06 Nov 2015 Shutterstock Shares Slightly Up on Q3 Earnings Rise of 28%
Shutterstock has reported 28% growth for the third quarter of 2015, with enterprise and video being the main drivers of growth.
Contributor royalties as a percentage of revenue remain stable at 29% while the paying user base expanded to 1.4 million customers.
Although the company reports no meaningful impact from Adobe on revenue with both downloads and revenue per download up, they did acknowledge an increase in advertising costs from new competitors bidding up keyword prices.
The full report is available here, but these are the highlights:
- Third quarter revenue increased 28% as compared to the third quarter of 2014 to $107.3 million.
- Paid downloads increased 22% and revenue per download increased 4%
- User base expanded to approximately 1.4 million customers
- Contributor royalties were stable at 29% of total revenue in Q3
- Adjusted EBITDA in the third quarter increased 11% to $19.6 million.
- Image collection expanded 49% to 63.7 million images and video collection expanded 60% to 3.3 million video clips
- The board approved a $100M share repurchase program
Laying to bed recent rumours that Shutterstock may be planning to acquire traditional stock agency Corbis, CEO Jon Oringer said in response to a question about possible future acquisitions that the company was only interested in acquisitions that contributed to growth and that were forward looking. Both factors rule out Corbis as an acquisition target.
Video and enterprise contributed most to growth, with the enterprise customer base up 50% from Q3 last year. Oringer said only 2% of the customer base has converted to enterprise, leaving a lot more room for growth. He also cited exclusive distribution partnerships like that with Red Bull Media House starting in 2016 as key for growing the video business.
New acquisitions PremiumBeats and Rex Features accounted for roughly 3% of growth for the quarter. Shutterstock said it’s too early to evaluate the impact of the music offer, and that the entrance to editorial market is very valuable to them. Again, exclusive content deals like that with Penske Media earlier this year were also mentioned as very important to enforce exclusive content.
Shutterstock’s earnings don’t yet show any major impact from Adobe’s entry to the market. However, they reported a 30% rise in marketing expenses citing increased “keyword prices” in their online advertising as one of the main reasons. This is no doubt completely caused by the $45B Adobe out-spending the $1.2B Shutterstock on Adwords.
Impacts of currency were mentioned frequently by new CFO Steve Berns on the earnings call, keen to avoid the experience of the previous quarter where currency fluctuations caused the company to miss revenue guidance and caused – along with other factors – a 30% drop in share price. Berns said that 70% of the company’s revenue is generated from customers outside the US, but that only 30% of that was affected by currency fluctuations –mostly the Euro and the British pound.
They reported strong responses in customer growth and retention from switching from daily to monthly download limits and the new 350-image subscription introduced this quarter. Oringer was keen to emphasize during the questions that testing these prices and products was not in reaction to competitive pressure, but that Shutterstock has been testing prices continually for 13 years.
Last, they’ve generated $14.8M in free cash flow this quarter, finishing with $282M in cash. As their capital objectives are still focused in investing in the company and in external opportunities, their positive cash balance and sustained operating momentum lead them to start a program to repurchase shares for a total of $100M. The pace of the program will be determined by market opportunities and results from their strategic initiatives.
Shutterstock’s shares closed at $33.23 up from $27.99 at the previous day’s close.