Shutterstock has reported $83.7 million in revenue and total downloads of 31.2 million for Q3 2014. About 30 percent of the revenue was paid out to contributors in royalties. At the end of the quarter the company had 491 employees worldwide. The average price per download was $2.65 up from $2.35 in the previous quarter and a 13% increase compared to Q2 2013. This increase in the average price was due primarily to a growing number of Enterprise and Video sales.
Net income for the third quarter of 2014 was $5.3 million as compared to $6.2 million in the third quarter of 2013. Net income available to common stockholders for the third quarter of 2014 was $5.3 million or $0.15 per share on a fully diluted basis as compared to $6.3 million or $0.18 per share on a fully diluted basis in the third quarter of 2013.
Future Guidance
Revenue for Q4 2014 is expected to be between $90 and $92 million and for all of 2014 revenue is expected to be between $326 and $329 million for a growth rate of roughly 39%. Adjusted EBITDA is expected to be between $68 million and $69.50 million.
Revenue for 2015 is expected to be between $430 and $435 million with adjusted EBITDA of $94 to $98 million.
Revenue And Download Trends
The chart below shows some of the trends in downloads, images in the collection and revenue growth since Q2 2012. (For earlier data going back to Q3 2010
see here.) The "Rev/Imagel" row is "revenue per image in the collection." For this figure I divide total revenue by the sum of still images and video clips since the video makes up a portion of the revenue.
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 rate faster than image downloads are increasing. For example, if a contributor had 1000 images in the collection in Q2 2012 on average he would have had 910 downloads in that quarter. The same 1000 images in the collection in Q3 2014 would have only resulted in 730 downloads.
| |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
| |
2012 |
2012 |
2012 |
2013 |
2013 |
2013 |
2013 |
2014 |
2014 |
2014 |
Downloads (millions)
|
18.3 |
18.7 |
21.4 |
22.4 |
24.3 |
25.4 |
28 |
29.7 |
31.5 |
31.2 |
| Rev.per DL |
$2.22 |
$2.26 |
$2.30 |
$2.28 |
$2.33 |
$2.35 |
$2.43 |
$2.45 |
$2.52 |
$2.65 |
Images & Video
|
20.2 |
21.7 |
23.3 |
25 |
28 |
31.3 |
34.5 |
37.1 |
40.7 |
42.7 |
| |
|
|
|
|
|
|
|
|
|
|
| Total Rev. (millions) |
$40.63 |
$42.26 |
$49.22 |
$51.5 |
$56.8 |
$56.8 |
$68 |
$72.8 |
$80.2 |
$83.7 |
| |
|
|
|
|
|
|
|
|
|
|
Rev/Image
|
$2.01 |
$1.95 |
$2.11 |
$1.98 |
$1.96 |
$1.81 |
$1.97 |
$1.96 |
$1.97 |
$1.96 |
| % Image Lic |
91% |
86% |
92% |
89% |
87% |
81% |
81% |
80% |
77% |
73% |
Other Insights From The Conference Call
During the third quarter Shutterstock spent about $21,122,000 on sales and marketing or about 25% of gross revenue. Only 30% of global revenue comes from U.S. sales.
CFO Tim Bixby said, “As a reminder about 20% of our global revenue is euro denominated and about 10% in the British pound. The balance is primarily in U.S. dollars. For a global company, with 70% of our revenue outside of the U.S., we actually have relatively low foreign currency exposure.” However, the U.S. dollar has strengthened substantially in recent weeks relative to other currencies and current exchange rates have been factored into the fourth quarter guidance.
The Shutterstock web site is available to customers in 20 languages. Contributors can supply content using 6 different languages. The company has offices in 8 countries including London, Berlin and Amsterdam.
Enterprise Sales
For photographers, the most interesting thing to watch is Enterprise sales. CEO Jon Oringer said that Enterprise sales are “approaching 20% of gross revenue, up from 10% two years ago.” That would mean that about $20 million of the $83.7 million in revenue in this quarter came from Enterprise sales compared to about $4 million in Q3 2012. That is 500% growth in 2 years. Revenue overall has about doubled from $42.26 million to $83.7 million in the same time period. Thus, the major driver of Shutterstock's revenue growth is these higher priced Enterprise sales. Given declining prices in the rest of the industry this is a significant development.
In a conference call at the beginning of 2014 Oringer indicated that Enterprise sales were expected to continue to grow, but not as rapidly as in 2013. He projected that at some point these sales might reach 20% to 25% of revenue. During the current call, when asked about the future of Enterprise, CFO Tim Bixby said, “It feels like pretty consistent expansion,” thus giving the impression that these sales could eventually represent a lot more than 25% of revenue.
The big question is the average price of an Enterprise sale. I’ve got access to the sales of some Shutterstock contributors and it looks like the average price is in the $20 range. Thus, if we look at the likely gross revenue for 2014 of $328 million and consider that Enterprise will probably represent about 18% of that for the year the gross Enterprise revenue would be about $59,040,000. Divide by $20 and the number of units licensed under the Enterprise program would be about 2,952,000 out of a total of about 125,000,000 downloads. This would be a little over 2% of total downloads.
But, Bixby said Enterprise customers are enthusiastic about Shutterstock’s Offset product and most of those images are selling at the $500 price point. We also know that the images of several photographers are being licensed in the $200 to $350 range which could mean that a lot less than 3 million uses are being licensed through the Enterprise system. The number licensed could easily be way less than 1 million and way less than 1% of the images licensed.
For purposes of comparison it may be worth looking at Getty’s RM and traditional RF numbers for 2013. Based on my analysis (see
here and
here) I believe Getty licensed about 502,159 RM images and 1,126,126 RF for a total of 1,632,285 in 2013. They will probably license less in 2014. One wonders how many of the customers of Getty and other traditional sellers have turned to Shutterstock and how many “New Users” at these price points there are left to find.