Shutterstock, Inc. (SSTK) Q1 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
Shutterstock's earnings call reveals strong financial performance with a record EBITDA and strategic growth through acquisitions like Backgrid and Envato. The Q&A highlights positive trends in content demand and revenue growth, despite some uncertainties like specific customer contributions. The guidance remains unchanged, but the Envato acquisition is expected to boost revenues. The market cap suggests moderate volatility, so the stock is likely to see a positive movement (2% to 8%) due to strong enterprise growth, improved margins, and strategic acquisitions.
Key Financial Performance
Revenue $214 million, down 10% year-over-year in content revenue, but overall revenue exceeded expectations due to strong performance in data distribution and services.
EBITDA $56 million, with margins of 26.1%. Margins impacted by acquisitions and increased marketing spend.
Data Distribution and Services Revenue $40 million, up 90% year-over-year, driven by strong growth in data offerings.
Cash $72 million at the end of Q1, increased to $90 million post-quarter.
Dividends $11 million paid out in Q1, with a 10% increase in dividends to $0.30 per share.
Stock Buybacks $8 million spent on stock buybacks in Q1.
Adjusted EBITDA Guidance Increased to $245 million to $248 million for 2024, including $6 million of one-time costs.
Subscriber Count Expected to more than double to 1.15 million subscribers post-Envato acquisition.
Adjusted EBITDA Margin 20% for Envato, expected to increase as the business scales.
Net Debt to Pro Forma Combined Adjusted EBITDA Expected to be 0.7 times post-Envato acquisition.
Revenue Growth from Envato Expected to add 20% to revenues and 15% to adjusted EBITDA on a full year basis.
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Operating Highlights
Generative AI Subscription: Customers can purchase credits to generate and download AI images directly within Shutterstock's ecosystem, leveraging models from Google, OpenAI, and Amazon.
Envato Acquisition: Acquisition of Envato adds a new product offering, Envato Elements, which serves as a one-stop shop for diverse content types, enhancing Shutterstock's portfolio.
Market Expansion through Envato: The acquisition expands Shutterstock's reach to faster-growing audiences such as freelancers and small agencies, increasing subscriber count to 1.15 million.
Data Distribution Revenue Growth: Data distribution and services revenue increased by 90% in Q1 2024, constituting almost 20% of total revenues.
Giphy Platform Growth: Giphy's advertising business is poised for growth, with significant deals won and increasing average order values.
Long-term Revenue Target: Shutterstock aims for $1.2 billion in revenue and $350 million in EBITDA by 2027, with the Envato acquisition accelerating this path.
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Risk or Challenges
Regulatory Issues: Emerging legislation and regulation in the EU and U.S. is expected to drive demand for Shutterstock's ethically sourced, licensable datasets, indicating a potential risk if compliance is not met.
Competitive Pressures: The competitive landscape in the digital creative assets market is intensifying, necessitating continuous innovation and adaptation to maintain market position.
Supply Chain Challenges: The need to grow the contributor base and the depth of the asset library to meet increasing demand for data poses a challenge in scaling operations effectively.
Economic Factors: Demand from small and medium-sized customers remains muted, which could impact overall revenue growth if larger customer demand does not compensate.
Acquisition Integration Risks: The integration of acquired companies like Envato and Backgrid carries risks related to operational alignment and realization of expected synergies.
Market Demand Fluctuations: While there are leading indicators of recovery in the content business, the lack of an end-to-end recovery thus far presents a risk to achieving growth targets.
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Guidance & Outlook
Acquisition of Envato: Shutterstock signed a definitive agreement to acquire Envato, a leading provider of digital creative assets and templates, which is expected to enhance product offerings and expand into faster-growing audiences.
Long-term Targets: Shutterstock aims to reach $1.2 billion in revenue and $350 million in EBITDA by 2027.
Generative AI Subscription: A new product allowing customers to generate and download AI images, with plans to expand to other generative asset types.
Data Distribution Growth: Data distribution and services revenue increased by 90% in Q1 2024, now constituting almost 20% of total revenues.
Giphy Platform Growth: Aggressive hiring for Giphy's sales team to grow its advertising business and monetize API connections.
Subscriber Growth: Envato acquisition expected to more than double Shutterstock's subscriber count to 1.15 million.
2024 Revenue Guidance: Shutterstock raised its 2024 revenue growth guidance to 5.5% to 7%.
Adjusted EBITDA Guidance: Adjusted EBITDA guidance increased to $245 million to $248 million for 2024.
Cash Flow and Capital Return: Shutterstock expects to have $100 million of unused revolver capacity post-acquisition for growth investments and shareholder returns.
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Shareholder Return Plan
Dividends Paid: $11 million paid out in Q1 2024.
Dividend Increase: Dividends increased by 10% in January 2024 to $0.30 per share.
Consecutive Dividend Increases: This marks the fourth consecutive year of double-digit dividend increases.
Stock Buyback: $8 million spent to buy back stock from employees for tax obligations on equity awards.
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Key Q&A
Q:How should we think about the guidance change for the addition of Envato versus organic changes?
A:We're pleased to raise our guidance for the year due to significant outperformance in Q1, particularly in our data distribution and services business. The acquisition of Envato is expected to contribute about 20% to our revenues and 15% to our EBITDA for the full year.
Q:Is $60 million still the right number for Computer Vision in the DDS business?
A:We cannot comment on specific customers or their contributions, but the DDS business is outperforming expectations, and the $60 million figure is likely to increase.
Q:How should we expect Giphy expenses to trend throughout the year?
A:While we are reimbursed for many cash expenses, salary and bonus expenses are impacting our EBITDA. We are hiring aggressively for Giphy, and as revenue grows, we expect profitability to improve.
Q:Can you provide any color on the pipeline for the data sales business?
A:We don't provide specifics on the pipeline, but we are seeing strong demand and growth in the DDS business, particularly due to changes in the regulatory environment.
Q:What opportunities are there for cross-sell with the Envato acquisition?
A:The acquisition will allow us to retain more subscribers and offer content not currently available to Envato customers, enhancing retention and growth.
Q:Do you assume Envato will be added to revenues and EBITDA from the start of Q3?
A:It's unlikely the acquisition will close in July; the back part of Q3 is more likely.
Q:What trends are you seeing in your content business in April?
A:We are seeing positive trends in our small and medium business, and we expect year-over-year growth in content to improve throughout the year.
Q:Where is the demand for your data beyond LLMs?
A:We are seeing demand from both new and existing customers for specialized content types, particularly as multimodal models require visual media.
Q:What challenges are you encountering in scaling the Giphy business?
A:The main challenge is reaching out to advertisers and getting in front of their budgets, but we are seeing high interest and are investing in sales.
Q:Will data deals signed in the quarter be recognized ratably?
A:We are structuring deals to be recognized over time, but there will be inherent lumpiness in the business.
Q:What trends are driving growth in your contributor base and library?
A:As we expand our content offerings, we are seeing increased demand and supply, which helps our conversion rates and drives business growth.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the Apple deal and the exact timeline for Giphy's profitability, indicating challenges in scaling the business without committing to a timeline.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Agnieszka Pustula
Apple deal
Backgrid
DDS lot
Elements content
Kenny Morgan
Kieran Kenny
Morgan Stanley
Shutterstock line
Shutterstock range
acquisition Shutterstock
acquisition leverage
advertising
audience
component
consumption
contribution
detail
distribution service
employee
folk
graphic
indicator
insight
output
pace
professional
return
side
size
start
story
supply
template
transaction
turnaround
video audio
SSTK Transcript
Shutterstock, Inc. (SSTK) Q3 2024 Earnings Call Transcript
Positive10-29
The earnings call highlights strong financial performance with revenue growth, increased guidance, and strategic acquisitions. The positive sentiment from analysts regarding Envato's growth and GIPHY's potential further supports optimism. Despite competitive pressures and regulatory concerns, the company is addressing market demand and maintaining a healthy cash balance. The share repurchase and dividend payments indicate confidence in financial health. Given the market cap, the stock is likely to see a positive movement of 2% to 8% over the next two weeks.
Shutterstock, Inc. (SSTK) Q2 2024 Earnings Call Transcript
Unknown8-6
The earnings call summary indicates mixed signals: strong financial metrics and growth in data services, but declining content revenue and challenges in customer acquisition. The Q&A section reveals management's confidence in future growth and strategic adjustments, but also highlights some uncertainties, such as unclear management responses and economic risks. The raised guidance and shareholder returns are positive factors, but the risks and uncertainties balance them out, resulting in a neutral sentiment. Given the market cap, the stock is likely to have a muted reaction, falling within the -2% to 2% range.
Shutterstock, Inc. (SSTK) Q1 2024 Earnings Call Transcript
Positive5-2
Shutterstock's earnings call reveals strong financial performance with a record EBITDA and strategic growth through acquisitions like Backgrid and Envato. The Q&A highlights positive trends in content demand and revenue growth, despite some uncertainties like specific customer contributions. The guidance remains unchanged, but the Envato acquisition is expected to boost revenues. The market cap suggests moderate volatility, so the stock is likely to see a positive movement (2% to 8%) due to strong enterprise growth, improved margins, and strategic acquisitions.
Shutterstock, Inc. (SSTK) Q1 2024 Earnings Call Transcript
Neutral5-2
SSTK Report
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