SSTK - Earnings call transcript Q2 2019

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Operator

Hello ladies and gentlemen and welcome to the Q2 2019 Shutterstock, Inc. earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions].

conference being this reminder, a call recorded. is As

turn over the to would Secretary. now host, conference to like ahead. Garfield, I your the Ms. please go Heidi, Corporate Heidi

Heidi Garfield

thank you you second Thank XXXX call. earnings morning Good everyone quarter for us for operator. joining Shutterstock's and

Chairman, Officer Officer today Oringer, and our Chief Financial and Steve Chief me our Accounting President Chief Executive our Ciardiello, Joining Pavlovsky, Founder, and and Officer. is Officer Jon Stan Chief Operating Interim

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

Risk differ to any on this for of results make important discussions those Our entitled Annual Report results that year time XXXX, XX, we Securities should predicted reports performance. cause Exchange statements on from release the actual forward-looking documents section Factors actual the the refer an time as from to company's may and from U.S. of discussed Please indication the risk in December and the materially be considered results today's not and Form call. reported with press XX-K including we ended for materially may the file could to in differ factors results and future Commission,

non-GAAP growth and adjusted refer will EBITDA, of income, adjusted EBITDA which financial flow, all currency free basis measures. we are constant net a adjusted call, this on margin, cash to On revenue

section Investor You is most these today's on release, the of comparable a a the which earnings description items posted measures directly to find financial our of Relations website. with reconciliation along GAAP in can

consider results that financial use the with our reporting. operating overall This in basis and our insights company's comparability same in these with about the them investors of the management. believe assessing measures and connection performance on enhances financial operating provides GAAP additional important by We to measures allows business used

should these a considered non-GAAP to However, financial GAAP. superior in be for information or accordance as measures prepared not substitute financial with

information Finally, deck materials our brief we that on please website to refer contains today's posted the call. for supporting

over And now I the call to will turn Jon.

Jon Oringer

Thanks joining everyone thank Heidi today. for us you and

see around press position. you in seen the to from our quarter, our further growth working continue revenue As have globe, customers our resulting we demand strengthening in capital release this and

However, guidance. we our announced revising XXXX we year that full are have

enterprise a and Pavlovsky immediate providing Stan reevaluation channel a our level, Ciardiello we critical But address, some sales shortly. particularly high to in be more drive demand details that how of Steve we will growth. at issues have renewed

As of positive have now are a we all will think to made sales this taking recently opportunity evaluate some that a have and we our we impact. team, changes enterprise channel carefully aspects

are as the these this business The platform opportunities. we our competitive significant. The marketplace evolving challenges our quickly face. the capture are to believe We potential in for landscape remains positioned that is customers best

and changing turn their ever, think solutions do meet to them more platform needs. to do to our for even users can it than more deliver rapidly we Now, We better.

new some streams the get sustainable optimize us improving order better in on opportunities areas the revenue for and and products within stronger our a to We are growth over services e-commerce find back several looking years. next channel trajectory, at existing

the to the grew at though e-commerce $XX from second basis. flat Revenue grew XXXX to quarter. positive $XX.X quarter million. of channel Revenue remained second we revised XXXX, outlook our channel some Even XXXX the year, of while compared our reported on quarter enterprise we our made for from X% in X% the a million, in as strides

primarily this growth. XX%. is XXXX, enabled X.X% the second of quarter and our from percentage of the revenue platform quarter our almost EBITDA We cloud from increased stability to further Adjusted that grew resulting and strengthened scalability the

always, we platform our and As and make available content anytime tools anywhere.

We introduced footage video new cinema-grade Shutterstock Elements, filmmakers. which our offers effects offering, for

growing free Our access our plans, from Editor, design Shutterstock million for increased a serve API surpassed We more strong and subscription five to than demonstrating further customers. reflecting launched self-serve demand application, support community our users our and not of support for mid-sized more to and million developers, Shutterstock. continued QX. $XX campaign, positive we businesses. marketplace saw We small than it's assets It's stock, XXX,XXX And added start-ups our promotional and traction contributors in new

of across platform, customers our proud talent. looking strategy step profitable strong look be and and been the At services. and initiatives. when that and company we flow And growing with goal are our When the these future. a a content, business, lens compelling and started pillars, to toward network we recent Shutterstock, build and back it's with results clear platform to take three focused We are have disruptive cash was continue technology most a on we are we provided we creative and a that this tools core, through our and

will be have tools forefront innovative customers of that success. a of We our creative and million we technology. times per brand our our content and improving for on industry one to X.X from relentlessly rely to our and Being to contributors know and need customers customers second, access and growth at keep have fuel the pushing the with our strong we building licenses stay our a successful. Today, they Six marketplace. ourselves constantly that the on

sell over services shape This drives off and that the other have extensive day-after-day. refined upon gives network to products build strong effect we improved we our created, a of. and contributors library to the powerful data That us years platform

management we our opportunities. plant team seeds Additionally, capture right these the to to have repositioned

and renewed our priority dedication platform, to our be right the and contributor team to a have roots, some Customer As thinking big stay ahead, am with further we ever customers' to look is I making our we to that enhance ahead we engagement bold. get improvements of and and acting back will changing needs. confident tools operational our

we have recently our point, management team. to that added perspectives fresh To

know, and to the this Operating you strategy long success into and As continue aspects his contributor to our as the the the managing In and leverage future. operational lead right drive experiences. strategic our improvement marketing elevated President of expertise Shutterstock and and platform Officer. Stan to customer in Stan person to product, role, Chief for of we Stan teams Pavlovsky position will technology-focused is the and sales, network they better continuous technology businesses execute

a search process midst next our of Steve Accounting We grateful for role Ciardiello, that filling Officer Chief and Chief is Financial in are the comprehensive interim. Officer, also the that are in our

heart remain engagement at are confident we on culture. to and focused and of we have our employee our success people to accomplish that attracting our vision our and further talent on the across the goals. us collaborative are innovative and our help addition, In and to We deliver our the retaining organization people committed best

as performance. was Sirius Shutterstock's Business for as SVP early and the Business a contribution Partners I Founder technology Magic and welcome Rachna vision, brings would years look strategic to Leap January currently at to Investments, to our to where operates Board We She companies. Development and Strategy as also Prior Rachna forward to XXXX, Radio of like York. she Chief CEO to media knowledge in we Pacifica take three perspectives this over Officer is drive previously to Board, Co-Founder stage complement investor advisor, of our Corporate consultant and EQ deep and of guidance. and Director Rachna a and existing XM industry her served opportunity Bhasin. strategic for New which members' and new look

an call our reinforce the in business over want growing technology. leverage I underscore as and forward discuss global to to as the path market long remains Stan position strategy confidence term greater we our our industry-changing differentiate technology we turn Shutterstock's I innovative opportunity detail, company. our brand strong in our to as Before

will successfully flow. remain And value delivering strategy focused growth, customers increase firmly to on we improve are and committed cash for We revenue our shareholders. our and executing earnings margins on and that our drive increased

to will I And with turn that, it you, Stan.

Stan Pavlovsky

good It management a like and whole and welcome. of I a I the for to team as a since and a giving me joined would months morning to thank has the been want couple everyone. company company Jon the I warm morning. few great accomplish this Thanks such things

identify some focus key to deep The business to for first provide the my going the the after into and of forward. my company is second is areas initial impressions dive

leading Shutterstock have creative April. by have opportunity confirms since seen have of my to the passion had of running talented contributions. the starting and innovative and And I that meet colleagues what lot a while and company. still I ground developed impressed in this I the have in platform. has hit been And early a tenure, strength technology past this unparalleled an potential of much company belief their my is it's

reputation We have a and services. solutions content, high-quality for strong

operational to newer the teams. can have have great I potential. and will business, continue including we marketing smaller and of leverage, that It's across are lines big Over some worked business the sales with that that heads months, closely technology, Jon past we and and the including few a product, but have clear number

grow. to continue unified opportunities platform, we business with see our a we to core innovate As further around

drive value sustainable that to customers, will for the growth are long additional will which We we also identifying confident areas term. are new provide

to that no I need services It's We they and make have range right to changes From authentic our the customers, customers businesses Shutterstock, them is across we rapidly. of that confident operate that of am a platforms that for The this successful. seen needs we make have and to further growing. what happen. high-performing the content, secret can efforts demonstrate our need works their how content I products to at

vast We be our customer and to technology library, are service. positioned successful leveraging cutting-edge our well help by exceptional customers

critical what fundamental is The our users as this trace possible. enable to back want goal to and improvements fast as do are goal. to they as all making yet we efficiently Our

enterprise in the strategy. enhancing process Focusing our sales of on channel, are our go-to-market and we effectiveness

needs reflect sales which customers' We are marketplace operate. our improvements, we team better structures the incentive improving reviewing this back-end systems. aligning competitive Internally, our in business organizational the our and includes and to

to a in present positioning and to marketing We a customers. look fresh sales are our taking at proposition order also unified value our better

acquiring higher with we trend, customer increased. e-commerce thoughtfully and customers Optimizing impact. ROI, channel, developing with strategy will associated more and Within the allow activities costs our that To conversion the to of marketing focus are on this address an lifetime invest a greater us value value. has with integrated rate customers lifetime our drive

elements X,XXX evolve the Shutterstock around world. to customers on to to cameras This offer uniquely which This compatible new are our product all introduced our Elements. In our over footage are major solutions existing with products and addition, programs. includes video captured we offering, continuing products launch new cinema-grade lenses, and meaningful editing

adding XX also and user And real-life footage. conversion launched up our augmented app the bringing the streamlining enhanced experience we par and experience reality for on in enhanced and served the We in images download languages our unifying apps our and View site. Shutterstock iOS XX to our image the by mobile Room by how We allowing for have visualize usage feature look to languages, experience with settings. users checkout from a might app, consumer

and in These helping users will fast creative our that continue believe as growth achieve new possible. us business goals goal, to drive efficiently and and driving our other their as core platform are our revenue across opportunities. initiatives innovating We unlock to accomplish

team lot working and a important have with and our ahead is work We of us urgency. thoughtfully of

team and this on opportunities innovation long-term operational has ability share execute with company for joined their and to our I I because the this excellence. confidence passion

comes calls. Shutterstock positions well on to to work to value of constantly progress experiences and he of to this the our Moving and what future this improve company. deliver and part Jon updating when for strategy great our Jon's I rest for forward, to be further am on with our I team you founded on vision forward us build closely ways look and customer investors. discover to contributor excited next

turn detailed call Steve financial review. the And I with over that, more for a will to

Steve Ciardiello

Stan for everyone and you Thank thank joining us you today.

and as with not we additional channel. while results First, cash continued liquidity flow, us we growth satisfied strong enterprise have in and had our Jon ahead free earlier, of have to work profitable the of the mentioned are our improved quarter,

reported as quarter X%. was Revenue growth the in second

second the Excluding to revenue impact currency of quarter was in the movements, growth foreign X% XXXX. compared as approximately

Our to million the constant e-commerce X%. as to compared XXXX and basis, channel e-commerce quarter $XX second revenue increased on of revenue X% grew currency a

and flat a X% currency was grew reported to of basis. million compared basis Our $XX.X enterprise XXXX channel on on revenue a constant

the euro approximately sterling. the reported majority will of the FX denominated foreign and British As revenue a with dollar one-third currencies, movements in reminder, to growth. revenues are the our our pound in impact U.S.

metrics on million, Reviewing to revenue quarter the paid some X% per second $XX.X by basis, X% in download. our increased grew per download key of a downloads to year-over-year $X.XX

XX% expanded clips. by and our video by over Our image XX over to XX% million library XXX library to million increased images

Operating a for year the $X.X the to prior decrease second X% in income quarter, adjusted was million ago. year $XX million period the XX% in a EBITDA million $X.X in which quarter to $XX.X million, compares from and the same grew of

the margin EBITDA XX.X% to adjusted compared grew XX quarter XXXX points year. in Our second of to basis the prior

profitable growth. continued our While to invest and expectations, to in term enable platform our revenue our long growth technology was we below

per an a share in loss of quarter XXXX. in the the quarter $X.XX $XXX,XXX diluted second GAAP loss diluted net net was or of share, or $X.XX $X.X from million increase per income second

a reminder, the $XX.X we million quarter in was charge. net quarter a quarter second compared $X.XX of XXXX, of in representing $X.XX $XX.X second as or year-over-year. increase $X.X after-tax the diluted the a recorded or second XXXX As XXXX, share impairment for diluted income per of per share XX% to Adjusted million million

decline and offset Now general, the of X.X%. second driven expenses, development second will expense product exclude be and a XXXX to compensation by marketing will operating increased Total increased expenses quarter operating increase in by following expenses. on in XXXX. the expenses the This of stock-based discussions was primarily administrative compared direct quarter

Our include royalties, increased cost revenues, of contributor which X%.

quarter expense approximately Our expense in contributor X% increased XX% revenue of to revenues. as marketing be XX% marketing was spending continues expenses increased the to of Sales and marketing XX% second XXXX. royalty Sales compared quarter to and in of due the initiatives. second XXXX of and

and XX%, consulting expenses personnel due primarily costs. Product development decreased to lower

in a costs revenue, X% XXXX the of percentage development XX% As period. product for the were quarter versus

the company million of addition, costs labor the In related development. quarter, during product to capitalized $X.X

G&A expenses XX% $X.X benefits includes and million This And of expenses XXXX. XXXX. accelerated with one-time costs from increased of associated quarter amortization. increased XX% from quarter second the G&A sequentially, the first increase severance or

the were G&A second XXXX. percentage of of a with XX% expenses As compared quarter revenue, as in XX%

Our expense income tax $X.X quarter compared million benefit of XXXX. to a in of $XXX,XXX tax was the second

XXXX. $X.X quarter as X.X%. million paid Cash of in second effective tax million of quarter XXXX the rate in second Our was $X.X taxes the were compared to quarter

Now the to balance sheet. on

enterprise. Our of consistent to as $XXX $XXX.X million and approximately we deferred At XX, revenue of of June XX, business had balance periods. was e-commerce with XX% XXXX, our million, relates is mix cash to which cash equivalents. approximately prior and This June XX%

positive to maintain continue position. strong capital a working We

of from flow For was of operations the second quarter an from quarter, $XX million $XX.X cash million, increase the second XXXX. net

capital of purchases. XXXX. payments Additionally, in for flow was of the cash flow and $XX.X expenditures quarter, from free $XX.X increase operations quarter million, second from cash Free flow an is cash the cash less million content

in million quarter operating our declined in actively We expenditures our compared in to for the million a of from believe current of expenditures higher reasonable and flow levels And capital had to business XXXX. are the quarter $X.X growth. XXXX. our addition, that and capital size second cash $X.X We the manage

flexibility us and to Our to the be strong with while continues also strategy consider cash maintain position enables providing us opportunities. to operations strategic fund that to growth liquidity a operational

continue appropriate we cash use historically, we stockholders. optimize in our As business the generated have of for will return done to to evaluate

and the channel reducing weaker-than-expected of to This to our million $XXX sales second focus in target And of to strong our million Based guidance $XXX our $XXX from finally, half our year, on guidance. our year company's will the we full strategies targets. growth on revenue million. are operating the also $XXX impact getting updated committed growth and income previous reduction EBITDA million previously to adjusted revenue enterprise guided

$XXX capitalized follows. $XX Adjusted from approximately teens. $XX of million million. result, now effective equity-based million. a of expenditures, in million Revenue As approximately million. $XXX tax labor, rate as including Income million. EBITDA expectations of to And of operations million. between $XX compensation are million Capital year of XXXX for to Non-cash the the $XX expense an our updated $XX to $XXX full

As on and in to company growth and term mentioned, we our maintain and through our will have the focuses position flow. beyond we continue profitable long business working capital cash XXXX invest free strong and

prompt you We appreciate participants Jon, answer any Joan, will your questions please time be can may today. questions. you Stan And now to and happy for I the have.

Operator

[Operator Instructions] line SunTrust. of from Your Youssef from question Squali first comes the

Your line open. is

Youssef Squali

very Thank much. you Okay. morning Good guys. Great.

the us. waned guess, marketing e-commerce in couple the part for like that sounds with business. a efficiency the I a questions, has Starting bit. just Just of business of It little

And of you spoke that just for having effects to may us versus I caused broadly broadly internally you Jon, maybe reinvigorate cost happen? you you from have to you you second, potential are the in to Can up. the that competitive doing customer seeing out think what Stan, I to pressures enterprise competitively? parse side, acquisition on speaking, of gone that are And what growth are that doing kind think things segment. talked about the try guys just

at kind very bit? price you of out of What Maybe different also Are introducing the using Or any you. and you and or think exactly sales Thank the repositioning there spoke of kind marketing I a you things marketing. or helpful. color for kind about can you point? would sales us you flesh little about just that there? be newer are guys products of a doing spoke one

Jon Oringer

will Thanks hand to e-commerce Youssef. will enterprise. and for Stan then start over I with I it

across get e-commerce data, happening there. can is results in smarter at most that with from But The for bit our it's a you the pretty, quantitative and that methods all that's advertising. goes, acquisition of on has cost paid that using don't. leads of the see produce business the what cost the kind ones increased industries as make look to far and when the we zoom sense we As

One high. by most out of great platform images Selling velocity thing anyone lot target the know way the data really We the way shape customers believe that collect the in in to can. of library top in a about six is funnel per second, our can far. our to don't is we content others of and industry we our at prospective information a really a this

So while we us going of we or also best bit, to not even cost and competitive industry a unique the and pressure just believe we are industries. those increase up acquisitions see the positioned in it's other our

far as As enterprise, you to Stan, jump want in?

Stan Pavlovsky

Sure. Stan, Youssef. is Hi. This

go-to-market create spent have the better the side, and to is of consumption with we in and the content an are fresh, time great When clients that's content on On how then our pressure we enterprise able trends deliver customers to you on clients. and culturally market a focused subsequent think the increase around authentic, the about we consumer that's opportunity with that strategy. relevant, that are of amount to position content our

piece of And one it our and is we blocking that base. sort the that's and is how the the tools deeper we so provide relationships services of kind with build of business. client packaging communicate and will we pricing and how But of tackling

Youssef Squali

you. Thank

Operator

comes of line question from the Alex from Giaimo Jefferies. next Your

Your open. line is

Alex Giaimo

Okay. taking the Thanks for question.

were management help challenges you Do feel parse in its industry the there cause us out the should outlook the turnover? you industry maybe differently, pressure I the fundamental you the given side? on then of anything with side. provide Just call Can you the any asked we are for main back forward, quarter? will just growing Thanks. aware like enterprise guys recent guess, way the changes do feel going still just CFO out softness? enterprise or to broader is be or the changes, just to the there And going

Jon Oringer

Alex. Thanks Sure.

then on Let I Stan I with me question and also will side. jump let just, start your the in here first enterprise will

is operation. main own believe for the we cause our softness So

the about think out the of you channel. it e-commerce If business grew, how was enterprise

multiple out what for different users with we to product, built started to our the in organizations our e-commerce were We learned those of customers customers how customer. in set we enterprise started customers site. we those from So We different was team there to companies. features which subscriptions a and realize reach is saw also premier we other our did and interact

we we a there at need XX opportunity. all exist, businesses challenges to images. to million you these gap. and that one that. our organize can there's still And intend seize continue our businesses big the Each look And to business. to own their And and use because While believe out million a of small we could better data is currently if we small on build market in businesses businesses the subscription the those growing a X.X team build serve, this way team

Anything on the side, else from enterprise Stan?

Stan Pavlovsky

add that. just will to little I bit a Yes.

and If provide custom the are you that it's platform better marketplace. a that we think with of we offer what about and and whether that workflow editorial workflow, communicating we content the or able whether combination to really services to whether into do and both the of clients, customers it's stock our have or around job our creation value, it's capabilities, coupled

us when right cycle. strategy, team team But the organized focus the it's in next deeper over will around And plan six a building current sales tenets clients, longer products to you on having that having enterprise obviously, with XX the so as help the have, that also talk talk the core relationships we place when you believe but of about we with we our the these launch months. to set go-to-market we and about products

Jon Oringer

market in know, on for as And Ciardiello our as on the at search, CFO. second CFO as your search next Steven find to very the question, is to executing CFO pursue our the moment the Interim comprehensive so currently, we Steve left far opportunities. Alex, company you other And company. a And are CFO

Alex Giaimo

you Thank Okay. guys.

Operator

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

line open. is Your

Lloyd Walmsley

Thanks.

figuring in timeline et still plan? or cetera? what then around you period a just And that you implementing sense back it a the it enterprise evaluating secondly, strategy. in On like sales there, the Can changes while. may are weaker. compensation, out transition bit call How give will little the of the What be force Anything haven't then Europe, issues deploying like in cash the sounds Thanks. to following be last And particular, the you bought was plan a us any are up balance one shares buyback you guys would out was you there? feeling sheet? in have just looks from a about authorization, changes

Jon Oringer

Thanks Lloyd. Yes.

So as but far as enterprise But the can on timeline, immediately, We that we as are only something we said some will quarters. fruit manage areas evolve. we that also giving we is don't low-hanging identified that XXXX believe before. have we guidance seize in the this are

So the will be e-commerce that make in take the or or benefit because believe a the a of will we enterprise, quarter parts in investments payback period this other business business. year in order longer to that's that we than business there could the lot

we the million as yes, have buyback more authorization, Board. from $XXX far As authorized the

strategy other the our there platform. and just like platform, services to off in allocation capital is many priority we believe this e-commerce recent appropriate years an And new building off a of ago product our session, the strategy as far products invest of that areas did through of to our build goes, order we first drive can business we are As level enterprise return. investing in

in in in editorial, custom, we enterprise, So of improvement e-commerce. there's that believe lot in a

we $XXX the out year. on last I am paid million dividend allocation capital also, We point, sorry,

with amount benefit cash the can will we evaluating always are it what best of and we how it So our shareholders. do have, we

the can up I several cause they And and business levers we the are choppier. jump can are enterprise a ups on deals and We About lot that. comment the in different are. business, that sorry, The think just cause the I quarter. in so part. on are Europe will regional Lloyd, that's factors any just There bigger, of that that don't downs missed where of down business. and given I

Lloyd Walmsley

you. Okay. Thank

Jon Oringer

Thank you Lloyd.

Operator

Instructions] [Operator

Jon Oringer

no us see quarter. for there joining looks next other Operator? like and Thanks are will questions. It we Okay. you

Operator

wonderful gentlemen, and and today's Thank conference. Ladies for concludes day. you a participation your this have

You may all disconnect.

Shutterstock (SSTK) 11 Aug 192019 Q2 Earnings call transcript