Shutterstock, Inc. (SSTK) Q2 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Revenue $220 million, up 5.4% year-over-year. Growth attributed to strong performance in Data, Distribution and Services.
Content Revenue $170 million, down 9% year-over-year. Decline due to soft new customer acquisition in small- and medium-sized customers.
Adjusted EBITDA $62 million, with margins of 28%. Strong performance exceeding expectations.
Data, Distribution and Services Revenue $50 million, up 129% year-over-year. Growth driven by signing larger deals and strong demand.
Free Cash Flow Conversion 36%. Strong cash flow generation despite share repurchases and dividend payments.
Cash Balance $75 million, increased sequentially despite $20 million in share repurchases and quarterly dividend.
G&A Expenses 12% of revenue, down from 13% year-over-year, including $3.1 million of Envato transaction costs.
Sales and Marketing Expenses 22% of revenue, down from 25% in the first quarter, reflecting reduced brand spend.
Product Development Expenses 6% of revenue, down from 7% year-over-year, due to prudent cost management.
Debt Facility $375 million credit facility established for the acquisition of Envato, with $280 million drawn at a low cost of 6.7%.
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Operating Highlights
New Product Launch: Shutterstock has publicly released GenAI 3D capabilities in conjunction with NVIDIA, with commercial API access beginning in September for corporate beta customers.
Acquisition: Shutterstock successfully completed the acquisition of Envato on July 22, which is expected to enhance their Content business and introduce unlimited subscription offerings.
Market Expansion: The acquisition of Envato is expected to contribute $75 million to 2024 revenues, enhancing Shutterstock's market positioning in the content sector.
Customer Growth: The number of active paying GIPHY customers increased from 5 at the start of the year to 65 in Q2, indicating significant market expansion.
Operational Efficiency: Shutterstock's adjusted EBITDA for Q2 was $62 million, with strong margins of 28%, reflecting operational efficiencies.
Cost Management: Product development expenses were reduced to 6% of revenue, demonstrating prudent cost management.
Strategic Shift: Shutterstock is focusing on expanding its Data, Distribution, and Services sectors, which saw a 129% revenue growth in Q2.
Investment Strategy: Shutterstock plans to invest in sales talent to accelerate growth in Data, Distribution, and Services, while also enhancing Content through the Envato acquisition.
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Risk or Challenges
Content Revenue Decline: Content revenue was $170 million for the quarter, a decline of 9% versus the prior year, indicating challenges in the content segment.
New Customer Acquisition: New customer acquisition in small- and medium-sized customers was soft and did not experience the rebound expected, posing a risk to growth.
Integration of Acquisitions: The ability to successfully integrate acquired businesses, such as Envato, into existing operations presents a risk to achieving long-term targets.
Volatility in Data Business: The Data business is difficult to forecast with significant volatility in revenues and bookings from quarter to quarter, indicating potential instability.
Economic Factors: The overall economic environment may impact customer spending and demand, particularly among small- and medium-sized customers.
Regulatory Issues: The evolving landscape of generative AI and data licensing may introduce regulatory challenges that could affect business operations.
Debt Management: Post-acquisition, Shutterstock has $280 million drawn on a $375 million credit facility, which could pose risks if not managed properly.
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Guidance & Outlook
Acquisition of Envato: Shutterstock successfully completed the acquisition of Envato on July 22, 2024, which is expected to enhance the Content business and contribute $75 million to 2024 revenues.
Long-term Revenue and EBITDA Targets: Shutterstock aims to achieve $1.2 billion in revenue and $350 million in EBITDA by 2027.
GenAI Innovations: Shutterstock has launched GenAI 3D capabilities and partnered with NVIDIA and Databricks to enhance its offerings in generative AI.
Hiring Initiatives: Shutterstock is aggressively hiring sales talent to support growth in Data, Distribution, and Services.
GIPHY Growth: The number of active paying GIPHY customers increased from 5 to 65 in Q2 2024, with expectations for further growth.
2024 Revenue Guidance: Shutterstock raised the lower end of its revenue guidance to 6% to 7% growth, projecting revenues of $927 million to $936 million.
Adjusted EBITDA Guidance: Adjusted EBITDA is maintained at $245 million to $248 million, burdened by $7.5 million of one-time M&A costs.
Content Revenue Expectations: Content revenues are expected to improve each quarter, with a full-year growth of 2.5% including Envato's contribution.
Data, Distribution and Services Growth: Data, Distribution, and Services revenues are expected to grow by 27% for the full year.
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Shareholder Return Plan
Quarterly Dividend Payment: Shutterstock executed a quarterly dividend payment during the second quarter.
Share Repurchase Program: Shutterstock executed $20 million of share repurchases in the second quarter.
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Key Q&A
Q:Can you just help explain the stepdown that you're expecting for the back half of the year?
A:We expect to see continued success in the back half of the year. So, please don't expect that stepdown to be significant. It's less than a $10 million stepdown.
Q:Can you talk about the recurring nature and what you guys are building into contracts to ensure that when there is a renewal, you guys are seeing revenue continue?
A:We're focused on building a sustainable business and a business that's going to have a backlog that's going to be carrying us forward to grow to meet our needs in the years to come.
Q:What were your learnings from the stepdown in brand marketing for 2Q and what are you guys carrying forward?
A:The only reason for the stepdown was really we had done a large branding campaign with an agency that ran off between the first and the second quarter.
Q:Can you just talk through what's the updated plan from here for the Content part of the business?
A:We think there's an opportunity to actually simplify our product offering and we've done that in real time both with our PremiumBeat offering, with our Pond5 offering.
Q:Can you just talk about some of the use cases for the 3D GenAI product with NVIDIA?
A:It's super early days on the use cases. I think we mentioned beta customers coming on in September.
Q:Did you guys quantify what barter transaction sizes were in this quarter?
A:I wasn't quite sure what the first part of your question was.
Q:Can you help us understand what's driving the churn in your existing subscriber base?
A:We really haven't seen significant movements in churn from the perspective of our customers.
Q:Review of Unclear Management Responses
A:Management did not provide a clear answer regarding the specific sizes of barter transactions in the quarter, indicating uncertainty in their response.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI company
AI player
AI training
Chief Financial
Content improvement
Content revenue
Databricks ImageAI
Distribution Services
Finance Investor
GIPHY
GenAI product
NVIDIA
Netflix
Officer
Powell SVP
PremiumBeat
SEM
SVP Finance
benefit
booking
category
churn
contract
creation
day
decline
experience
focus
game
marketplace
nature
partnership
perspective
position
share repurchase
stepdown
transaction
year
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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