Shutterstock Inc (SSTK) Q1 2024 Earnings Call Transcript Highlights: Strong Start with Revenue ...

• Revenue: $214 million in Q1 2024, exceeding expectations.

• EBITDA: $56 million in Q1 2024.

• Net Income: Not specifically mentioned, focus on EBITDA provided.

• Adjusted EBITDA Margin: 26.1% in Q1 2024.

• Content Revenue: Down 10% from previous year, aligned with expectations.

• Data Distribution and Services Revenue: Up 90% to $40 million in Q1 2024.

• Free Cash Flow: Strong cash generation noted, specifics not provided.

• Subscriber Count: Expected to more than double to 1.15 million post-Envato acquisition.

• Subscription Revenue: To increase from 48% to 55% of total content revenue post-Envato acquisition.

• 2024 Revenue Guidance: Raised to 5.5% to 7% growth, reflecting strong Q1 performance and Envato acquisition.

• 2024 Adjusted EBITDA Guidance: Increased to $245 million to $248 million, including $6 million for one-time deal and integration costs.

• Warning! GuruFocus has detected 3 Warning Sign with SSTK.

Release Date: May 02, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Shutterstock Inc (NYSE:SSTK) exceeded Q1 2024 revenue expectations with $214 million and an EBITDA of $56 million.

• The acquisition of Envato is expected to accelerate growth, filling a critical product gap and expanding into new customer segments.

• Data distribution and services revenue grew by 90% in the quarter, highlighting strong demand for Shutterstock's ethically sourced licensable datasets.

• The company's content library and contributor base saw significant growth, with assets growing 34% to nearly 900 million and contributors increasing by over 40%.

• Shutterstock Inc (NYSE:SSTK) raised its full-year 2024 revenue guidance to 5.5% to 7% growth, reflecting strong Q1 performance and the anticipated contribution from the Envato acquisition.

Negative Points

• Content revenue was down 10%, aligning with expectations but indicating areas needing improvement.

• The company is experiencing challenges in scaling the Giphy business, particularly in re-engaging and expanding its advertising platform.

• There is an inherent lumpiness in the data distribution and services business due to varying deal structures, which could affect revenue predictability.

• Despite positive trends, the content business has not fully turned around, with recovery expected in the back half of the year.

• Shutterstock Inc (NYSE:SSTK) incurred $2 million in one-time costs related to acquisitions, impacting profitability in the short term.

Q & A Highlights

Q: Could you provide insights on how the guidance change reflects the addition of Envato versus organic changes?A: Jarrod Yahes, CFO of Shutterstock, explained that the raised guidance for the year includes both the outperformance in Q1 across the business, especially in data distribution and services, and the anticipated contributions from the Envato acquisition, expected to close in Q3. Envato is projected to add about 20% to annual revenues and 15% to EBITDA.

Q: Is $60 million still the right number to think about for computer vision, especially with rumors of an Apple deal?A: Jarrod Yahes noted that while specific customer details like Apple cannot be confirmed, the overall performance in data distribution and services suggests that the $60 million figure is likely conservative. The segment is experiencing robust growth, indicating a potentially higher future projection.

Q: How should we expect Giphy expenses to pace throughout the year?A: Jarrod Yahes mentioned that while many cash expenses are reimbursed, salary and bonus expenses impact EBITDA. Shutterstock is actively hiring sales professionals to meet growing demand, which should help improve Giphy's profitability as revenue increases throughout the year.

Q: Can you provide any color on the pipeline for the data sales business and how does the Envato acquisition impact this?A: CEO Paul Hennessy highlighted strong demand for Shutterstock's ethically sourced content, driven by regulatory changes. The addition of Envato's diverse content types is expected to further enhance Shutterstock's data offerings, appealing to a broader range of data customers.

Q: What opportunities are there for cross-selling with the doubling of the subscriber base post-Envato acquisition?A: Paul Hennessy discussed the potential for increased retention and cross-selling opportunities, given Envato's complementary content offerings and highly retentive subscriber base. This synergy is expected to enhance the value proposition to both Shutterstock and Envato customers.

Q: Regarding the trends in the content business, is there any month-on-month improvement, particularly in April?A: Paul Hennessy confirmed positive trends in the content business, particularly in the small and medium business segment, driven by strategic changes like eliminating free trials. These trends are expected to contribute to a return to growth in the latter half of the year, with April showing encouraging signs.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.