350 GETTY GROWTH CONTINUES IN 3RD QUARTER
November 8, 2000
Getty Images, Inc. reported 3rd quarter 2000 revenue of $127
million, up from $123.6 million for the 2nd quarter, or a 2.75% increase for the
For the first three quarters of 2000 the revenues have been $104.8, $123.6 and $127
million. Getty has advised investors that they expect sales to be in the range of
$133 to $135 million for the fourth quarter which would result in gross revenue for
the year of about $490.4 million. It should be noted that the big jump in second
quarter growth included the acquisition of VCG.
Getty's gross sales for 1999 were $247.8 million but this included only 38 days of
TIB revenue and none of VCG. The 2000 revenue will include a full year of the TIB
brand and over nine
months of the VCG brand.
E-commerce revenues were $44.9 million and represented 35% of the total sales for the
Company. For the first three quarters E-commerce revenues have been steadily rising
from $31.5 to $38.3 and $44.9 million respectively. If e-commerce revenue remains at the same 35% for
the 4th quarter the total e-commerce revenue for 2000 would be approximately $162
million. Based on the steady growth they have experienced I would expect that the
final number would be somewhat higher than this.
Klein said that nearly 40% of Stone's 3rd Quarter revenue was from e-commerce sales.
In September more than half of Stone's North American sales were transacted on the
Internet. It should be noted that in e-commerce sales there may be an element
of negotiation rather than deriving all prices from a fixed on-line price schedule.
In addition the client may be invoiced rather than being required to make automatic
payment by credit card.
Just under 20% of sales for The Image Bank collection took place on the web site in
the 3rd Quarter. A full e-commerce web site for FPG images was rolled out in late
Adding To The Collection
In his conference call to investors CEO Jonathan Klein reported that they had
completed the editing of the TIB files and that most of the images were already
available on the Gettyone site. He also indicated that the integration of the VCG
files is ahead of schedule and is expected to be completed before the end of the
When asked how many images they expected to add in the future Klein said they had
approximately 1.2 million images in the system now. He said that 90% of their sales
come from 500,000 of these images and 80% of the sales come from about 250,000 images
from the four major brands - Stone, TIB, VCG and PhotoDisc. He also indicated that
in the major advertising brand categories they expect to add about 15,000 images
per-brand, pre-year for the next three to five years. The major brands are Stone,
TIB, VCG and PhotoDisc. These four brands represent 80% of their sales.
In the historical collections that they wholly own they will be adding 100,000 to
200,000 new images per-year in the next three years. In news, sports and other
photojournalistic area they expect to add 3,000 to 4,000 images a week given the
nature of the editorial market. Klein pointed out that the files sizes of these
images will be much smaller than 48MB and thus cost them much less than $45 per image
to input and store.
Klein said the average per-image price for the Stone brand in North America was $640.
This is up from just over $550 about a year ago and approximately $400 when Getty
acquired Stone in 1997. They instituted a price increase at Stone, PhotoDisc and
other key brands in early September, but because it came at the end of the quarter it
did not have a strong influence on 3rd Quarter revenue. However, they have seen no
resistance to these new prices or reduced volume as a result of the increased prices.
In his speech at Photo+Expo, Mark Getty said the average transaction at Stone was
around $1500 meaning that they sell about 2.34 images per transaction.
Klein acknowledged that the average per image price is lower in other parts of the
world than in North America. He also said that the average price for an advertising
images sold through Stone in North America is over $800 and that the average
per-image price for one sold to the Publishing market is under $200 in North America.
The total number of registered users has risen to approximately 1.1 million. Over
40% of those registered on Gettyone.com are new customers to Getty Images.
During 2,000 Getty Images has closed 11 offices and eliminated over 400 positions.
However, during that same period they have also created many new positions,
particularly in technology to support their growing infrastructure of websites.
Thus, on March 22nd they reported that their total number of employees was
approximately 2,600 and in November the number remains at 2,600. Their highest
staffing during the year was approximately 2,800 employees.
It has been argued that by selling through the Internet fewer people will be needed
to conduct business. At Getty that does not seem to be the case at the present time.
While different skills may be needed the overall numbers appear to remain
essentially the same.
Breakdown of 3rd Quarter Revenue
In the 3rd Quarter 56% of revenue came from North America, 35% from Europe and 9%
from the Rest of the World. The percentage from Europe was affected by the weak
Euro. On a currency neutral basis Europe would represent a larger percent of total
Klein said that PhotoDisc royalty free sales continue to grow at about 20% on an
annual basis and that the vast majority of those sales are in North America. They
are trying to do more to extend this brand to other parts of the world.
Thomas Weisel Partners is estimating that Getty's revenue for 2001 could exceed $600
million which would be consistent with at 20 to 22% annual revenue growth.
Revenue for the third quarter of 2000 increased 109 percent over the third quarter of
1999 to $127 million. Organic revenue growth, excluding all acquisitions made in the
last twelve months, was 37 percent and was 42 percent on a currency neutral basis.
This is the third quarter in succession in which organic revenue growth has exceeded
EBITDA increased 250 percent over the third quarter of 1999 to $27.4 million. The
EBITDA margin increased from 12.9 percent in the third quarter of 1999 to 21.6
After tax cash flow per share was 37 cents, compared with 17 cents per share in the
third quarter of 1999. Loss per share before integration and restructuring charges
was 48 cents in the quarter, down from a loss of 56 cents in the third quarter of
1999 and net loss per share after integration and restructuring was 52 cents, down
from 69 cents in the third quarter of 1999.
Getty plans to make the consumer part of their business (Art.com) profitable on an
EBITDA basis in 2001. They expect the integration of the businesses they have
acquired to be completed by the 2nd Quarter of 2001.