Shutterstock has reported Q3 2018 revenue of
$151.6 million up $7.5% million compared to Q3 2017. (The comparison excludes the 2017 revenue from
Webdam which was divested in Q1 2018.) Gross revenue was and down from $156.6 million in Q2 2018. Revenue per download averaged
$3.40 per image, compared to $3.23 in Q3 2017. (Much of this growth is probably due to increased sales of video content offered at much higher prices than still image content.)
Total image and video downloads for Q3 were
43.9 million, up from 41.2 million a year earlier, but down from 45.2 million in Q2 2018. At the end of the quarter the company had 221 million images and 12 million videos or 233 million pieces of content in its collection. Compared to the 155.8 image and video collection a year earlier the collection expanded by about 49%.
More than
550,000 photographers, videographers, musicians, artists and designers have contributed to the Shutterstock collection. The company paid out
27.3% of net revenue in royalties or roughly $41.38 million. Thus, the average contributor earned about
$75.23 in the quarter, or $301 annually. Of course, the vast majority of contributors earn much less from the imagery they have contributed and a very small percentage earn significantly more.
At the end of the quarter Shutterstock had about
1.9 million customers meaning that the average customer spent
$79.78 with Shutterstock during the quarter. It seems obvious that many customers purchased nothing during the quarter.
Of the 550,000 million contributors about 2,500 to 3,000 have more than 10,000 images in the Shutterstock collection. Recently, I had the opportunity to examine the 2018 revenue of a contributor with slightly more than 10,000 images in the Shutterstock collection. This contributor also has most of the same images are with more than 18 other microstock collections and is on track to earn about $36,000 in 2018 from all microstock sources.
About 30% of this revenue will come from Shutterstock, 15% from AdobeStock and 15% from iStock. The other 40% is spread among the other 15 or so microstock sites. Compared to 2017 the Shutterstock revenue for this photographer is flat, AdobeStock is on the rise and iStock is in slight decline despite the fact that the photographer has been regularly contributing to all these collections.
Revenue
Revenue generated through Shutterstock’s e-commerce platform increased approximately 8.5% as compared to the third quarter of 2017, to
$88.7 million, representing 58.5% of total revenue in the third quarter of 2018. Revenue from enterprise customers increased approximately 14.1% as compared to 2017, to
$62.9 million, representing 41.5% of total revenue in the third quarter of 2018.
Income from Operations
Income from operations of $6.7 million increased $1.1 million, or 20%, as compared to the third quarter of 2017, driven primarily by growth in revenues, which outpaced growth in operating expenses for the second consecutive quarter. Operating expenses increased $9.4 million, or 7%, primarily as a result of increased expenditures for sales and marketing, royalties and costs associated with our product development enhancements, including depreciation.
Net Income
Net income of $7.4 million, or $0.21 per diluted share, increased 49% for the third quarter of 2018 as compared with $5.0 million, or $0.14 per diluted share, for the third quarter of 2017, primarily driven by the growth in income from operations, and a reduction in effective tax rate in the current period.
Future Outlook
Revenue guidance for all of 2018 has been lowered to $625M to $630M from the prior guide of $625M to $635M. Adjusted EBITDA guide was also tightened from $105M to $110M to $105M.
It is interesting to consider that with 233 million images in the collection and an expected $630 million gross revenue,
with 27.3% of that paid in royalty ($171,990.000) to the 550,000
contributors, that the average
contributor will have 424 images in the collection and earn
$312.70 in 2018, or about $0.73 per image.
Chart
The chart below shows some of the trends in downloads, images in the collection and revenue growth since Q2 2016. Video downloads are not included in this calculation. (For earlier data going back to Q4 2013 see
here.) The “Rev Per DL” is the “Downloads” times the “Avg Rev per DL). This differs slightly from “Total Rev.” because a small percentage of revenue comes from other activities not associated with stock content downloads. The The "Rev/Image" row is "the average revenue per image in the collection." For this figure, I divide total revenue by the sum of still images.
| |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
| |
2016 |
2016 |
2016 |
2017 |
2017 |
2017 |
2017 |
2018 |
2018 |
2018 |
| Downloads (millions) |
43.4 |
41.2 |
41.1 |
43.5 |
42.7 |
41.9 |
43.9 |
43.7 |
45.2 |
43.9 |
| Avg Rev per DL |
$2.81 |
$2.91 |
$3.02 |
$2.96 |
$3.05 |
$3.23 |
$3.33 |
$3.40 |
$3.41 |
$3.40 |
| Images/video in collection |
92.1 |
102.7 |
116.2 |
132 |
144.7 |
155.8 |
170.1 |
196.8 |
215.1 |
233 |
| |
|
|
|
|
|
|
|
|
|
|
| Total Rev. (millions) |
$124.3 |
$123.1 |
$130.2 |
$130.2 |
$134.0 |
$141.1 |
$151.8 |
$153 |
$156.6 |
$151.6 |
| Rev. Per DL (millions) |
$121.95 |
$119.89 |
$124.12 |
$128.76 |
$130.24 |
$135.34 |
$146.19 |
$148.58 |
$154.13 |
$149.26 |
| |
|
|
|
|
|
|
|
|
|
|
| Rev/Image |
$1.34 |
$1.20 |
$1.12 |
$0.98 |
$0.93 |
$0.90 |
$0.89 |
$0.81 |
$0.73 |
$0.65 |
| % Image Lic |
47% |
40% |
35% |
32% |
30% |
26% |
25% |
23% |
21% |
18% |
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, I 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 at a much faster rate than image downloads are increasing. For example, if a contributor had 1,000 images in the collection in Q2 2016 on average he would have had . In Q3 2018 a collection with 1,000 image would have only had . Back in Q4 2013 a contributor with a 1,000 image collection could have expected to see 860 downloads in a quarter.
Images In The Collection
One thing that is a little strange is how Shutterstock counts “images in the collection.” They say they have 221 million images and 12 million videos for a total of 233 million pieces of content in their collection. But these numbers are only for images in the Shutterstock collection. However, only part of the total revenue generated by the company comes from the Shutterstock collection.
They also have 40 million images in the Editorial collection and are adding 700,000 new images a month, but those images are not counted as part of the Shutterstock collection. They also have a huge number of images in the Bigstock collection. The Bigstock brand is separate from Shutterstock, but the revenue that brand generates is reported as part of total Shutterstock revenue.
A search of Bigstock indicates that there are 68,568,513 in the collection. Does that mean that 31% of the company's gross revenue comes from downloads from Bigstock? We also know a high percentage of the Bigstock images are also in the Shutterstock collection. It is unclear how many unique images are in Bigstock that can’t also be found in Shutterstock. If we search for “people” in Shutterstock we get 34,744,416 returns, but the same search in Bigstock only produces 14,108,874. There is no way to know how many of the 14 million images are unique to Bigstock.
When Shutterstock says that the average price per image licensed from the Shutterstock collection is $3.40, and that they licensed 43.9 million images in the quarter that comes to a total or $149,260,000. Since total revenue for the company was $151.6 million does that mean that total revenue generated by the Editorial collection and Bigstock during the quarter was only $2.34 million? Is Editorial growing significantly?
Shutterstock ended the trading day at $39.01 per share, down 12.63%.