Shutterstock Reports Second Quarter 2021 Financial Results

Shutterstock, Inc., a leading global creative platform offering full-service solutions, high-quality content, and tools for brands, businesses and media companies, announced financial results for the second quarter ended June 30, 2021.

Commenting on the Company’s performance, Stan Pavlovsky, the Company’s Chief Executive Officer, said, “Revenue growth accelerated in the second quarter supported by robust demand across revenue channels, content types and product offerings. Our subscription offerings are resonating strongly in the market and we are encouraged by the execution in our enterprise revenue channel.

“I am also excited to launch Shutterstock.AI and welcome Pattern89, Datasine and Shotzr to Shutterstock. The acquisition of these leading artificial intelligence platforms will power our predictive performance capabilities to help creatives and customers accomplish their goals by making more data-informed content decisions.”

Second Quarter 2021 highlights compared to Second Quarter 2020:

Financial Highlights

  • Revenue increased 19% to $189.9 million. On a constant currency basis, revenue increased 16%.
  • Income from operations increased 47% to $33.2 million.
  • Net income increased 55% to $29.5 million.
  • Adjusted EBITDA increased 43% to $53.1 million.
  • Diluted EPS increased by 49% to $0.79 per share.
  • Adjusted net income per diluted share increased by 65% to $1.02 per share.

Key Operating Metrics

  • Subscribers increased 44% to 321,000.
  • Subscriber revenue increased 25% to $78.1 million.
  • Average revenue per customer, increased 9% to $356.
  • Paid downloads increased 2% to 44.9 million.
  • Revenue per download increased 16% to $4.17.
  • Image collection expanded 12% to approximately 380 million images.
  • Footage collection expanded 16% to approximately 22 million clips.

Shutterstock Acquires Three Artificial Intelligence Platforms

In July 2021, Shutterstock acquired Pattern89 Inc., Datasine Limited and assets from Shotzr, Inc. The aggregate cash consideration was approximately $35 million, and is subject to customary working capital and other adjustments, paid from existing cash on hand.

SHUTTERSTOCK INVESTOR RELATIONS MICRO SITE

Accessible at content.shutterstock.com/investor-report/index.html.

SECOND QUARTER RESULTS

Revenue

Second quarter revenue of $189.9 million increased $30.7 million or 19% as compared to the second quarter of 2020. Revenue generated through our E-commerce sales channel increased 23% as compared to the second quarter of 2020, to $120.7 million, and represented 64% of total revenue in the second quarter of 2021. E-commerce revenue growth was driven by higher subscriber revenue and also benefited from our acquisition of TurboSquid on February 1, 2021. Revenue from our Enterprise sales channel increased 13% as compared to the second quarter of 2020, to $69.2 million, and represented 36% of second quarter revenue in 2021.  Enterprise revenue growth was driven by billings momentum over the last several quarters, supported by sales execution, and the introduction of new subscription products such as SMB Flex.

On a constant currency basis, revenue increased 16% in the second quarter of 2021 as compared to the second quarter of 2020. On a constant currency basis, E-commerce revenue increased by 20% in the second quarter of 2021, as compared to the second quarter of 2020. On a constant currency basis, Enterprise revenue increased by 9% in the second quarter of 2021, as compared to the second quarter of 2020.

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Net income and net income per diluted share

Net income of $29.5 million increased $10.5 million as compared to $19.0 million for the second quarter in 2020. Net income per diluted share was $0.79, as compared to $0.53 for the same period in 2020. This increase is due primarily to increased revenue in the second quarter of 2021 as compared to the second quarter of 2020, which has outpaced the growth of expenses. Growth in our operating expenses was driven by higher royalty expense related to our increased revenues, increased sales commissions associated with higher enterprise billings and non-cash compensation expense associated with certain performance-based awards.

Adjusted net income per diluted share was $1.02 as compared to $0.62 for the second quarter of 2020, an increase of $0.40 per diluted share.

Adjusted EBITDA

Adjusted EBITDA of $53.1 million for the second quarter of 2021 increased by $16.0 million, or 43%, as compared to the second quarter of 2020, due primarily to increased revenue, and to our margin expansion initiatives. The adjusted EBITDA margin increased to 27.9% from 23.3% in the second quarter of 2020.

SECOND QUARTER LIQUIDITY

Our cash and cash equivalents increased by $47.1 million to $411.0 million at June 30, 2021, as compared with $363.9 million as of March 31, 2021. This increase was driven by $71.4 million of net cash provided by our operating activities, partially offset by $9.8 million used in investing activities and $14.4 million used in financing activities.

Net cash provided by our operating activities was favorably affected by our increased operating income, in addition to changes in the timing of payments pertaining to operating expenses. Cash used in investing activities primarily consists $6.8 million related to capital expenditures. Cash used in financing activities consists primarily of $7.7 million related to the payment of the quarterly cash dividend and $7.2 million paid in settlement of tax withholding obligations related to employee stock-based compensation awards.

Free cash flow was $61.7 million for the second quarter of 2021, an increase of $39.3 million from the second quarter of 2020. This change was primarily driven by higher cash flows from operating activities.

QUARTERLY CASH DIVIDEND

During the three and six months ended June 30, 2021, the Company declared and paid cash dividends of $0.21 and $0.42 per common share, respectively, or $7.7 million and $15.3 million, respectively.

On July 19, 2021, the Board of Directors declared a dividend of $0.21 per share of outstanding common stock, payable on September 16, 2021 to stockholders of record at the close of business on September 2, 2021.

KEY OPERATING METRICS

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Subscribers (end of period)(1)

321,000

223,000

321,000

223,000

Subscriber revenue (in millions)(2)

$

78.1

$

62.7

$

154.6

$

126.6

Average revenue per customer (last twelve months)(3)

$

356

$

326

$

356

$

326

Paid downloads (in millions)(4)

44.9

44.0

90.7

90.8

Revenue per download(5)

$4.17

$3.61

$4.07

$3.51

Content in our collection (end of period, in millions)(6):

Images

380

340

380

340

Footage clips

22

19

22

19

______________________________________________________________________

(1) Subscribers is defined as those customers who purchase one or more of our monthly recurring products for a continuous period of at least three months, measured as of the end of the reporting period.

(2) Subscriber revenue is defined as the revenue generated from subscribers during the period.

(3) Average revenue per customer is calculated by dividing total revenue for the last twelve-month period by customers. Customers is defined as total active, paying customers that contributed to total revenue over the last twelve-month period.

(4) Paid downloads is the number of downloads that our customers make in a given period of our content. Paid downloads exclude custom content and downloads of content that are offered to customers for no charge, including our free image of the week.

(5) Revenue per download is the amount of content-related revenue recognized in a given period divided by the number of paid downloads in that period excluding revenue from custom content and the impact of revenue that is not derived from or associated with content licenses.

(6) Represents approved images (photographs, vectors and illustrations) and footage (in number of clips) in our library on shutterstock.com at the end of the period. This collection metric excludes content that is not uploaded directly to our site but is available for license by our customers through an application program interface, custom content and certain content that may be licensed for editorial use only.

2021 GUIDANCE UPDATE

The Company’s revised expectations for the full year 2021 are as follows:

  • Revenue of $740 million to $750 million, representing annual growth of 11% to 12.5%, an increase from the previous guidance of $720 million to $730 million.
  • Adjusted EBITDA of between $175 million to $180 million, an increase from the previous guidance of $171 million to $177 million.
  • Adjusted net income per diluted share of between $2.80 to $2.95, an increase from the previous guidance of $2.78 to $2.93 per diluted share.

NON-GAAP FINANCIAL MEASURES

To supplement Shutterstock’s consolidated financial statements presented in accordance with the accounting principles generally accepted in the United States, or GAAP, Shutterstock’s management considers certain financial measures that are not prepared in accordance with GAAP, collectively referred to as non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income per diluted share, revenue growth (including by distribution channel) on a constant currency basis (expressed as a percentage), billings and free cash flow.

Shutterstock defines adjusted EBITDA as net income adjusted for depreciation and amortization, non-cash equity-based compensation, foreign currency transaction gains and losses, interest income and expense and income taxes; adjusted EBITDA margin as the ratio of adjusted EBITDA to revenue; adjusted net income as net income adjusted for the impact of non-cash equity-based compensation, the amortization of acquisition-related intangible assets and the estimated tax impact of such adjustments; adjusted net income per diluted common share as adjusted net income divided by weighted average diluted shares; revenue growth (including by distribution channel) on a constant currency basis as the increase in current period revenues over prior period revenues, utilizing fixed exchange rates for translating foreign currency revenues for all periods in the comparison; billings as revenue adjusted for the change in deferred revenue during the period; and free cash flow as cash provided by operating activities, adjusted for capital expenditures, content acquisition, and, with respect to the year ended December 31, 2020, a payment associated with long-term incentives related to our 2017 acquisition of Flashstock. These figures have not been calculated in accordance with GAAP and should be considered only in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results. Shutterstock cautions investors that non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly-titled measures presented by other companies.

Shutterstock’s management believes that adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income per diluted share, revenue growth (including by distribution channel) on a constant currency basis (expressed as a percentage), billings and free cash flow are useful to investors because these measures enable investors to analyze Shutterstock’s operating results on the same basis as that used by management. Additionally, management believes that adjusted EBITDA, adjusted EBITDA margin, adjusted net income and adjusted net income per diluted share 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 revenue growth (including by distribution channel) on a constant currency basis (expressed as a percentage) provides useful information to investors by eliminating the effect of foreign currency fluctuations that are not directly attributable to Shutterstock’s operating performance. Management also believes that providing these non-GAAP financial measures enhances the comparability for investors in assessing Shutterstock’s financial reporting. Shutterstock’s 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 after excluding the impact of nonrecurring payments associated with long-term incentives related to our 2017 acquisition of Flashstock, and provides them with the same measures that management uses as the basis for making resource allocation decisions.

Shutterstock’s management also uses the non-GAAP financial measures adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income per diluted share, revenue growth (including by distribution channel) on a constant currency basis (expressed as a percentage), billings 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.

Reconciliations of the differences between adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income per diluted share, billings, free cash flow, and the most comparable financial measures calculated and presented in accordance with GAAP, are presented under the headings “Reconciliation of Non-GAAP Financial Information to GAAP” and “Supplemental Financial Data” immediately following the Consolidated Balance Sheets. We do not provide a reconciliation of adjusted EBITDA guidance to net income guidance or a reconciliation of adjusted net income per diluted share guidance to net income per diluted share guidance, because we are unable to calculate with reasonable certainty the impact of potential future transactions, including, but not limited to, capital structure transactions, restructuring, acquisitions, divestitures or other events and asset impairments, without unreasonable effort. These amounts depend on various factors and could have a material impact on net income and net income per diluted share, but may be excluded from adjusted EBITDA and adjusted net income per diluted share. 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 second quarter and full year financial results during a teleconference today, July 27, 2021, 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# 5195865. 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 August 3, 2021 in the U.S. at (855) 859-2056 or outside the U.S. at (404) 537-3406 with the conference ID# 5195865.

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