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): | October 26, 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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). | |
Emerging growth company o | |
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. o | |
Item 2.02 | Results of Operations and Financial Condition. |
On October 31, 2017, Shutterstock, Inc. (the “Company”) issued a press release announcing its financial results for the fiscal period ended September 30, 2017. 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 Tuesday, October 31, 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. |
(b) On October 26, 2017, the Company and Jeffrey Weiser, the Company's Chief Marketing Officer, mutually determined that Mr. Weiser would separate from the Company effective November 9, 2017.
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 October 31, 2017
99.2Presentation slides referenced on the earnings call held by Shutterstock, Inc. on October 31, 2017
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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: October 31, 2017 | By: | /s/ Steven Berns |
Steven Berns | ||
Chief Financial Officer and Chief Operating Officer | ||
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EXHIBIT INDEX
Exhibit No. | Exhibit Description | |
99.1 | ||
99.2 | ||
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EXHIBIT 99.1
Shutterstock Reports Third Quarter 2017 Financial Results
New York - October 31, 2017 - Shutterstock, Inc. (NYSE: SSTK), a leading global technology company offering a creative platform for high-quality assets, tools and services, today announced financial results for the third quarter ended September 30, 2017.
Founder and CEO Jon Oringer said, “We executed well on our business strategy in the third quarter. The investments we continue to make in technology, operations, infrastructure and products, combined with more optimized pricing and packaging of our offerings are now beginning to positively impact our financial results. In July, we completed our acquisition of Flashstock, whose offering has since been rebranded as Shutterstock Custom™, providing enterprise clients with an innovative platform and editing tools to scale branded content creation. We continued to enrich our product offering, including through enhancing our plugins to better enable our customers to access Shutterstock images directly in their chosen environment, integration with the Google Slides application, and the beta launch of a natural language processing tool. We are attracting new customers, delivering new and innovative products and solutions, and utilizing our technological and operational infrastructure, positioning us well for continued profitable growth and increasing shareholder value.”
Third Quarter 2017 highlights as compared to Third Quarter 2016:
Key Operating Metrics
• | Paid downloads increased 2% to 41.9 million |
• | Revenue per download increased 11% to $3.23 |
• | Image collection expanded 52% to 155.8 million images |
• | Video collection expanded 54% to 8.3 million clips |
Financial Highlights
• | Revenue increased 15% to $141.1 million |
• | Income from operations decreased 51% to $5.6 million |
• | Net income decreased 47% to $5.0 million |
• | Adjusted EBITDA increased 1% to $23.2 million |
• | Diluted EPS decreased 46% to $0.14 per share |
THIRD QUARTER RESULTS
Revenue
Revenue of $141.1 million for the third quarter of 2017 increased $18.0 million, or 15%, as compared to the third quarter of 2016. This increase is attributable to our continued growth in enterprise sales, as well as increased customer acquisition through our e-commerce platform. Excluding the impact of foreign currency movements, revenue growth was approximately 14% in the third quarter of 2017.
Income from Operations
Income from operations of $5.6 million for the third quarter of 2017 decreased $5.7 million, or 51%, as compared to the third quarter of 2016, due primarily to increases in employee cash and non-cash compensation expenses and depreciation and amortization expense. These increases are attributable to the Company’s ongoing investments in improving its technology platform and operations.
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Net Income
Net income of $5.0 million, or $0.14 per diluted share, for the third quarter of 2017 decreased $4.4 million, or 47%, as compared with $9.4 million, or $0.26 per diluted share, in the third quarter of 2016 primarily due to the decline in operating performance. This was partially offset by a lower effective tax rate in the third quarter of 2017 compared to 2016.
Adjusted EBITDA
Adjusted EBITDA of $23.2 million for the third quarter of 2017 increased $0.2 million or 1%, as compared to the third quarter of 2016 driven primarily by the increase in revenues, which was offset by the Company’s investment in its smaller but high-growth businesses. Adjusted EBITDA is defined as net income adjusted for foreign currency transaction gains and losses, expenses related to long-term incentives and 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, expenses related to long-term incentives and contingent consideration related to acquisitions and the estimated tax impact of such adjustments was $10.9 million, or $0.31 per diluted share, for the third quarter of 2017 as compared to $14.3 million or $0.40 per diluted share, in the third quarter of 2016.
LIQUIDITY
Our cash, cash equivalents and short-term investments decreased by $43.9 million to $235.3 million at September 30, 2017 as compared with $279.2 million at December 31, 2016. This decrease reflects approximately $49.5 million of cash used to acquire Flashstock (now known as Shutterstock Custom), $25.0 million of cash used to repurchase shares of the Company’s outstanding common stock, $37.6 million of cash used for capital expenditures and a payment of contingent consideration of $10.0 million related to the 2015 acquisition of PremiumBeat, which were partially offset by cash generated from operations, including cash taxes paid of $4.1 million through September 30, 2017 compared to $16.3 million in 2016.
Free cash flow was $18.2 million in the third quarter of 2017, a decrease of $2.5 million from the third quarter of 2016. This change is primarily related to decreased cash from operations and an increase in capital expenditures, partially offset by a decrease in cash used to acquire content.
STOCK REPURCHASE PROGRAM
During the third quarter of 2017, we did not repurchase shares of our stock pursuant to our existing stock repurchase program. From the inception of this program, through September 30, 2017, we have repurchased 2.6 million shares of our stock for a total of $100.0 million under the stock repurchase program at an average per-share price of $39.09. In February 2017, our 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 our common stock, and as of September 30, 2017 there was $100 million available for purchases under these authorizations.
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 our management based on its evaluation of market conditions and other factors. The repurchase program may be modified, suspended or discontinued at any time.
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OPERATING METRICS
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
(in millions, except revenue per download) | ||||||||||||
Number of paid downloads | 41.9 | 41.2 | 128.1 | 125.8 | ||||||||
Revenue per download (1) | $3.23 | $2.91 | $3.06 | $2.83 | ||||||||
Content in our collection (end of period)(2): | ||||||||||||
Images | 155.8 | 102.7 | 155.8 | 102.7 | ||||||||
Videos | 8.3 | 5.4 | 8.3 | 5.4 | ||||||||
(1) Revenue per download metric excludes the impact of revenue not associated with content downloads.
(2) Represents images (photographs, vectors and illustrations) and video clips 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
“We are pleased with the current quarter’s revenue performance, and we believe that the full-year 2017 is trending toward the high end of our annual revenue guidance range of $535 to $545 million,” said Steven Berns, COO and CFO. “Given expected higher levels of investment in the fourth quarter of 2017, we expect our Income from Operations and Adjusted EBITDA to be in the low to midpoint of our guidance range.”
The Company’s current expectations for the full year 2017 remain as follows:
• | Revenue of $535 - $545 million |
• | Income from Operations of $30 - $40 million |
• | Adjusted EBITDA of $85 - $95 million |
• | Non-cash equity-based compensation expense of approximately $30 million |
• | Effective tax rate in mid-30’s% |
In addition, the Company expects its fourth quarter 2017 capital expenditures to be approximately $15 million, of which 60% is expected to be capitalized labor. Accordingly, management expects capital expenditures for the full year 2017 to be approximately $55 million, including capitalized labor of approximately $35 million.
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NON-GAAP FINANCIAL MEASURES
Shutterstock defines adjusted EBITDA as net income adjusted for foreign currency transaction gains and losses, expenses related to long-term incentives and 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 expenses related to long-term incentives and 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 margin (expressed as a percentage) as the ratio of adjusted EBITDA to revenue; 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 EBITDA margin, adjusted net income, revenue growth on a constant currency basis, 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 EBITDA margin, 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
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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.
EARNINGS TELECONFERENCE INFORMATION
The Company will discuss its third quarter financial results during a teleconference today, October 31, 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# 95974683. 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 7, 2017 in the U.S. at (855) 859-2056 or outside the U.S. at (404) 537-3406 with the conference ID# 95974683.
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 300,000 contributors, Shutterstock adds hundreds of thousands of images each week, and currently has more than 150 million images and more than 8 million video clips available.
Headquartered in New York City, Shutterstock has offices around the world and customers in more than 150 countries. The company also owns Bigstock, a value-oriented stock media agency; Shutterstock Custom, a custom content creation platform; 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 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 | Michael Mestrandrea |
917-563-4991 | 646-454-4284 |
press@shutterstock.com | mmestrandrea@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, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenue | $ | 141,063 | $ | 123,073 | $ | 405,282 | $ | 364,144 | ||||||||
Operating expenses: | ||||||||||||||||
Cost of revenue | 58,812 | 50,184 | 168,512 | 150,492 | ||||||||||||
Sales and marketing | 36,008 | 32,977 | 105,620 | 91,636 | ||||||||||||
Product development | 13,340 | 11,604 | 37,276 | 34,800 | ||||||||||||
General and administrative | 27,333 | 17,020 | 74,716 | 54,629 | ||||||||||||
Total operating expenses | 135,493 | 111,785 | 386,124 | 331,557 | ||||||||||||
Income from operations | 5,570 | 11,288 | 19,158 | 32,587 | ||||||||||||
Other income (expense), net | 130 | 102 | 2,095 | (122 | ) | |||||||||||
Income before income taxes | 5,700 | 11,390 | 21,253 | 32,465 | ||||||||||||
Provision for income taxes | 698 | 1,999 | 6,582 | 9,692 | ||||||||||||
Net income available to common stockholders | $ | 5,002 | $ | 9,391 | $ | 14,671 | $ | 22,773 | ||||||||
Net income per common share available to common stockholders: | ||||||||||||||||
Basic | $ | 0.14 | $ | 0.27 | $ | 0.42 | $ | 0.65 | ||||||||
Diluted | $ | 0.14 | $ | 0.26 | $ | 0.42 | $ | 0.64 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 34,643 | 35,036 | 34,607 | 35,123 | ||||||||||||
Diluted | 35,177 | 35,824 | 35,339 | 35,855 | ||||||||||||
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Shutterstock, Inc.
Consolidated Balance Sheets
(In thousands, except par value amount)
(Unaudited)
September 30, 2017 | December 31, 2016 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 212,782 | $ | 224,190 | ||||
Short-term investments | 22,500 | 54,972 | ||||||
Accounts receivable, net | 44,896 | 38,107 | ||||||
Prepaid expenses and other current assets | 35,878 | 22,569 | ||||||
Total current assets | 316,056 | 339,838 | ||||||
Property and equipment, net | 77,770 | 56,101 | ||||||
Intangibles assets, net | 43,015 | 30,157 | ||||||
Goodwill | 90,524 | 49,271 | ||||||
Deferred tax assets, net | 18,342 | 23,013 | ||||||
Other assets | 6,842 | 3,398 | ||||||
Total assets | $ | 552,549 | $ | 501,778 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 10,210 | $ | 7,305 | ||||
Accrued expenses | 51,989 | 41,106 | ||||||
Contributor royalties payable | 20,072 | 20,473 | ||||||
Deferred revenue | 146,430 | 122,235 | ||||||
Other liabilities | 1,665 | 12,378 | ||||||
Total current liabilities | 230,366 | 203,497 | ||||||
Deferred tax liability, net | 1,664 | 2,147 | ||||||
Other non-current liabilities | 13,139 | 9,438 | ||||||
Total liabilities | 245,169 | 215,082 | ||||||
Commitment and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Common stock, $0.01 par value; 200,000 shares authorized; 37,219 and 36,926 shares issued and 34,660 and 34,816 shares outstanding as of September 30, 2017 and December 31, 2016, respectively | 373 | 369 | ||||||
Treasury stock, at cost; 2,559 and 2,110 shares as of September 30, 2017 and December 31, 2016, respectively | (100,027 | ) | (77,567 | ) | ||||
Additional paid-in capital | 268,565 | 251,890 | ||||||
Accumulated other comprehensive loss | (4,601 | ) | (17,061 | ) | ||||
Retained earnings | 143,070 | 129,065 | ||||||
Total stockholders’ equity | 307,380 | 286,696 | ||||||
Total liabilities and stockholders’ equity | $ | 552,549 | $ | 501,778 | ||||
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Shutterstock, Inc.
Reconciliation of Non-GAAP Financial Information to GAAP
(In thousands, except per share information)
(Unaudited)
Adjusted EBITDA, adjusted net income and free cash flow are not financial measures under United States generally accepted accounting principles (GAAP). Such non-GAAP financial measures should not be construed as alternatives to any other measures of performance determined in accordance with GAAP, or 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 present non-GAAP 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, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net Income | $ | 5,002 | $ | 9,391 | $ | 14,671 | $ | 22,773 | ||||||||
Add: | ||||||||||||||||
Depreciation and amortization | 10,227 | 5,176 | 24,948 | 14,181 | ||||||||||||
Non-cash equity-based compensation | 6,885 | 6,505 | 20,128 | 21,110 | ||||||||||||
Other adjustments, net (1) | 384 | (102 | ) | (1,581 | ) | 1,773 | ||||||||||
Provision for income taxes | 698 | 1,999 | 6,582 | 9,692 | ||||||||||||
Adjusted EBITDA(2) | $ | 23,196 | $ | 22,969 | $ | 64,748 | $ | 69,529 | ||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net income | $ | 5,002 | $ | 9,391 | $ | 14,671 | $ | 22,773 | ||||||||
Add/(less): | ||||||||||||||||
Non-cash equity-based compensation | 6,885 | 6,505 | 20,128 | 21,110 | ||||||||||||
Tax effect of non-cash equity-based compensation (3) | (2,531 | ) | (2,336 | ) | (7,400 | ) | (7,533 | ) | ||||||||
Acquisition-related amortization expense | 1,900 | 1,053 | 3,976 | 3,310 | ||||||||||||
Tax effect of acquisition-related amortization expense (3) | (699 | ) | (387 | ) | (1,463 | ) | (1,217 | ) | ||||||||
Acquisition-related long-term incentives and contingent consideration | 514 | 130 | 514 | 2,625 | ||||||||||||
Tax effect of acquisition-related long-term incentives and contingent consideration (3) | (189 | ) | (48 | ) | (189 | ) | (965 | ) | ||||||||
Adjusted net income | $ | 10,882 | $ | 14,308 | $ | 30,237 | $ | 40,103 | ||||||||
Adjusted net income per diluted common share | $ | 0.31 | $ | 0.40 | $ | 0.86 | $ | 1.12 | ||||||||
Weighted average diluted shares | 35,177 | 35,824 | 35,339 | 35,855 | ||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net cash provided by operating activities | $ | 31,105 | $ | 35,938 | $ | 71,510 | $ | 76,178 | ||||||||
Capital expenditures | (11,857 | ) | (10,453 | ) | (37,626 | ) | (26,747 | ) | ||||||||
Content acquisition | (1,017 | ) | (4,752 | ) | (2,568 | ) | (6,214 | ) | ||||||||
Free cash flow | $ | 18,231 | $ | 20,733 | $ | 31,316 | $ | 43,217 | ||||||||
_______________________________________________________________________________________________________________________
(1) Included in other adjustments, net is foreign currency transaction gains and losses, expenses related to long-term incentives and 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.
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Shutterstock, Inc.
Supplemental Financial Data
(Unaudited)
Historical Operating Metrics
9/30/17 | 6/30/17 | 3/31/17 | 12/31/16 | 9/30/16 | 6/30/16 | 3/31/16 | 12/31/15 | 9/30/15 | ||||||||||||||||||||||||||||
(in millions, except revenue per download) | ||||||||||||||||||||||||||||||||||||
Number of paid downloads | 41.9 | 42.7 | 43.5 | 42.1 | 41.2 | 43.4 | 41.2 | 39.8 | 38.1 | |||||||||||||||||||||||||||
Revenue per download (1) | $ | 3.23 | $ | 3.05 | $ | 2.91 | $ | 3.02 | $ | 2.91 | $ | 2.81 | $ | 2.77 | $ | 2.86 | $ | 2.76 | ||||||||||||||||||
Content in collection (end of period): (2) | ||||||||||||||||||||||||||||||||||||
Images | 155.8 | 144.7 | 132.0 | 116.2 | 102.7 | 92.1 | 81.0 | 71.4 | 63.7 | |||||||||||||||||||||||||||
Videos | 8.3 | 7.6 | 6.9 | 6.2 | 5.4 | 4.9 | 4.2 | 3.7 | 3.3 | |||||||||||||||||||||||||||
_______________________________________________________________________________________________________________________
(1) Revenue per download metric excludes the impact of revenue not associated with content downloads.
(2) Images (photographs, vectors and illustrations) and video clips 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, custom content and certain images that may be licensed for editorial use only.
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Third Quarter 2017
October 31, 2017
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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
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In addition to reporting financial results in accordance with GAAP, we also refer to adjusted EBITDA, adjusted net income, revenue growth on a constant currency basis, adjusted EBITDA
margin and adjusted EBITDA growth on a constant currency basis and free cash flow. We define adjusted EBITDA as net income adjusted for foreign currency transaction gains and
losses, expenses related to long-term incentives and 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 expenses related to long-term incentives and 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 margin (expressed as a percentage) as the ratio of adjusted EBITDA to revenue; 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 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, revenue growth on a constant currency basis, adjusted EBITDA margin, 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.
We believe that adjusted EBITDA, adjusted net income, revenue growth on a constant currency basis, adjusted EBITDA margin, adjusted EBITDA growth on a constant 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
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, 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, 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 of our website. 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.
Non-GAAP Financial Measures
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Compared to Q3'16:
• Revenue increased 15% to $141.1 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 51% to $5.6 million, driven by higher depreciation and
amortization expense and personnel costs in the period
• Net income decreased 47% to $5.0 million
• Adjusted net income during the quarter decreased 24% to $10.9 million
• Adjusted EBITDA increased 1% to $23.2 million
• Generated $18.2 million of free cash flow during the quarter
Q3'17 Financial Highlights
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Q3'17 Operating Highlights
Compared to Q3'16:
• Paid downloads of 41.9 million up 2%
• Image library expanded to 155.8 million images, up 52%
• Video library expanded to 8.3 million video clips, up 54%
• More than 300,000 contributors made their images, video clips & music tracks available
• More than 1.7 million customers contributed to revenue over past 12 months, which was up 11%
• Completed the acquisition of Flashstock for approximately $50 million, and rebranded the offering
as Shutterstock Custom, enabling us to serve a growing base of enterprise marketers seeking on-
brand custom content across content types
• Launched a number of enhancements to our plugins, adding compatability across multiple
applications and for the first time, offering in-application access to our video library
• Launched direct integration of our library and Shutterstock Editor in the Google Slides application
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Consolidated Financial Results
($ in millions)
Three Months Ended September 30,
2017 2016 % Δ
Total Revenues $ 141.1 $ 123.1 15 %
Total Expenses 136.1 113.7 20 %
Net Income 5.0 9.4 (47 )%
Plus: Depreciation & Amortization 10.2 5.2 96 %
Plus: Equity-Based Compensation 6.9 6.5 6 %
Plus: Other Adjustments 0.4 (0.1 ) NM
Plus: Provision for Income Taxes 0.7 2.0 (65 )%
Adjusted EBITDA $ 23.2 $ 23.0 1 %
Adjusted EBITDA Margin 16.4 % 18.7 %
Note: Totals may not sum exactly due to rounding.
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Revenue by Sales Channel
2017 2016 2015
Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
E-commerce $ 85.9 $ 85.9 $ 83.8 $ 84.2 $ 80.8 $ 83.5 $ 79.9 $ 81.3 $ 75.5 $ 75.1 $ 72.1
Enterprise 49.3 42.9 41.9 41.3 38.2 37.1 33.4 31.7 28.8 26.5 23.0
Other 5.8 5.1 4.6 4.7 4.1 3.8 3.4 3.0 3.0 2.8 2.4
Total Revenues $ 141.1 $ 134.0 $ 130.2 $ 130.2 $ 123.1 $ 124.4 $ 116.7 $ 116.0 $ 107.3 $ 104.4 $ 97.5
($ in millions)
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Free Cash Flow
($ in millions)
Three Months Ended
September 30,
2017 2016
Net Cash From Operations $ 31.1 $ 35.9
Less: Capital Expenditures (11.9 ) (10.5 )
Less: Content Acquisitions (1.0 ) (4.8 )
Free Cash Flow $ 18.2 $ 20.7
Note: Totals may not sum exactly due to rounding.
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Adjusted Net Income
($ in millions, except per share data)
Three Months Ended
September 30,
2017 2016
Net Income $ 5.0 $ 9.4
Add: Non-Cash Equity-Based Comp 6.9 6.5
Add: Acquisition-Related Amortization 1.9 1.1
Add: Acquisition-related long-term
incentives and contingent consideration 0.5 0.1
Less: Tax Effect of Adjustments (3.4 ) (2.8 )
Adjusted Net Income $ 10.9 $ 14.3
Diluted Shares Outstanding (M) 35.2 35.8
Adjusted Net Income / Diluted Share $ 0.31 $ 0.40
Note: Totals may not sum exactly due to rounding.
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Share Repurchase Activity
Note: Share repurchase plan implemented in Nov’15. Activity to date through 9/30/2017.
Note: Total repurchase activity % and % of shares acquired calculated on shares outstanding at 9/30/15.
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Total Activity
Share Repurchase Activity $15.6 $27.8 $16.3 -- $17.8 $22.5 -- -- $100.0
Shares Repurchased 459,602 880,648 399,242 -- 370,036 448,722 -- -- 2,558,250
Average Repurchase Price $34.01 $31.59 $40.73 -- $48.20 $50.04 -- -- $39.09
% of Shares Acquired 1.3% 2.4% 1.1% -- 1.0% 1.2% -- -- 7.1%
($ in millions, except per share data)
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2017 Guidance
Current
2017 Guidance
Previously Announced
2017 Guidance
Revenue $535 - $545 million
Income from Operations $30 - $40 million
Adjusted EBITDA $85 - $95 million
Non-Cash Equity Based Comp. ~$30 million
Capital Expenditures ~$55 million ~$45 million
Capitalized Labor
(included in total Capital Expenditures) ~$35 million ~$20 million
Effective Tax Rate Mid 30’s% Range
The Company’s current expectations for the full year 2017, updated from our previously announced guidance for
capital expenditures and capitalized labor guidance, are as follows:
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