420 GETTY SECOND QUARTER RESULTS
July 26, 2001
Getty Images Inc. released its complete 2nd quarter sales data and reported gross sales
of $115.9 million, slightly better than the $115 figure pre-announced on July 10th. (See
story 416 )
They expect sales to continue to fall off for the rest of the year and estimate that
sales in both the 3rd and 4th quarters will be between $100 and $110 million. If sales
hit the middle level of those estimates gross sales for the year will be approximately
$449 million, down from $484.8 for 2000. This would be a drop of about 7%.
Getty announced in early July that they would cut their worldwide staff from 2300 to
2000 by the end of the year. They expect to save $15 million to $20 million annually as
a result of this reduction. CEO, Jonathan Klein indicated that once the economy turns
around it is unlikely that it will be necessary to replace these people. Due to the
increased efficiency of Getty's e-commerce marketing system they should be able to grow
sales with a smaller staff.
E-commerce revenues rose from $52.6 million in the 1st quarter to $52.9 million in the
2nd quarter. Because overall sales were down the percent of total revenue was 46% for Q2
compared with 42% for Q1 and 31% in the second quarter 2000. Despite the relatively slow
growth in e-commerce sales, Klein expects all North American sales to be generated on
the web in less than three years.
No Lowering Of Prices
Klein said that despite the falloff in sales volume, they have not seen a lowering of
prices. The price increases they instituted last year are holding. In addition they are
not seeing customers moving to Royalty Free to save money, as some has expected would
happen in a down economy. Based of their customer research, it seems that buyers either
have money to spend or they don't. Project are either being done, or they are totally
cancelled. Customers are not trying to figure out how to do the same number of projects
less expensively. Klein also said that, "now is not the time to contemplate further
Stone and The Image Bank sales had moderate double-digit growth compared with a year
ago. PhotoDisc showed some growth, but less than double-digit. PhotoDisc and Eyewire
have seen single images sales online "grow significantly." Since single images sell for
less than discs, it is possible to have a growth in transactions without a corresponding
growth in revenue.
These improvement were not sufficient enough to offset weakness elsewhere. There was a
sharp decline in VCG sales (FPG, Telegraph Colour Library, PIX, Bavaria). Klein said
progress at FPG has been brought to a halt and more "remedial therapy" is needed. The
VCG operations in France and Germany (PIX and Bavaria) continue to struggle. Europe
represents more than 35% of Getty's sales.
A new web site is scheduled for introduction in October. It will be full e-commerce
worldwide. Today Germany and France can not do full e-commerce on the Getty web site,
and they can not search in their own language. Klein expects a growth in sales in Europe
when that is possible.
Klein said, "We have seen an acceleration in the return of contracts. We already have
more than enough high quality photographers with signed contracts to enable us to get
the imagery that our clients need." The signing deadline is August 1st, and Klein and
his staff are giving every indication that they intend to drop photographers who haven't
signed the new contract by that time.
Klein continued, "We continue to be cautious about the challenging U.S. and European
economic environments and their impact on our sales, we remain positive about our
business and its ability to weather the downturn and emerge even stronger. Media and
advertising are an integral part of today's economy and when our customers have more
money to spend, we will be in an excellent position to continue to grow, thanks to our
market-leading products, large customer base and global presence."
The net lost for the second quarter was $23.7 million or $.46 a share, compared with
$30.3 million, or $.62 a share a year ago. EBITDA, or earnings before interest, tax,
depreciation and amortization, was $22.6 million, up slightly from a year earlier. Cash
flow per share rose to $.36 from $.33 a year earlier.