SSTK - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Shutterstock Third Quarter 2019 Earnings Conference Call.

[Operator Instructions] I would now like to hand the conference over to your speaker today, Heidi Garfield, Vice President, General Counsel and Corporate Secretary. Thank you. Please go ahead ma’am.

Heidi Garfield

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

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

effects existing information Actual and and business, materially new Please of without offerings, including forward-looking trends the hear of of investments our our our strategy margins impact you long-term financial forecast. and in differ our growth, product profitability, note future and future that some discussion during success the could statements, limitation, will our from of today consist the our results long-term our XXXX guidance. will or

press with the we SEC. XX-K, For on and release our filed more discussed information, the Report the from including time, the recently file please risk to factors most Form with time in today’s to Annual SEC reports filed refer

adjusted release, financial measures of basis and included We will by measure currency on constant can be flow. including growth, a revenue net the distribution discussing EBITDA financial comparable channel these with including the free GAAP Relations measures certain today, found adjusted income, on in today’s our non-GAAP directly be the posted website. to most which press margin, Investor EBITDA, Reconciliations of non-GAAP is cash adjusted tables section

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

the And call to now, over I will Jon. turn

Jon Oringer

for today XXXX joining call. for us Shutterstock’s Thanks quarter Heidi. earnings And you third everyone thank

in platform, our an ever-changing improvements make we quarter, get needs. To ahead As to of our are customers' I last to on further our enhance order to operational in update provide continuing mentioned that Chief Ciardiello, role search our our been for interim. grateful Chief well, going Talent, on and filling our Accounting we this are the has Financial Officer, Officer, Steve next is process

Shutterstock best quarter, sustainable our efforts for third growth. continued we to the position During

our progress channel our evaluation continued business. e-commerce including of steady been have in thoughtful our thorough enterprise as well growth as making We and strong

quarter third e-commerce XXXX the grew million reported compared XXXX. of from in XXXX our quarter $XX.X X% from as basis. third to of to X% channel grew the a Revenue on Revenue

$XX.X $XX.X XX% enterprise the This EBITDA decline channel and million. additional our quarter million, driven Adjusted acquisition marketing infrastructure. a at of decline third and was costs flat remained is from by in increased investment Our customer XXXX.

see we long-term always, we in marketing, people platform As growth the our invest opportunity and drive will our in business. to when

remain guidance EBITDA. said, that our and With we for XXXX on to track both revenue full-year meet

last the and Shutterstock a built years, brand has Over XX trustworthy platform.

We have using Capitalized the to and on images, effectively our of changing around and us communicating have people solutions increasingly which the with businesses to music. We become know and more needs innovative customers. world video meet how created has visual

is continuously initiatives. Our they cloud-based content successful provide to the business designed get ability and our in enhance, we need be creative platform, projects customers seamlessly their the which to to

that expanding we way in help As to planning have communicate and more and we we trends the work on remain and solutions offering are teams, We users, that our provide the beyond, confident of needs marketers delivering to our world. XXXX as of successful our our on and creatives for strategic passionate mission the finger our for evolving best they work. the ever-changing collaboration, creative pulse that businesses be around that prioritizing suit of range ease value a businesses, workflow about sustained of and Shutterstock’s platform a the

over it like to to Company. I employees and investors thank Before support Stan, of the I’d our for continued turn their

come. to We are excited for what’s

turn I’ll it now, And Stan. to

Stan Pavlovsky

that forward. for now as started I’ve moving thus we work the I’m seven when I joined far, the Company. that that at everyone. ambitious considering goals a progress have been over Company first the morning, we the is especially made good little months a we’ve excited and Jon, by Thanks, and

a improvements, to offerings, mix SMB our products focusing retention, custom asset accounts, to go-to-market are quarter, can from a trends. set solutions types, API services of scaling in and pipeline we our approach and of and making and our engagement initiatives by businesses and to enterprise extending cross-selling to focusing sales including last our drive largest of dedicating spoke we’ll business specifically take advantage new the that the our to the rebuilding e-commerce our opportunities growth I that enterprise, digital do into with key new on offerings the of and editorial Shutterstock, As on and bring focusing subscription future continuing on by business benefit this millions across lastly resources results, the increasing platform

help We thoughtful able taking areas and that such and the that greater we feel where returns getting and to are will on we approach believe drive drive methodical time. that analysis and our to that improvements will ensure which our to meaningful thorough we can we fairly some on are of being into be improvements, to delve act made quickly more we a can we really need heart as take execution We be we investment. can of others

structural initiatives make In approach. began and verticals we progress In in just we to corporate the outlined. I third the quarter, changes made go-to-market our the against enterprise,

revenue quarter-over-quarter traction from perspective. seeing We are a

custom saw we which demand quarter-over-quarter as growth with our stronger product, Additionally, saw well.

mentioned initial the we’re drive and future. last these working but steps urgency results As thoughtfully with into will quarter, we

grow, saw see the strong used continue subscription Our as for demand offering our video improved in capitalize to and video we e-commerce clients image our renewals third perform, high We content trends. only asset in saw our and across business our quarter, we results on all continues strength business of Not types. also our to plans. to that

downloads active saw healthy all monthly growth. Additionally, usage, download, average per revenue and

a also would operational few highlight initiatives and the quarter. I accomplishments notable from to like

Notably, the advertising including our campaign has in many mentioned the the we’ve the the and is leading and and Interactive International Telly These target to Shutterstock" awards it’s Stock, our it’s The in and awards influencing campaign, WX our won driving U.S., UK, awards platform. As it previously, by is DMAD sentiment Arts. and awards organizations from of generating audience. evolved traffic positive Not driving Visual Academy "It’s the has the and among demonstrate conversations marketing

technological a improvements consolidate made customer number and have We platforms our of that enhance our experience.

our For sign-on this the self-service websites. Shutterstock for on time download footage, offerings improvements, image, and as platform, all we customers PremiumBeat search now front-end speed our a one get across well. improved music platform, first to ever, offer with and made plan on music single enterprise the PremiumBeat tracks platform On and are

delivered introduced Smart Brief a their the improve briefing video available More new custom, clips, and and the we our million XXth. music we collection, approved which has As brands to guided XXX experience made images, streamlined of downloads platform, September And the ended process. than approximately nine quality and X and Shutterstock contributors our million grown finally, XXth. months video during the part as XXX of across tracks million paid in of XX September of a to approximately clips speed million than more images all

platform. the results are to be Shutterstock is and and more innovative of confident of these proud strength we work there remain in dynamic done, While

are customers delivering long-term for shareholders. laser value term and focused and for increased the the our our We both on and short executing

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

Steve Ciardiello

X%. by revenue approximately XXXX for currency us in quarter third compared was Stan, revenue joining Thank growth I’d saying today. X%, to you, prior-year thank movements, like everyone growth and was to impact the third as and foreign excluding you, the the quarter start of of

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

our X% per basis, downloads in on key per the third of remained download some $X.XX at a Revenue quarter, download. to Reviewing constant by $XX.X metrics, grew paid year-over-year million.

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

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

mentioned, in in customer infrastructure. acquisition and investment and our attributed previously increased were the additional operating marketing income costs declines and Jon to EBITDA adjusted As

of XXXX, GAAP representing of net quarter in net income third from decrease or was or diluted $XX.X a XXXX. a $X.X $XX.X was the share, increased diluted third share per $X.XX as per income net quarter XXXX, $X.XX XX% third to the compared the million or net diluted share million income $X.XX in decrease $X.X per in Adjusted GAAP diluted million year-over-year. of share or million or per quarter for $X.XX income

quarter general third administrative As compare decline expenses, increased change amounts Total by I XXXX X%. compensation stock-based development discuss of will to direct slight in expenses partially product will and cost the operating exclude and and and expense. driven was with XXXX expenses. percentages revenue a marketing by expenses, offset increased of operating This following expenses, the

The revenues, of rate remains contributor X.X%. royalties, includes approximately of contributor revenue. increased at royalty cost XX% Our unchanged which

revenues in of costs quarter marketing to of XX% marketing to quarter of in of third in XX% expenses as and XXXX. XX% third primarily percentage in a the As increased Sales due and compared was XXXX. XXXX, revenue, expense in cost Sales performance increased marketing. XX% our of the XXXX, of revenue XX% to was compared revenues

driven by in primarily a technology software and reduction development costs. decreased Product $X.X costs million, other

percentage of and a X% development in were both revenue, As XXXX XXXX. product costs

from capitalized the product quarter, increased XX% development, $X.X of million related the G&A addition, costs labor Company third quarter expense during to XXXX. the In of

XX% decreased revenue, XXXX. from quarter And were second of percentage million as quarter the X% or sequentially, a in G&A As of expenses G&A compared XX% third expenses XXXX. of with $X the

as of benefit discrete a tax certain Cash $X.X the We million taxes the income benefit XXXX. quarter paid compared rate $X.X income in quarter our tax of of recording X.X%. had benefits. the timing year. in tax negligible to and effective compared an quarterly benefit $X.X is third income of The is due year-to-date in million were million to basis, tax prior tax an to On

September sheet, balance and of and as balance deferred was XX% our consistent to $XXX.X our On our to revenue of previous was with enterprise revenue our our XX% million XXXX channel. Approximately XX, e-commerce quarters. deferred channel relates

strong maintain to capital position. a continue working We positive

cash Our cash was equivalents approximately and million. $XXX balance

which in operations is quarter, from third XXXX. $XX.X to third For flow million, $XX.X million the the cash comparable was quarter the of net

of business for and quarter, the of third cash increase change This are our in $XX.X million, that from believe the continually Additionally, our in driven manage the by the primarily million CapEx reasonable are XXXX. was growth. We of was a an and we to flow managing free levels increase expenditures. size quarter $X.X capital

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

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

communicated And are guidance, which finally, we was last reaffirming our quarter.

of between the million to expenditures million, $XX tax million, of teens. operations to full-year million, $XX including as non-cash expectations $XX and $XXX be XXXX capital labor for Our follows. rate approximately approximately $XX expense to of adjusted $XXX continue the to effective EBITDA $XX equity-based million, from million, in income Revenue million million $XXX of of capitalized compensation an

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

Operator

question first with [Operator Squali Youssef Instructions] Our SunTrust. comes from

is open. line Your

Nate Mitchell

of million. full-year me. guidance as from as for the growth reported to is a currently This us X% implies wide for Full-year Mitchell million revenue in great. XQ? year-over-year EBITDA $XX from help range well XQ Two Youssef. from negative XQ questions Okay, Can $XX Nate context understand XX% on the to you plus guidance

how can free XXXX, top and trajectory margin expect on to how the trajectory. you we for thinking then be fair XQ. enterprise? out you versus the then e-commerce And And comment to looking should about That’s line growth

XXXX. e-commerce. as If walk there. the on the remarks color hanging through versus key or you. fruit leverage us Thank as it growth could drivers If would qualitative Any be enterprise for you comment from helpful and well lowest you very quantitative call prepared Stan, could your

Steve Ciardiello

this Steve. it question address as is Okay. to full-year relates first Hi, I’ll Nate, your first guidance.

as updated you So we second the put was the we when top what guidance see components widened there. at out quarter, part in the and historically line the that revenue our from of would end of were range

initiatives when because of quite they we’re That’s And of of sales term long see we to when – some those in quite were results term that so weren’t the the term going going that’s longer that, are initiatives. weren’t see the of enterprise we going some – that to sure channel fact from results cycle, we a part sales the And that. longer due to sure of the materialize. were when was to and the

as to EBITDA target to XXXX So would it both revenue on the still and the I fall say is what relates we’re within range.

Jon Oringer

versus And sure on details Oringer. can for Thanks could as provide the this question. Nate, e-commerce and well. I some your Stan join enterprise Jon growth, is I’m

can So about on that you year-over-year new see currency the delivering, e-commerce is platform front, neutral XX%. growing our

but opportunity that. continue So we believe going there’s to a more build to there, lot we’re

– of over those our past further happened the as that’s platform, the growth of do to head lot spend of from also a to have buy items our and we that There’s continues can the that all a that resources What’s have on is, optimization efficiency traffic there. quarter all as a increase is list we that roadmap to growth we more efforts continue and of we interesting toward from platform. of and marketing migration believe kind we press shifted and on there path to get long

and We’re of ways new more efficient. learning new to make that kind

you the in? On front, if want maybe enterprise jump to Stan,

Stan Pavlovsky

Sure.

When have large on we this SMB. the about last call. customers and sales little we about talked So our you enterprise bit enterprise we a channel, think about this have

more lot a being SMB. are thinking We enterprise about from we’re in thoughtful how differently

and reorganizing the tools the investment SMB the the sort that’s marketing investing looking rebuild to pipeline as in as of segment, well to of necessary for consist So team in pipeline. to develop we’re going both

all the going we’re how higher as to are, go you that things XXXX. start to for the our products about restructuring strategy needs, so going into we so sort a we’re can when a we organization goal need plan, we’re sales to these These bullish XXXX the comp work and be to and their our clients and are into go-to-market solution enterprise going we’re of low-hanging address that that to doing Our fruits team see of and offer. touch ask serve the how XXXX in that basis now we’re fruit,

Jon Oringer

of this still it. that a starting the and technology to couple interesting disruptive in we platform If is just that custom, and add both evolve more I we’ve already we and there can On product believe enterprise do onto and are again. And could some learn our we’re things, editorial product our opportunities really we market. bringing as built Jon

of principles some can over On as enterprise side apply out well. the e-commerce side, we build of to channel that the those kind and same

XXXX. we’re So of excited the for about rest that XXXX and also into

Nate Mitchell

thank Great, you.

Operator

comes next question from Our Jefferies. Brent with Thill

Your line is open.

Alex Giaimo

maybe we CFO lastly, search, there? private Thanks. And expectations the just Alex questions thing. color isn’t of? is company the around been for then that comments Is the provide you more This at made significant be fun guys. arise? timing Would Thanks the consider Summit a of of any thinking the your fact Brent. being for going Jon, can in always around lot you future most getting some Forbes the just public the that if should shift regarding opportunity aware we’ve there you on if recently around

Jon Oringer

kind in and of Yes, that Conference, Summit, and interesting Forbes during I sure. It that of Detroit everyone great was for that was was XX a these difference panel with the questions were company. a thinking going fielding entrepreneurs there kind public being being panel about that with XX about all after public. from between And talked what company the private Under

our of years, are to being everything public what with that we us. and kind told company suits and but the with structure was over the we both, is have, of with built what continue And cons them believe, a past and I I ultimately, there company for sheet being strongest kind we that public the opportunities believe we’ve have, the balance XX to pros

of I lot audience. of through with And some that about a that went so pitfalls going IPO details into of kind process of the

Again, Conference. it XX a was Under XX

strong sheet. to toward product, and were your some were eye the on looking keeping about on future what there with as that do a So talked customer their keeping to really company. eye your balance young there keeping entrepreneurs the I the pretty

at we we company, years. much how operated a If look past operated as we as over to of generate you our on our focus revenue. public this the XX how cash, as EBITDA And company kind continue we’ve

on We here, at have products, debt and times make no have really new in a a invest we to lot our all lot powder new use balance strong we cash that dry balance of investments have a team. of There’s sheet. a can to we services, strong

So pretty about we’re excited that. of all

the along of On we’re your as meeting. search, we’re we’re some the far about and second CFO far candidates question, excited really really as

news have as we we’ll soon in the we’ll you. can. you and as Thank that updating possibly So on be future

Alex Giaimo

maybe said the year. just more Adobe quickly. one was that XX% Jon, side about Thanks, their stock from our growing in recently business

curious And they’re on some recently would the maybe to share? helpful. just So, overall differently doing if guys. anything gain then be just competitive Thanks broader environment comments

Jon Oringer

is of I from, you’d On I sure. environment, space comes tell I’ve company I comment. Look, this, best our as couple this the about have before. quarters. no past in the all talked them, positioned you we to the talked how believe I opportunity account ask but And as the about analysts far to Adobe, for XX% front competitive that mean, we’re what think Yes, to where over I in can’t take growth advantage we’ve of have idea our I can really, specifically of us. of they this

still have the we track fact generating our those XX fact complicated we’re profit code I we we our quarter of migration, go of you’ll it through go go years, those constantly, single of a pushing sheet code to to the need that clean changes our go competition our changes back past on that you really as week, balance to I want. every we’re comes product site back customers back ship team, have, for the can to to what release every we that product. And go watch I technical when it XX are ahead to exactly all record I and see of our years all back even over the

space you’ll there about the some are much opportunity. we are. competitive our and this you And but public, look, can So them private, as the as over from far take of are – competitors, over, things best company our as said positioned advantage of we providing I’ve of are them nobody environment, what believe I some is than to hear detail

Alex Giaimo

Thanks, Jon.

Operator

Thank you. with [Operator Lloyd Deutsche Instructions] Walmsley from Our next question comes Bank.

line open. is Your

Seth Gilbert

should thanks two for at second talk a on to Hey, I any, lot hear you of you also, be talk I to be there. you. the sales on your One to of And for much This this mentioned about potential significant wanted a Seth of thoughts you powder. authorization, about re-purchases, question, if question. are comments to curious on made. re-purchase M&A going is kind you shares when What Thank think cost? just as sales full we of is Lloyd. that reorganization. and still you force expect just then amount how just up share – follow have the Can in strength? you for and a dry productivity, also have the Can and left would what the loss

Stan Pavlovsky

Yes.

we the to as understand enterprise start it and of turn the that’s to on any M&A, and – required but on absolutely Jon then part understand reorganization. I the question I’ll some give sales Now, over color ramp with

plans XXXX. that absolutely – to we for for XXXX we’re are our guidance so build And for into and going

see So that. you’ll definitely

have short EBITDA a term. As a resources look the on see taken we having cost, impact the that far restructure good the significant incremental or sales long in we term as don’t and the at we��ve think I

Jon Oringer

join capital bit On I’ll little about jump in to a and maybe allocation, that, and Steve, you talk want if after.

invest regularly and cash of at to strong a our look the we towards always position, I to a M&A, first. have we will that we position, also know continue business we in there look at a in kind to. look there, want We I look think everyone We that of businesses know strong when adjacent cash had our space, we’ve we out to look is position. our pipeline spaces cash

So we those as well. talk to businesses

make look the services other you can integrate customers platform kind sure platform and building, they end-to-end workflow need. at getting need our of we are products that When into are there and and that we’re content the services that that to

of the for opens this So platform. in opportunity a us up the in make business to new way, platform and build kind the in investments further we’ve

if either we we’re plan return to way that. figure to as is done a We to store the past. it the continue do efficient extra we’ve or forever. capital look looking said, there, so there most not out being do to to That just back shareholders And buyback it in dividend via to

Steve Ciardiello

with to looked Jon, and to of would I return sure maximize conversations and ultimately buyback you’ve mentioned, And Board what add do our basis all the shareholders. the at Jon history, we that, and special team dividend, Seth, we make M&A. the just the On right, are regular which the to executive above a if have utilized

Operator

have with Thank Squali our question, SunTrust. next Youssef from you. a And follow-up we

Your line is open.

Nate Mitchell

guys, Nate Hi is again. this

negative versus comment rest mid-single double geo, Can the digit we growth in saw for just America by hopping in. world. digits the performance a back North Just and of you low in on maybe the Europe

that? what maybe within that? change do you it are control competitive seeing in America that’s Thanks. related Shutterstock’s driving what’s to And Is North So think? you

Steve Ciardiello

is business the this that see driving client side can particular say the size on third variability is quarter-to-quarter, what base deals in in, is would particular due that Steve. the that trend of for of some nothing but or Nate, the the or lot geo’s segment the there is, that with I quarter. some they’re is house, of – you coming Hey and of the A enterprise to

Jon Oringer

back at was the years. have of geography, opportunity big here things past some Shutterstock debt a couple unraveled On over of of we tech holding we international and one out have us that of the the

geography the so and our the of on to specific optimize as based on is plan well. lot and site see to opportunity the there’s product some new platform by to think a start there into on continue of we changes future you’ll part So geographies

Nate Mitchell

it. you. Thank Got

Operator

you. Ladies this conference time. Thank further no for call. showing you concludes and And currently this questions today’s I’m gentlemen, Thank at participating.

You may disconnect. now

Shutterstock (SSTK) 5 Nov 192019 Q3 Earnings call transcript