Shutterstock Q3 2016 Financial Results

Posted on 11/4/2016 by Jim Pickerell | Printable Version | Comments (0)

Shutterstock has reported Q3 2016 revenue of $123.1 million up 15% from $107.3 million compared to Q3 2015. The growth is due mainly to new customers and increased activity by enterprise clients.

The average price per download during the quarter was $2.91, up from $2.76 in Q3 2015 and from $2.81 in Q2 2016. There were 41.2 million paid downloads in the quarter and 102.7 million still images and illustrations in the collection at the end of the quarter up 61% from 63.7 million a year ago. In addition there were over 5.4 million video clips in the library.

Royalties paid to contributors during the quarter were about 28% of total revenue, or approximately $34.5 million. Currently, there are over 160,000 contributors meaning that the average contributor earned $215 during the quarter.

Sales and marketing expenses for the quarter were approximately 26% of revenue or $32 million.

Founder and CEO Jon Oringer said, "This was a solid quarter for Shutterstock as we continue to expand the market for high quality, digital content. Over 160,000 contributors added more than 10 million images and 500,000 video clips to our robust library in the third quarter. 

“Our image library now offers more than 100 million images, giving us meaningful scale compared to our competition. At the same time, our editorial and music capabilities continue to accelerate, providing yet another leg of growth for our business. We also continue to dedicate considerable time and resources ensuring that our platform can handle an increasingly diverse array of content, enhancing our product offering and attracting new customers, including an expanding number of international and enterprise clients. We believe that these efforts will translate into sustained financial growth and shareholder value."

Revenue Guidance for all of 2016 remained at $495 to $510 million, or somewhere between $131 and $140 million for Q4 2016.

Enterprise Customers

Currently, the company has about 35,000 Enterprise customers representing about 30% of revenue. The number of customers is up from 24,000 in Q4 2015. If we estimate gross revenue for the year at $503 million then the revenue from Enterprise customers will be about $151 million and the average Enterprise customer would spend about $4,314 with Shutterstock during 2016. We know that a few Enterprise customers spend more than $100,000 a year so many must be spending much less than $4,000 a year.

We know that in addition to single images Enterprise customers purchase subscriptions, video and editorial content. They pay additional for legal indemnity and access to the Premier collection. But it is unclear exactly how this Premier collection differs from the main site that most customer access.

In addition, we don't know if when it comes to counting the 1.6 millions customers each Enterprise account represents a single customer, or if there are several designers (each counted as a single customer) connected to each Enterprise account. An interesting question would be the number of customers not connected to an Enterprise account.


The chart below shows some of the trends in downloads, images in the collection and revenue growth since Q2 2014. Video downloads are not included in this calculation. (For earlier data going back to Q4 2011 see here.) The "Rev/Image" row is "the average revenue per image in the collection." For this figure I divide total revenue by still images in the collection at the end of the quarter.

  Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
  2014 2014 2014 2015 2015 2015 2015 2016 2016 2016
Downloads (millions) 31.5 31.2 33.5 33.4 35.9 38.1 39.8 41.2 43.4 41.2
Rev.per DL $2.52 $2.65 $2.68 $2.87 $2.85 $2.76 $2.86 $2.77 $2.81 $2.91
Images in collection 38.8 42.7 46.8 51.6 57.2 63.7 71.4 81.0 92.1 102.7
Total Rev. (millions) $80.2 $83.7 $91.2 $97.5 $104.4 $107.3 $115.9 $116.7 $124.4 $123.1
Rev/Image $2.07 $1.96 $1.95 $1.89 $1.83 $1.68 $1.62 $1.44 $1.34 $1.20
% Image Lic 84% 81% 72% 65% 63% 60% 56% 51% 47% 40%
    The "% Image Lic” row measures the odds that a single image in the collection will have been licensed one time within the quarter. To arrive at this number, we divide the total downloads by the number of images in the collection at the end of the quarter. This number is significant because it shows that new images are being added to the collection at a much faster rate than downloads increase. For example, if a contributor had 1000 images in the collection in Q2 2014 on average he would have had 840 downloads in that quarter. The same 1000 images in the collection in Q3 2016 would have only resulted in 400 downloads.

Contributor Perspective

From the contributor’s point of view, the 15% increase in revenue-per-download in the last year is not making up for the 110% loss in downloads-per-image-in-the-collection. Most photographers cannot produce new images fast enough to maintain flat earnings quarter-to-quarter, let alone see revenue growth. Consequently, many, for whom earnings are important, are turning to other ways to generate revenue.

Yes, the number of Shutterstock contributors is growing, but are they the right contributors? There is more and more talk on photographer forums -- where serious photographer trying to earn a living hang out -- about declining Shutterstock revenue. As the competition from part-timers and amateurs grows photographers for whom photography is a business are finding it harder and harder to produce enough new images to grow revenue. They are turning to other ways to earn a living.

More images from amateurs might be fine, if they are the right images. But the Shutterstock numbers don’t seem to bare that out. It is undeniable that some amateurs produce great images. But the number of images Shutterstock has been adding to its collection doesn’t seem to result in a proportional share of increased downloads. This could be because Shutterstock has already reached all the customers and those customers don’t need larger quantities – just different – images. It could be because the huge volume of new images being presented for customer consideration have made it harder for customers to find the “right image.”

The industry – and this is not just Shutterstock – is headed toward greater reliance on User Generated Content and imagery produced by part-timers for whom revenue generated from their work is of insignificant importance. They are primarily interested in seeing their work used and in having fun.

If the part-timers are able to produce everything the customers need, and are willing to accept lower and lower returns-per-image created, then Shutterstock will be fine. But it is interesting that some much smaller companies with small, tightly curated collections such as Stocksy, Caia Image, Hero Images, Westend61 and Cavan Images seem to be growing much faster, finding a lot of customers and generating much higher revenues for the photographers they represent.

Income from Operations

Income from operations of $11.3 million increased $3.2 million or 40% as compared to the third quarter of 2015 driven by the $15.8 million revenue growth, which was partially offset by an increase in operating expenses primarily from higher royalty costs associated with the increase in paid downloads and an increase in marketing spend year-over-year.

Net Income

Net income available to common stockholders of $9.4 million, $0.26 per diluted share, for the third quarter increased $5.3 million as compared with $4.1 million, $0.11 per diluted share, in the third quarter a year ago primarily due to the improved operating performance, lower income tax expense and a decrease in non-cash equity based compensation expense.  The lower tax expense during the current year's quarter was primarily a result of a tax benefit related to the U.S. Research and Development tax credit claimed for the tax years 2013, 2014 and 2015.

Adjusted EBITDA

Adjusted EBITDA of $23.0 million for the third quarter increased $3.3 million or 17%, as compared to the third quarter of 2015 driven primarily by revenue growth. Adjusted EBITDA is defined as net income adjusted for foreign currency transaction gains and losses, changes in fair value of contingent consideration related to acquisitions, interest income and expense, income taxes, depreciation, amortization, disposals, and non-cash equity-based compensation.

Non-GAAP Net Income

Non-GAAP net income, which excludes the impact of non-cash equity-based compensation, amortization of acquisition-related intangible assets, changes in fair value of contingent consideration related to acquisitions and the estimated tax impact of such adjustments was $14.3 million, or $0.40 per diluted share, for the third quarter as compared to $10.1 million or $0.28 per diluted share, in the third quarter of 2015.


The Company’s cash, cash equivalents and short term investments increased by $2.0 million to $290.4 million at September 30, 2016 as compared with $288.4 million at December 31, 2015. This increase primarily reflects $76.7 million of cash generated from operations and $3.0 million of net cash from other sources, which were partially offset by cash used for capital expenditures and content acquisitions of $33.0 million and cash used to repurchase shares of approximately $44.9 million.

Free cash flow was $19.9 million for the third quarter, an increase of $5.1 million from the third quarter of 2015, as the improved operating performance and working capital fluctuations were partially offset by increased spending on capital expenditures and content acquisitions.

Stock Repurchase Program

During the third quarter of 2016, the Company did not repurchase any shares of its stock, pursuant to its existing $100 million stock repurchase program. Through September 30, 2016, the Company has repurchased 1.7 million shares of its stock for a total of $59.7 million under the stock repurchase program. The stock repurchase program, which commenced in November 2015, authorizes management to purchase shares from time to time through open market purchases or privately negotiated transactions at prevailing prices as permitted by securities laws and other legal requirements. The timing and amount of any shares repurchased will be determined by the Company’s management based on its evaluation of market conditions and other factors. The repurchase program may be suspended or discontinued at any time.

Copyright © 2016 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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