Shutterstock Q2 2020 Financial Results

Posted on 7/28/2020 by Jim Pickerell | Printable Version | Comments (0)

Shutterstock has reported Q2 2020 revenue of $159.2 million down 2% compared to $161.7 million in Q2 2019 and down from $161.3 million the previous quarter. Revenue per download was $3.61 per-image compared to $3.44 in Q2 2019 and $3.42 the previous quarter.

Total image and video downloads for Q2 were 44 million compared to 46.6 million a year earlier and down from 46.8 million from the previous quarter. At the end of the quarter Shutterstock had over 340 million images and 19 million video clips in its collection, for a total of 259 million pieces of content. For the quarter E-commerce revenue was $98.2 million and represented 62% of total revenue.  Enterprise revenue was about $61 million and represented 38% of total revenue. Compared to Q2 2019 E-commerce revenue increased about 2% and Enterprise decreased by approximately 5%.

The number of subscribers increased to 223,000 compared to 173,000 in 2019, but an increasing number of these subscribers are Prosumers and Small Business who tend to purchase the 10 image monthly subscriptions for $49 per month. If all 233,000 subscriber had purchased 10 image subscriptions for 3 months the gross revenue generated would have been a little less than $33 million about one-third of total revenue. Fortunately, a few subscribers purchase larger subscription packages.

They say, “While professional creatives have always been a core source of demand for Shutterstock, the Casual Creative or “Prosumer” represents an important new trend driving our business forward.”

Commenting on the Company's performance, CEO Stan Pavlovsky said, "Shutterstock delivered a strong second quarter characterized by revenue that surpassed our expectations. Our margin expansion initiatives have begun to take hold, which has resulted in record adjusted EBITDA for the quarter. I am impressed by the resiliency of our business and our ability to deliver strong performance in the current operating environment. Based on a higher level of confidence we have in our business outlook, we are accelerating several targeted investments in our platform solutions offering and marketing and brand building to support growth in our subscriptions products.”

Jarrod Yahes, Shutterstock’s  Chief Financial Officer, said, "As our business evolves towards a primarily subscription-based model, we are now disclosing additional key operating metrics to the investor community. We expect the increase in subscriber revenues to result in greater operating leverage and allow us to consistently deliver incremental margin expansion over a sustained period of time.”

To highlight Shutterstock’s market opportunity and business model, the company has created an interactive investor relations microsite. Image creators may find some of the information very enlightening and useful.

For example one chart shows the percentage of people shopping for video and music compared to still images for various types of uses. In addition it reports that the company has 1.4 million contributors making the average gross revenue per contributor in the last six month $228.92.

Last year about 28% of revenue was paid to contributors in royalties. At that rate total average royalty per contributor in the last six months would have been $64.10. However, the contributor royalty structure was changed dramatically in the last quarter so royalties going forward will probably be lower. If sales continue at the same rate for the rest of 2020 photographers can expect to earn on average about $0.99 for each image they have in the collection.

Revenue per customer in last 12 months was $326 which means approximately 1,981,595 customers purchased something during the last year. The following chart provides a breakdown of customers by company size and industry.

Customer Breakdown by Size     Customers Breakdown by Industry  
Large Enterprises 500+ employees 19%   Media-Digital Print & Production 25%
Mid-Market. 25 to 499 employees 29%   Marketing & Advertising Agencies 21%
Small Businesses 2 to 24 employees 32%   Other (not specified) 20%
Individual Creatives 20%   Consumer Goods, Retail, Mfg. 9%
      Technology Company 7%
      Educational 5%
      Financial Services 4%
      Healthcare 3%
      Food & Beverage 3%
      Non-Profit 3%


The chart below shows some of the trends in downloads, images in the collection and revenue growth since Q1 2018. Video downloads are included in this calculation. (For earlier data going back to Q3 2015 see here.) The “Rev Per DL” is the “Downloads” times the “Avg Rev per DL.” This differs slightly from “Total Rev.” because a small percentage of revenue comes from other activities not associated with stock content downloads. The The "Rev/Image" row is "the average revenue per image in the collection." For this figure, I divide total revenue by the sum of still images.

  Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
  2018 2018 2018 2018 2019 2019 2019 2019 2020 2020
Downloads (millions) 43.7 45.2 43.9 46.8 47.2 46.6 46.3 47.7 46.8 44
Avg Rev per DL $3.40 $3.41 $3.40 $3.40 $3.42 $3.44 $3.40 $3.44 $3.42 $3.61
Images in collection 187 204 221 242 260 280 297 314 330 340
Video in collection 10 11 12 13 14 15 16 17 18 19
Total Rev. (millions) $153 $156.6 $151.6 $162.1 $163.3 $161.7 $159.1 $166.4 $161.3 $159.2
Rev. Per DL (millions) $148.58 $154.13 $149.26 $159.10 $161.42 $160.30 $157.42 $163.06 $160.05 $158.54
Rev/Image $0.81 $0.73 $0.65 $0.62 $0.59 $0.54 $0.51 $0.50 $0.46 $0.44
% Image Lic 23% 21% 18% 18% 17% 15% 14.8% 14.4% 13.4% 12.3%

    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, I 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 at a much faster rate than image downloads are increasing. For example, if a contributor had 1,000 images in the collection in Q1 2018 on average he would have had 230 downloads in the quarter. In Q2 2020 a collection with 1,000 image would only have had 123 downloads. Back in Q3 2015 a contributor with a 1,000 image collection could have expected to see 600 downloads in a quarter.

Net Income and Income Per Diluted Share

Net income of $19.0 million, increased $15.7 million as compared to $3.3 million for the second quarter in 2019. Net income per diluted share was $0.53, as compared to $0.09 for the same period in 2019. This increase is primarily due to our margin expansion initiatives which have resulted in lower operating expenses in the second quarter of 2020.

Adjusted net income per diluted share was $0.62 as compared to $0.33 for the second quarter of 2019, a increase of $0.29 per diluted share.

Adjusted EBITDA

Adjusted EBITDA of $37.0 million for the second quarter of 2020 increased $11.9 million, or 48%, as compared to the second quarter of 2019, driven primarily by lower operating expenses resulting from our margin expansion. The adjusted EBITDA margin increased to 23.3% from 15.5% in the second quarter of 2019.


Our cash and cash equivalents increased by $7.9 million to $311.2 million at June 30, 2020, as compared with $303.3 million at December 31, 2019. This increase was driven by $36.3 million of net cash provided by our operating activities, partially offset by $15.4 million used in investing activities and $14.9 million used in financing activities. Net cash provided by our operating activities was impacted by a one-time $7.8 million payment related to long-term incentives made in conjunction with our 2017 acquisition of Flashstock Technology, Inc. ("Flashstock"), in addition to unfavorable impacts due to changes in the timing of payments pertaining to operating expenses. Cash used in investing activities primarily consists of $14.0 million related to capital expenditures. Cash used in financing activities includes $12.1 million related to the payment of the quarterly cash dividend.

Free cash flow was $28.6 million for 2020, a decrease of $3.2 million from 2019. This change was primarily driven by lower cash flows from operating activities. Free cash flow for the six months ended June 30, 2020 is presented excluding a nonrecurring payment of $7.8 million with respect to long-term incentives related to our 2017 acquisition of Flashstock.

Copyright © 2020 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


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