SSTK - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Q3 2020 Shutterstock, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. And after the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] I would like to hand the conference over to Chris Suh, Vice President, Investor Relations and Corporate Development. sir. ahead, go Please

Chris Suh

and for everyone. earnings Shutterstock James joining call. you us today third good you, Thank morning, for Thank quarter XXXX

and financial and will the margins of impact our the business, Joining success Chief you limitation, could business, will Financial Stan the is our information forward-looking forecast. Please strategy Jarrod discussion our effects the product targets. existing trends statements, investments of during Officer and performance materially without today results Officer. Actual long-term growth, some me of our on in impact offerings, Chief of long-term our our Yahes, of and that Pavlovsky, future and our from note differ COVID-XX or hear new our future our consist today Executive profitability, our including

of net non-GAAP and adjusted constant on the Reconciliations EBITDA Investor found of tables For refer our more press including be discussions comparable with that our our free including measures statements revenue reports adjusted to in materially a which EBITDA on and financial our XX-Q, XX-Q important factors for release of by we to from website. and Relations GAAP the risk and discussing today, non-GAAP can measure posted with most XX-K press results most financial directly margin, income, in our factors these forward-looking the today’s time-to-time, channel may make and certain measures the release including flow. discussed cash in SEC filed from included we on the information, We'll file section to are today’s could differ recently please annual be adjusted the distribution any growth, currency cause billings basis, call. risk

information over call. turn brief Stan. on this contains materials that supporting now the our to And to I'll the for posted that call today's we website refer at please Finally, time,

Stan Pavlovsky

for you earnings everyone. And Good Chris. joining thank call. quarter Shutterstock's Thanks, morning third

half quarter X% which of year-on-your growth, year-on-year focused growth. of X%. our by subscription each returned constant which in or regions, offering. Revenue Europe with roughly up To total growth representing all revenue, driven revenue the of world was QX was on Shutterstock particularly a from last We represented product. a of across our on to America, were rest growth year, revenue across North especially This regions, saw basis. on the North grow product revenue innovating X%, and are continue of growth very America up we to currency $XXX million, in these smeller X%

response by smaller For with our DIY subscription subscription To help include month so into that prosumers for and of time example, on are into working the save editing in-house a we video the our model, audience. a can we video made subscriptions, success creatives, and set as free subscriptions to work focus allotments $XX pre-edited marketer content Through broader audience, our expedite with on process, ease to with to low footage our rolled five in licenses as the quality we've content out professional month. smaller accessible low-cost per of per image the their editing the us clips storytelling. audience and users -- including

audience strong is our leading innovation we revenue the a to are we per annualized these that quarter for also last on. our The is driving for accretive an An to customer. with attracting basis, addition, stock believe we introduced subscription new new against results KPIs $XX.XX In subscription will products monthly music month product and we of Shutterstock. in launched per average October, whole PremiumBeat licenses allotment be first five

growth of each we results, exceptionally few subscription quarter. our While Jared we're this and a were metrics do strong minutes. pleased the quarter pace on in more with and into KPI will go continue detail metrics will not every this our believe

from overall to attention our turning product strategy. Now innovation

We fresh and continue spend content, I'd progress to focus insights relevant drive time, the data and some enterprise innovation areas outlined and Today, to innovation, on make workflow against performance. strategic that previously, in workflow like I've Shutterstock's to particularly channel. three

customers innovation and the to value. workflow a our the In driving On we enterprise refine started third to of customer third front, vision quarter, and work groundwork began a we number the customer the of broader quarter, for to in beta test establish experience. with inspiration

experience discoverability. capabilities, access and to bulk including such improved and and enterprise self-serve new introduces Our downloads workflows multi-asset actions, as licensing

We is launch of customer's our higher Workspaces, collaborative improve allow and enterprise. content to creative us collaborative workflow strategy drive to businesses piece enabling to of by ideation also teams will our the workspaces which application. on-platform process and completed across discovery small medium from beta a core utility

Video is clips Shutterstock editorial to to in with XX XXX,XXX enables news, video recently exciting Studios entertainment, enterprise, launch Editorial have In containing fashion, market image complimentary us and workflow customer the we will unique needs. go stock generated services beyond catalog address custom new and sports to and over Editorial highly Video At addition across Studios. more provide to which content our project archive images. the million Shutterstock to innovating launch of brought live products with than user to two of

XX% QX from against to moving on from EBITDA strategic Now XX% progress and QX. adjusted which up XX% up discussing margin in the our our $XX million, objectives, last a was year margin in EBITDA initiatives from represents

reflect margins of our improving EBITDA strong efficiency Our content, the efforts. marketing efforts at and technology our

some we margin the XXXX, we More specifically requisite our and in business. growth. We of rest are, and over XXXX number investments which we a areas to make quarters, as towards invest however, the of going we look invest growth while to continue compression several plan have for in next anticipate to for do

invest aggressively in includes drive both We platform technology. our offering, which in headcount to growth and solutions continue to expansion sales

expand last to as capital area secure to higher markets out customers, drive and highly as usage and new customer a higher new attractive segments given and to to see redeploy laid continue engagement revenue and We opportunity the platform solutions retention. quarter

team, in marketing, was Officer. as building not product that the thrilled the Chief Human a to in but month Shutterstock just brings Resources environment. and a continue high-performing Sara changing also I solutions sales, earlier platform also invest optimizing expanding joined of in Birmingham in to technology. and organizations She announce in people, in experience also wealth We fast

Shutterstock Before the this discuss to impressive I'll call turning wanted call financial, Jarrod. our performance to over the the quarter. for And thank to turn now, I to team over Jarrod

Jarrod Yahes

Growth we growth good our subscription third success and the expected, everyone. channel. Thank Shutterstock return earlier realized QX a from by on the X%, our quarter. was by revenues channel, year material grew which previously constant and driven grew last continued currency over led revenue a X% enterprise In than the X% basis. you, our momentum e-commerce quarter, the uptick past fastest and growth offerings representing of year-on-year, or the Stan to morning, revenue in rate

also is impact. North are materially, to regions, to a X% bookings improved saw Gross quarter, We In tracking Our are our believe API, And in this America, approximately now geographic were our we're saw rest of last return from million our and to XXXX. X% to We strength first of enterprise product we X% of X% in $XX or quarter. Asia we've and X%. increase perspective, both acceleration the a million. the making. X% we million. and channel $X.X margins the it's in was investments growth XX.X%, $XX innovating improvement we're enterprise particular of still to starting deferred indicative progress up for positive down grew having with quarter platform in recognize revenue all offerings of the sales By revenue organization, our $XX the world, changes see sequential basis which reinvigorating implemented an this growth year-on-year the Europe across also down From including clear up to return to revenues, part quarter XXX to early revenue. channel, channel points revenue grew that the enterprise further suite in making which improvements deferred million.

is While X.X%, to utilization and is pandemic. the which strong, of the the note reduction part by were gross margins driven the gross investors, in due and margin would downloads paid in short-term for the partially improvement I of nature

margins or As XX% ROI these we marketing compared decline a Consistent gross margin gross of quarter, metrics become and revenue to adhered of acquisition. XXXX. at basis. levels level expect more second of this expect the utilization marketing we've our from in customer on the XX% Sales efficient to tight not and to normalizes, as was and third quarter investors go-forward should with expense

half were back with new was product sequential increase of to development, for branding there sales the on X% marketing X% accelerating QX costs, year a marketing. In of consistent in from costs costs. down expected, we're reductions contractor subscription and in spend third-party third performance targeted the software costs As and and marketing seeing from our plan the revenue, products our Product XXXX. QX, quarter in employee development of in

in enhance products the our to and and expect existing invest functionality continue to tools We products new developing of and internal technologies.

approximated G&A third quarter down third the increases awards. met performance So, Absent expense, performance-based in XX% development in included of I with being from the we would expenses quarter of associated the have second which with see expense this would expenses costs those were million the XX% going of G&A of quarter. $X.X in revenue, G&A to of in where anticipate our G&A stock more revenue, forward. is expect XX% product revenue line awards, in XXXX. criteria for now

reductions to respect margin scales. margins from in XXXX. We our to process in We as to the XX% long-term decisions with G&A third to vendor of leverage operating believe quarter to these and quarter This an discipline towards a exceptional us enable cost will are EBITDA was continuing Adjusted increased accelerating reserve perspective. business efforts compared create XX% automation.

However, Shutterstock, please come. $XX.X was the compared research August or including $XXX or significantly quarters and diluted per we $X.XX relations was and shareholder platform expanding pressure of of in and $XX.X are increasing offering margins per objectives share. the million several million, GAAP million universe coverage. million, $X.XX a investments XXXX. income investor net XX, completed the income $X.XX share equity the share analyst for base, products expectation net to share earnings third we quarters and marketed the common the float $XX.X our note of public our adjusted making come, to in On Adjusted in broadening with achieved diluted and to was that as will this per diluted utilization higher quarter stock per that in

pleased long-term our vision we on look institutional for working them with research execute shareholder We welcome and at as to to investors our creating analysts Shutterstock. forward and new are value closely,

in we quarter, XX, the balance sheet of and operating offset cash, quarterly addition $XXX million and our billion have partially flows. million the At of includes to paid content the from million of $X flows, increase at Turning quarterly $XX dividend offering, net September. cash proceeds million XXXX. stock million of cash $XX cash $XXX of cash June acquisitions CapEx by to from in million and The $X of end $XX up the in

Our $X.X positive balance of is to periods. increase to development change businesses $XXX.X of deferred growth bookings XX, a revenue a $XXX.X in an back deferred million from getting million increase at result enterprise revenue due this our e-commerce in increased prior million. to June and both The is as XXXX, and or

by revenue during Subscriber metrics. the by were XX% bright Turning total at to increased Shutterstock revenue to of percentage for key increased X.X% customer XXX,XXX increased of as $XX.X year-over-year per XX% revenue our from QX, end $XXX. from operating to revenue to in increased the XXXX. a million and third of XXXX, subscriber There quarter. XXX,XXX Subscribers $XX.X Average a particular million the XX%. spot to quarter

in revenue in to While by were utilization these to due a will in pipeline discussed, Paid the download. each in download the believe are million do pleased This subscription we with $X.XX not and product innovation we to down continue this X% $XX.X trends pace be downloads as and activity Stan partially continue investing are soft to aggressively growth and truly of quarter. subscription per pandemic. reduction per increasing to $X.XX related resulted every and

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

XXXX. next of will capital payout December of $X.XX quarterly terms In XX, per dividend on we our share allocation,

the quarterly are as number As dividend the grow dividend acquisitions plan strategy, of and end fourth growth quarter respect we'll inline optimistic bolt-ons the announcements that technology, opportunities to to front. of talent earnings a of with have previously some our for key in we're stated, before as on smaller the medium we our sized to M&A well seeing year release. With revisit plan and with earnings

our results, XXXX expect we full fourth investors guidance through While we provide wanted fourth with expect the provide to to on earnings year to what color quarter quarter.

revenue Firstly, demand to quarter, pandemic. material with and the growth due patterns we assuming utilization consistent third no change expect the be to in

utilization pleased but the are growth momentum the growth, experienced are back until gets X% and positive we increases the to increased we'll quarter reinvesting as to and margin QX we with the as to some for pressure industry levels. of X% cautious continue is encouraging, margins we've be growth XXXX. margins, and the compared in in return From also EBITDA fourth to as will margin revenue our sales perspective, we we be in previously EBITDA be the to quarter return While to expect evaluating in continue current expect both QX XX%, to Expense we to an experienced. TAM as growth, well gross forecasted XXXX for approximately marketing, year-to-date our prospects upside our focused

We the to return are management revenue with growth, QX margins. as team with our a the with terms results, pleased exceptional in both of combined --

best to the we'd As like for continue joining we've in come. your appreciate upside the today. some we to that growth open line Operator, margin us previously, to for much questions. time. reinvest to Shutterstock you Thank of to plan for experienced very We years any stated now position

Operator

the first Securities. from Youssef line question Instructions] Squali Truist please. [Operator And ahead, from Go our comes of

open. is line Your

Youssef Squali

Good Thank much. and you morning very there. congrats. cost story containment guys Pretty impressive Great.

just and you're First around that whole question there talked little the the you just can but enterprise you on and was the QX, are because a of bit? -- that of rev I distributor e-commerce trends you in -- the of XX% improvement just gross not reported. and -- to guys from the and pretty you doing different terms to seems October, a of guidance of different substantially the improvement cost components of can in Jarrod you QX pandemic, margin, gross us help think your the of posts margin the lower just If what I to big sorry XX% you're kind seeing margin things. seeing other is on utilization contributors just parse impact and are to I'm seems guess gross surprise. be unpack out the the slew be maybe sustainability both EBITDA, share below other side about things Maybe the

go there, So, over Thanks. just again, you super be take if maybe the puts would can helpful. and

Stan Pavlovsky

Hi, Youssef. piece the QX then margins. gross touch sort let so This I'll of is about Stan. Jarrod the on much. Thanks talk and

the QX that touch heading real quarter, the the let into momentum gross in in Jarrod see -- quick, margin around the piece. just momentum of on which in strength improve continue for I'll and So, into is continued QX, enterprise. performance margin and the the momentum the e-commerce -- in we to giving we continued saw gross sort terms of that hence, we're QX guidance

Jarrod Yahes

Youssef, Sure. margins. of think We about I gross the gross are And why of reasons in And a the feel margins. right number good good feel -- trajectory the there's about margins gross trending the direction. we

think talked we about last our quarter a content process. ingestion I lot

offshore and to that AI than impact. process much positive a having doing we're think certainly job using content onshore ingestion people technology rather in our manage order in a better of I resources is

payout in And make an contributor having the time As to profile check impact think know, during I at to where this an royalties you as change to year. point did we a contributors. there's annual our the that's

paid the change in there's a downloads. significant also think impact from I

downloads, of quarter. to cost margin from sold impact the gone you the X.X% down down in paid meaningful If X% that a they've down X.X% to the in gross hence kind and have this of profile. track And of goods does terms

come think back we sustainable. gross they So, We margins will the don't that at are this level down. expect

We that We to as improves. next to will up think into fourth are tick paid is downloads start going happen confident the as year. well utilization in back as that quarter

really think quarters. to reverting be they of around you'll including margins of to they've we've a things interchange card to last of of in upside But levels. our where the these to think some the acceptance, work say number several we other the We keep the it on see edges gross of start that But number we're back experienced course working to reducing again, think fees as on reverse gross so, there's possible. margin doing suffice credit we cost at our as don't sustainable itself. a to historically over going things been will lowering stay they're and And

Youssef Squali

right. helpful. That's Thank All you.

Operator

Our comes & Needham line from please. Company. Brad Go the of next ahead, question with Erickson

Your line is open.

Brad Erickson

Thanks. Hi.

a Just couple.

recovery different your So, or you first demand what guess, the new performance subscription about are on you saw we either in there may channels where over for different is that customers? I marketing talked on curious have subscription faster messaging broad based quarter? existing acceleration. beyond just Just the anything or to any the channels, and in driven doing either shift

Stan Pavlovsky

Yeah.

So, I'll one. take this

One both is side of in as changes are with most the well the recently smaller big we've for introduced we've as that PremiumBeat. nature smaller image subscriptions then and footage businesses, on that made

how And we we so, a go-to-market. do our perspective, marketing differently audiences terms from address in of

well So, -- those that to how our use, lifetime as become emails customers of as of product. copy spend we subscribers subscribers with or the how once our the the we channels use, type we much day one customers to relative acquire communicate we either of they that value,

helpful. very that do we approach segmentation to been a customers. have So, these acquiring And has

are the overall, the growth you the to see subscriber. much of at can of how impact subscriptions relative relative subscriber accelerated look on growth overall in overall more subscriber that's to where our revenue revenue smaller kind having the you If growth

Brad Erickson

side rebound again. it. if and commerce was you just imagine advertising could, I helpful. then get came the fairly little the broad-based the Got we I just digital That's And there a on follow-up like But to to know of e-commerce more well. said things detail sub-sector bit business. curious back

Just curious Thanks. the outperformance that of type other in if categories of showed quarter. you can call any out improvement sort

Stan Pavlovsky

Yeah.

-- of sorts movements continue Day back-to-school, I QX for of of well combination sector you've to to other particularly as as around think, seen to as getting as companies what all we holiday, that their So, ready momentum push, back. to in that be well retail both around early well through were as as able things some did like, our Amazon's of Prime as started and come have spend categories sort see

be to in some as which this auto, e-commerce So, kind growth we such what the in pandemic. of travel continued continue do well. in small is softness little was the business of large segment. categories continued medium by some as the we -- more We But impacted acceleration back categories, bit some several to in quarter saw very and did I as see particularly would a that to say for of coming such see last growth categories

Brad Erickson

great. That's you. Thank it. Got

Operator

Instructions] And [Operator our Go ahead, Ron from Securities. of Josey next please. question line JMP comes the with

open. is line Your

Ron Josey

Great. quarter taking little talk to for Stan, question. wanted a about Thanks And subscriptions. and the I taking the more

Thank you also growth, buying price mentioned then in But those and who can talk here SMBs for might investing you just aggressively about little curious can understood more are that you. you're but helping if a the but mentioned be the platform curious the just profile and those also solutions subscriptions. plans, whatnot. I are broader talk And think about You about subscriptions? I'm We buying the and you subscriptions. past. lower how mentioned prosumers

Stan Pavlovsky

Yeah. Absolutely.

are most in today, So, subscriptions our e-commerce area. our of

both create the to to as subscription more solutions. invest, products, As and platform we we're enterprise, going well as continue in more

certain think customer they an that develop smaller of a we So, subscriptions for think about to today, they year sort or way sort content a the course sets that know of to to looking -- going the to content in the that. available are are projects is, available we a sort for subscriptions about and our They of are points. help that self-serve they make They subscriptions, do manager need that tied allotments lot needs today of When are capabilities. of of of over tailored not for them. investing way the we price it looking with are simple account different make we

I things as the on previously of talked well continue script that One about services. going a to as our evolve as backup, to with the we're subscriptions

imagine creative in will overall subscriptions. those can to as Shutterstock of you enterprise, a services develop, the for become So, our part types business Studios our continue of we example,

will at start those as available make We various will services types. part targeted of subscriptions to workflow be our audience and

channels. that when of we channel. subscription today of that's us be think So, has sort platform look going With is e-commerce this driven successful successful predominantly growth, for across our that area. something been But about an out solutions, channel a we're really to definitely our to really a all continues and

starting within new to introduce not products are the We just content. so channel,

including, We services and vision. computer channel including well, our datasets are editing, that launching as within leveraging

on we working well. for different developing actively are product that of as So, channel subscription sort

those However, subscriptions. today, as written, don't classify the most contracts those but at of we are way

lot our an three to we their more of come opportunity So, all profile how purchase the but tied subscriptions our behavior. of terms across sales to our a see customers that all will of how across of ultimately drive is [ph] do subscription channels, purchase evolve and channels. to And in

Ron Josey

great. That's you. Thank

Operator

with question ahead, please. Go Stifel. comes line Egbert the Our from of John next

open. Your line is

John Egbert

Great. for question. Congrats and taking on the thanks results, my

return about few gross just a a the to evolved last taken about months. you in growth. for past evolution that it revenue I talked in know sales wondering I'm recent looks fuel e-commerce you've strategy organization. your enterprise the using you was you've seems talk some to to and of reasonable enterprise you've that as sales example. the And the few the could So, curious if the like relative sales, steps segment significant had enterprise in timeline to I a improvement billings quarters. like for nice inflection

Stan Pavlovsky

was talking had of around from It's Absolutely. partnership for that quarters in our historically interesting, of changing a more segmenting approach much of strategic a about very been strategy I've how we customers. to with sort the enterprise several a approach, and started our transactional purely that team enterprise Yeah. realignment the

aligned the First objectives and brought to within who's larger relationships comp businesses had the And We focus of that foremost, around Elden, values, enterprise. one the aligning plan the creating amazing the on order a done biggest average team an new on is to Jamie CRO, impacts of we've itself. job.

We have an incredible talked sales operations launched team. as And the we sort services. to. We've we needed go-to-market new that and has some of products changed about

you offer we creative So, it's creative, it's what today, if just think and about workflow It's working. services not services. it's

need can customers scale. cost We this you do particularly at your drive we creative a solution when can that today do Our to global needs, in environment very that effectively.

enterprise, nicely focused business on as small is new So, segment we as entirely retention we're that it have and within enterprise et well across also but our medium us is and enterprise. finding a actually cetera, customers, we're also existing a media, as verticals, success it's business very including that growing agency customers seeing both of all -- of and well segment interesting, what part our team for is including of as

and strategic partnership results the I'm are a some organization is success. So, proud in. more the very what move team our is And transactional much of I that say would of think, bringing having it -- they to sort I organization of from a

John Egbert

Thanks. Great.

Operator

Truist Go from Our use ahead, please. with Squali the next Securities. of of Youssef line question comes

line Your is open.

Youssef Squali

follow-ups, I you. you a -- Thank on Stan on of have maybe just one couple the question. last for

of us area channel seems maybe time that's it some about renewed Can the that about on improvement guys launches, party guys the of -- and then But have You this going a self-serve first just And interest. that presentation little coming an that how time you. assets what some out for workflow in quite in think what's the as about that? not, to you some you you you around? in Can flush are you And guys area the in guys presently out and bit have potentially so of you data kind the talked like talked help different terms us for be will opportunity. products that for of How innovating now? anything micro-side, market capabilities, helpful. -- really data now. area there? I highlighted interest what's enterprise for are it of you of -- seeing kind differently Thank are guys with you

Stan Pavlovsky

Yeah.

So, want about as all differentiates I've what really of our for company I competitors, -- us successful, this be Youssef, the is of sales assets. where is believe as workflow talked need about data we many content before, as of to well combination as And to channels. the fact that our bring platform. an we through three of those all think Unlike of open we ourselves our

They we're ingest internally content we because leveraging, we example, available, So, when work in have that many safe manage vision we to have needs computer started is needs. for or for our internally. for either characteristics, partners how we look They solutions and for -- image customers those or example, needs. has you our certain platform content through solutions, make they services that brand when around recognition for example those platform work, with content how have of

So, when bring competing collaboration retention part content one to our be going where subscription that more a develop any products. and around is subscription going workflow, initial on of our we tool, about of we when services or think customers to engagement part as services, about to products. monetizing with that's about tool right, one share sort workspaces, to workflow we That's ideate, -- and allow their about of continue it's our collaborate, any seriousness we isn't like -- this providing us be how

be As we to start and more and that we recommendations performance, of data are across more leverage sales products party more our bring our more of and for part going subscription all for to channels. our those first

they So, But usage research really launch of as used, that of and the our let some sort customers. subscription vision bring is well some entirely while are know they're based just -- bringing become making right much quarters. we are what that the very these and have based serious upcoming on it's are and of as now a market investments beta as I've widely as computer provide The like these information from services that more we workflow with community to asked customers. an in we're and But types about wanted lot them. us we this available, more that to customers we're our our examples on numbers how area in just products impacting

Youssef Squali

Sounds good. Thank you. Thanks.

Operator

in are And Stan Pavlovsky. like to back at no call the CEO, turn further queue over there I'd time. questions to this

Stan Pavlovsky

Thank much. take my express you that our to to and that encouragement. excited everyone. for I I'd ahead, be we front ends for as that, of their again to our like gratitude the have we contributors customers, our our continue in support employees, so advantage to road opportunities say continue And us. with for call and and of Thanks today. so the

Operator

call. gentlemen, this and conference today's conclude does Ladies

You may now disconnect.

Shutterstock (SSTK) 27 Oct 202020 Q3 Earnings call transcript