Getty Images First Quarter Report

Posted on 4/25/2002 by Jim Pickerell | Printable Version | Comments (0)



April 25, 2002

The Getty Images, Inc. report for the first quarter that ended March 31, 2002 was in line with
their April 4th pre-announcement that Selling Stock reported in Story

470 . Getty's quarterly
revenue was $113.9 million, up 11.8 percent sequentially and down 9.5 percent from $125.8 million
in the first quarter of 2001.

EBITDA for the first quarter of 2002 was $30.6 million, representing an EBITDA margin of 26.9
percent, up from $28.6 million, or a margin of 22.8 percent, in the comparable quarter of 2001.

Cash and short-term investment balances increased from $46.2 million at the end of the fourth
quarter of 2001 to $54.3 million at March 31, 2002. "The very positive results for the first
quarter continue to provide compelling evidence to validate our business model, our strategy and
its execution," said Jonathan Klein, Getty Images co-founder and CEO.

"We are pleased to achieve sequential growth in revenue and, most importantly, increased free cash
flow, despite an economic environment that remains very challenging for our customers. Throughout
2002, we will continue to sharpen our focus on growing revenue and market share, providing
unparalleled service to our customers and expanding into new product areas and markets."

Business Outlook

For the second quarter of 2002, the company expects to report revenue in the range of $115 million
to $119 million and diluted earnings per share of $0.07 to $0.09. For all of 2002, the company
expects to report revenue in the range of $460 million to $480 million and diluted earnings per
share of $0.35 to $0.45.

E-Commerce Sales

Klein said that at this point more than 90% of the sales that are capable of being delivered
digitally are being delivered in that manner. In the 4th quarter of 2001 Klein said that 61% of
their sales out of a possible 80% of total sales that were capable of being digitally delivered
were being delivered digitally.

Digital delivery is not possible for certain categories of sales such as the footage division,
sales made by sub-agents and RF CD-ROM disc sales which, while digital, are normally not been
counted as e-commerce sales because the discs must be shipped by Fed Ex or some other non-digital
means. These sales make up about 20% of Getty's gross revenue.

Given that the percentage of these sales is so near 100% it no longer seemed important to provide
this number as it creeps toward 100%.

Important New Metrics

With this report Getty has provided investment analysts with some new metrics for gauging the
progress of the business. It is expected that Getty will update most of these numbers with each new
quarterly report. This data will be of great interest to many in the stock photo industry.

These new metrics include the percent of revenue of various segments of the business, gross margin
of each segment, average price per usage, average revenue per sales employee and a geographic
breakdown of sales.

Percent Of Revenue


Q1 2002   

Q4 2001   

Rights Managed   



Royalty Free   



News & Sports   



Archival & Footage   



Based on the $113.9 million in sales the revenue in these areas for the Q1 2002 would have been.


Q1 2002   


Rights Managed   



Royalty Free   



News & Sports   



Archival & Footage   



Rights Managed includes all the rights managed brands, RF includes PhotoDisc and EyeWire, and the
News & Sports includes Allsport and Getty Images News Service.

Gross Margin

The gross margin is the percentage of the total income received that Getty retains for its own
operations. Most of the remainder consists of royalties paid to photographers for licensed images,
plus some costs associated with the sale of CD-ROMs.


Gross Margin   


Rights Managed   



Royalty Free   



News & Sports   



Archival (wholly owned)






The average gross margin for all sales in Q1 2002 was 73.6%, down from 74% in Q4 2001. This
compares with 71.7% in Q1 2001 and 62% in 1996 when Getty took over the company. Klein expects that
over a three year period they will be able to raise gross margin to about 76% of revenue, but they
do not expect to be able to move significantly beyond that percentage.

Looking at the creator share for this quarter it would mean that of the $63.784 million collected
for RM images about $20.4 million was paid out to photographers. Of the $29.614 million collected
from RF sales a little over $5 million was paid out to the image creators.

Average Price Per Usage

The average price per images for Rights Managed Images in Q1 2002 was $490 per images, worldwide.
This was up from an average of $465 in Q4 2001. The average price for a single image sale of RF was
$85 and that remained essentially the same for Q1 2002 as it was for Q4 2001.

Using these average prices we can figure how many images Getty might have licensed in the quarter.
The number of Rights Managed images would have been about 130,171. In the Royalty Free sector we
can not get a totally accurate number because we don't know what percentage of the RF sales were
disc sales. If the total RF revenue resulted from single image sales the total number of RF images
purchased at an average price of $85 per image would have been 384,400. Obviously, they sold many
fewer images than this because much of the RF revenue came from disc sales.

Average Revenue Per Sales Employee

Klein reported that the average revenue per sales employee in 2001 in the North American creative
stock photography business was $650,000. In Q1 2002 the average annualized revenue per sales
employee was $900,000 (that would have been about $225,000 for the quarter). The company's goal is
to achieve $1 million per sales employee by year-end on an annual basis.

Geographic Breakdown

Getty also reported that the breakdown in sales worldwide has remained relatively stable on a
percentage basis.


Q1 2002

Q4 2001

North America










Klein said that improvement in VCG sales in Europe is acceptable, but in North America it is
spectacular. He indicated that in this 2nd Quarter and this summer one of their objectives is to
take the VCG brands to the next level with a whole new look and a new collection of relevant
content. This new look will introduce new content, new packaging and new marketing. It appeared
that Getty is now prepared to launch a concerted effort to improve VCG sales after having allowed
those brands to languish for so long. Klein promised more information on the new look when he
reports in July.

The company reported net income of $2.7 million, or $0.05 per diluted share, for the first quarter,
compared to a net loss of $14.6 million, or a loss of $0.28 per diluted share, for the same period
in 2001. In 2002, the company adopted SFAS No. 142, under which the company discontinued the
amortization of goodwill. Excluding the impact of goodwill amortization, for the first quarter of
2001, net income was $2.2 million, or $0.04 per diluted
share, on $125.8 million of revenue as compared to $2.7 million, or $0.05 per diluted share, on
$113.9 million of revenue for the first quarter of 2002.

"The results for the first quarter clearly demonstrated the strength of our business model," said
Liz Huebner, senior vice president and chief financial officer. "In the first quarter, we generated
an additional $12 million of revenue sequentially while further reducing expenses, allowing $10
million to drop directly to the EBITDA line. Throughout 2002, significant cash flow generation will
continue to be our primary financial objective."

Copyright © 2002 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 301-461-7627, e-mail: wvz@fpcubgbf.pbz

Jim Pickerell is founder of, 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:  


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