Getty Images Has Fat Quarter

Posted on 8/3/2000 by Jim Pickerell | Printable Version | Comments (0)



August 3, 2000

After outstanding first quarter revenue results (
Story 310
) Getty Images, Inc. has announced relatively flat second quarter results in revenue.
Total sales for the quarter were $123.6 million up from $104.8
million in the first quarter. However, this was the first full quarter that Getty Images has
incorporated sales from the Visual Communications Group (VCG).

VCG (which includes the FPG brand) generated about $90 million in 1999 or an average of $22.5
million per quarter. VCG contributed only $3.7 million to Getty Images first quarter. Thus
Getty would have had a $101.1 million first quarter without VCG. Add $22.5 million to that and
we have exactly $123.6.

The comparison of revenue growth quarter-to-quarter would appear to be significant, if in each
case we remove the revenue from the most recent acquisitions. Getty achieved a 15.3% revenue growth
in 1st quarter 2000 when compared with 4th quarter 1999 and 0.0% revenue growth for 2nd Quarter
2000 when compared with the 1st Quarter. Remember, our industry has no particular seasonality
that would account for such a huge 1st quarter decline in growth. The comparisons are as follows:
(The prices are in millions.)


Q4 1999   

Q1 2000   

% Growth   

Non-Image Bank, VCG   

$ 71.21   

$ 82.13   


The Image Bank   

$ 8.70   

$ 19.00   




$ 3.70   


Total Revenues   

$ 79.91   

$ 104.83   



Q1 2000   

Q2 2000   

% Growth   


$ 101.13   

$ 101.15   



$ 3.70   

$ 22.50   


Total Revenues   

$ 104.83   

$ 123.65   


Moreover, market analysts are also being advised to expect revenues for the 3rd
and 4th Quarters to be $126 million and $132 million respectively. This doesn't look like a
growing company or a growing industry. Nevertheless, the stock market seems to have totally
ignored this information. Getty stock rose more than $5 per share in early trading after the


Total e-commerce revenue reached $38.3 million and accounted for 44 percent of sales in the
quarter, excluding the recently acquired VCG and The Image Bank (TIB), which Getty Images is in
the process of e-commerce enabling. Including VCG and TIB, e-commerce sales accounted for 31.0
percent of total sales.

E-commerce revenues continued to accelerate, almost tripling over the second quarter of 1999
and showing sequential growth of more than 20 percent.

Over 1/3 of Stone's sales worldwide were e-commerce and 42% of their sales in North America.
60% of the PhotoDisc sales were generated on-line. Registered users on-line increased by more
than 25% from the 1st quarter and now total approximately one million across all brands.
(Photographers should keep in mind that this includes consumer sales through and the
sale of software and other non-photographic products through EyeWire.) reported revenue growth of more than 100 percent over the first quarter of 2000,
following its launch in January 2000. The site saw increases in both transactions and average
transaction value.

Stone Sales Growth

Sales growth at Stone was almost 40% on a currency neutral basis compared with sales for the
same period in 1999. While not as strong as the 45% in 1st quarter 2000 this is still very
impressive year-to-year growth. In his conference call Jonathan Klein also said that still
photo sales at TIB are "significantly higher" without putting a percentage number on that
statement. If sales revenues are up at Stone and TIB, yet overall revenues for Getty Images
are still flat, it would appear that sales must be lower for some other brands. The most
likely candidate is VCG.

Klein mentioned that at the time they acquired VCG they said they would move slowly with the
integration of that company. Now they
have changed their strategy. Given the success they have had in integrating TIB, they plan to
rapidly move ahead with the integration of VCG and to complete that process by the end of 2000.

The integration of TIB is essentially complete. They have more than 55,000 images on-line and
about 5% of TIB's sales this quarter were on the web. According to Klein they have more than
doubled their profit margins for the TIB brand, but that is due mostly to a reduction in staff
of approximately 125 people, and a reduction in other overhead costs, not in increased sales.

Getty now wholly owns all the U.S. offices of TIB and there are only three major franchise
offices left -- Germany, United Kingdom and Brazil. Klein told investment managers that they
should expect to see news in the near future that one of these had also been acquired.

Klein was asked if many more images would be needed to grow TIB's online revenue? He answered,
"We don't need many more images. All the top selling images have already been integrated." He
went on to explan that they would grow TIB revenues by aggressively visiting customers and
training them in the use of the site, training TIB sales people, and with an outstanding
new print catalog that is about to be launched.

Klein reiterated that Getty has proved that price does not suffer when images are sold on-line,
and that the number of images licensed per transaction increases. He said that in the analog world
they were licensing about 1.7 images per transaction, but in the on-line world it is currently
about 2 images per transaction.

Klein also pointed out that Getty Images has made 25 acquisitions in the last five years, but
that he expects, "few, if any acquisitions in the future."

Klein identified three new market areas where he expects the Getty Images business to grow in
the future.

    1 - He expects to see an increased use on the web of images and film as bandwidth grows.

    2 - He expects to see significant growth in demand in the international market and believes
    Getty Images is strategically positioned to capitalize on that growth.

    3 - The Getty Images Digital Media Assets Management which will be launched in conjunction with
    the Olympics will manage image assets for other customers. At the Olympics this system will
    give customers access to images shot by Allsport, the official photographers for the Olympics,
    the customers own photographers providing special coverage as well as historical and
    personality photos relative to the Olympics. Individual editors will be able to call up only
    those images that are relative to their needs.

Overall Financial Picture

Reported EBITDA for the group rose to $22.4 million, an EBITDA margin of 18.1 percent. This
represents an increase of 176 percent over the second quarter of 1999 and 62 percent growth
sequentially. In its core business-to-business operations the Company generated EBITDA of $27.5
million in the second quarter of 2000, an increase of 155 percent over the second quarter of
1999 and an EBITDA margin of 23.0 percent.

The business was very cash generative in the quarter with net cash from operating activities of
$17.1 million, compared with an outflow of $2.6 million in the first quarter. The Company ended
the quarter with $86 million in cash.

The loss per share before integration and restructuring charges was 55 cents in the quarter.
After tax cash flow per share was 33 cents and cash earnings per share was 8 cents. The number
of shares outstanding under the treasury method is 49.7 million.

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, 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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