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Press release from PR Newswire

Shutterstock Reports Third Quarter 2012 Financial Results

Thursday, November 15, 2012

Shutterstock Reports Third Quarter 2012 Financial Results16:11 EST Thursday, November 15, 2012-- Quarterly image downloads reach record of 18.7 million -- Collection exceeds 21 million images and video clips -- Third quarter revenue increased 36% from prior year -- Adjusted EBITDA of $10.3 millionNEW YORK, Nov. 15, 2012 /PRNewswire/ -- Shutterstock, Inc. (NYSE: SSTK) a leading global provider of commercial digital imagery, today announced financial results for the third quarter ended September 30, 2012. (Logo: http://photos.prnewswire.com/prnh/20120514/NY06418LOGO )"We are very pleased with our operating results in the third quarter and for 2012 to date," said CEO Jon Oringer. "We continue to see strong growth in both volume and revenue across all geographies and all of our product offerings." Operating MetricsThree Months Ended September 30, 20122011(in millions, except revenue per download)Number of paid downloads18.714.8Revenue per download$    2.26$    2.10Images in collection (end of period)21.716.2 RevenueRevenue for the third quarter was $42.3 million, a 36% increase from the third quarter of 2011.  The Company experienced growth in all product lines and in all major global territories.Net IncomeGAAP net income for the third quarter of 2012 was $8.7 million as compared to $5.7 million in the third quarter of 2011. GAAP net income available to common members for the third quarter of 2012 was $6.6 million or $0.31 per share as compared to $4.3 million or $0.20 per share in the third quarter of 2011. Non-GAAP net income for the third quarter of 2012 was $9.4 million as compared to $6.3 million in the third quarter of 2011. Non-GAAP net income excludes the after tax impact of non-cash equity based compensation expense.Adjusted EBITDAAdjusted EBITDA for the third quarter of 2012 was $10.3 million, as compared to $6.9 million in the third quarter of 2011.  CashThe Company's cash balance was $28.8 million at September 30, 2012 as compared to $14.1 million as of December 31, 2011.  The Company also had short-term debt of $12.0 million and no long-term debt as of September 30, 2012.  The Company generated $14.0 million of cash from operations in the third quarter of 2012 and $32.9 million of cash from operations in the first nine months of 2012.  Also, during the third quarter, the Company incurred planned capital expenditures related primarily to the purchase of computer servers and networking equipment, and to a lesser extent leasehold improvements, resulting in a cash outlay of approximately $0.6 million.   Cash outlays in this category for the first nine months of 2012 totaled $3.5 million. Free cash flow for the third quarter of 2012 was $13.4 million as compared to $8.3 million in the third quarter of 2011.On October 16, 2012, the Company completed its initial public offering that resulted in net proceeds to the Company of $81.8 million after deducting underwriting discounts and commissions.  Financial OutlookThe Company's current financial and operating expectations for the fourth quarter of 2012, full year 2012 and full year 2013 are as follows:Fourth Quarter 2012Revenue of $44 - $45 million Adjusted EBITDA of $9.0 - $9.5 million Non-cash equity-based compensation expense of approximately $8 million Effective and cash tax rate of 43% Fully diluted adjusted weighted average share count of approximately 34 million Full Year 2012Revenue of $164 - $166 million Adjusted EBITDA of $32.5 - $33.0 million Fully diluted adjusted weighted average share count of approximately 32 million Other Full Year 2012 AssumptionsAmortization of intangibles of approximately $0.3 million Depreciation of approximately $2.5 million Non-cash equity-based compensation expense of approximately $11 million Capital expenditures of approximately $5.0 million Full Year 2013We are increasing our expectations for revenue to $204 - $208 million We are increasing our expectations for adjusted EBITDA to $44 - $45 million Fully diluted share count of approximately 35.5 million Capital expenditures related to network servers and technology of approximately $5 million Capital expenditures for leasehold improvements related to a headquarters office expansion/relocation of approximately $6 million Earnings Teleconference InformationThe Company will discuss its third quarter 2012 financial results during a teleconference today, November 15, 2012, at 5:00 PM ET.  To participate, please call 800-706-7749 or 617-614-3474. Please use the conference ID:  3816 7173. For recorded conference replay starting at 6:00 p.m. ET on November 15, 2012 until November 29, 2012 please call 888-286-8010 or 617-801-6888. Please use the conference ID:  3780 8719.                     Non-GAAP Financial MeasuresShutterstock considers adjusted EBITDA, non-GAAP net income, and free cash flow to be important financial indicators of the Company's operational strength and the performance of its business. Shutterstock defines adjusted EBITDA as earnings adjusted for interest income/(expense), income taxes, depreciation, amortization and non-cash equity-based compensation; non-GAAP net income as net income excluding the after tax impact of non-cash equity based compensation expense; and free cash flow as cash provided by (used in) operating activities adjusted for capital expenditures and interest income/(expense). These figures are non-GAAP financial measures and should be considered in addition to results prepared in accordance with generally accepted accounting principles (GAAP), and should not be considered as a substitute for, or superior to, GAAP results. In addition, adjusted EBITDA, non-GAAP net income, and free cash flow should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions; accordingly, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies.A reconciliation of the differences between adjusted EBITDA, non-GAAP net income, and free cash flow, and the most comparable financial measure calculated and presented in accordance with GAAP, is presented under the heading "Reconciliation of Non-GAAP Financial Information to GAAP" immediately following the  Consolidated Statements of Operations included below. Historical Operating MetricsThree Months Ended9/30/1012/31/103/31/116/30/119/30/1112/31/113/31/126/30/129/30/12(in millions, except revenue per download)Number of paid downloads11.112.513.314.414.816.217.618.318.7Revenue per download$    1.89$    1.91$    1.92$    2.01$    2.10$    2.14$    2.13$    2.22$    2.26Images in our library (end of period)12.313.314.415.316.217.418.820.221.7Amortization of Intangible Assets and DepreciationIncluded in the accompanying financial results are expenses related to the amortization of intangible assets, as follows (in thousands):Three Months Ended September 30,Nine Months Ended September 30,2012201120122011Cost of revenue$                  8$               8$                 24$               24General and administrative5553163159   Total$                63$             61$               187$             183Included in the accompanying financial results are expenses related to depreciation, as follows (in thousands):Three Months Ended September 30,Nine Months Ended September 30,2012201120122011Cost of revenue$               401$           168$               984$             411General and administrative264181717439   Total$               665$           349$             1,701$             850Adjusted Weighted Average Shares ReconciliationThe following table presents a reconciliation of weighted average shares to adjusted weighted average shares. The adjusted shares give effect to our reorganization from a New York limited liability company to a Delaware corporation on October 5, 2012. The adjusted weighted average shares measure is similar to the expected weighted average shares measure post-reorganization and its sole purpose is for use in calculating adjusted EBITDA per share:Three Months Ended September 30,Nine Months Ended September 30, 2012201120122011Weighted average shares20,882,19121,380,17820,957,22221,678,381Incremental shares representing conversion of profits interest awards 541,305571,749545,893589,979Preferred interest shares6,960,7307,126,7266,985,7417,226,127Adjusted weighted average shares28,384,22629,078,65328,488,85529,494,487About ShutterstockShutterstock is a leading global provider of high-quality licensed photographs, vectors, illustrations and videos to businesses, marketing agencies and media organizations around the world. Headquartered in New York City, Shutterstock works closely with its growing contributor community of photographers, videographers, illustrators and designers to curate a global marketplace for royalty-free imagery. Shutterstock adds tens of thousands of rights-cleared images each week, and with more than 21 million images currently available, the Company recently surpassed 250 million image downloads. Shutterstock also owns Bigstock, a value-oriented stock agency that offers both credit and simple Pay As You Go purchase options.For more information, please visit http://www.shutterstock.com, and follow Shutterstock on Twitter or on Facebook.Safe Harbor ProvisionThe statements contained in this press release that are not purely historical are forward looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, including statements regarding the Company's expectations, predictions, beliefs, hopes, intentions or strategies regarding the future.  Forward looking statements include statements regarding the Company's business strategy, timing of, and plans for, the introduction of new products and enhancements, future sales, market growth and direction, competition, market share, revenue growth, operating margins and profitability.  All forward looking statements included in this document are based upon information available to the Company as of the date hereof.  Actual events or results could differ materially from those contained in the Company's current projections or forward-looking statements. It is routine for internal projections and expectations to change as the quarter progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which the Company bases its expectations may change prior to the end of the quarter. Although these expectations may change, the Company assumes no obligation to update any such forward looking statement, whether as a result of new information, future developments or otherwise.  Factors that could cause or contribute to such differences include the Company's inability to continue to attract customers and contributors to its online marketplace for commercial digital imagery; a decrease in repeat customer purchases; a reduction in customer spending; a decrease in contributor participation in the Company's marketplace; the Company's inability to evaluate its future prospects; competitive factors; the Company's inability to prevent the misuse of its imagery; assertions by third parties of infringement or other violations of intellectual property rights by the Company; the Company's inability to increase market awareness of the Company and its services; the Company's inability to increase the percentage of its revenues that come from larger companies; the Company's inability to effectively manage its growth; the Company's inability to continue expansion into international markets; failure to respond to technological changes or upgrade the Company's website and technology systems; failure to adequately protect the Company's intellectual property; general economic conditions worldwide; and other factors and risks discussed in the Company's Final Prospectus dated October 10, 2012 and other reports filed by the Company from time to time with the Securities and Exchange Commission.  Forward-looking statements in this release are made pursuant to the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. Shutterstock Images LLCConsolidated Balance Sheets(In Thousands)September 30, 2012December 31, 2011(Unaudited)ASSETSCurrent assets:Cash and cash equivalents$                  28,793$                 14,097Credit card receivables2,100964Accounts receivable, net1,377647Prepaid expenses and other current assets5,1511,554Deferred tax assets807644Due from related party-168Total current assets38,22818,074Property and equipment, net5,4023,844Intangibles, net1,0451,029Goodwill1,4231,423Deferred tax assets14658Other assets427427Total assets$                  46,671$                 24,855LIABILITIES, REDEEMABLE PREFERRED MEMBERS' INTEREST AND MEMBERS' DEFICITCurrent liabilities:Accounts payable$                    2,325$                   1,838Accrued expenses13,72810,875Contributor royalties payable6,7345,261Deferred revenue36,21428,451Term loan debt12,000Other liabilities9585Total current liabilities71,09646,510Other non-current liabilities5,4542,548Total liabilities76,55049,058Commitment and contingenciesRedeemable preferred members' interest27,67533,725Members' deficit:Common members' interest 5,6995,699Accumulated deficit(63,253)(63,627)Total members' deficit(57,554)(57,928)Total liabilities, redeemable preferred members' interest, and members' deficit$                  46,671$                 24,855 Shutterstock Images LLCConsolidated Statements of Operations(In thousands, except for share and per share information)UnauditedThree Months EndedNine Months EndedSeptember 30,September 30,2012201120122011Revenue$          42,260$         31,156$         120,459$           85,543Operating expenses:Cost of revenue16,20811,37346,31232,529Sales and marketing9,6338,49332,76022,329Product development3,9922,81111,0627,066General and administrative3,5362,53911,4306,836Total operating expenses33,36925,216101,56468,760Income from operations8,8915,94018,89516,783Other income / (expense), net(3)128Income before income taxes8,8885,94118,89716,791Provision for income taxes146253374715Net income$            8,742$           5,688$           18,523$           16,076Less:Preferred interest distributed2,2631,3136,0506,188Preferred interest discount accretion---4,058Undistributed earnings (loss) to participating members(77)109(1,419)(3,183)Net income available to common members$            6,556$           4,266$           13,892$            9,013Net income (loss) per basic share available to common members:  Distributed$             0.32$            0.18$              0.87$              0.86  Undistributed(0.01)0.02(0.20)(0.44)  Basic$             0.31$            0.20$              0.67$              0.42Net income (loss) per diluted share available to common members:  Distributed$             0.32$            0.18$              0.87$              0.86  Undistributed(0.01)0.02(0.20)(0.44)  Diluted$             0.31$            0.20$              0.67$              0.42Weighted average shares outstanding:Basic20,882,19121,380,17820,957,22221,678,381Diluted20,882,19121,380,17820,957,22221,678,381 Shutterstock Images LLCConsolidated Statements of Cash Flows(In thousands)(unaudited)Nine Months EndedSeptember 31,20122011CASH FLOWS FROM OPERATING ACTIVITIESNet income $18,523$16,076Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization 1,8881,033Deferred taxes (251)236Non-cash equity-based compensation 2,8271,390Bad debt reserve 131-Changes in operating assets and liabilities:Credit card receivable (1,136)(299)Accounts receivable (861)(349)Prepaid expenses and other current and non-current assets (1,066)(935)Due from member 168(37)Accounts payable and other liabilities 3,4293,229Contributors payable 1,4731,212Deferred revenue 7,7637,908Net cash provided by operating activities $32,888$29,464CASH FLOWS FROM INVESTING ACTIVITIESCapital expenditures (3,268)(2,742)Acquisition of patents (193)(25)Security deposit receipt 38-Net cash used in investing activities $ (3,423)$ (2,767)CASH FLOWS FROM FINANCING ACTIVITIES   Term loan facility 12,000-Payment of term loan fee(30)-Payment of deferred offering fees(2,539)-Members' distributions (24,200)(24,750)Net cash used in financing activities (14,769)(24,750)Net increase in cash and cash equivalents $14,696$  1,947Cash and cash equivalents?Beginning 14,0976,544Cash and cash equivalents?Ending $28,793$  8,491Supplemental Disclosure of Cash Information:Cash paid for:Income taxes $     300$  1,226Non-cash financing activities:Preferred members' interest accretion $         -$  4,058 Shutterstock Images LLCReconciliation of Non-GAAP Financial Information to GAAP(In thousands, except for share and per share information)UnauditedUnaudited Supplemental DataThe following information is not a financial measure under generally accepted accounting principles (GAAP). In addition, it should not be construed as an alternative to any other measures of performance determined in accordance with GAAP, or as an indicator of our operating performance, liquidity or cash flows generated by operating, investing and financing activities as there may be significant factors or trends that it fails to address. We present this financial information because we believe that it is helpful to some investors as one measure of our operations. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions; accordingly, its use can make it difficult to compare our results with our results from other reporting periods and with the results of other companies.Three Months EndedNine Months EndedSeptember 30,September 30,2012201120122011Net income in accordance with generally accepted accounting principles$        8,742$        5,688$     18,523$        16,076Add/(less):(a) Depreciation and amortization7284101,8881,033(b) Non-cash equity based compensation6705992,8271,390(c) Interest (income)/expense, net3(1)(2)(8)(d) Provision for income taxes146253374715Adjusted EBITDA (1)$     10,289$         6,949$    23,610$       19,206Adjusted EBITDA per diluted common share $         0.49$          0.33$        1.13$           0.89Adjusted EBITDA per diluted common share (2)$         0.36$          0.24$        0.83$           0.65Weighted average shares 20,882,19121,380,17820,957,22221,678,381Adjusted weighted average shares (2) 28,384,22629,078,65328,488,85529,494,487Three Months EndedNine Months EndedSeptember 30,September 30,2012201120122011Net income$       8,742$       5,688$     18,523$       16,076(a) Non-cash equity based compensation6705992,8271,390(b) Adjustment for the tax impact of certain Non-GAAP adjustments (11)(26)(56)(59)Non-GAAP net income$       9,401$       6,261$     21,294$       17,407Three Months EndedNine Months EndedSeptember 30,September 30,2012201120122011Net cash provided by operating activities$     13,966$      9,517$     32,888$       29,464Interest income/(expense), net(3)128Capital expenditures(597)(1,213)(3,461)(2,767)Free cash flow$     13,372$      8,303$     29,425$       26,689Adjusted EBITDA$     10,289$      6,949$     23,610$       19,206Add/(less):(a) Changes in operating assets and liabilities3,8412,7469,77010,729(b) Provision for income taxes(146)(253)(374)(715)(c) Deferred income taxes(96)74(251)236(d) Provision for doubtful accounts81-131-(e) Other (income)/expense, net(3)128Net cash provided by operating activities$     13,966$      9,517$     32,888$       29,464(1)  Earnings/(loss) before interest income/(expense), income taxes, depreciation, amortization, non-cash equity-based compensation and other non-cash charges.(2) The adjusted shares give effect to our reorganization from a New York limited company to a Delaware corporation and includes incremental shares for profit interest awards and preferred shares that are excluded from the weighted average shares.Media Contacts:Meagan KirkpatrickShutterstock, Inc.mkirkpatrick@shutterstock.com  Denise GarciaICRdenise.garcia@icrinc.com SOURCE Shutterstock, Inc.