Getty Growth Continue in 3rd Quarter

Posted on 11/8/2000 by Jim Pickerell | Printable Version | Comments (0)

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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

quarter.

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

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

October.

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

year.

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.

Price Increase

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.

Registered Users

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.

Closing Offices

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

sales.

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

30 percent.

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

percent.

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.


Copyright © 2000 Jim Pickerell. The above article may not be copied, reproduced, excerpted or distributed in any manner without written permission from the author. All requests should be submitted to Selling Stock at 10319 Westlake Drive, Suite 162, Bethesda, MD 20817, phone 301-251-0720, e-mail: wvz@fpcubgbf.pbz

Jim Pickerell is founder of www.selling-stock.com, an online newsletter that publishes daily. He is also available for personal telephone consultations on pricing and other matters related to stock photography. He occasionally acts as an expert witness on matters related to stock photography. For his current curriculum vitae go to: http://www.jimpickerell.com/Curriculum-Vitae.aspx.  

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