Shutterstock Reports Q2 Results: Stock Declines Sharply

Posted on 8/6/2015 by Jim Pickerell | Printable Version | Comments (0)

Today, Shutterstock reported $104.4 million in revenue for Q2 2015, a 30% increase over Q2 2014. However, they missed their projected revenue estimate by $960,000. Investors were disappointed and the stock that had been trading at $50.75 per share the day before dropped 32.20% to $34.41 before the market closed.

The average price per download during the quarter was $2.85 down from $2.87 in the previous quarter, and compared to $2.52 in Q2 2014. There were 35.9 million downloads in the quarter and they paid out about 28% of gross revenue in royalties to contributors.

Thirty-nine percent of the company’s revenue came from North America, but 70% came from outside the U.S. meaning that 9% came from Canada and Mexico. Europe was responsible for 33% of revenue and the Rest of the World for 27%.

At the end of Q2 they had about 58 million photos, vectors and illustrations in the collection and 3 million video clips. They had 642 employees worldwide.

Sales and marketing expenses were approximately 25% of revenue in the quarter. The company is also seeing somewhat higher keywording costs due to competition.

Excluding contributions from their newly acquired businesses PremiumBeat and Rex Features, and the impact of foreign currency, total Company revenue growth was approximately 27% in the second quarter. That was down from approximately 30% in Q1.

Adjusted EBITDA of $20.7 million increased $4.0 million or 24% as compared to the second quarter of 2014. The 30% revenue growth was partially offset by an increase in operating expenses primarily from higher royalty costs associated with the increase in paid downloads. Additionally, the second quarter of 2015 included higher personnel and marketing expenses to support growth, as well as operating costs associated with newly acquired businesses.

Net income available to stockholders for second quarter of 2015 was $5.3 million, a 10% increase compared to the $4.9 million in the first quarter a year ago.

The company’s cash, cash equivalents and short term investments totaled $266.4 million as of June 30, 2015 as compared to $288.3 million as of December 31, 2014, primarily reflecting the $40.1 million of cash generated from operation, which was more than offset by cash paid for acquisitions of approximately $65 million. The Company generated $18.6 million of cash from operations in the second quarter of 2015, compared to $21.2 million generated in the second quarter of 2014.

Future Guidance

Revenue for Q3 2015 is expected to be between $105 and $108 million (below a $113.3 million consensus expectations). Revenue for all of 2015 is expected to be between $425 and $430 million (below a $440.7M consensus). This is down from $436 and $444 million estimate for the year at the end of Q1. The adjusted EBITDA for the year is expected to be between $82 and $85 million (below the previous guidance of $90 to $94 million). Capital expenditures are expected to be about $18 million.

Revenue And Download Trends

The chart below shows some of the trends in downloads, images in the collection and revenue growth since Q4 2012. (For earlier data going back to Q3 2010 see here. ( The "Rev/Image" 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.

  Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
  2013 2013 2013 2013 2014 2014 2014 2014 2015 2015
Downloads (millions) 22.4 24.3 25.4 28 29.7 31.5 31.2 33.5 33.4 35.9
Rev.per DL $2.28 $2.33 $2.35 $2.43 $2.45 $2.52 $2.65 $2.68 $2.87 $2.85
Images & Video 26 28 31.3 34.5 37.1 40.7 42.7 48.8 54.2 61
Total Rev. (millions) $51.5 $56.8 $56.8 $68 $72.8 $80.2 $83.7 $91.2 $97.5 $104.4
Rev/Image $1.98 $1.96 $1.81 $1.97 $1.96 $1.97 $1.96 $1.87 $1.80 $1.71
% Image Lic 89% 87% 81% 81% 80% 77% 73% 69% 62% 59%
    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 Q4 2012 on average he would have had 920 downloads in that quarter. The same 1000 images in the collection in Q2 2015 would have only resulted in 590 downloads.
During the quarter Revenue per download increased 13%, and paid downloads increased 14% year-on-year, with the growth in revenue per download reflecting the impact of higher enterprise sales as well as continued momentum across video, editorial, and music products, all of which carry higher than average effective prices for Shutterstock.

Interpolating Shutterstock Numbers

In today’s conference call Shutterstock provided a few random numbers. I will try to use them to get some sense of how the revenue generated by each individual customer breaks down. Granted, a lot of guess work and speculation is involved in this exercise so the conclusions may be way off.
  • The company has over 20,000 Enterprise customers, a 50% increase compared to the Enterprise customer base a year ago.
  • In the past year the number of Enterprise customers spending over $50,000 a year has doubled and the number spending over $100,000 had increased 70%.
  • They have 1.3 million customers, up 25% from a year ago.
  • Gross revenue for first six months of 2015 was $201.9.
  • They expect to have gross revenue of about $428 million for all of 2015.
  • At one point they said that Enterprise revenue represented over 20% of their business. At another point Tim Bixby used the figure 22%.
If Enterprise revenue is 22% of over revenue it will have been about $45 million for the first six month and $94 million for the year. Assuming that 100 customers spend $100,000 or more and 200 customers spent $50,000 more that would represent at least $20 million of the revenue for the whole year.

Substract that $20 million from the $94 million and 19,700 would be responsible for $74 million in revenue or approximately an average of $3,756.

The other 1,280,000 subscription, IOD and video customers will generate about $226 million of Shutterstock’s revenue or an average of $176.56 per customer.

However, subscription customers will pay $2,388 for an annual subscription that entitles them to download 750 images per month or $2,028 per year for a subscription plan that allows them to download 350 images per month. During the conference call they indicated that demand is strong for the 350 images per month option.

Of the approximate $334 million of the combined subscription, Image on Demand and video revenue that is expected in 2015, I estimate that about 55% will be for subscription and the other 45% for IOD and video sales.

Either a huge percentage of the 1.3 million “customers” do not purchase anything in a given year, or a very high percentage of customers spend less than $100 per year.

Lower Priced Subscription Offering

During the quarter Shutterstock removed the 25 image daily download limit on their subscriptions and went to a monthly limit of 750 images. They also introduced a new, cheaper subscription product that only allows the downloading of 350 images a month.

During the question and answer session Brian P. Firzgerald of Jefferies LLC asked if they had seen any shifts from subscription business to a-la-carte (IOD) given the changes in the competitive environment.

CFO Timothy E. Bixby said, “No, I mean most of the trends in terms of the share of business we're seeing across each of the content types and the product lines has remained quite stable.” He indicated that an increasing number of customers seem to be choosing the cheaper subscription offering with a lower monthly download limit and continued, “removing that daily download limit is not only appearing to be a great move for subscribers or historic subscribers but also it's possible that on-demand customers may find it more interesting. So we are seeing a couple of positive trends with that launch.”

This may also be an indication that many subscribers never needed anything near the 750 images per month and are happy to save a little money. It could also be an indication that some subscribers are using the Shutterstock savings to check out Adobe Stock and see if they can find what they need there.

Copyright © 2015 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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