Shutterstock has reported a record 25.4 million downloads and $56.8 million in revenue in Q3 2013. The Shutterstock collection has grown to more than 30 million still images and over 1.3 million video clips. Revenue per download grew 4% year-over-year to $2.35. The growth in revenue per download was driven primarily by a growing portion of revenue that is derived from video footage downloads.
(Note: With the pricing of a video clip at $19 for web use, $49 for SD files and $79 for HD files it doesn’t take many video licenses to raise the average price per download 4% when the average per license for a still photo or illustration sold through a subscription is under $2.00.)
Gross Margin was 61.5% of gross revenue. That would mean that cost of revenue was 38.5% (about $21.8 million). Tim Bixby, CFO, said ,“The primary component of our cost of revenue, which is our contributor royalties was also stable in the quarter.” Last quarter the royalties paid out were about 28% of gross revenue. Jon Oringer, Chairman and CEO, says the goal is to keep the royalty payout in the range of 28% to 30%. At 28% of gross revenue total royalties paid out would have been about $15.9 million and the average royalty per download would be $0.66.
Sales and marketing expenses were $14.9 million or 25% of revenue as compared to 23% of revenue or $9.8 million in Q3 2012. R&D expense were $5.7 million and General and Administrative were $6.1 million. At the end of the quarter Shutterstock had 326 employees up about 40% from a year earlier and 10% from the last quarter.
On September 30 the company’s cash balance was $195 million.
Revenue And Download Trends
The chart below shows some of the trends in downloads, images in the collection and revenue growth since the second quarter of 2011. The bottom row is "revenue per image in the collection." For this figure we divide total revenue by the sum of still images and video clips since the video makes up a portion of the revenue.
| |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
| |
2011 |
2011 |
2011 |
2012 |
2012 |
2012 |
2012 |
2013 |
2013 |
2013 |
| Download |
14.4 |
14.8 |
16.2 |
17.6 |
18.3 |
18.7 |
21.4 |
22.3 |
24.3 |
25.4 |
| Rev per DL |
$2.01 |
$2.10 |
$2.14 |
$2.13 |
$2.22 |
$2.26 |
$2.30 |
$2.29 |
$2.33 |
$2.35 |
| Images |
15.3 |
16.2 |
17.4 |
18.8 |
20.2 |
21.7 |
23.3 |
25 |
28 |
31.3 |
| |
|
|
|
|
|
|
|
|
|
|
| Total Rev |
$28.94 |
$31.08 |
$34.67 |
$37.49 |
$40.63 |
$42.26 |
$49.22 |
$51.5 |
$56.8 |
$56.8 |
| |
|
|
|
|
|
|
|
|
|
|
| Rev/ImCol |
$1.89 |
$1.92 |
$1.99 |
$1.99 |
$2.01 |
$1.95 |
$2.11 |
$1.98 |
$1.96 |
$1.81 |
Future Guidance
Revenue between $64 and $66 million is expected in Q4 2013 implying that revenue for all of 2013 will be between $231 and $233 million. For 2014 revenue is expected to be between $300 and $305 million for a growth rate of roughly 32%.
EBITDA for Q3 2013 was $12.8 million, a 24% growth over the $10.3 million in Q3 2012. Adjusted EBITDA in Q4 2013 is expected to be between $12.5 and $13.5 million. For all of 2013 adjusted EBITDA is expected to be between $50 and $51 million and for 2014 it is expected to be between $68 and $70 million.
In the the quarterly conference call question period one analyst pointed out that historically they had talked about the business potentially supporting a 30% EBITDA (earnings before interest, tax, depreciation and amortization). If Shutterstock hits its top projections in 2013 EBITDA will be 21.8% and for 2014 it will be 22.9%. Will the market be happy with them rolling along at 22% to 25% or has it already priced in much higher expectations? Going forward management may be tempted to cut costs more than is advisable in order to reach that magical 30%. This will be something to watch. This industry has already seen what happened when Getty Images fought to maintain an unreasonably high EBITDA.
On the call Jon Oringer said, “We continue to execute on our three primary growth strategies which are increasing our penetration in all markets foreign and domestic. Investing in emerging content types particularly video footage and bringing Shutterstock to large enterprises through our expanding direct sales team.”
Thilo Semmelbauer, President & COO pointed out that, “Direct sales to enterprises continues to be one of the fastest growing parts of our business, roughly doubling year-over-year across agencies, publishers, media companies, large corporations, both the number and size of deals increased. Let me give you three examples of some of the larger deals we did in Q3."
"First example, we signed a six-figure deal with a European Educational Publisher that includes both images and video footage for both print and online channels. Another six-figure deal was with a South American Advertising Agency. They were looking for exceptional images for a client going through a large re-branding project. Finally, we signed another six-figure deal with an online marketing platform for local businesses. This is the sector where we see a tremendous amount of growth potential in serving small businesses. So these deals are just a few examples of a very active and rapidly growing channel for us,” he concluded.