Shutterstock has reported Q1 2016 revenue of $116.7 million up $19.1 million compared to Q1 2015. The growth is due mainly to new customers and increased activity by enterprise clients.
The average price per download during the quarter was $2.77, down from $2.87 in Q1 2015 and from $2.86 in Q4 2015. There were 41.2 million paid downloads for the quarter and 81 million still images and illustrations in the collection at the end of the quarter. In addition there were 4.2 million video clips in the library.
It is important to note that Q1 is normally a strong quarter and in Q1 2014 revenue was up 7% compared to Q4 2013. In Q1 2015 revenue was up 6.9% compared to the previous quarter. This quarter was up less than 1% (0.69%) compared to Q4 2015. They gave no specific guidance for revenue in Q2 2016 except to say, "we expect the second quarter to be the slowest quarter of the year, but with nice growth during the remaining portion of the year."
Royalties paid to contributors during the quarter were about 29% of total revenue, or approximately $33.8 million. Currently, there are over 100,000 contributors meaning that the average contributor earned $338 during the quarter.
Marketing expenses were about 22% of total revenue or $25.7 million.
Shutterstock also reported that 1.5 million customers have contributed to revenue in the past 12 months. Currently, the company has over 28,000 Enterprise customers up from over 24,000 in Q4 2015. These Enterprise customers represented over 25% of revenue for Q1 2015. The company has had an 80% growth in Enterprise customers since Q1 2015. In the past Shutterstock has indicated that about 10% of revenue comes from Video and Music, but an unknown percent of these video and music sales are made to Enterprise customers. Consequently, the proportion of revenue represented by the combination of Enterprise, Video and Music is unclear.
No information was provided for the Editoral segment of the business, but my estimate based on the figures reported in
Q4 2015 is a little over $2 million.
Chart
The chart below shows some of the trends in downloads, images in the collection and revenue growth since Q4 2013. Video downloads are not included in this calculation. (For earlier data going back to Q2 2011 see
here.) The "Rev/Image" row is "the average revenue per image in the collection." For this figure I divide total revenue by still images in the collection at the end of the quarter.
| |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
| |
2013 |
2014 |
2014 |
2014 |
2014 |
2015 |
2015 |
2015 |
2015 |
2016 |
| Downloads (millions) |
28 |
29.7 |
31.5 |
31.2 |
33.5 |
33.4 |
35.9 |
38.1 |
39.8 |
41.2 |
| Rev.per DL |
$2.43 |
$2.45 |
$2.52 |
$2.65 |
$2.68 |
$2.87 |
$2.85 |
$2.76 |
$2.86 |
$2.77 |
| Images in collection |
32.2 |
35.4 |
38.8 |
42.7 |
46.8 |
51.6 |
57.2 |
63.7 |
71.4 |
81.0 |
| |
|
|
|
|
|
|
|
|
|
|
| Total Rev. (millions) |
$68 |
$72.8 |
$80.2 |
$83.7 |
$91.2 |
$97.5 |
$104.4 |
$107.3 |
$115.9 |
$116.7 |
| |
|
|
|
|
|
|
|
|
|
|
| Rev/Image |
$2.10 |
$2.06 |
$2.07 |
$1.96 |
$1.95 |
$1.89 |
$1.83 |
$1.68 |
$1.62 |
$1.44 |
| % Image Lic |
86% |
80% |
84% |
81% |
72% |
65% |
63% |
60% |
56% |
51% |
The "% Image Lic” row measures the odds that a single image in the collection will have been licensed one time within the quarter. To arrive at this number, we divide the total downloads by the number of images in the collection at the end of the quarter. This number is significant because it shows that new images are being added to the collection at a rate faster than image downloads are increasing. For example, if a contributor had 1000 images in the collection in Q4 2013 on average he would have had 860 downloads in that quarter. The same 1000 images in the collection in Q4 2015 would have only resulted in 510 downloads.
Estimated Breakdown Of Revenue
My estimates of how Q1 2016 revenue breaks down in terms of number of downloads and revenue for each segment of Shutterstock's business are as follows:
| |
Shutterstock |
Percent |
Average |
Total |
| |
& Bigstock |
Total
|
Price Per |
Downloads |
| |
Revenue |
Revenue
|
Downloads |
|
| |
|
|
|
|
| Subscription |
$45,880,000 |
40% |
$1.25 |
36,704,000 |
Image on Demand
|
$30,969,000 |
27% |
$9.50 |
3,259,894 |
| Enterprise |
$28,675,000 |
25% |
$30 |
955,833 |
Video & Music (non-Enterprise)
|
$9,176,000 |
8% |
$60 |
152,933 |
| |
|
|
|
|
| |
$114,700,000 |
100% |
|
41,072,660 |
| |
|
|
|
|
Rex, Premium Beat, AP, Other
|
$2,000,000
|
|
|
|
| |
|
|
|
|
| Total 2015 Revenue |
$116,700,000 |
|
|
|
Previously, I had estimated that the average price of an Enterprise sale was in the range of $50, but based on the royalties some contributors have been receiving the average price may be closer to $30 or less. It is also unclear whether Shutterstock includes video downloads when it reports total downloads or if video downloads are counted separately and the number not reported. If the video downloads are not included, then the number of Enterprise downloads could be higher, or the average price per Enterprise download could be higher.
Financial Outlook
Revenue for all of 2016 is still expected to be between
$495 and
$510 million (the same as estimated in January). This would result in between 17% and 20% growth over 2015 revenue. It is worth noting that while revenue is continuing to grow the rate of growth is slowing.
| Year |
Gross |
Annual |
Percent |
| |
Revenue |
Rev. Growth |
Rev. Growth |
| 2011 |
$120.3 |
|
|
| 2012 |
$169.2 |
$48.9 |
41% |
| 2013 |
$235.5 |
$66.3 |
40% |
| 2014 |
$327.9 |
$92.5 |
39% |
| 2015 |
$425.1 |
$97.2 |
30% |
| 2016 Estimate |
$500.0 |
$74.9 |
18% |
Location Of Customers
The company reported that 40% of revenue came from North America, 34% from Europe and 26% from the Rest of the World. In the past they have said that 70% of revenue comes from outside the U.S. meaning that about 10% of revenue comes from Canada and Mexico and 30% from the U.S. They also indicated that Asia is a strong part of the Rest of the World and that sales are particularly strong in India, Korea and Germany.
Adjusted EBITDA
Adjusted EBITDA of $24.0 million increased $5.3 million or 28% as compared to the first quarter of 2015 driven by the 20% revenue growth, partially offset by an increase in operating expenses primarily from higher royalty costs associated with the increase in paid downloads. Additionally, the first quarter included higher personnel expenses to support growth initiatives. Excluding the impact of foreign currency, Adjusted EBITDA growth was approximately 36% in the first quarter as compared to the first quarter of 2015.
Net Income
Net income available to common stockholders of $6.1 million ($0.17 per diluted share) for the first quarter increased $2.9 million as compared with $3.2 million ($0.09 per diluted share) in the first quarter a year ago as the improved operating performance and a $0.7 million unrealized non-cash gain associated with foreign currency movements was partially offset by a $2.4 million change in the fair value of contingent consideration.
Liquidity
The Company's cash, cash equivalents and short term investments totaled $275.5 million at March 31, 2016 as compared with $288.4 million at December 31, 2015 primarily reflecting the $23.0 million of cash generated from operations, which was more than offset by capital expenditures and content acquisitions of $8.4 million and by cash used to repurchase shares of approximately $27.8 million.
Free cash flow was $14.6 million for the first quarter, a decrease of $3.9 million from the first quarter of 2015, as the improved operating performance was partially offset by increased spending on capital expenditures and content acquisitions as well as working capital fluctuations. Free cash flow is defined as cash provided by operating activities adjusted for capital expenditures and content acquisition.
Stock Repurchase Program
During the first quarter of 2016, the Company repurchased approximately 881,000 shares of its stock, pursuant to its existing $100 million stock repurchase program, at an average price per share of $31.59 for a total of $27.8 million. Through March 31, 2016, the Company has repurchased 1.3 million shares of its stock for a total of $43.5 million under the stock repurchase program. The stock repurchase program, which commenced in November 2015, authorizes management to purchase shares from time to time through open market purchases or privately negotiated transactions at prevailing prices as permitted by securities laws and other legal requirements. The timing and amount of any shares repurchased will be determined by the Company's management based on its evaluation of market conditions and other factors. The repurchase program may be suspended or discontinued at any time.