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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):
February 27, 2017

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 February 27, 2017, Shutterstock, Inc. (the “Company”) issued a press release announcing its financial results for the fiscal period ended December 31, 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 Monday, February 27, 2017 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.

Item 5.02
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(c)     The Board of Directors (the “Board”) of the Company has appointed Steven Berns, the Company’s Chief Financial Officer, to the role of Chief Operating Officer, effective March 1, 2017. Mr. Berns will continue in his role as Chief Financial Officer of the Company and his new title will be Chief Operating Officer and Chief Financial Officer.

Mr. Berns, age 52, has served as the Company’s Chief Financial Officer since September 2015. Mr. Berns also served as a member of our Board from March 2012 to August 2015. From June 2013 to September 2015, Mr. Berns served as Executive Vice President and Chief Financial Officer of Tribune Media, a multimedia company operating businesses in publishing, digital, and broadcasting. From February 2010 to June 2013, Mr. Berns served as the Executive Vice President and Chief Financial Officer of Revlon, Inc., a worldwide cosmetics and beauty products company, and he served as its Treasurer from May 2009 to February 2010. Mr. Berns previously served as Chief Financial Officer of Tradeweb, LLC, an over-the-counter, multi-asset class online marketplace, and a pioneer in the development of electronic trading and trade processing, from November 2007 to May 2009. From November 2005 until July 2007, Mr. Berns served as President, Chief Financial Officer and Director of MDC Partners Inc., a provider of marketing, activation and communications solutions and services, and from September 2004 to November 2005, Mr. Berns served as its Vice Chairman and Executive Vice President. Prior to that, Mr. Berns was the Senior Vice President and Treasurer of The Interpublic Group of Companies, Inc., an organization of advertising agencies and marketing services companies, from August 1999 until September 2004. Mr. Berns served as a director of LivePerson, Inc., a provider of hosted software products that facilitate real-time sales and customer service, from April 2002 until June 2011. Mr. Berns holds a B.S. from Lehigh University and an M.B.A. from New York University and is a Certified Public Accountant.

There is no agreement or understanding between Mr. Berns and any other person pursuant to which he was appointed as Chief Operating Officer and Chief Financial Officer of the Company, nor is there any family relationship between Mr. Berns and any of the Company’s directors or other executive officers. There are no transactions in which Mr. Berns has an interest requiring disclosure under Item 404(a) of Regulation S-K.

Amendment to Employment Agreement

In connection with his appointment, the Company and Mr. Berns amended (the “Amendment”) the employment agreement between the Company and Mr. Berns dated August 5, 2016 to (a) reflect the change in Mr. Berns' position and responsibilities and (b) change Mr. Berns' annual base salary from $500,000 to $600,000. The Amendment is effective March 1, 2017.

The foregoing description of the Amendment is qualified in its entirety by the Amendment, which is filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2016 and is incorporated herein by reference.

2


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 February 27, 2017
99.2Presentation slides referenced on the earnings call held by Shutterstock, Inc. on February 27, 2017

3


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: February 27, 2017
By:
/s/ Steven Berns
 
 
Steven Berns
 
 
Chief Financial Officer

4


EXHIBIT INDEX
Exhibit No.
 
Exhibit Description
 
 
 
99.1
 
Press release dated February 27, 2017
 
 
 
99.2
 
Presentation slides referenced on the earnings call held by Shutterstock, Inc. on February 27, 2017

5
Exhibit


EXHIBIT 99.1
 https://cdn.kscope.io/3761501133b5033d570cf98188cde0d3-sslogoa08.jpg

Shutterstock Reports Fourth Quarter and Full Year 2016 Financial Results
 

Full Year 2016 highlights as compared to Full Year 2015:
     
Financial Highlights
•
Revenue increased 16% to $494.3 million
•
Income from operations increased 12% to $45.8 million
•
Net income increased 67% to $32.6 million
•
Adjusted EBITDA increased 13% to 95.5 million
•
Diluted EPS increased 69% to $0.91 per share

Key Operating Metrics    
•
Paid downloads increased 14%
•
Revenue per download increased 1%
•
Image collection expanded 63% to 116.2 million images
•
Video collection expanded 68% to 6.2 million clips
 
New York - February 27, 2017 - Shutterstock, Inc. (NYSE: SSTK), a leading global provider of imagery and music, today announced financial results for the fourth quarter and full year ended December 31, 2016.
 
Founder and CEO Jon Oringer said, "We made a tremendous amount of progress in 2016.  We improved and expanded the content we offer; we greatly enhanced the technology on which our customers access our products; we have meaningfully diversified our offerings with video, music and editorial imagery; and we have strengthened our business in international markets.  Our operational progress manifested into 18% annual revenue growth and 18% adjusted EBITDA growth when adjusting for the impact of foreign currency movements.  Moving forward, our focus and vision is to expand our business from a marketplace to a platform, and we are confident that this will mean accessing a larger addressable market, accelerating growth and increasing shareholder value."

In addition, Shutterstock announced today that Steven Berns, its Chief Financial Officer, has been appointed as Chief Operating Officer effective March 1, 2017. Along with his new responsibility, Mr. Berns will also continue in his role as Chief Financial Officer.
 
FULL YEAR RESULTS

Revenue

Full year revenue of $494.3 million increased $69.2 million or 16% as compared to the full year 2015, primarily attributable to a 14% increase in the number of paid downloads, the acquisition of new customers and increased activity by our enterprise customers. Unfavorable foreign currency movements versus the US dollar partially offset this growth. Excluding the impact of foreign currency movements, revenue growth was approximately 18% for the full year.
Income from Operations
Income from operations of $45.8 million increased $4.8 million or 12% as compared to the full year 2015. This increase is driven by the full year revenue growth of $69.2 million, offset by increased operating expenses. Operating expense increases are primarily due to higher royalty costs associated with the increase in paid downloads, an increase in marketing spend and other general operating expense increases resulting from our continued growth.

1



Net Income
Net income available to common stockholders of $32.6 million, or $0.91 per diluted share, increased $13.1 million as compared to $19.6 million or $0.54 per diluted share for the full year 2015, primarily due to improved operating performance, a decrease in non-operating expenses related to foreign exchange and contingent consideration, and lower income tax expense. The lower income tax expense during the current year was primarily a result of a tax benefit related to the U.S. Research and Development credit for the tax years 2013 through 2016 which was claimed during the current year.
Adjusted EBITDA
Adjusted EBITDA of $95.5 million for the full year increased $10.7 million or 13% as compared to the full year 2015, driven primarily by our 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.

Adjusted Net Income

Adjusted 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 $55.2 million, or $1.54 per diluted share, for the full year as compared to $44.2 million or $1.22 per diluted share, for the full year 2015.

FOURTH QUARTER RESULTS
 
Revenue
Fourth quarter revenue of $130.2 million increased $14.2 million or 12% as compared to the fourth quarter of 2015, primarily due to an 6% increase in the number of paid downloads, mainly due to new customers, as well as continued expansion in enterprise sales as evidenced by a 6% 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, revenue growth was approximately 14% in the fourth quarter.

Income from Operations
Income from operations of $13.2 million decreased $1.8 million or 12% as compared to the fourth quarter of 2015 driven 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.

Net Income
Net income available to common stockholders of $9.9 million, or $0.27 per diluted share, for the fourth quarter increased $3.0 million as compared with $6.9 million, or $0.19 per diluted share, in the fourth 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 current year.

Adjusted EBITDA
Adjusted EBITDA of $25.9 million for the fourth quarter increased $0.3 million or 1%, as compared to the fourth 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.

2



Adjusted Net Income                                        
Adjusted 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 $15.1 million, or $0.42 per diluted share, for the fourth quarter as compared to $13.9 million or $0.38 per diluted share, in the fourth quarter of 2015.

LIQUIDITY
 
The Company’s cash, cash equivalents and short term investments decreased by $9.2 million to $279.2 million at December 31, 2016 as compared with $288.4 million at December 31, 2015. This decrease primarily reflects cash used for capital expenditures and content acquisitions of $40.0 million and cash used to repurchase shares of approximately $60.2 million which was partially offset by $101.1 million of cash generated from operations.

Free cash flow was $9.4 million in the fourth quarter, a decrease of $11.6 million from the fourth quarter of 2015, as our improved operating performance was offset by increased spending on capital expenditures and content acquisitions and working capital fluctuations related to the timing of payments.  Free cash flow is defined as cash provided by operating activities adjusted for capital expenditures and content acquisition.

STOCK REPURCHASE PROGRAM

During the fourth quarter of 2016, the Company repurchased approximately 370,000 shares of its stock at an average per-share price of $48.20, pursuant to its existing $100 million stock repurchase program. Through December 31, 2016, the Company has repurchased 2.1 million shares of its stock for a total of $77.5 million under the stock repurchase program at an average per-share price of $36.76. In February 2017, the Company’s Board of Directors approved an increase to the stock repurchase program, pursuant to which the Company is authorized to purchase an additional $100 million of its common stock, in addition to the $22.5 million that was remaining under the previous authorization as of December 31, 2016. 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 future share repurchases will be determined by the Company’s management based on its evaluation of market conditions and other factors. The repurchase program may be modified, suspended or discontinued at any time.

OPERATING METRICS
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
2016
 
2015
 
2016
 
2015
 
 
(in millions, except revenue per download)
Number of paid downloads
 
42.1

 
39.8

 
167.9

 
147.2

Revenue per download (1)
 
$3.02

 
$2.86

 
$2.88

 
$2.84

Images in our collection (end of period) (2)
 
116.2

 
71.4

 
116.2

 
71.4

_______________________________________________________________________________________________________________________ 
(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 2017 are as follows:
•
Revenue of $545-560 million 
•
Income from Operations of $47-52 million 
•
Adjusted EBITDA of $105-110 million
•
Non-cash Equity Based Compensation Expense of approximately $30 million
•
Effective tax rate in mid-30’s%
•
Capital Expenditures of approximately $45 million, including Capitalized Labor of approximately $20 million 

3


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; adjusted 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 constant 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; adjusted EBITDA growth on a constant currency basis (expressed as a percentage) as the increase in current period adjusted EBITDA over prior period adjusted EBITDA, utilizing fixed exchange rates for translating foreign currency revenues and expenses 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, adjusted net income, revenue growth on a constant currency basis, adjusted EBITDA growth on a constant 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, adjusted net income, revenue growth on a constant currency basis, and adjusted EBITDA growth on a constant 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, adjusted net income, revenue growth on a constant currency basis and adjusted EBITDA growth on a constant 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 adjusted 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 and adjusted EBITDA growth on a constant 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, adjusted 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.


4


 EARNINGS TELECONFERENCE INFORMATION
 
The Company will discuss its fourth quarter and full year financial results during a teleconference today, February 27, 2017, 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# 51650762.  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 March 6, 2017 in the U.S. at (855) 859-2056 or outside the U.S. at (404) 537-3406 with the conference ID# 51650762.
 
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 190,000 contributors, Shutterstock adds hundreds of thousands of images each week, and currently has more than 100 million images and more than 6 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.

5


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 creative content; competitive factors; our inability to innovate technologically or develop, market and offer new products and services; unforeseen costs related to infringement claims, indemnification claims and the inability to prevent misuse of our digital content; our inability to increase market awareness of Shutterstock and our products and services; our inability to effectively manage our growth; our inability to grow at historic growth rates; technological interruptions that impair access to our websites; assertions by third parties of infringement of intellectual property rights by Shutterstock, our inability to effectively manage risks associated with operating internationally; our exposure to foreign exchange rate risk; our inability to address risks associated with sales to large corporate customers; government regulation of the internet; increased laws related to the handling of personal data; actions by governments to restrict access to our products and services; our inability to effectively expand our operations into new products, services and technologies; our inability to protect the confidential information of customers; increased tax liabilities associated with our worldwide operations, including our exposure to withholding, sales and transaction tax liabilities; general economic and political 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

6


Shutterstock, Inc.
Consolidated Statements of Operations
(In thousands, except for per share data)
(unaudited, except full year information)
 
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
Revenue
 
$
130,173

 
$
116,002

 
$
494,317

 
$
425,149

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Cost of revenue
 
52,637

 
47,944

 
203,129

 
174,526

Sales and marketing
 
34,990

 
26,709

 
126,626

 
106,636

Product development
 
12,989

 
9,622

 
47,789

 
41,322

General and administrative
 
16,358

 
16,698

 
70,987

 
61,647

Total operating expenses
 
116,974

 
100,973

 
448,531

 
384,131

Income from operations
 
13,199

 
15,029

 
45,786

 
41,018

Other income (expense), net
 
(1,167
)
 
(3,360
)
 
(1,289
)
 
(6,746
)
Income before income taxes
 
12,032

 
11,669

 
44,497

 
34,272

Provision for income taxes
 
2,177

 
4,800

 
11,869

 
14,720

Net income
 
$
9,855

 
$
6,869

 
$
32,628

 
$
19,552

Less:
 
 

 
 

 
 

 
 

Undistributed earnings to participating stockholder
 
—

 
—

 
—

 
2

Net income available to common stockholders
 
$
9,855

 
$
6,869

 
$
32,628

 
$
19,550

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per common share available to common stockholders:
 
 

 
 

 
 

 
 

Basic
 
$
0.28

 
$
0.19

 
$
0.93

 
$
0.54

Diluted
 
$
0.27

 
$
0.19

 
$
0.91

 
$
0.54

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 

 
 

 
 

 
 

Basic
 
35,089

 
35,975

 
35,114

 
35,880

Diluted
 
35,881

 
36,468

 
35,861

 
36,319










7


Shutterstock, Inc.
Consolidated Balance Sheets
(In thousands, except par value amount)
 
 
 
December 31, 2016
 
December 31, 2015
 
 
 
 
 
ASSETS
 
 

 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
224,190

 
$
241,304

Short-term investments
 
54,972

 
47,078

Accounts receivable, net
 
38,107

 
28,464

Prepaid expenses and other current assets
 
22,569

 
11,713

Total current assets
 
339,838

 
328,559

Property and equipment, net
 
56,101

 
32,094

Intangibles assets, net
 
30,157

 
29,781

Goodwill
 
49,271

 
50,934

Deferred tax assets, net
 
23,013

 
25,807

Other assets
 
3,398

 
1,946

Total assets
 
$
501,778

 
$
469,121

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 

 
 

Current liabilities:
 
 

 
 

Accounts payable
 
$
7,305

 
$
6,816

Accrued expenses
 
41,106

 
30,696

Contributor royalties payable
 
20,473

 
17,822

Deferred revenue
 
122,235

 
98,239

Other liabilities
 
12,378

 
7,211

Total current liabilities
 
203,497

 
160,784

Deferred tax liability, net
 
2,147

 
3,778

Other non-current liabilities
 
9,438

 
15,994

Total liabilities
 
215,082

 
180,556

Commitment and contingencies
 
 

 
 

Stockholders’ equity:
 
 

 
 

Common stock, $0.01 par value; 200,000 shares authorized; 36,926 and 36,146 shares issued and 34,816 and 35,686 shares outstanding as of December 31, 2016 and December 31, 2015, respectively
 
369

 
361

Treasury stock, at cost; 2,110 and 460 shares as of December 31, 2016 and December 31, 2015, respectively
 
(77,567
)
 
(15,635
)
Additional paid-in capital
 
251,890

 
213,851

Accumulated other comprehensive loss
 
(17,061
)
 
(6,449
)
Retained earnings
 
129,065

 
96,437

Total stockholders’ equity
 
286,696

 
288,565

Total liabilities and stockholders’ equity
 
$
501,778

 
$
469,121



8


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 December 31,
 
Year Ended December 31,
 
 
2016
 
2015
 
2016
 
2015
Net Income
 
$
9,855

 
$
6,869

 
$
32,628

 
$
19,552

Add:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
5,765

 
4,478

 
19,946

 
14,841

Non-cash equity-based compensation
 
6,970

 
6,089

 
28,080

 
28,860

Other adjustments, net (1)
 
1,167

 
3,360

 
2,940

 
6,746

Provision for income taxes
 
2,177

 
4,800

 
11,869

 
14,720

Adjusted EBITDA(2)
 
$
25,934

 
$
25,596

 
$
95,463

 
$
84,719

 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
2016
 
2015
 
2016
 
2015
Net income
 
$
9,855

 
$
6,869

 
$
32,628

 
$
19,552

Add/(less):
 
 
 
 
 
 
 
 
Non-cash equity-based compensation
 
6,970

 
6,089

 
28,080

 
28,860

Tax effect of non-cash equity-based compensation (3)
 
(2,515
)
 
(2,003
)
 
(10,048
)
 
(10,148
)
Acquisition-related amortization expense
 
999

 
1,196

 
4,309

 
4,504

Tax effect of acquisition-related amortization expense (3)
 
(367
)
 
(416
)
 
(1,584
)
 
(1,640
)
Change in fair value of contingent consideration
 
325

 
3,330

 
2,925

 
4,770

Tax effect of change in fair value of contingent consideration (3)
 
(119
)
 
(1,190
)
 
(1,075
)
 
(1,717
)
Adjusted net income
 
$
15,148

 
$
13,875

 
$
55,235

 
$
44,181

Adjusted net income per diluted common share
 
$
0.42

 
$
0.38

 
$
1.54

 
$
1.22

 
 
 
 
 
 
 
 
 
Weighted average diluted shares
 
35,881

 
36,468

 
35,861

 
36,319

 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
2016
 
2015
 
2016
 
2015
Net cash provided by operating activities
 
$
24,412

 
$
25,882

 
$
101,148

 
$
85,331

Capital expenditures
 
(13,212
)
 
(4,130
)
 
(39,959
)
 
(14,003
)
Content acquisition
 
(1,831
)
 
(789
)
 
(8,045
)
 
(2,981
)
Free cash flow
 
$
9,369

 
$
20,963

 
$
53,144

 
$
68,347
















_______________________________________________________________________________________________________________________ 
(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 adjusted net income adjustments reflects the consolidated blended tax rate as applied to the taxable portion of the adjustment.

9


Shutterstock, Inc.
Supplemental Financial Data
(In thousands)
(Unaudited, except full year information)

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 December 31,
 
Year Ended December 31,
 
 
2016
 
2015
 
2016
 
2015
Cost of revenue
 
$
386

 
$
452

 
$
1,938

 
$
1,896

Sales and marketing
 
1,372

 
410

 
5,444

 
4,520

Product development
 
1,949

 
1,702

 
7,681

 
7,565

General and administrative
 
3,263

 
3,525

 
13,017

 
14,879

Total
 
$
6,970

 
$
6,089

 
$
28,080

 
$
28,860

 
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 December 31,
 
Year Ended December 31,
 
 
2016
 
2015
 
2016
 
2015
Cost of revenue
 
$
556

 
$
418

 
$
1,864

 
$
1,488

General and administrative
 
777

 
852

 
3,230

 
3,257

Total
 
$
1,333

 
$
1,270

 
$
5,094

 
$
4,745

 
Included in the accompanying financial results are expenses related to the depreciation of property and equipment, as follows:
 
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
2016
 
2015
 
2016
 
2015
Cost of revenue
 
$
1,681

 
$
1,906

 
$
6,448

 
$
5,666

General and administrative
 
2,751

 
1,302

 
8,404

 
4,430

Total
 
$
4,432

 
$
3,208

 
$
14,852

 
$
10,096

 
Historical Operating Metrics
 
 
12/31/16
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
 
(in millions, except revenue per download)
Number of paid downloads
 
42.1

 
41.2

 
43.4

 
41.2

 
39.8

 
38.1

 
35.9

 
33.4

 
33.5

Revenue per download (1)
 
$
3.02

 
$
2.91

 
$
2.81

 
$
2.77

 
$
2.86

 
$
2.76

 
$
2.85

 
$
2.87

 
$
2.68

Images in collection (end of period) (2)
 
116.2

 
102.7

 
92.1

 
81.0

 
71.4

 
63.7

 
57.2

 
51.6

 
46.8












_______________________________________________________________________________________________________________________ 
(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.

10
ex9922016q4final
Fourth Quarter & Full Year 2016 Summary February 27, 2017

 
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

 
3 In addition to reporting financial results in accordance with GAAP, we also refer to adjusted EBITDA, adjusted net income 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; adjusted 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 constant 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, adjusted net income, 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 and adjusted net income 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 adjusted 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. 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, adjusted 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 o f our website. Non-GAAP Financial Measures

 
4 The Leading Global Marketplace for Stock Content Contributors Photographers Illustrators Videographers Musicians Customers Designers Businesses Marketing Agencies Media Organizations

 
5 - Revenue increased 16% to $494.3 million primarily driven by new customers, an increase in paid downloads and increased activity from enterprise clients - Revenue increased 18% on a constant currency basis - Income from Operations increased 12% to $45.8 million driven by revenue growth offset by higher royalty costs associated with the increase in paid downloads, an increase in marketing spend and other general operating expense increases resulting from our continued growth - Adjusted EBITDA increased 13% to $95.5 million - GAAP Net Income available to common stockholders increased 67% to $32.6 million - Adjusted Net Income increased 25% to $55.2 million - Cash, cash equivalents and short term investments of $279 million at year end - Generated $53.1 million of free cash flow during the year FY’16 Financial Highlights

 
6 - Revenue increased 12% to $130.2 million primarily driven by new customers, an increase in paid downloads and increased activity from enterprise clients - Revenue increased 14% on a constant currency basis - Income from Operations decreased 12% to $13.2 million driven by higher royalty costs associated with the increase in paid downloads and an increase in marketing spend year-over-year - Adjusted EBITDA increased 1% to $25.9 million - GAAP Net Income available to common stockholders increased 43% to $9.9 million - Adjusted net income during the quarter increased 9% to $15.1 million - Generated $9.4 million of free cash flow during the quarter Q4’16 Financial Highlights

 
7 Q4’16 & FY’16 Operating Highlights Q4’16 Operating Highlights: - Launched Shutterstock Editor out of beta with new features & functionality - Signed distribution deals with AM Stock-Cameo & European Pressphoto Agency B.V. FY’16 Operating Highlights: - Image library expanded to 116.2 million images, up 63% vs. FY’15 - Video library expanded to 6.2 million video clips, up 68% vs. FY’15 - More than 190,000 contributors made their images, video clips & music tracks available - Paid downloads of 167.9 million increased 14% vs. FY’15 - More than 1.6 million customers contributed to revenue in FY’16 which was up 14% vs. FY’15 - Entered into an exclusive distribution agreement with the Associated Press ® - Acquired over 700,000 image assets in two prominent collections: The Art Archive & The Kobal Collection - Released plug-ins for Microsoft PowerPoint ® & Adobe Photoshop® - Entered into an API integration partnership with Google ®

 
Consolidated Financial Results ($ in millions) Three Months Ended December 31, Twelve Months Ended December 31, 2016 2015 % Δ 2016 2015 % Δ Total Revenues $130.2 $116.0 12% $494.3 $425.1 16% Total Expenses 120.3 109.1 10% 461.7 405.6 14% Net Income 9.9 6.9 43% 32.6 19.6 67% Plus: Depreciation & Amortization 5.8 4.5 29% 19.9 14.8 34% Plus: Equity-Based Compensation 7.0 6.1 14% 28.1 28.9 (3%) Plus: Other Adjustments 1.2 3.4 (65%) 2.9 6.7 (56%) Plus: Provision for Income Taxes 2.2 4.8 (55%) 11.9 14.7 (19%) Adjusted EBITDA $25.9 $25.6 1% $95.5 $84.7 13% Adjusted EBITDA Margin 19.9% 22.1% 19.3% 19.9% 8 Note: “Other Adjustments” includes accelerated change in fair value of contingent consideration that is recorded as a component of G&A expense. Note: Totals may not sum exactly due to rounding.

 
Free Cash Flow 9 ($ in millions) Three Months Ended December 31, Twelve Months Ended December 31, 2016 2015 2016 2015 Net Cash From Operations $24.4 $25.9 $101.1 $85.3 Less: Capital Expenditures (13.2) (4.1) (40.0) (14.0) Less: Content Acquisitions (1.8) (0.8) (8.0) (3.0) Free Cash Flow $9.4 $21.0 $53.1 $68.3 Note: Totals may not sum exactly due to rounding.

 
Adjusted Net Income 10 ($ in millions, except per share data) Three Months Ended December 31, Twelve Months Ended December 31, 2016 2015 2016 2015 GAAP Net Income $9.9 $6.9 $32.6 $19.6 Add: Non-Cash Equity-Based Comp 7.0 6.1 28.1 28.9 Add: Acquisition-Related Amortization 1.0 1.2 4.3 4.5 Add: Change in Fair Value of Contingent Consideration 0.3 3.3 2.9 4.8 Less: Tax Effect of Adjustments (3.0) (3.6) (12.7) (13.5) Adjusted Net Income $15.1 $13.9 $55.2 $44.2 Diluted Shares Outstanding (M) 35.9 36.5 35.9 36.3 Adjusted Net Income / Diluted Share $0.42 $0.38 $1.54 $1.22 Note: Totals may not sum exactly due to rounding.

 
Share Repurchase Activity 11 Note: Share repurchase plan implemented in Nov’15. To date activity through 12/31/16. Note: % of shares acquired calculated as % of shares outstanding at beginning of each period. Note: Total repurchase activity % calculated as % of shares outstanding at 9/30/15. Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Total Activity Share Repurchase Activity (in millions) $15.6 $27.8 $16.3 -- $17.8 $77.5 Shares Repurchased 459,602 880,648 399,242 -- 370,036 2,109,528 Average Repurchase Price $34.01 $31.59 $40.73 -- $48.20 $36.76 % of Outstanding Shares Acquired 1.3% 2.4% 1.1% -- 1.0% 5.8%

 
2017 Guidance 2017 Guidance Revenue $545 - $560 million Income from Operations $47 - $52 million Adjusted EBITDA $105 - $110 million Non-Cash Equity Based Comp. ~$30 million Capital Expenditures ~$45 million Capitalized Labor (included in total Capital Expenditures) ~$20 million Effective Tax Rate Mid 30’s% 12