Getty Q2 2007 Results Disappointing

Posted on 8/3/2007 by Jim Pickerell | Printable Version | Comments (0)

Getty Images reported revenue for Q2 2007 of $218 million, up from $204.8 million in Q2 2006 and $212.6 million in Q1 2007. Net income for the quarter was $33.7 million, with earnings per diluted share of $0.56. This compared to $23.2 million or $0.37 per share in the second quarter of 2006, but was down from $38 million or $0.63 per share in Q1 2007.

As a result of the WireImage acquisition, editorial was the major growth segment of the business. Revenue for editorial was about $36 million, up from $25 million in Q2 2006 and $26.56 million in the previous quarter. Based on these figures, WireImage can probably be expected to contribute around $30 million to the bottom line for all of 2007. Creative stills revenue represents 74.1% of total revenue and was flat. Footage revenue was also flat. When compared to the previous quarter, the only segment of the business that showed an increase in revenue was editorial.

The amount of money Getty is paying out in royalties has risen from $48.67 million in Q2 2006 to $55.65 million in this quarter. This is an increase from 24.8% of total revenue to 27.6%. The increase results from the decline in the creative stills portion of the business, where average royalties paid to suppliers is lower than that paid in other lines of business, particularly editorial and microstock. The acquisition of WireImage had a big impact on this number, due to its photographers receiving a higher royalty share of sales than Getty's other editorial suppliers.

Cash balances as of June 30, 2007 were $288.6 million. During the quarter, the company spent $248 million for acquired businesses, of which $120 million was financed through the company's senior credit facility and the remaining $128 million was paid from existing cash.

Business Outlook

The company has announced a restructuring and related reduction in workforce of about 100 employees, including a number of very senior people, particularly in Europe. This will result in a charge of approximately $4.0 million in the third quarter of 2007 and is expected to result in annualized savings of approximately $20 million in staff and staff related costs. Klein also indicated that by the end of 2007, the total head count for the company will be about the same as it was in 2006, due to the recent acquisitions and increased staffing in certain areas. Some have speculated that this may also be a move to transfer certain positions from the high-cost pound and Euro economies in Europe to the U.S., where salaries are lower.

In the third quarter, the company expects revenue to drop to about $210 million, with earnings per diluted share of $0.43.  At the end of the first quarter, the company said it expected revenue for the full year to be $880 million.  It has now dropped its expectations to $855 million.

Getty's gross revenue in 2006 was $807.3 million. If we assume that WireImage will contribute $30 million to that $855 million, and the other acquisition will contribute something, the total growth in revenue from businesses owned at the beginning of 2007 will be in the range of $15 to $20 million. A good part of that figure will come from iStockphoto.

Copyright © 2007 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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