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01/10 17:27
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals several challenges: revenue stagnation due to the Hollywood strike, a decline in subscription revenue retention, and significant merger financing costs. Despite some growth in creative revenue, overall financial performance is weak, with decreased EBITDA and increased SG&A expenses. The Q&A section highlights ongoing challenges in media segments and lack of transparency on key partnerships. Given the small market cap, these negative factors are likely to result in a stock price decline of -2% to -8% over the next two weeks.
Third quarter revenue $240 million, representing a slight year-over-year decrease of 0.2% and 2% on a currency-neutral basis. The decrease was due to declines in editorial revenue and agency customers, partially offset by growth in creative revenue.
Adjusted EBITDA $78.7 million for the quarter, down 2.4% reported and 4.4% on a currency-neutral basis at a margin of 32.8% of revenue. The decline was attributed to increased SG&A expenses, including costs for SOX compliance and litigation.
Annual subscription revenue 58.4% of total revenue, up from 52.4% in Q3 of last year, representing year-on-year growth of 11.2% or 9.3% on a currency-neutral basis. Growth was driven by premium access, which grew 17% or 15% currency neutral, aided by a large renewal.
Creator revenue $144.9 million for the quarter, up 8.4% year-on-year and 6.4% on a currency-neutral basis. Growth was driven by premium access revenue, video, Unsplash+, and custom content, while agency revenue declined 22% year-on-year.
Editorial revenue $89.3 million, down 3.7% year-on-year and 5.6% on a currency-neutral basis. The decline was due to double-digit decreases in news and sports, partially offset by growth in entertainment and archives.
Other revenue $5.8 million, down from $14.1 million in Q3 '24. The decline was due to the timing of prior year revenue recognition for creative content deals, including AI rights.
Adjusted EBITDA less CapEx $64 million, down 6.1% or 8.1% on a currency-neutral basis. The decline was due to increased CapEx and lower adjusted EBITDA.
Free cash flow $7.9 million compared to negative $1.8 million in Q3 2024. The increase was due to changes in working capital, primarily the timing of receivables and payables.
SG&A expense $101 million, up $0.9 million year-on-year. The increase was due to $3 million of professional fees for SOX compliance and $1 million for litigation costs.
CapEx $14.7 million in Q3, up $2.2 million year-over-year. The increase reflects the timing of payments for routine CapEx spend.
AI Data Licensing: Revenue from AI data licensing was down from 2024, but new opportunities emerged, including deals with AI Large Language Models and search experiences to utilize Getty's content. A multiyear agreement with Perplexity was highlighted.
Custom Content Business: Getty created training content specific to customer needs, leveraging its expertise and global contributor network.
Geographic Revenue Performance: Revenue grew 0.8% in the Americas, while EMEA and APAC saw declines of 4% and 10.8%, respectively, primarily due to agency declines.
Subscription Revenue Growth: Annual subscription revenue grew 11.2% year-on-year, driven by premium access, which grew 17%. Subscription revenue now accounts for 58.4% of total revenue.
Adjusted EBITDA Margin: Adjusted EBITDA margin was 32.8%, slightly down from 33.5% in Q3 2024, impacted by SOX compliance and litigation costs.
Merger with Shutterstock: The merger with Shutterstock has been referred to a Phase 2 review by the U.K.'s CMA, delaying the close to 2026. Both parties remain committed to the transaction.
Legal Ruling Against Stability AI: Getty won a U.K. judgment against Stability AI for trademark infringement, affirming that Getty's copyright-protected works were used to train Stable Diffusion. The ruling will be used in U.S. litigation.
Regulatory Review Process: The ongoing regulatory review process for the merger with Shutterstock has delayed the transaction, pushing the expected close into 2026. This creates uncertainty and potential operational distractions.
Decline in Editorial Revenue: Editorial revenue declined by 3.7% year-on-year, driven by double-digit decreases in news and sports due to tough comparisons with a strong event calendar in 2024. This decline impacts overall revenue growth.
Agency Business Decline: The agency business continues to face headwinds, with a 22% year-on-year decline attributed to ongoing macroeconomic uncertainty and weaker demand.
AI Data Licensing Revenue Decline: Revenues from AI data licensing have decreased compared to 2024, reflecting variability and challenges in sustaining this revenue stream.
Legal and Compliance Costs: Increased legal costs related to ongoing litigation with Stability AI and accelerated SOX compliance efforts have added financial pressure, impacting adjusted EBITDA margins.
Debt and Interest Costs: The company has significant debt, with total outstanding debt of $1.38 billion and high interest rates on various loans and notes. This results in substantial cash interest expenses, impacting free cash flow.
Currency Exchange Impact: Currency-neutral revenue declined by 2% year-on-year, with specific regions like EMEA and APAC experiencing declines of 4% and 10.8%, respectively, due to currency fluctuations and regional challenges.
Hollywood Strike Impact: The broadcast and production business has not returned to pre-Hollywood strike performance levels, contributing to revenue stagnation.
Subscription Revenue Retention Decline: The annual subscription revenue retention rate declined to 90.3% from 92.2% in the prior year, reflecting challenges in retaining subscribers, particularly in the absence of major events.
Merger Financing Costs: The company incurred $3.5 million per month in net interest costs related to merger financing held in escrow, adding to financial strain.
Revenue Guidance for 2025: Updated guidance range to $942 million to $951 million, representing year-on-year growth of 0.3% to 1.2% or a decrease of 0.5% to growth of 0.5% on a currency-neutral basis. Guidance reflects approximately $6.5 million positive impact from FX for the full year, including an estimated $4.3 million benefit in the fourth quarter.
Adjusted EBITDA Guidance for 2025: Updated guidance range to $291 million to $293 million, translating to a year-on-year decrease of 3% to 2.3% or 4.1% to 3.3% currency neutral. Includes an approximate $3.5 million tailwind from FX in 2025, with an estimated $1.7 million benefit in the fourth quarter.
Editorial Event Calendar Impact: Guidance reflects the anticipated impacts of the odd year versus even year editorial event calendar comparisons, largely impacting the second half of 2025.
SOX Compliance Costs: Guidance includes approximately $8 million in one-off increases in SG&A for SOX acceleration efforts, including $2.5 million expected in the fourth quarter of 2025.
Merger-Related Costs: All merger-related costs are excluded from the guidance as they are considered one-time in nature and therefore excluded from adjusted EBITDA.
Potential Broader Impacts: Guidance does not fully reflect potential broader impacts from tariffs and other global macroeconomic conditions, which remain unknown.
The selected topic was not discussed during the call.
The earnings call reveals several challenges: revenue stagnation due to the Hollywood strike, a decline in subscription revenue retention, and significant merger financing costs. Despite some growth in creative revenue, overall financial performance is weak, with decreased EBITDA and increased SG&A expenses. The Q&A section highlights ongoing challenges in media segments and lack of transparency on key partnerships. Given the small market cap, these negative factors are likely to result in a stock price decline of -2% to -8% over the next two weeks.
The earnings call presents a mixed picture. Strong partnerships and subscription growth are positives, but weak guidance, negative free cash flow, and declining creative revenue are concerning. The Q&A highlights challenges in agency performance and ongoing litigation. Despite some positive aspects like new partnerships and subscriber growth, the weak financial metrics and uncertain outlook balance out the sentiment, leading to a neutral prediction.
The earnings call highlights several challenges: weak financial guidance, operational disruptions, and increased costs. The Q&A reveals management's inability to provide clear insights on FX and tariff impacts, adding uncertainty. Despite a merger and AI developments, no share repurchase program was announced, and free cash flow turned negative. These factors, coupled with a small market cap, suggest a negative stock price reaction in the short term.
The earnings report shows mixed results: strong Q4 revenue and EBITDA growth, but challenges like creative revenue decline and debt management concerns. The Q&A highlights cautious sentiment, with management avoiding specific guidance, which may cause uncertainty. The market cap suggests moderate reaction, likely resulting in a neutral stock price movement.
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