470 GETTY SALES UP
Signs of Life in Ad Spending
April 8, 2002
Getty Images announced significantly higher than expected 1st Quarter revenues of $113.5
million in a pre-release statement on April 5th. This was up from $102 million for the
4th Quarter and exceeded Getty's 1st Quarter estimate of between $103 and $106 million.
In addition Getty Images has made a profit for the first time since 1997. They expect
the Earnings Per Share (ESP) to be between $.04 and $.05 per share, compared with the
previous guidance of a loss of $.05 per share.
Getty would not normally be expected to announce the full results of the quarter until
April 24th, but a pre-release statement is appropriate when the numbers are expected to
be either much better, or much worse, than the previous guidance the company had given
CEO Jonathan Klein said: "revenue has grown more than 10 percent, sequentially, over Q4.
And, in addition to that, we have made a profit for the first time since 1997."
Raising Estimates - But Room For Upside
Klein told Vivien Lou Chen of Bloomberg News, "We had previously guided to $430 million
to $460 million for the full year. But given the progress we are making, we've increased
that guidance to, at the bottom end, 460 million, to up to 480 million. And we've given
earnings per share guidance of 35 to 45 cents. By way of reference, the consensus
numbers were nearer 20 cents."
Morgan Stanley raised their estimate of Getty's 2002 earning from $448M to $460M and
Earnings Per Share (EPS) from $0.31 to $0.40. But, even with this improved estimate they
acknowledged, "We believe there could still be upside to these estimates, as (the
current) 2002E revenues assume economic conditions remain at 1Q levels."
The $480 million figure would get Getty Images very close to the $484.8 million in sales
they recorded in 2000.
Getty expects their revenue for the second quarter to be, "along the lines of revenue of
between $115 and $119 million, a margin of approximately 27 percent, resulting in fully
diluted EPS of between 7 cents and 9 cents a share."
Demand from its core advertising customer continued to improve during the quarter,
especially in rights-managed images, in both the U.S. & Europe. Getty no longer expects
Europe to lag the U.S. recovery. Getty reports that customer sentiment is decidedly more
positive and that demand improved throughout the quarter. In addition there were no
unusually large orders driving results.
Klein told Bloomberg News that the customers Getty services in the advertising,
publishing and media industries were "very quiet" in the second half of 2001. The
advertising industry has said 2001 was the worst year since 1938.
Klein attributes the company's improvement in sales to:
- Advertising customers getting back to work;
- Getty's being in a position to take additional market share and get a
disproportionate share of the revenue being spent;
- And an improved cost base as more sales were done over the internet. With these
sales a larger share of the extra revenue drops to the bottom line.
Klein told Chen that there was no lift in sales from post September 11th demand. "Quite
the contrary, in fact. What happened as a result of September 11th is that there was so
much uncertainty in the economy, that the creative or advertising businesses really did
suffer. Our news business, which is a very small part of our company, certainly, was
very busy post September 11th. We have photographers in Afghanistan, the Middle East,
Pakistan, et cetera. But September 11th was not good for business at all. And it's fair
to say that, in January and February, our customers began to get back to work, having
been very uncertain through the second half of last year."
He continued, "We feel that even - that just the modest improvement that we saw in the
first quarter in demand is enough for us to feel much more confident about the whole of
the year from a revenue or sales perspective. And we do have our cost base very locked
down and a very powerful business model, due to the fact that we have
changed our company from a labor-intensive and analog business to an electronic or
e-commerce business, with the result that there's very little cost to us in extra
revenue because so much of it happens electronically."