Shutterstock, Inc. (SSTK) Q3 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Revenue $251 million, representing growth of 7.4% year-over-year.
Adjusted EBITDA $70 million, with a 28% margin.
Content Revenue $204 million, representing growth of 14% year-over-year. Excluding Envato, Content revenues declined 7% year-over-year, an improvement from a 9% decline in Q2.
Envato Contribution to Content Revenue $38 million in the third quarter.
Data, Distribution and Services Revenue $47 million in the third quarter.
Free Cash Flow $45.7 million.
Cash Balance Increased to $131 million, up from $75 million in Q2.
Net Debt $149 million, with a net debt to LTM EBITDA ratio of 0.6 times.
Sales and Marketing Expenses 20% of revenue, down from 22.6% in the prior year.
Product Development Expenses 6.1% of revenue, down from 7.5% in the prior year.
G&A Expenses 13% of revenue, up from 11% in the prior year, including $3.2 million of Envato transaction costs.
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Operating Highlights
Generative Plus Subscription: Launched in April 2024, this low-cost, month-to-month subscription for AI-generated content has seen a steady increase in subscribers, with millions of AI images generated and hundreds of thousands licensed.
Envato Acquisition: Envato contributed $38 million in Content revenues for Q3 2024, significantly outperforming expectations and driving new subscriber growth.
Giphy Business Growth: Giphy's views reached approximately 19 billion per day in Q3 2024, up over 10% year-over-year, with a growing paying customer base.
TikTok Partnership: TikTok expanded its relationship with Giphy, selecting it as a partner for a new recommendation engine in direct messaging.
Operational Efficiency in Content: Content revenues improved with a decline of only 7% year-over-year, showing a positive trend compared to previous quarters.
Sales Force Expansion: Shutterstock is hiring aggressively to build out its sales force, particularly in Data, Distribution, and Services.
Focus on AI and Data Services: Shutterstock is investing heavily in AI-generated content and Data services, targeting 20%+ growth in these emerging businesses.
Long-term Financial Targets: Shutterstock aims to achieve $1.2 billion in revenue and $350 million in EBITDA by 2027.
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Risk or Challenges
Competitive Pressures: Shutterstock faces competitive pressures in the Content business, particularly as it integrates Envato and seeks to improve performance in a declining market segment. The company is working to enhance its product offerings and pricing strategies to regain market share.
Regulatory Issues: The company mentions the importance of compliance with SEC regulations and the need to disclose risk factors in their filings, indicating potential regulatory challenges that could impact operations.
Supply Chain Challenges: There are no specific supply chain challenges mentioned, but the integration of Envato and the need for continuous improvement in product offerings suggest potential operational complexities.
Economic Factors: The overall economic environment and its impact on customer spending are implied risks, particularly in the context of traditional stock content licensing and the need for growth in new product areas.
Integration Risks: The integration of Envato into Shutterstock poses risks related to aligning business operations, culture, and customer expectations, which could affect overall performance.
Market Demand Fluctuations: The company acknowledges fluctuations in market demand for traditional content and the need to adapt to changing customer preferences, particularly with the rise of AI-generated content.
Debt Management: Shutterstock's strategy to maintain a net debt balance while focusing on share repurchases and acquisitions could pose risks if cash flows do not meet expectations.
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Guidance & Outlook
Envato Acquisition: Envato contributed $38 million in Content revenues in Q3, with strong product market fit and subscriber growth.
AI-Generated Content: AI-generated Content is driving incremental growth, with subscribers to Generative Plus increasing each month.
Giphy Business: Giphy's audience engagement is growing, with 19 billion views per day, and new sales hires are increasing the customer base.
Shutterstock Studios: Shutterstock Studios achieved revenues more than double that of Q3 last year, indicating strong growth potential.
Sales Force Expansion: Shutterstock is building out its sales force to address growing global demand for licensed Data.
2024 Revenue Guidance: Revenue is expected to be between $935 million to $940 million, representing growth of 7% to 7.5% year-over-year.
Adjusted EBITDA Guidance: Adjusted EBITDA guidance increased to $247 million to $250 million.
2027 Targets: Shutterstock aims to achieve $1.2 billion in revenue and $350 million in EBITDA by 2027.
Adjusted Net Income Guidance: Adjusted net income per diluted share guidance increased to $4.22 to $4.31.
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Shareholder Return Plan
Quarterly Dividend Payment: Shutterstock paid a quarterly dividend during the third quarter.
Share Repurchase: In the third quarter, Shutterstock repurchased $21 million of shares and plans to continue buying back shares over the long term.
Share Repurchase Authorization: Shutterstock will renew its share repurchase authorization as necessary.
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Key Q&A
Q:What was the revenue contribution from Giphy in Q3?
A:As we acquired the business, the run rate revenues of the business were about $20 million. We’ve consolidated that business into our Data, Distribution and Services segment.
Q:What is the potential monetization from TikTok?
A:I can’t talk about the specifics or nature of the deal, but we believe we’re going to monetize that.
Q:Can you provide more details on the trajectory of Content growth excluding Envato?
A:We’re making really good progress. The changes that we’ve made are getting traction. We’re seeing growth in the business and the level of the decline is shrinking.
Q:What kind of visibility do you have into the Data pipeline for Q4 and 2025?
A:We came into this year with about $60 million for visibility and we’re going to finish the year with well over $100 million of revenue this year.
Q:What growth do you expect from Envato on a standalone basis?
A:We’re seeing the work that they did on the customer experience is driving new subs into the franchise.
Q:What is the nature of the recurring demand for Data?
A:We’re seeing existing Data customers continue to purchase refreshed Data from us.
Q:What is the potential for generative AI to become a larger portion of the Content business?
A:We’re seeing subscriptions grow in that product. It’s growing every single month.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the specifics of the TikTok deal and the revenue contribution from Giphy. They also provided vague language about the trajectory of Content growth and the potential for generative AI without specific metrics or timelines.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI Content
AI Shutterstock
AI model
Chief Financial
Content AI
Content revenue
Distribution Services
Finance
Financial Officer
GIF content
GIFs
RD
Securities
Shutterstock record
TikTok
application
client
comment
confidence
content AI
content use
contribution Content
core
day
effort
example customer
experience
hire
kind
land
pack
party
product market
product stock
sale force
side
site
specific
stock content
subscription product
visibility
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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