this agreement, the Company paid debt issuance costs of approximately $0.6 million.
As of June 30, 2023 and December 31, 2022, the Company had $30 million and $50 million, respectively, of outstanding borrowings under the Credit Facility. As of June 30, 2023, the Company had a remaining borrowing capacity of $68 million, net of standby letters of credit. For the three and six months ended June 30, 2023, the Company recognized interest expense of $0.5 million and $0.7 million, respectively.
The Credit Facility contains financial covenants and requirements restricting certain of the Company’s activities, which are usual and customary for this type of credit facility. The Company is also required to maintain compliance with a consolidated leverage ratio and a consolidated interest coverage ratio, in each case, determined in accordance with the terms of the Credit Facility. As of June 30, 2023, the Company was in compliance with these covenants.

(8) Stockholders’ Equity and Equity-Based Compensation
Stockholders’ Equity
Common Stock
The Company issued approximately 194,000 and 130,000 shares of common stock during the three months ended June 30, 2023 and 2022, 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 (the “2015 Share Repurchase Program”), authorizing the Company to repurchase 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. As of December 31, 2022, the Company had fully utilized its authorization for repurchases under the 2015 Share Repurchase Program.
In June 2023, the Company’s Board of Directors approved a share repurchase program (the “2023 Share Repurchase Program”), authorizing the Company to purchase up to $100 million of its common stock.
17

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



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.
During the three and six months ended June 30, 2023, the Company repurchased approximately 80,400 shares of its common stock at an average cost of $49.78 under the 2023 Share Repurchase Program. During the three and six months ended June 30, 2022, the Company repurchased approximately 286,700 and 708,700 shares of its common stock at an average cost of $63.95 and $79.87, respectively, under the 2015 Share Repurchase Program.
Dividends
The Company declared and paid cash dividends of $0.27 and $0.54 per share of common stock, or $9.7 million and $19.4 million during the three and six months ended June 30, 2023, respectively, and $0.24 and $0.48 per share of common stock, or $8.7 million and $17.4 million, during the three and six months ended June 30, 2022, respectively.
On July 17, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.27 per share of outstanding common stock payable on September 14, 2023 to stockholders of record at the close of business on August 31, 2023. 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 compensation awards, including employee Restricted Stock Units and Performance-based Restricted Stock Units (“PRSUs” and, collectively with Restricted Stock Units, “RSUs”) and stock options, based on the fair value of each award on the grant date. Awards granted prior to June 1, 2022 were granted under the Company’s Amended and Restated 2012 Omnibus Equity Incentive Plan (the “2012 Plan”). At the Annual Meeting held on June 2, 2022, the Company’s stockholders approved the 2022 Omnibus Equity Incentive Plan (the “2022 Plan”). Awards granted subsequent to June 2, 2022 were granted under the 2022 Plan.
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, 2023 and 2022 (in thousands): 
 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
Cost of revenue$306 $156 $490 $234 
Sales and marketing2,487 1,629 3,091 2,557 
Product development4,221 2,557 6,669 4,338 
General and administrative7,929 2,701 13,336 7,740 
Total$14,943 $7,043 $23,586 $14,869 
For the three and six months ended June 30, 2023 and 2022, substantially all of the Company’s non-cash equity-based compensation expense related to RSUs.
Stock Option Awards
During the six months ended June 30, 2023, no options to purchase shares of its common stock were granted. As of June 30, 2023, there were approximately 303,000 options vested and exercisable with a weighted average exercise price of $34.54.
18

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



Restricted Stock Unit Awards
During the six months ended June 30, 2023, the Company had RSU grants, net of forfeitures, of approximately 965,000. As of June 30, 2023, there are approximately 2,225,000 non-vested RSUs outstanding with a weighted average grant-date fair value of $69.87. As of June 30, 2023, the total unrecognized non-cash equity-based compensation expense related to the non-vested RSUs was approximately $116.5 million, which is expected to be recognized through 2027.
During the six months ended June 30, 2023 and 2022, shares of common stock with an aggregate value of $12.3 million and $21.0 million were withheld upon vesting of RSUs and paid in connection with related remittance of employee withholding taxes to taxing authorities.

(9) Revenue
The Company distributes its products 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 subscription-based plans that are paid on a monthly or annual basis. Customer are also able 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.
The Company’s revenues by distribution channel for the three and six months ended June 30, 2023 and 2022 are as follows (in thousands):
 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
E-commerce$111,903 $127,388 $231,657 $254,458 
Enterprise96,937 79,484 192,463 151,546 
Total Revenue$208,840 $206,872 $424,120 $406,004 
Deferred revenue reported on the balance sheet represents unfulfilled performance obligations for which the Company has either received payment or has outstanding receivables. The June 30, 2023 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. $126.5 million of total revenue recognized for the six months ended June 30, 2023 was reflected in deferred revenue as of December 31, 2022. In addition, as of June 30, 2023, the Company has approximately $74.5 million of contracted but unsatisfied performance obligations relating primarily to our computer vision offering, which are not included as a component of deferred revenue and that the Company expects to recognize over a five year period.

19

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



(10) 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 six months ended June 30, 2023 and 2022 (in thousands):
 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
Foreign currency gain$551 $(2,495)$1,662 $(1,761)
Interest expense(493)(205)(724)(205)
Interest income and other668 39 833 63 
Total other income / (expense)$726 $(2,661)$1,771 $(1,903)

(11) Income Taxes
The Company’s effective tax rates yielded a net expense of 2.7% and 14.4% for the three months ended June 30, 2023 and 2022, respectively, and a net expense of 10.7% and 16.9% for the six months ended June 30, 2023 and 2022, respectively.
During the three months ended June 30, 2023, the net effect of discrete items decreased the effective tax rate by 13.6%. For the six months ended June 30, 2023, the net effect of discrete items decreased the effective tax rate by 7.1%. The discrete items for the three and six months ended June 30, 2023, primarily relate to the non-taxable bargain purchase gain associated with the acquisition of Giphy. Excluding discrete items, the Company’s effective tax rate would have been 16.3% and 17.8% for the three and six months ended June 30, 2023, respectively.
During the three months ended June 30, 2022, the net effect of discrete items decreased the effective tax rate by 4.9%. For the six months ended June 30, 2022, the net effect of discrete items decreased the effective tax rate by 2.2%. The discrete items for the three and six ended June 30, 2022, primarily relate to windfall tax benefits associated with equity-based compensation. Excluding discrete items, the Company’s effective tax rate would have been 19.3% and 19.1% for the three and six months ended June 30, 2022, respectively.
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, 2023 and 2022, 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, 2023 and 2022.
During the six months ended June 30, 2023 and 2022, the Company paid net cash taxes of $6.8 million and $12.7 million, respectively.

20

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



(12) 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, 2023 and 2022 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Net income$50,013 $19,445 $82,856 $46,017 
Shares used to compute basic net income per share36,047 36,123 35,952 36,213 
Dilutive potential common shares
Stock options119 169 136 201 
Unvested restricted stock awards240 286 402 476 
Shares used to compute diluted net income per share36,406 36,578 36,490 36,890 
Basic net income per share$1.39 $0.54 $2.31 $1.27 
Diluted net income per share$1.37 $0.53 $2.27 $1.25 
Dilutive shares included in the calculation1,112 836 1,400 1,121 
Anti-dilutive shares excluded from the calculation1,041 590 611 325 

(13) Geographic Information
The following table presents the Company’s revenue based on customer location (in thousands): 
 Three Months Ended June 30,Six Months Ended
June 30,
 2023202220232022
North America$96,202 $85,896 $195,342 $165,839 
Europe58,413 62,931 117,447 125,484 
Rest of the world54,225 58,045 111,331 114,681 
Total revenue$208,840 $206,872 $424,120 $406,004 
The United States, included in North America in the above table, accounted for 43% and 38% of consolidated revenue for the six months ended June 30, 2023 and 2022, respectively. No other country accounts for more than 10% of the Company’s revenue in any period presented.
The Company’s long-lived tangible assets were located as follows (in thousands):
As of June 30,As of December 31,
20232022
North America$43,931 $42,266 
Europe15,435 12,079 
Rest of the world68 203 
Total long-lived tangible assets$59,434 $54,548 
The United States, included in North America in the above table, accounted for 70% and 73% of total long-lived tangible assets as of June 30, 2023 and December 31, 2022, respectively. Ireland, included in Europe in the above table, accounted for 20% and 17% of total long-lived tangible assets as of June 30, 2023 and December 31, 2022, respectively. No other country accounts for more than 10% of the Company’s long-lived tangible assets in any period presented.

21

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



(14) Commitments and Contingencies
As of June 30, 2023, the Company had total non-lease obligations in the amount of approximately $78.1 million, which consisted primarily of minimum royalty guarantees and unconditional purchase obligations related to contracts for infrastructure and other business services. As of June 30, 2023, the Company’s non-lease obligations for the remainder of 2023 and for the years ending December 31, 2024, 2025, 2026, 2027 and 2028 were approximately $30.6 million, $35.0 million, $10.6 million, $1.3 million, $0.4 million and $0.2 million, respectively.
Legal Matters
From time to time, the Company may become party to litigation in the ordinary course of business, including direct claims brought by or against the Company with respect to intellectual property, contracts, employment and other matters, as well as claims brought against the Company’s customers for whom the Company has a contractual indemnification obligation. The Company assesses the likelihood of any adverse judgments or outcomes with respect to these matters and determines loss contingency assessments on a gross basis after assessing the probability of incurrence of a loss and whether a loss is reasonably estimable. In addition, the Company considers other relevant factors that could impact its ability to reasonably estimate a loss. A determination of the amount of reserves required, if any, for these contingencies is made after analyzing each matter. The Company reviews reserves, if any, at least quarterly and may change the amount of any such reserve in the future due to new developments or changes in strategy in handling these matters. Although the results of litigation and threats of litigation, investigations and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these matters will not have a material adverse effect on its business, consolidated financial position, results of operations, or cash flows. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. The Company currently has no material active litigation matters and, accordingly, no material reserves related to litigation.
Indemnification and Employment Agreements
In the ordinary course of business, the Company enters into contractual arrangements under which it agrees to provide indemnification of varying scope and terms to customers with respect to certain matters, including, but not limited to, losses arising out of the breach of the Company’s intellectual property warranties for damages to the customer directly attributable to the Company’s breach. The Company is not responsible for any damages, costs, or losses to the extent such damages, costs or losses arise as a result of any modifications made by the customer, or the context in which content is used. The standard maximum aggregate obligation and liability to any one customer for any single claim is generally limited to ten thousand dollars but can range to $250,000, with certain exceptions for which our indemnification obligation are uncapped. As of June 30, 2023, the Company had recorded no material liabilities related to indemnification obligations for loss contingencies. Additionally, the Company believes that it has the appropriate insurance coverage in place to adequately cover such indemnification obligations, if necessary.
Pursuant to the Company’s charter documents and separate written indemnification agreements, the Company has certain indemnification obligations to its executive officers, certain employees and directors, as well as certain former officers and directors.
The Company has also entered into employment agreements with its executive officers and certain employees. These agreements specify various employment-related matters, including annual compensation, performance incentive bonuses, and severance benefits in the event of termination or in the event of a change in control or otherwise, with or without cause.

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Table of Contents                            
Item 2.         Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our interim unaudited consolidated financial statements and related notes contained elsewhere in this Quarterly Report on Form 10-Q and with information contained in our other filings, including the audited consolidated financial statements included in our 2022 Form 10-K.
In addition to historical consolidated financial information, this discussion contains forward-looking statements including statements about our plans, estimates and beliefs. These statements involve risks and uncertainties and our actual results could differ materially from those expressed or implied in forward-looking statements. See “Forward Looking Statements” above. See also the “Risk Factors” disclosures contained in our 2022 Form 10-K for additional discussion of the risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements.

Overview and Recent Developments
Shutterstock, Inc. (referred to herein as the “Company”, “we,” “our,” and “us”) is a premier partner for transformative brands, digital media and marketing companies. Our 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. Contributors upload their content to the Company’s web properties in exchange for royalty payments based on customer download activity. Beyond content, customers also leverage the Company’s platform to assist with the entire creative process from ideation through creative execution.
Our key content offerings include:
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.
3 Dimensional (“3D”) Models - consisting of 3D models, used in a variety of industries such as advertising, media and video production, gaming, retail, education, design and architecture.
Our offerings are distributed to customers under the following brands: Shutterstock; Pond5; Giphy; TurboSquid; Offset; PremiumBeat; Bigstock; PicMonkey; and Splash News.
Shutterstock, our flagship brand, includes various content types such as image, footage, music and editorial. For customers seeking specialized solutions, Shutterstock Studios extends our offerings by providing custom, high-quality content matched with production tools and services at scale. In addition, our collection of images, footage clips, music tracks and 3D models is also distributed through our computer vision offering which is used by large technology companies to train AI models.
Pond5 is a video-first content marketplace which expands the Company’s content offerings across footage, image and music. PicMonkey is a leading online graphic design and image editing platform. TurboSquid operates a marketplace that offers more than one million 3D models and a 2 dimensional (“2D”) marketplace derived from 3D objects. Our Offset brand provides authentic and exceptional content for high-impact use cases that require extraordinary images, featuring work from top assignment photographers and illustrators from around the world. PremiumBeat offers exclusive high-quality music tracks and provides producers, filmmakers and marketers the ability to search handpicked production music from the world’s leading composers. Bigstock maintains a separate content library tailored for creators seeking to incorporate cost-effective imagery into their projects.
Over 2.2 million active, paying customers contributed to our revenue for the twelve-month period ended June 30, 2023. As of June 30, 2023, more than 2.7 million approved contributors made their images, footage and music tracks available in our collection, which has grown to more than 734 million images and more than 50 million footage clips as of June 30, 2023. This
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Table of Contents                            
makes our collection of content one of the largest of its kind, and we delivered 81.2 million paid downloads to our customers across all of our brands during the six months ended June 30, 2023.
Contributors of content typically earn a royalty each time their work is licensed. Contributors earn royalties based on our published earnings schedule that is based on annual licensing volume, which determines the contributor’s earnings tier and the purchase option under which the content was licensed. Royalties represent the largest component of our operating expenses, are reported within cost of revenue, tend to fluctuate proportionately with revenue and paid downloads and may be impacted by the mix of products sold.
In October 2022, Shutterstock announced our strategic partnership with OpenAI, an AI research and deployment company. In 2023, Shutterstock integrated Dall-E 2, OpenAI’s tool for AI-generated content into the Shutterstock platform to enable our customers to input keywords and generate unique images based on their specific criteria.
Through our platform, we generate revenue by licensing content to our customers. During the six months ended June 30, 2023, 55% of our revenue and the majority of our content licenses came from our E-commerce sales channel. The majority of our customers license content directly through our self-service web properties. E-commerce customers have the ability to purchase plans that are paid on either a monthly or annual basis or to license content on a transactional basis. E-commerce customers generally license content under our standard or enhanced licenses, with additional licensing options available to meet customers’ individual needs.
Customers in our Enterprise sales channel generally have unique content, licensing and workflow needs. These customers benefit from communication with our dedicated sales, service and research teams which provide a number of personalized 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 our e-commerce platform. Customers in our enterprise sales channel may also benefit from access to (i) Shutterstock Editorial, which includes our library of editorial images and videos, (ii) Shutterstock Studios, our offering which provides custom, high-quality content matched with production tools and services at scale, and (iii) computer vision, our data partnerships offering which provides metadata associated with our content collection, used to train AI models. Our range of solutions, including the depth of our API platform integrations, appeals to a broad and diverse customer base and enables us to adapt and evolve with the needs of our more high touch clients to deliver capabilities that embed deep within their workflows. Our Enterprise sales channel provided approximately 45% of our revenue for the six months ended June 30, 2023.

Acquisition of Giphy, Inc.
On May 22, 2023, we entered into a Stock Purchase Agreement with Meta Platforms, Inc. (“Meta”) dated May 22, 2023 (the “Purchase Agreement”). On June 23, 2023, we completed its acquisition of all of the outstanding shares of Giphy, Inc. (“Giphy”) from Meta. The consideration payable, pursuant to the Purchase Agreement, is $53 million in net cash, in addition to cash acquired, assumed debt and other working capital adjustments. The consideration was paid with existing cash on hand. Giphy is a New York-based company that operates a collection of GIFs and stickers that supplies casual conversational content. The Company believes its acquisition of Giphy extends Shutterstock’s audience touchpoints beyond primarily professional marketing and advertising use cases and expands into casual conversations.
In January 2023, the United Kingdom Competition and Markets Authority (the “CMA”) issued its final order requiring Meta to divest its ownership of Giphy, which Meta acquired in 2020. In connection with the closing of the acquisition, whose terms were preapproved by the CMA, Shutterstock and Meta entered into a transitional services agreement (the “TSA”) pursuant to which Meta is responsible for certain costs related to retention of Giphy employees, including (i) recurring salary, bonus, and benefits through August 2024, which would be $35.6 million if all employees are retained through August 2024, and (ii) nonrecurring items, totaling $87.9 million, comprised of one-time employment inducement bonuses and the cash value of unvested Meta equity awards (the “Giphy Retention Compensation”).
The Giphy Retention Compensation will be paid to the individuals for being employees of the Company subsequent to the completion of the acquisition. Accordingly, we determined that the payments are for future service requirements and will be reflected as operating expenses, less any amounts earned by the employees prior to the acquisition, in our Statements of Operations as incurred. The Giphy Retention Compensation is reflected as a reduction of the purchase price and has been funded into an escrow account.
Upon closing of the acquisition, the Company also entered into an agreement with Meta whereby the Company will provide Meta with Giphy content through API services for a period of two years.
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Table of Contents                            
Key Operating Metrics
In addition to key financial metrics, we regularly review a number of key operating metrics to evaluate our business, determine the allocation of resources and make decisions regarding business strategies. We believe that these metrics can be useful for understanding the underlying trends in our business.
Subscribers, subscriber revenue and average revenue per customer from acquisitions are included in these metrics beginning twelve months after the closing of the respective business combination. Accordingly, the metrics include Subscribers, Subscriber revenue, and Average revenue per customer from TurboSquid beginning February 2022, from PicMonkey beginning September 2022, and from Pond5 and Splash News beginning May 2023. These metrics exclude the respective counts and revenues from Giphy.
Subscribers
We define subscribers as those customers who purchase one or more of our monthly recurring products for a continuous period of at least three months, measured as of the end of the reporting period. We believe the number of subscribers is an important metric that provides insight into our monthly recurring business. We believe that an increase in our number of subscribers is an indicator of engagement in our platform and potential for future growth.
Subscriber Revenue
We define subscriber revenue as the revenue generated from subscribers during the period. We believe subscriber revenue, together with our number of subscribers, provide insight into the portion of our business driven by our monthly recurring products.
Average Revenue Per Customer
Average revenue per customer is calculated by dividing total revenue for the last twelve-month period by customers. We define customers as total active, paying customers that contributed to total revenue over the last twelve-month period. Changes in our average revenue per customer will be driven by changes in the mix of our subscription-based and transactional products as well as pricing in our transactional business.
Paid Downloads
We define paid downloads as the number of downloads that our customers make in a given period of our content. Paid downloads exclude content related to our Studios business, downloads of content that are offered to customers for no charge (including our free trials), and downloads associated with our computer vision offering. Measuring the number of paid downloads that our customers make in a given period is important because it is a measure of customer engagement on our platform and triggers the recognition of revenue and contributor royalties.
Revenue per Download
We define revenue per download as the amount of revenue recognized in a given period divided by the number of paid downloads in that period excluding revenue from our Studios business, revenue that is not derived from or associated with content licenses and revenue associated with our computer vision offering. This metric captures any changes in our pricing, including changes resulting from the impact of competitive pressures, as well as the mix of licensing options that our customers choose, some of which generate more revenue per download than others, and the impact that changes in foreign currency rates have on our pricing. Changes in revenue per download are primarily driven by the introduction of new product offerings, changes in product and sales channel mix and customer utilization of our products.
Content in our Collection
We define content in our collection as the total number of approved images (photographs, vectors and illustrations) and footage (in number of clips) in our library at the end of the period. We exclude content from this collection metric that is not uploaded directly to our site but is available for license by our customers through an application program interface, content from our Studios business and AI generated content. Prior to December 31, 2022, this metric only included approved images and footage clips in our library on shutterstock.com at the end of the period. We believe that our large selection of high-quality content enables us to attract and retain customers and drives our network effect.
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The following table summarizes our key operating metrics, which are unaudited, for the three and six months ended June 30, 2023 and 2022:
Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
 
Subscribers (end of period)1
556,000 368,000 556,000 368,000 
Subscriber revenue (in millions)1
$87.4 $84.7 $178.0 $170.1 
Average revenue per customer (last twelve months)1
$374 $359 $374 $359 
Paid downloads (in millions)38.5 43.4 81.2 88.0 
Revenue per download$4.71 $4.46 $4.56 $4.34 
Content in our collection (end of period, in millions):
Images734 511 734 511 
Footage clips50 27 50 27 
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1 Subscribers, Subscriber Revenue and Average Revenue Per Customer from acquisitions are included in these metrics beginning twelve months after the closing of the respective business combination. Accordingly, the metrics include Subscribers, Subscriber revenue, and Average revenue per customer from TurboSquid beginning February 2022, from PicMonkey beginning September 2022, and from Pond5 and Splash News beginning May 2023. These metrics exclude the respective counts and revenues from our acquisition of Giphy.


Critical Accounting Estimates
Our financial statements are prepared in accordance with GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires our management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure or inclusion of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the period. We evaluate our significant estimates on an ongoing basis, including, but not limited to, estimates related to allowance for doubtful accounts, the volume of expected unused licenses used in revenue recognition for our subscription-based products, the fair value of acquired goodwill and intangible assets and income tax provisions. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying value of assets and liabilities that are not readily apparent from other sources. Therefore, we consider these to be our critical accounting estimates. Actual results could differ from those estimates.
A description of our critical accounting policies that involve significant management judgments appears in our 2022 Form 10-K, under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates.”
See Note 1 to our Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a full description of the impact of the adoption of new accounting standards on our financial statements. There have been no material changes to our critical accounting estimates as compared to our critical accounting policies and estimates included in our 2022 Form 10-K.

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Table of Contents                            


Key Components of Our Results of Operations
Revenue
We distribute our content offerings through two primary channels:
E-commerce: The majority of our customers license content directly through our self-service web properties. E-commerce customers have the flexibility to purchase a subscription-based plan that is paid on a monthly or annual basis or to license content on a transactional basis. These customers generally license content under our 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: We also have a base of customers with unique content, licensing and workflow needs. These customers benefit from communication with our dedicated sales, 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.
The Company’s revenues by distribution channel for the three and six months ended June 30, 2023 and 2022 are as follows (in thousands):
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2023202220232022
E-commerce$111,903 $127,388 $231,657 $254,458 
Enterprise96,937 79,484 192,463 151,546 
Total Revenues