SSTK - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen and welcome to the First Quarter 2018 Shutterstock Inc. Earnings Call. [Operator Instructions] As a reminder, today’s conference maybe recorded. I would now like to turn the call over to Mr. Steve Ciardiello, Chief Accounting Officer. begin. may you Sir,

Steve Ciardiello

Good Shutterstock’s and call. first operator. joining you us for quarter morning, you, thank everyone for Thank XXXX earnings

me Berns, Oringer, and Jon Chief today Chief Joining Officer Executive Financial our Officer. Chairman Chief our Founder, Steven Operating and and is

uncertainties, of existing management of These growth footprint, and and include our reduce our to effects predictions, solutions this growth statements to call, impact guidance. There investments subject and of business, success make offerings, relating financial may During strategy, and and expense long-term and new expectations, business potential, the in future product implementation statements. estimates large forward-looking our profitability, efforts are risks scale our including XXXX of results information. future future to our other long-term

materially actual to currency XXXX a non-GAAP release to the EBITDA, the any may on the an as including all titled of that risk to file of free discussions cause actual adjusted are adjusted this Commission, time-to-time and in call. for discussed of growth could on make may Risk which net and financial revenue measures. constant Our we report Form results the and the XX, not section from important should refer forward-looking call, cash December differ XX-K reported ended be today’s will results differ reports those for from we income, materially refer year factors on in basis statements flow, from this Exchange Please considered Securities company’s results and results we Factors press future performance. indication documents annual and U.S. predicted with On

consider Form the insights our to with directly the which of and these comparability use by our are find investors on our GAAP a and with provides additional of same Investor performance business financial in GAAP operating measures earnings results overall the measures website. This in the to posted in our release the about basis a that used company’s We allow the on description assessing financial items section important financial along reporting. management. You measures today’s conjunction in Relations can XX-K, most enhances operating these and comparable of with reconciliation them believe

non-GAAP Jon. these should as I financial a GAAP. And for in the considered with financial measures superior substitute information However, to would be not turn over like accordance to that, call with to or prepared

Jon Oringer

today first Steve XXXX Thanks, and us everyone earnings joining for quarter for Shutterstock’s thanks call.

compelling a execute and on discovery creative During the platform, global first more faster, be empowering valuable creation. to our to customers tools we continue and content to vision efficient quarter, services with content, drive innovative

for upgraded are our new operational customers. functionality our momentum introduction from We strong our technology features many seeing and including platform and of products, the initiatives,

Importantly, develop we and continuing enable that individuals our talented are to also success. attract

to make While our the and by growth focused line I is remain noted business. which in prior impacted pleased am with have on platform during top made the and improving we quarter, the margins, also performance continue company investments infrastructure in our calls, in our we

XX, the While these the In they financial quarters, quarter the margins impacted result February XXXX, critical will first on several in of long-term XXXX. our results. impacts investments WebDAM our we last have on of positive we in completed our business believe sale

results did period. our grew first quarter WebDAM, Adjusted in compared adjusted constant to reported of first not excluding XXXX. impact of revenue XX.X%. $XX.X the first either On Our million of basis, EBITDA to the to and grew was first impact approximately EBITDA increased XX.X% compared to And currency revenue the XX.X% a quarter quarter revenue XXXX. $XX.X quarter when currency compared $XXX WebDAM million the of in million XXXX. materially

customer our year-over-year a currency on basis on expanded video million XX% Revenue to XXXX, clips. X% to downloads. grew customers. million to images nearly a base Paid image quarter the of library our X.X% grew increased than addition, XX.X downloads In million by download increased by basis, more X.X and by during per XX to library we XX% and million our constant nearly by XXX first XX%

In we years the prior our customer calls, growth. needed we discussed content to provides image over are tools into we and a experiencing types our As platform believe enterprises marketplace have collaboratively made and the business, creative on design that with that build investments few last we evolve solid projects. e-commerce individuals

optimizing on the improved as offering first focus acquisition and has of our rate pricing customer conversion Our right funnel the lifetime XXXX. to quarter while our customer customers, value to our packaging and compared

rolled the business, we launched first our features page, out During personalization our product new significant offerings progress we XXXX, launch Within pricing expect and new launched localization in quarter. exciting to motion the and we made experience that a XXXX. in quarter customer on of new

fourth our results. with search our free of new this catalog, provides support users. favorable search royalty-free music XXXX enhanced premiumbeat.com optimization, Together language quarter including website, In revamped additional premiumbeat.com to for continued music expand our efforts and to algorithm curated engine addition, quality built improving dramatically launch a upon our our much experience we search our

types. efficient increasingly enhance experience Turning our we across enterprise making to with customers multi-product creation, our our content discovery purchases and to for business, content customer to continue allow

our geographic on as we continues and focus to presence enhance Our expand under-penetrated also localization markets.

business first of our at revenue represented in XXXX. our grew the compared a of the XX% of quarter in to year-over-year approximately first of Our rate XX% XX% and revenue revenue quarter total enterprise

We are also cover continuing to events. fantastic

fashion nearly events. quarter, X,XXX sporting the during events covered business, editorial entertainment and our For XXX and we

continue and increase entertainment stages, to in content its offering. we is early content news our sports, our While

In syndication the and exclusive governing offering. custom growing interest services I we path in pleased Shutterstock to summary, cover photography, football. are events pleased activities obtained around the and with our English forward. is last am distribution example, rights quarter well of For body customers Custom and Association, quarter going with for integration key and we from the Football the the

will by new to financial make customer performance. of progress technology our functionality platform, provide call over to a I that, And turn growing the overview continue and on our and focusing who detailed of operations features products with launching and more We will base. Steven our

Steven Berns

Thanks, thanks joining today. for and everyone Jon us

Before let we want you always know I I information discuss our a to contains on for material that performance, that supporting brief posted call. as website deck our today’s

basis to resulting adjusted and first As a Jon execute our EBITDA XX.X% growth continued an the margin of on of in we has highlighted, vision strategic throughout quarter reported against XX.X%. revenue

company currency saw benefit first from XX.X% did first of currency quarter excluding at revenue we the in quarter, growth the growth to was and XXXX. the the of favorable While XXXX WebDAM, level. local currency foreign quarter from a constant basis movements the On

as improved see improved image download are As smaller subscriptions. generated plans, focus our motion quarter continuing to than on quarter, on mix improved as which increased per on compared and optimization first by well basis growth compared enterprise to positive and prior shift larger traditional towards saw XX% higher e-commerce subscription as businesses revenue image by our at Revenues XX% in our we rates funnel. the results year are first sold price from constant business the our to we per conversion a XX% reported a our of product and e-commerce as continued currency continued in basis a prior year our the driven offerings

$XX to compared prior the year million. first business to enterprise quarter grew Our XX% approximately

include results revenue other. sales adjusted enterprise have All reflect reported our API been Our periods historically been from this reported which change. now platform, have in to

improvements These a strategy. part the include features Europe Jon mentioned, currency XX% to outside quarter of our America. to local our continues Asia-Pacific United with growth improved and approximately be the from algorithm. remaining As continued XX% international core In localization payment from of and from search functionality, States, expansion revenues workflow and Latin in of improved the was our XX% first customers derived the XXXX, of customers contributor

like would XXXX Before first we affecting two items our revenue. discuss quarter to highlight expenses, I

at first $X.X February the first which versus WebDAM the WebDAM X million which period of of end XXXX, First, quarter for we were full quarter. the represented WebDAM is of $X.X owned XXXX, for revenues Shutterstock the a months quarter of first completed million the sale XXXX, business. in the our which first of

resulted January revenue in recognition This first recognizing the new million revenue the revenue addition, the standard $X In company of we an that legacy XXXX. standards. recognition to additional compared on adopted using revenue quarter the the in reported would X, been have

If you of will impact review XX-K, you Form new this and X that in footnote standard of disclosure filed our morning. see this the recognition XX-Q was revenue the

impact the first the into improve other quarter slightly shift the within quarters this first While is primarily from results, financial a quarter. XXXX does

driven primarily our from in X% of operating high-growth the XXXX, investments for versus excluding are first smaller, quarter we the Our stock-based but potential first infrastructure XX% XXXX has and the expenses, of both This been XXXX. businesses. and high our quarter increased increased fourth quarter of making by compensation

expense of XX.X% First revenue, was unchanged is quarter approximately royalty which experience. our historical from recent contributor essentially

Before reduce is to believe results of ongoing reiterate I we categories, the into increasing expenses. growth some XXXX. taken take throughout actions like we our an that go to expense that I would continue major and of will to our This have exercise yield

highlight flat year-over-year between equally to the sum the in Overall, changes Generally, and fourth comments brand return ‘XX. XXXX. healthy and the of investment marketing on my Sales of compared XX% XXXX ‘XX exclude and category compared historical spend our and expense from marketing the with split our as of expense compensation enterprise remains For well category has to is been cost both and quarter first each remained quarter changes consistent our will results. performance stock-based sales organization. of this and discussed, as as this to quarter sequential increased

due on increased $X solutions, XX% in is of large fourth we the Product we XXXX expansive by will of expense consulting today X% and or discussed cost XX% last year the XXXX consistent primarily personnel of quarter building business in revenue fourth to the and quarter up well the driven in administrative slightly General million as quarter versus which first from of customer organization’s XXXX the of increased primarily have expenses revenue, to to of believe from XX% up and sales on marketing the related personnel enhance implementations XXXX, our and quarter XXXX. of the which expenses XX% development costs year more several leading first operational as the up the first As scale XX% to and a was the fourth first quarter quarter consulting call. related higher the calls prior of of higher of from many and with and efficiency. quarter this by platform costs percentage

that with margins as been are – prior believe through and performance we stated margin current our to a in As actioned steps I XXXX cost have result continue that of be will calls, improve our have throughout not and that are the management actioned pleased will year.

gain connection in As we WebDAM in sale the $XX.X February recognized a pre-tax million $XX.X of this discussed have and we after-tax of business an million. a our of gain year, with previously of

Our was effective quarter for tax XX.X%. rate the

includes provision million to expense WebDAM Our $XX.X income first $XX.X of quarter million for of tax taxes sale. related the

the discrete tax the rate best is Excluding The would effective the quarter as during our continue first this Tax Jobs act on Act at additional rate of available gain, the relevant impact XX.X%. year. of implementation including XXXX have the based of WebDAM rate this estimate on the information information. to this of monitor tax all effective and provisions point items, been provisions Cuts effects and becomes and the The the of will guidance available company based

share. payment in $X.XX net period quarter in for WebDAM. or first the XXXX, in of the on or first $X.XX been refund the compared increase Also, WebDAM the a diluted exclude $XX.X the gain in gain million EPS first reported per net which this was million to is to of first in actually attributable into $X.XX of quarter revenue million of quarter growth I of level the would in EBITDA year $XX.X $X.X versus $XX.X with quarter have the XXXX. of comments. the diluted income $XX.X $X.X quarter quarter was adjusted EBITDA XXXX our the adjusted XXXX, million in first was During a Overall, share in the adjusted excluding the so adjusted share company’s of first Adjusted of associated The income were a as translated paid our ago. which diluted results sale expenses a of same earlier operating taxes the sale. the million, in expenses benefit mentioned to decline tax cash EBITDA combination the in of XXXX. diluted income million GAAP net first per quarter These compares per my with

cash from Free and $XXX XXXX. to cash of was quarter million cash first content generated the in $XX.X At million million includes we the flow, the million sheet, quarter, balance purchases, the cash and we which expenditures cash $X for of versus equivalents. of flows first cash Moving capital and outflows operations. $X.X approximately of had end

attributable Moving from balance XX, the XXXX adjustment pursuant end specific important quarter total million December of standards the to that that reduced those new the declines the the of was and revenue items: revenue by operations. the of to offset revenue, of million WebDAM in is cumulative by declined $X.X the that was attributable $XXX.X at revenue and business; deferred a note deferred $XX.X two $XX.X first million March. million million; sale the of end growth deferred company’s recognition WebDAM three $X.X effect It’s first, in to revenue XX% deferred were deferred to this revenue reduced to decline ‘XX by to because

Of So, March continuing change business our accounting XX% enterprise XX, rev/rec and approximately grew XXXX to deferred of the relates WebDAM. business the our e-commerce our XX% of standards to for business. absent this and sale balance, revenue

in our reiterating as previously WebDAM and fully this XXXX, is guidance We a today’s are excludes provided detailed for financial guidance release. press earnings which reminder,

between for of of million for revenue million representing and versus between adjusted growth XX% EBITDA both our XX%. XXXX excludes expect XX.X% between again, million, and guidance million EBITDA, We XX.X% representing of $XXX we and revenue And and and once happy recognized excludes I on expect today. and Jon $XXX please quarter. adjusted Victor, now, $XXX gain of growth that XXXX, XXXX. have. prompt we be it for And between I you other questions. and WebDAM just participants in the the questions any the appreciate of WebDAM sale answer your also first will associated revenue mentioned And the We with to may time $XXX

Operator

Yes, sir. first Squali from [Operator comes question Instructions] Youssef of line And the from SunTrust. our

You may begin.

Naved Khan

Khan Yes, Naved It’s hi. for Youssef.

Just a of questions. couple

gives downloads growth obviously to regards growth have then change the guidance, the in to the on there pricing affected related slowed annual paid something that but year? how should thinking if can you at the numbers look low shape confidence it growth here? just the that you are guidance, bit. And just so the the the hit end, might at So still EBITDA year-on-year be I just Is about XX%, reiterating the those and a implies the what of the we you

Steven Berns

Sure.

and to basis relates downloads question, the growth first it the year-over-year we as have the mind So I XXXX, our think subscriptions quarter not of in did a paid in small out. first keep on the that

the launched was were there so a shift. those so in And quarter second and

we our saw So, benefits the in that both account. shift customer actual of

significant had we in so And growth customers.

combination also of paid we subs. some of in utilizing shift The those actual downloads month of of that per those. in addition, from small subscriptions shift shift per weren’t in In the to that had subs month number XXX the terms the some benefit growth and those of full these XXX resulted

at So, when products and and our our whether all be includes content video of editorial all obviously or paid music. or the we look downloads images it of

and on the you And this to we so total that the I will subs us third though in have which second year versus portion, you the like is given and this slight in think the comparison. images first XXXX which the say growth in the benefits of saw quarter small see I quarter is what quarter being quarter surprising first not this largest

don’t to quarter quarter. As just first it relates first guidance. give quarterly the is our We guidance, the

have the that combination the plan, revenue based we management based in to based continue provided. on our is And say the the guidance so performance, that seen, our we achieving based I us we taken revenue actions believe take, have our we cost on on on cost our what activities will business and performance would have of and that result

Naved Khan

Steven. personalization is localization you maybe when about And the for one if this from to Thanks, quick that I a have and effort Jon, question should helpful. undertaking? start payoff increased the are may. we follow-up I That’s think

Jon Oringer

Well, been it’s and personalization, actually have localization many for we process a implementing years. continuous

going in to on it can new we continue do our and are a We and optimized more that way platform. to efficient evolve

place run in is platform our codes our products. new of because all Our one have a across to experiments, great all of stacks and we language different

have data We have are – place. one we to going our all of in

that data to that we ways before to our that are process certain We products. it methodologies didn’t and in all standardized clean going will have across be of data,

evolving it’s I process. an say So, would

and continue from more will have replatform. from to more some we We seen see and benefit it the

Naved Khan

you. Thank

Operator

question next Jefferies. from Fitzgerald our And the of Brian line from comes

You may begin.

Brian Fitzgerald

Thanks, guys.

would the are total enterprise, SMBs on of businesses in the pockets are mix that maybe seeing seeing particularly in strength little we detail in new where products strong On you is specific it U.S in bit and revenue, And the from or can you larger on growth a likewise are coming whether multinationals? more side, of Thanks. you maybe get regions the two-thirds then the callout roughly and momentum also? you any U.S. seeing, international

Steven Berns

Sure.

So, good we of to clients would growth seen the in what say platform. the is of enterprise, on their consumption terms that from it activity as very have existing I relates

of is being has extremely that team way their a terms in them the enterprise in Our features aware by that been our serves of and functionality best. utilized productive customers ensuring needs new are platform

you on would, that’s think future front I so revenue. if a the obviously So, positive bookings

to regions, as have a relates of the basis. in on true continue We it including That’s to corporates. global SMBs U.S., all lots of our opportunities

people the have of over our in years, in about So, have and would, within in European as really booking each significant countries couple course office, we we the you of results think office, Berlin local in side Asia-Pac London we American our Singapore regions to ultimately if you and the as utilization. I Latin out our established, and past of probably have presence that talked know, the of drive office

So, work the function the are that we deferred what – we it’s up a the not enterprise a bookings shows revenue did XXXX necessarily it’s is account. and really and extent and that’s important course not that feel in the growth of in of utilization to commitment activity what in a in that by resulted

positive. a feel to so that that, we And be continue will

two-thirds been the over we have as As wanted it the content, revenues consistent for years. that we our would versus to We localization target and international as what I think relates that efforts, relatively I the ago, would have instance, of again percentage companies the refinement And to continued features music. not and has implementation target, a of years localization – their to from that, including they functionality the benefits think of a I of once localization the efforts, of localization of products think video around localization international, – have the international be about search, many talked payment, on our continued domestic. of our don’t

both All grow the of don’t we and have by to but outside, in market. will U.S. contribute that Jon? targets specific

Jon Oringer

to our and place, one all sell add are to different in images We get our us And images future. sell different momentum, the be over X lot from I countries. sold better insights we one again, single but a to of spots with platform a countries. in code for XXX Yes, our source specific data in would generating base of the images ways no on are near is we every and data There second in new that. able of going we XXX

Brian Fitzgerald

and that? would process, characterize the of process, in but an ongoing your would even And you Steve How of platform terms previous process, bit follow-up and but of are late maybe you discussion you gauge question. be endings this in on would that, going one you said how follow-up your Jon. it an Thanks, replatforming your to and it’s to the gauge you we on are I like to it’s have Great. point ongoing

Jon Oringer

we say I’d changing a every adapting are things to if it never are going is it’s doing lot we to and Technology end day. single right.

it one gets now big bigger, see going that all It’s of move to we direction I gets into and kind we language. of board stack, our forward. multiple we for pages stack of us have with a we introduced and new bring getting starting rolling and this of am on better. replatform live our go continuous the are process. complicated code business technologies code pieces The everybody one have more to are perform the getting of on moving of As optimize and types then from is that to languages where the those the all to the to new behind system

Brian Fitzgerald

Thank you.

Operator

Blair. from our the Ralph from And William question comes line Schackart next of

may You begin.

Ralph Schackart

Good morning.

looking And products any you or to you. business going e-comm Just the that of out ‘XX, impact conversion you in the then then about new on too? products are and growth as the think within more Thank some those funnel, sort the add business, growth. new double-digit driving in and be sort rate of you that of color could pronounced great impact you growth? price forward of focusing one call the products Any I about perspective e-comm changes talked of on and on sort a having factors strong potential would I talked a of optimizing rollout follow-up, you terms think new

Steven Berns

question. in the of on for think platform, users. the XXXX, quarter appreciate but result user many, experience, technology important in in many creates a richer the environment changes performance that to of it activity driving our features, in first the the our about functionality, is led really many, our is When small, much the in activities all quarter the factors up I of the and we So first really in growth, that our

it’s about in ‘XX. is in performance to it of the I the the enabled exist, that we on what business really it to that us quarter what that began of this have had goes think isn’t on really then that half to music try e-commerce to second one it while we find we of back the think did And – second I doesn’t just easy really So, growth last talked XXXX side. continuation year soundbite effort. I and late know first that a is as saw We quarter in video and

significant there one And the and once so We in those. thing not performance again, benefit to, from to have could improvements is made it’s that a that performance. of also platforms of accumulated those e-commerce contributes perspective you point really our all financial

As to of the your question? it relates second part

Jon Oringer

point them. Yes, to for I new products, a couple would of

photography. I with like will of will to stock you customers our going think able asset see to us types it and as move that from and for purchasing side, see where that’s types custom enterprise enterprise types another developing of and commercial, spawn tighter more will multi-asset new our and integration. we tighter much Well, stock see without makes one you be side sell. easier will on asset to photography you to I other Also know easier the are some our of products on deals integration custom types friction we editorial plans and integrate

Ralph Schackart

thank you. Okay,

Operator

our next from Lloyd from comes Bank. of Walmsley And line Deutsche the question

begin. may You

Lloyd Walmsley

Thanks. a had couple. I

rest the you help specifically $XX you operating revenue cost a us reduction I control the we of it deferred over firm to was mentioned items the commitment from start second you million to think show year? to timing costs. First should And to a or on start $X like understand it impact then in maybe from side, about identified have the leverage which should perspective, line plan and just that pretty to Can expect million leverage? one a accounting change. when see And sounds

is slightly XQ? Any to is big it than why and this revenue into Just help of can as cash you look kind in recognized understand and wondering came help flow been if you out as it of shifting or contribution it has free actually understand, can us historically source positive that’s this of that that color like quarter it a was additional didn’t a quarter. us it since – more

some love there? help So would

Steven Berns

Sure.

was second with the standard take is to QX. as so question required recognized revenue just was as revenue not as by So, first, that – in recognized – that deferred the

that So comments. for the it in prior did $X but not my million benefit, I mentioned

just any change. pursuant revenue reflects adjustment benefit deferred – of our directly accounting the The for the deferred So, $X revenue from accounting was earnings a booked our $XX from million of avoidance doubt, to to million revenue nearly standards. retained

just direct because impact entry. just a collected a keep in that could through forward mind, we so revenue, And that revenue. of ultimately going have deferred that was not P&L its it that a be and deferred there as liability reflects cash have to relates GAAP cash we that is form effectively in the advance on the And way revenue makes the

Lloyd Walmsley

shouldn’t revenue? don’t that we kind hit so – we Okay, see ever won’t evaporates. We that of –

Steven Berns

Correct. right It went through...

Lloyd Walmsley

side, then on And the cost first question?

Steven Berns

Yes.

sales continue improvements. is growth. revenue So growth COGS side proportional the and to on will you the to as that And cost cost as marketing, see well side, and G&A product to development continue on will see

third-party about of internally factors number because generating revenue the a same areas should talked be as have incremental of incremental cost, applications. of and a generated margin the We of without number degree both implementation where our I

platforms our workday platform new are is our that that enables engineering capabilities the of don’t talent. marketing whether significant internal many content tools that to productivity the be where of productive. done other engineers. the functions, platform whether by of it And other functions are internal be those to we or have function us in There engineers platform about, our we we those as some that talked So, just number are building do are terms things benefit our our would more used and enabling require use or be from of our marketing the of that environment, now tools the have

level generated. So, I of for There resources revenue the we would single highlight. same wasn’t incremental any don’t other line require the being

make choices P&L think get and across I we total our the will that.

Lloyd Walmsley

you. thank Okay,

Operator

further showing Thank no I time. to this for Steven closing Mr. questions you. would now remarks. call I like am the at And turn Berns over to back

Steven Berns

time future. the to will we everybody’s appreciate you this again Thanks in near and talk We morning.

Operator

conference. today’s does Ladies and This conclude gentlemen, for in thank participating the program. you

all may have a day. disconnect. great Everyone You

Shutterstock (SSTK) 29 Apr 182018 Q1 Earnings call transcript