Shutterstock has reported $97.5 million in revenue for Q1 2015, a 34% increase over Q1 2014. There were 33.4 million downloads in the quarter. About 28% percent of revenue for the quarter was paid out to contributors in royalties. The average price per download was $2.87 up from $2.68 in the previous quarter, and a 17% increase compared to Q1 2014. There were 51.6 million images in the collection as of March 31, 2015 plus 2.6 million video clips. At the end of the quarter the company had 542 employees worldwide.
First quarter results also included contributions from newly acquired businesses PremiumBeat (on January 22nd) and Rex Features (on January 19th). Excluding contributions from these new businesses and the impact of foreign currency, total Company revenue growth was approximately 30% in the first quarter. (This would make the combined revenue of these two brands about $2.9 million.) CFO Tim Bixby pointed out that the effective average price per download for these brands ranges from $20 to $40.
Adjusted EBITDA of $18.7 million increased $4.6 million or 33% as compared to the first quarter of 2014. The 34% revenue growth was partially offset by an increase in operating expenses primarily from higher royalty costs associated with the increase in paid downloads.
Net income for first quarter of 2015 was $3.2 million, a decrease compared to the $4.9 million in the first quarter a year ago. The improved operating performance in the first quarter of 2015 was more than offset by an increase in non-cash equity-based compensation expense, an unrealized non-cash loss associated with foreign currency movements and amortization of acquisition related intangible assets.
The company’s cash, cash equivalents and short term investments totaled $245.5 million as of March 31, 2015. This compared to $288.3 million as of December 31, 2014. The Company generated $21.8 million of cash from operations in the first quarter of 2015 which was more than offset by the approximately $65 million paid for acquisitions.
Future Guidance
Revenue for Q2 2015 is expected to be between $104 and $106 million. Revenue for all of 2015 is expected to be between $436 and $444 million with adjusted EBITDA of $90 to $94 million. Capital expenditures are expected to be about $18 million.
Revenue And Download Trends
The chart below shows some of the trends in downloads, images in the collection and revenue growth since Q4 2012. (For earlier data going back to Q3 2010 see
here.) The "Rev/Image" row is "revenue per image in the collection." For this figure I divide total revenue by the sum of still images and video clips since the video makes up a portion of the revenue.
| |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
| |
2012 |
2013 |
2013 |
2013 |
2013 |
2014 |
2014 |
2014 |
2014 |
2015 |
| Downloads (millions) |
21.4 |
22.4 |
24.3 |
25.4 |
28 |
29.7 |
31.5 |
31.2 |
33.5 |
33.4 |
| Rev.per DL |
$2.30 |
$2.28 |
$2.33 |
$2.35 |
$2.43 |
$2.45 |
$2.52 |
$2.65 |
$2.68 |
$2.87 |
| Images & Video |
23.3 |
26 |
28 |
31.3 |
34.5 |
37.1 |
40.7 |
42.7 |
48.8 |
54.2 |
| |
|
|
|
|
|
|
|
|
|
|
| Total Rev. (millions) |
$49.22 |
$51.5 |
$56.8 |
$56.8 |
$68 |
$72.8 |
$80.2 |
$83.7 |
$91.2 |
$97.5 |
| |
|
|
|
|
|
|
|
|
|
|
| Rev/Image |
$2.11 |
$1.98 |
$1.96 |
$1.81 |
$1.97 |
$1.96 |
$1.97 |
$1.96 |
$1.87 |
$1.80 |
| % Image Lic |
92% |
89% |
87% |
81% |
81% |
80% |
77% |
73% |
69% |
62% |
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 2012 on average he would have had 920 downloads in that quarter. The same 1000 images in the collection in Q1 2015 would have only resulted in 620 downloads.
During the conference call Jon Oringer, Founder, Chairman and CEO said, “user accounts (grew) by 28% over the past year. We now have nearly 1.3 million active users who have licensed content from Shutterstock in the past year.” Given that the average price per download in the last 12 months was $2.68 and there were 129.6 million downloads in the last 4 quarters the average customer would have downloaded 99.69 images during the year and paid a total of $267.17 for those images.
Of course some customers would have downloaded many more than 99 images during
the year while other customers would have downloaded far fewer. Given the average annual payment it is
worth considering that customers pay $249 for a one-month subscription and $2,388 for a full year subscription. Many of those 1.3 million "active users" must be buying one image a year and paying $10 or less.
It has been reported that Shutterstock has over 38,000 enterprise customer including many of the world’s largest creative agencies. Smaller companies must achieve a certain volume of sales annually to qualify for "master service agreement" status. Bixby says they are seeing consistent growth in this area and over “20% (of the companies) crossed over the line last year.”
According to Oringer, "enterprise revenue now exceeds 20% of our overall revenue" and "the video business has grown to nearly 10% of our overall revenue." However, this does not mean that the combined total of enterprise and video exceeds 30% because some of the video sales are made to enterprise customers and would be double counted in the above figures.
Oringer also said that Shutterstock has over 78,000 contributors and has paid out over $300 million in royalties since the company’s inception. About $27.3 million of that payout was made in Q1 2015.
About 30% of first quarter revenue came from the United States, 35% from Europe, 8% from Canada and Mexico and 27% from the rest of the world.
Sorting Out Downloads
During the Question and Answer session it was pointed out that enterprise customer are allowed do download comp images free or charge and these “comp downloads” are not counted as part of the total download figure. On the other hand all the subscription customer downloads are counted and many of these may be used for comps, or never find their way into any project. The questioner wanted to know if there was any way to get a sense of the “underlying engagement” of the two user groups.
CFO Bixby indicated that they carefully track comp downloads internally, but they do not disclose that number. However, “that number has been growing faster than the enterprise business more than doubling in recent periods. And so I think that is another good indicator of the underlying health that doesn’t show up in paid downloads but it really gives you a feel for another metric that gives you a feel for the health of the enterprise business.”
API
Oringer said, “API is an important growth area for us. We continue to look for new partners when it comes to the partnership we have with Facebook.” They have also announced partnerships with Wix and Constant Contact. “We’ve also heard from customers that use the API that they prefer our API over our competitors. It’s faster, it’s more efficient and is a more streamlined functionality.”