UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K | |
CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
Date of Report (Date of earliest event reported): | November 4, 2016 |
Shutterstock, Inc. (Exact name of registrant as specified in its charter) | |
Delaware | 001-35669 | 80-0812659 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
350 Fifth Avenue, 21st Floor New York, New York 10118 (Address of principal executive offices, including zip code) (646) 710-3417 (Registrant’s telephone number, including area code) Not Applicable (Former name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
On November 4, 2016, Shutterstock, Inc. (the “Company”) issued a press release announcing its financial results for the fiscal period ended September 30, 2016. A copy of the press release is furnished as Exhibit 99.1 to this current report and is incorporated herein by reference. In addition, a copy of the presentation slides which will be referenced on the Company’s earnings call at 8:30 a.m. Eastern Time on Friday, November 4, 2016 is furnished as Exhibit 99.2 to this current report and incorporated herein by reference.
In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
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Item 7.01 | Regulation FD Disclosure. |
The information provided above in “Item 2.02 Results of Operations and Financial Condition” is incorporated by reference in this Item 7.01.
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
99.1Press release dated November 4, 2016
99.2Presentation slides referenced on the earnings call held by Shutterstock, Inc. on November 4, 2016
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SHUTTERSTOCK, INC. | ||
Dated: November 4, 2016 | By: | /s/ Steven Berns |
Steven Berns | ||
Chief Financial Officer | ||
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EXHIBIT INDEX
Exhibit No. | Exhibit Description | |
99.1 | Press release dated November 4, 2016 | |
99.2 | Presentation slides referenced on the earnings call held by Shutterstock, Inc. on November 4, 2016 | |
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EXHIBIT 99.1
Shutterstock Reports Third Quarter 2016 Financial Results
Third Quarter 2016 highlights as compared to Third Quarter 2015:
Financial Highlights
• | Revenue increased 15% to $123.1 million |
• | Income from operations increased 40% to $11.3 million |
• | Net income increased 129% to $9.4 million |
• | Adjusted EBITDA increased 17% to $23.0 million |
Key Operating Metrics
• | Paid downloads increased 8% |
• | Revenue per download increased 5% |
• | Image collection expanded 61% to 102.7 million images |
• | Video collection expanded 64% to 5.4 million clips |
New York - November 4, 2016 - Shutterstock, Inc. (NYSE: SSTK), a leading global provider of commercial imagery and music, today announced financial results for the third quarter ended September 30, 2016.
Founder and CEO Jon Oringer said, “This was a solid quarter for Shutterstock as we continue to expand the market for high quality, digital content. Over 160,000 contributors added more than 10 million images and 500,000 video clips to our robust library in the third quarter. Our image library now offers more than 100 million images, giving us meaningful scale compared to our competition. At the same time, our editorial and music capabilities continue to accelerate, providing yet another leg of growth for our business. We also continue to dedicate considerable time and resources ensuring that our platform can handle an increasingly diverse array of content, enhancing our product offering and attracting new customers, including an expanding number of international and enterprise clients. We believe that these efforts will translate into sustained financial growth and shareholder value.”
THIRD QUARTER RESULTS
Revenue
Third quarter revenue of $123.1 million increased $15.8 million or 15% as compared to the third quarter of 2015, primarily due to an 8% increase in the number of paid downloads, mainly due to new customers, as well as continued expansion in enterprise sales as evidenced by a 5% increase in revenue per download. The negative impact of foreign currency movements versus the US dollar partially offset this growth. Excluding the impact of foreign currency movements, total Company revenue growth was approximately 17% in the third quarter.
Income from Operations
Income from operations of $11.3 million increased $3.2 million or 40% as compared to the third quarter of 2015 driven by the $15.8 million revenue growth, which was partially offset by an increase in operating expenses primarily from higher royalty costs associated with the increase in paid downloads and an increase in marketing spend year-over-year.
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Net Income
Net income available to common stockholders of $9.4 million, $0.26 per diluted share, for the third quarter increased $5.3 million as compared with $4.1 million, $0.11 per diluted share, in the third quarter a year ago primarily due to the improved operating performance, lower income tax expense and a decrease in non-cash equity based compensation expense. The lower tax expense during the current year's quarter was primarily a result of a tax benefit related to the U.S. Research and Development tax credit claimed for the tax years 2013, 2014 and 2015.
Adjusted EBITDA
Adjusted EBITDA of $23.0 million for the third quarter increased $3.3 million or 17%, as compared to the third quarter of 2015 driven primarily by revenue growth. Adjusted EBITDA is defined as net income adjusted for foreign currency transaction gains and losses, changes in fair value of contingent consideration related to acquisitions, interest income and expense, income taxes, depreciation, amortization, disposals, and non-cash equity-based compensation.
Non-GAAP Net Income
Non-GAAP net income, which excludes the impact of non-cash equity-based compensation, amortization of acquisition-related intangible assets, changes in fair value of contingent consideration related to acquisitions and the estimated tax impact of such adjustments was $14.3 million, or $0.40 per diluted share, for the third quarter as compared to $10.1 million or $0.28 per diluted share, in the third quarter of 2015.
LIQUIDITY
The Company’s cash, cash equivalents and short term investments increased by $2.0 million to $290.4 million at September 30, 2016 as compared with $288.4 million at December 31, 2015. This increase primarily reflects $76.7 million of cash generated from operations and $3.0 million of net cash from other sources, which were partially offset by cash used for capital expenditures and content acquisitions of $33.0 million and cash used to repurchase shares of approximately $44.9 million.
Free cash flow was $19.9 million for the third quarter, an increase of $5.1 million from the third quarter of 2015, as the improved operating performance and working capital fluctuations were partially offset by increased spending on capital expenditures and content acquisitions. Free cash flow is defined as cash provided by operating activities adjusted for capital expenditures and content acquisition.
STOCK REPURCHASE PROGRAM
During the third quarter of 2016, the Company did not repurchase any shares of its stock, pursuant to its existing $100 million stock repurchase program. Through September 30, 2016, the Company has repurchased 1.7 million shares of its stock for a total of $59.7 million under the stock repurchase program. The stock repurchase program, which commenced in November 2015, authorizes management to purchase shares from time to time through open market purchases or privately negotiated transactions at prevailing prices as permitted by securities laws and other legal requirements. The timing and amount of any shares repurchased will be determined by the Company’s management based on its evaluation of market conditions and other factors. The repurchase program may be suspended or discontinued at any time.
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OPERATING METRICS
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||
(in millions, except revenue per download) | ||||||||||||
Number of paid downloads | 41.2 | 38.1 | 125.8 | 107.4 | ||||||||
Revenue per download (1) | $2.91 | $2.76 | $2.83 | $2.83 | ||||||||
Images in our collection (end of period) (2) | 102.7 | 63.7 | 102.7 | 63.7 | ||||||||
(1) Revenue per download metric excludes the impact of revenue not associated with content downloads.
(2) Images are photographs, vectors and illustrations available on shutterstock.com at the end of the period. We exclude content that is not uploaded directly to our site but is available to our customers through an application program interface and certain images that may be licensed for editorial use only.
FINANCIAL OUTLOOK
The Company’s current expectations for the full year 2016 are as follows:
Full Year 2016
• | Revenue of $495 - $510 million (17% - 20% growth) |
• | Income from operations of $43 - $51 million (5% - 24% growth) |
• | Adjusted EBITDA of $95 - $100 million (12% - 18% growth) |
• | Non-cash equity-based compensation expense of $28 - $33 million |
• | Capital expenditures of $40 - $45 million |
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NON-GAAP FINANCIAL MEASURES
Shutterstock defines Adjusted EBITDA as net income adjusted for foreign currency transaction gains and losses, changes in fair value of contingent consideration related to acquisitions, interest income and expense, income taxes, depreciation, amortization, disposals and non-cash equity-based compensation; non-GAAP net income as net income excluding the impact of non-cash equity-based compensation, the amortization of acquisition-related intangible assets and changes in the fair value of contingent consideration related to acquisitions and the estimated tax impact of such adjustments; revenue growth on a fixed-currency basis (expressed as a percentage) as the increase in current period revenues over prior period revenues, utilizing fixed exchange rates for translating foreign currency revenues for both periods; and free cash flow as cash provided by/(used in) operating activities adjusted for capital expenditures and content acquisition. These figures have not been calculated in accordance with United States generally accepted accounting principles (GAAP) and should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results. In addition, Adjusted EBITDA, non-GAAP net income, revenue growth on a fixed-currency basis and free cash flow should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions; accordingly, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies.
Shutterstock’s management uses the non-GAAP financial measures adjusted EBITDA, non-GAAP net income, revenue growth on a fixed-currency basis and free cash flow, in conjunction with GAAP financial measures, as an integral part of managing the business and to, among other things: (i) monitor and evaluate the performance of Shutterstock’s business operations, financial performance and overall liquidity; (ii) facilitate management's internal comparisons of the historical operating performance of its business operations; (iii) facilitate management's external comparisons of the results of its overall business to the historical operating performance of other companies that may have different capital structures and debt levels; (iv) review and assess the operating performance of Shutterstock’s management team and, together with other operational objectives, as a measure in evaluating employee compensation and bonuses; (v) analyze and evaluate financial and strategic planning decisions regarding future operating investments; and (vi) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments.
Management believes that Adjusted EBITDA, non-GAAP net income and revenue growth on a fixed-currency basis are useful to investors to provide them with disclosures of Shutterstock’s operating results on the same basis as that used by management. Additionally, management believes that Adjusted EBITDA and non-GAAP net income provide useful information to investors about the performance of the Company's overall business because such measures eliminate the effects of unusual or other infrequent charges that are not directly attributable to Shutterstock’s underlying operating performance and, with respect to revenue growth on a fixed-currency basis, provides useful information to investors by eliminating the effect of foreign currency fluctuations that are not directly attributable to Shutterstock’s business. Additionally, management believes that providing these non-GAAP financial measures enhances the comparability for investors in assessing Shutterstock’s financial reporting. Management believes that free cash flow is useful for investors because it provides them with an important perspective on the cash available for strategic measures, after making necessary capital investments in property and equipment to support the Company's ongoing business operations, and provides them with the same measures that management uses as the basis for making resource allocation decisions.
A reconciliation of the differences between Adjusted EBITDA, non-GAAP net income, and free cash flow, and the most comparable financial measure calculated and presented in accordance with GAAP, is presented under the heading “Reconciliation of Non-GAAP Financial Information to GAAP” immediately following the Consolidated Balance Sheets. We do not provide a reconciliation of Adjusted EBITDA guidance to net income guidance, as the impact of net non-operating foreign currency exchange gains or losses which are excluded from Adjusted EBITDA is inherently uncertain and difficult to estimate and is unavailable without unreasonable efforts. In addition, we believe such reconciliations would imply a degree of precision that would be confusing or misleading to investors.
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EARNINGS TELECONFERENCE INFORMATION
The Company will discuss its second quarter financial results during a teleconference today, November 4, 2016, at 8:30 AM ET. The conference call can be accessed in the U.S. at (844) 634-1442 or outside the U.S. at (615) 247-0239 with the conference ID# 89163942. A live audio webcast of the call will also be available simultaneously at http://investor.shutterstock.com.
Following completion of the call, a recorded replay of the webcast will be available in the investor relations section of Shutterstock’s website. A telephone replay of the call will also be available until November 11, 2016 in the U.S. at (855) 859-2056 or outside the U.S. at (404) 537-3406 with the conference ID# 89163942.
Additional investor information can be accessed at http://investor.shutterstock.com.
ABOUT SHUTTERSTOCK
Shutterstock, Inc. (NYSE: SSTK), directly and through its group subsidiaries, is a leading global provider of high-quality licensed photographs, vectors, illustrations, videos and music to businesses, marketing agencies and media organizations around the world. Working with its growing community of over 160,000 contributors, Shutterstock adds hundreds of thousands of images each week, and currently has more than 100 million images and more than 5 million video clips available.
Headquartered in New York City, with offices in Amsterdam, Berlin, Chicago, Dallas, Denver, London, Los Angeles, Montreal, Paris, San Francisco, and Silicon Valley, Shutterstock has customers in more than 150 countries. The company also owns Bigstock, a value-oriented stock media agency; Offset, a high-end image collection; PremiumBeat a curated royalty-free music library; Rex Features, a premier source of editorial images for the world's media; and WebDAM, a cloud-based digital asset management service for businesses.
For more information, please visit www.shutterstock.com and follow Shutterstock on Twitter and on Facebook.
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SAFE HARBOR PROVISION
Statements in this press release regarding management’s future expectations, predictions, beliefs, goals, intentions, plans, prospects or strategies, including statements regarding Shutterstock’s future financial and operating performance on both a GAAP and non-GAAP basis and statements regarding Shutterstock’s ability to deliver sustained financial growth, may constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Such forward-looking statements involve known and unknown risks, uncertainties and other factors including risks related to any unforeseen changes to or the effects on liabilities, financial condition, future capital expenditures, revenue, expenses, net income or loss, synergies and future prospects; our inability to continue to attract and retain customers and contributors to our online marketplace for commercial digital imagery and music; a decrease in repeat customer purchases or in content contributed to our online marketplace; our inability to successfully operate in a new and rapidly changing market and to evaluate our future prospects; competitive factors; assertions by third parties of infringement or other violations of intellectual property rights by Shutterstock; our inability to increase market awareness of Shutterstock and our services; our inability to effectively manage our growth: failure to respond to technological changes or upgrade Shutterstock’s website and technology systems; Shutterstock’s inability to increase the percentage of its revenues that come from larger companies; our inability to continue expansion into international markets and the additional risks associated with operating internationally, including fluctuations in currency exchange rates; general economic conditions worldwide; our ability to successfully integrate acquisitions and the associated technology and achieve operational efficiencies; and other factors and risks discussed under the heading “Risk Factors” in our most recent Annual Report on Form 10-K, as well as in other documents that may be filed by Shutterstock from time to time with the Securities and Exchange Commission. As a result of such risks, uncertainties and factors, Shutterstock’s actual results may differ materially from any future results, performance or achievements discussed in or implied by the forward-looking statements contained herein. Shutterstock is providing the information in this press release as of this date and assumes no obligation to update the information included in this press release or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.
Media Contact: | Investor Contact: |
Siobhan Aalders | Rawson Daniel |
917 563 4991 | 646 856 9074 |
press@shutterstock.com | ir@shutterstock.com |
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Shutterstock, Inc.
Consolidated Statements of Operations
(In thousands, except for per share data)
(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenue | $ | 123,073 | $ | 107,260 | $ | 364,144 | $ | 309,147 | ||||||||
Operating expenses: | ||||||||||||||||
Cost of revenue | 50,184 | 44,512 | 150,492 | 126,582 | ||||||||||||
Sales and marketing | 32,977 | 27,393 | 91,636 | 79,927 | ||||||||||||
Product development | 11,604 | 10,827 | 34,800 | 31,700 | ||||||||||||
General and administrative | 17,020 | 16,441 | 54,629 | 44,949 | ||||||||||||
Total operating expenses | 111,785 | 99,173 | 331,557 | 283,158 | ||||||||||||
Income from operations | 11,288 | 8,087 | 32,587 | 25,989 | ||||||||||||
Other income (expense), net | 102 | (767 | ) | (122 | ) | (3,386 | ) | |||||||||
Income before income taxes | 11,390 | 7,320 | 32,465 | 22,603 | ||||||||||||
Provision for income taxes | 1,999 | 3,217 | 9,692 | 9,920 | ||||||||||||
Net income | $ | 9,391 | $ | 4,103 | $ | 22,773 | $ | 12,683 | ||||||||
Less: | ||||||||||||||||
Undistributed earnings to participating stockholder | — | — | — | 2 | ||||||||||||
Net income available to common stockholders | $ | 9,391 | $ | 4,103 | $ | 22,773 | $ | 12,681 | ||||||||
Net income per common share available to common stockholders: | ||||||||||||||||
Basic | $ | 0.27 | $ | 0.11 | $ | 0.65 | $ | 0.35 | ||||||||
Diluted | $ | 0.26 | $ | 0.11 | $ | 0.64 | $ | 0.35 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 35,036 | 36,040 | 35,123 | 35,848 | ||||||||||||
Diluted | 35,824 | 36,270 | 35,855 | 36,269 | ||||||||||||
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Shutterstock, Inc.
Consolidated Balance Sheets
(In thousands, except par value amount)
(unaudited)
September 30, 2016 | December 31, 2015 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 237,997 | $ | 241,304 | ||||
Short-term investments | 52,407 | 47,078 | ||||||
Credit card receivables | 4,230 | 2,811 | ||||||
Accounts receivable, net | 34,064 | 25,653 | ||||||
Prepaid expenses and other current assets | 16,553 | 11,713 | ||||||
Deferred tax assets, net | 6,654 | 7,116 | ||||||
Total current assets | 351,905 | 335,675 | ||||||
Property and equipment, net | 49,814 | 32,094 | ||||||
Intangibles assets, net | 30,763 | 29,781 | ||||||
Goodwill | 50,523 | 50,934 | ||||||
Deferred tax assets, net | 21,521 | 18,691 | ||||||
Other assets | 2,807 | 1,946 | ||||||
Total assets | $ | 507,333 | $ | 469,121 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 15,303 | $ | 6,816 | ||||
Accrued expenses | 39,126 | 30,696 | ||||||
Contributor royalties payable | 19,286 | 17,822 | ||||||
Income taxes payable | 845 | 953 | ||||||
Deferred revenue | 117,877 | 98,239 | ||||||
Other liabilities | 10,385 | 6,258 | ||||||
Total current liabilities | 202,822 | 160,784 | ||||||
Deferred tax liability, net | 2,199 | 3,778 | ||||||
Other non-current liabilities | 8,967 | 15,994 | ||||||
Total liabilities | 213,988 | 180,556 | ||||||
Commitment and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Common stock, $0.01 par value; 200,000 shares authorized; 36,854 and 36,146 shares issued and 35,115 and 35,686 shares outstanding as of September 30, 2016 and December 31, 2015, respectively | 368 | 361 | ||||||
Treasury stock, at cost; 1,739 and 460 shares as of September 30, 2016 and December 31, 2015, respectively | (59,728 | ) | (15,635 | ) | ||||
Additional paid-in capital | 244,333 | 213,851 | ||||||
Accumulated other comprehensive loss | (10,838 | ) | (6,449 | ) | ||||
Retained earnings | 119,210 | 96,437 | ||||||
Total stockholders’ equity | 293,345 | 288,565 | ||||||
Total liabilities and stockholders’ equity | $ | 507,333 | $ | 469,121 | ||||
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Shutterstock, Inc.
Reconciliation of Non-GAAP Financial Information to GAAP
(In thousands, except per share information)
(Unaudited)
The following information is not a financial measure under United States generally accepted accounting principles (GAAP). In addition, it should not be construed as an alternative to any other measures of performance determined in accordance with GAAP, or as an indicator of our operating performance, liquidity or cash flows generated by operating, investing and financing activities as there may be significant factors or trends that it fails to address. We present this financial information because we believe that it is helpful to some investors as one measure of our operations. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions; accordingly, its use can make it difficult to compare our results with our results from other reporting periods and with the results of other companies.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net Income | $ | 9,391 | $ | 4,103 | $ | 22,773 | $ | 12,683 | ||||||||
Add: | ||||||||||||||||
Depreciation and amortization | 5,176 | 3,869 | 14,181 | 10,363 | ||||||||||||
Non-cash equity-based compensation | 6,505 | 7,683 | 21,110 | 22,771 | ||||||||||||
Other adjustments, net (1) | (102 | ) | 767 | 1,773 | 3,386 | |||||||||||
Provision for income taxes | 1,999 | 3,217 | 9,692 | 9,920 | ||||||||||||
Adjusted EBITDA(2) | $ | 22,969 | $ | 19,639 | $ | 69,529 | $ | 59,123 | ||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income | $ | 9,391 | $ | 4,103 | $ | 22,773 | $ | 12,683 | ||||||||
Add/(less): | ||||||||||||||||
Non-cash equity-based compensation | 6,505 | 7,683 | 21,110 | 22,771 | ||||||||||||
Tax effect of non-cash equity-based compensation (3) | (2,336 | ) | (2,750 | ) | (7,533 | ) | (8,145 | ) | ||||||||
Acquisition-related amortization expense | 1,053 | 1,195 | 3,310 | 3,308 | ||||||||||||
Tax effect of acquisition-related amortization expense (3) | (387 | ) | (437 | ) | (1,217 | ) | (1,224 | ) | ||||||||
Change in fair value of contingent consideration | 105 | 540 | 2,600 | 1,440 | ||||||||||||
Tax effect of change in fair value of contingent consideration (3) | (48 | ) | (198 | ) | (965 | ) | (529 | ) | ||||||||
Non-GAAP net income | $ | 14,283 | $ | 10,136 | $ | 40,078 | $ | 30,304 | ||||||||
Non-GAAP net income per diluted common share | $ | 0.40 | $ | 0.28 | $ | 1.12 | $ | 0.84 | ||||||||
Weighted average diluted shares | 35,824 | 36,270 | 35,855 | 36,269 | ||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net cash provided by operating activities | $ | 35,133 | $ | 19,350 | $ | 76,736 | $ | 59,449 | ||||||||
Capital expenditures and content acquisition | (15,205 | ) | (4,508 | ) | (32,961 | ) | (12,065 | ) | ||||||||
Free cash flow | $ | 19,928 | $ | 14,842 | $ | 43,775 | $ | 47,384 | ||||||||
_______________________________________________________________________________________________________________________
(1) Included in other adjustments, net is foreign currency transaction gains and losses, changes in fair value of contingent consideration related to acquisitions, and interest income and expense.
(2) Earnings/(loss) before foreign currency transaction gains and losses, changes in fair value of contingent consideration related to acquisitions, interest income and expense, income taxes, depreciation, amortization, disposals and non-cash equity-based compensation.
(3) Estimated tax effect of non-GAAP net income adjustments reflects the consolidated blended tax rate as applied to the taxable portion of the adjustment.
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Shutterstock, Inc.
Supplemental Financial Data
(In thousands)
(Unaudited)
Non-Cash Equity-Based Compensation
Included in the accompanying financial results are expenses related to non-cash equity-based compensation, as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Cost of revenue | $ | 498 | $ | 496 | $ | 1,552 | $ | 1,444 | ||||||||
Sales and marketing | 1,524 | 1,364 | 4,072 | 4,110 | ||||||||||||
Product development | 1,580 | 1,743 | 5,732 | 5,863 | ||||||||||||
General and administrative | 2,903 | 4,080 | 9,754 | 11,354 | ||||||||||||
Total | $ | 6,505 | $ | 7,683 | $ | 21,110 | $ | 22,771 | ||||||||
Amortization of Intangible Assets and Depreciation of Property and Equipment
Included in the accompanying financial results are expenses related to the amortization of intangible assets, as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Cost of revenue | $ | 447 | $ | 402 | $ | 1,308 | $ | 1,070 | ||||||||
General and administrative | 793 | 867 | 2,453 | 2,405 | ||||||||||||
Total | $ | 1,240 | $ | 1,269 | $ | 3,761 | $ | 3,475 | ||||||||
Included in the accompanying financial results are expenses related to the depreciation of property and equipment, as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Cost of revenue | $ | 1,765 | $ | 1,412 | $ | 4,767 | $ | 3,760 | ||||||||
General and administrative | 2,171 | 1,188 | 5,653 | 3,128 | ||||||||||||
Total | $ | 3,936 | $ | 2,600 | $ | 10,420 | $ | 6,888 | ||||||||
Historical Operating Metrics
9/30/14 | 12/31/14 | 3/31/15 | 6/30/15 | 9/30/15 | 12/31/15 | 3/31/16 | 6/30/16 | 9/30/16 | ||||||||||||||||||||||||||||
(in millions, except revenue per download) | ||||||||||||||||||||||||||||||||||||
Number of paid downloads | 31.2 | 33.5 | 33.4 | 35.9 | 38.1 | 39.8 | 41.2 | 43.4 | 41.2 | |||||||||||||||||||||||||||
Revenue per download (1) | $ | 2.65 | $ | 2.68 | $ | 2.87 | $ | 2.85 | $ | 2.76 | $ | 2.86 | $ | 2.77 | $ | 2.81 | $ | 2.91 | ||||||||||||||||||
Images in collection (end of period) (2) | 42.7 | 46.8 | 51.6 | 57.2 | 63.7 | 71.4 | 81.0 | 92.1 | 102.7 | |||||||||||||||||||||||||||
_______________________________________________________________________________________________________________________
(1) Revenue per download metric excludes the impact of revenue not associated with content downloads.
(2) Images are photographs, vectors and illustrations available on shutterstock.com at the end of the period. We exclude content that is not uploaded directly to our site but is available to our customers through an application program interface and certain images that may be licensed for editorial use only.
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Third Quarter 2016 Summary
November 4, 2016
2
This presentation contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our
management’s beliefs and assumptions and on information currently available to management. Forward-looking statements include information concerning our
possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities,
potential market opportunities and the effects of competition.
Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,”
“estimates,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Forward-
looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be
materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements
represent our management’s beliefs and assumptions only as of the date of our most recent public filings. You should read our public filings, including the Risk
Factors set forth therein and the documents that we have filed as exhibits to those filings, completely and with the understanding that our actual future results may
be materially different from what we currently expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to
update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the
future.
Safe Harbor Statement
In addition to reporting financial results in accordance with GAAP, we also refer to adjusted EBITDA, non-GAAP net income, revenue growth on a fixed-currency basis and free cash
flow. We define adjusted EBITDA as net income adjusted for foreign currency transaction gains and losses, changes in fair value of contingent consideration related to acquisitions,
interest income and expense, income taxes, depreciation, amortization, disposals and non-cash equity-based compensation; non-GAAP net income as net income excluding the
impact of non-cash equity-based compensation, the amortization of acquisition-related intangible assets and changes in the fair value of contingent consideration related to
acquisitions and the estimated tax impact of such adjustments; revenue growth on a fixed-currency basis (expressed as a percentage) as the increase in current period revenues
over prior period revenues utilizing fixed exchange rates for translating foreign currency revenues for both periods; and free cash flow as cash provided by/(used in) operating
activities adjusted for capital expenditures and content acquisition. These figures are non-GAAP financial measures and should be considered in addition to results prepared in
accordance with generally accepted accounting principles (GAAP), and should not be considered as a substitute for, or superior to, GAAP results.
We use the non-GAAP financial measures adjusted EBITDA, non-GAAP net income, revenue growth on a fixed-currency basis and free cash flow, in conjunction with GAAP financial
measures, as an integral part of managing the business and to, among other things: (i) monitor and evaluate the performance of Shutterstock’s business operations, financial
performance and overall liquidity; (ii) facilitate management's internal comparisons of the historical operating performance of its business operations; (iii) facilitate management's
external comparisons of the results of its overall business to the historical operating performance of other companies that may have different capital structures and debt levels; (iv)
review and assess the operating performance of Shutterstock’s management team and, together with other operational objectives, as a measure in evaluating employee
compensation and bonuses; (v) analyze and evaluate financial and strategic planning decisions regarding future operating investments; and (vi) plan for and prepare future annual
operating budgets and determine appropriate levels of operating investments.
We believe that Adjusted EBITDA, non-GAAP net income and revenue growth on a fixed-currency basis are useful to investors to provide them with disclosures of our operating
results on the same basis as that used by management. Additionally, we believe that Adjusted EBITDA and non-GAAP net income provide useful information to investors about the
performance of the Company's overall business because such measures eliminate the effects of unusual or other infrequent charges that are not directly attributable to our underlying
operating performance and, with respect to revenue growth on a fixed-currency basis, provides useful information to investors by eliminating the effect offoreign currency fluctuations
that are not directly attributable to Shutterstock’s business. Additionally, we believe that providing these non-GAAP financial measures enhances the comparability for investors in
assessing our financial reporting. We believe that free cash flow is useful for investors because it provides them with an important perspective on the cash available for strategic
measures, after making necessary capital investments in property and equipment to support the Company's ongoing business operations, and provides them with the same
measures that we use as the basis for making resource allocation decisions.
Please refer to the reconciliation of the differences between Adjusted EBITDA, non-GAAP net income, and free cash flow, and the most comparable financial measure calculated and
presented in accordance with GAAP, presented under the heading “Reconciliation of Non-GAAP Financial Information to GAAP” immediately following the Consolidated Balance
Sheets in today’s earnings release, which is available in the Investor Relations section of our website.
Non-GAAP Financial Measures
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The Leading Global Marketplace for
Stock Content
Contributors
Photographers
Illustrators
Videographers
Musicians
Customers
Designers
Businesses
Marketing Agencies
Media Organizations
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• Revenue increased 15% to $123.1 million, primarily driven by new customers and an increase in paid downloads
• Excluding the impact of currency, revenue increased 17%
• Income from Operations increased 40% to $11.3 million
• Net Income available to common stockholders increased 129% to $9.4 million
• Non-GAAP net income during the quarter increased 41% to $14.3 million
• Adjusted EBITDA increased 17% to $23.0 million, which represents a 19% margin; revenue growth was partially
offset by higher royalty costs associated with growth in paid downloads and higher personnel expenses to support
growth initiatives
• Excluding the impact of currency, Adjusted EBITDA margin was 21%
• Cash, cash equivalents and short term investments of $290 million at quarter end
• Generated $19.9 million of free cash flow during the quarter
Q3’16 Financial Highlights
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• Image library expanded 61% to 102.7 million images
• Video library expanded 64% to 5.4 million video clips
• Paid downloads grew 8% to 41.2 million
• Revenue per download of $2.91, up 8% excluding the impact of foreign currency movements
• More than 1.6 million customers contributed to revenue in the prior 12 months
• Integrated API with Google; launched plug-in for Adobe Photoshop®
• Acquired editorial content libraries: The Art Archive and The Kobal Collection
Q3’16 Operating Highlights
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Consolidated Financial Results
($ in millions) Three Months Ended
September 30,
Nine Months Ended
September 30,
2016 2015 % 2016 2015 %
Total Revenues $123.1 $107.3 15% $364.1 $309.1 18%
Total Expenses 113.7 103.2 10% 341.4 296.5 15%
Net Income 9.4 4.1 129% 22.8 12.7 80%
Add: Other Income / (Expense) (0.1) 0.8 NM 1.8 3.4 (48%)
Add: Tax 2.0 3.2 (38%) 9.7 9.9 (2%)
Add: Dep. & Amort. 5.2 3.9 34% 14.2 10.4 37%
Add: Stock Based Comp. 6.5 7.7 (15%) 21.1 22.8 (7%)
Add: Other Adjustments -- -- -- 1.7 -- --
Adjusted EBITDA $23.0 $19.6 17% $69.5 $59.1 18%
Adjusted EBITDA Margin 18.7% 18.3% 19.1% 19.1%
Notes
-Totals may not sum exactly due to rounding.
-Other Adjustments includes accelerated change in fair value of contingent consideration that is recorded as a component of G&A expense.
-Total Expenses includes operating expenses and non operating foreign currency gains & losses, changes in the fair value of contingent consideration related to acquisitions, interest
income and expense, and the provision for income taxes
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Free Cash Flow
($ in millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2016 2015 2016 2015
Net Cash From Operations $35.1 $19.4 $76.7 $59.4
CapEx and Content Acquisitions (15.2) (4.5) (33.0) (12.1)
Free Cash Flow $19.9 $14.8 $43.8 $47.4
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Note
-Totals may not sum exactly due to rounding.
Non-GAAP Net Income
($ in millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2016 2015 2016 2015
Net Income $9.4 $4.1 $22.8 $12.7
Add: Non-Cash Equity-Based Comp 6.5 7.7 21.1 22.8
Add: Acquisition-Related Amortization 1.1 1.2 3.3 3.3
Add: Change in Fair Value of Contingent
Consideration
0.1 0.5 2.6 1.4
Less: Tax Effect of Adjustments (2.8) (3.4) (9.7) (9.9)
Non-GAAP Net Income $14.3 $10.1 $40.1 $30.3
Diluted Shares Outstanding (M) 35.8 36.3 35.9 36.3
Non-GAAP Net Income / Diluted Share $0.40 $0.28 $1.12 $0.84
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Notes
-Totals may not sum exactly due to rounding.
-Tax Effect of Adjustments includes the tax effect of non-cash equity-based compensation, acquisition related amortization expense and change in fair value of contingent consideration.
2016 Guidance
2016 Guidance Implied Y/Y Growth
Revenue $495 - $510 million 17% - 20%
Income from Operations $43 - $51 million 5% – 24%
Adjusted EBITDA $95 - $100 million 12% - 18%
Non-Cash Equity Based Comp. $28 - $33 million
Capital Expenditures $40 - $45 million
2016 Guidance Numbers Assume End of Period Q3’16
FX Rates Hold Throughout the Remainder of the Year
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