Financial Data and Key Metrics Changes - Revenue growth for Q3 2022 was 5%, or 10% on a constant currency basis, with reported revenue declining 1% excluding Pond5 [25] - Adjusted EBITDA for the quarter was $56 million, with margins at 27.5%, up more than 450 basis points year-on-year [29] - GAAP diluted EPS was $0.64 and adjusted diluted EPS was $1.00 [30] Business Line Data and Key Metrics Changes - Ecommerce revenue grew 2% on a reported basis or 6% on a constant currency basis, significantly impacted by weakness in Europe [25] - Enterprise revenue grew 9% on a reported basis or 15% on a constant currency basis, with strong momentum from large brands [26] - Subscriber count increased to 607,000, up 80% year-over-year, with subscriber revenue representing 43% of total revenues [34] Market Data and Key Metrics Changes - North America saw revenue growth of 15%, while Europe experienced a decline of 5%, indicating a 20% growth differential between the two regions [25] - The macroeconomic uncertainty has had a pronounced impact on demand in Europe, particularly in the ecommerce channel [25][10] Company Strategy and Development Direction - The company is focused on integrating generative AI into its product offerings, partnering with OpenAI to enhance its capabilities [16][19] - The acquisition of Pond5 is aimed at expanding video leadership, with a significant increase in the combined video library size [12][13] - The company aims to balance growth and margins while navigating macroeconomic challenges [11] Management's Comments on Operating Environment and Future Outlook - Management noted a softening demand environment, particularly in Europe and ecommerce, but highlighted ongoing strength in the U.S. and enterprise channels [10] - The company is lowering its 2022 revenue guidance to $815 million, equating to 5% year-over-year growth, while raising EBITDA margin guidance to 26.5% [36] - Management expressed confidence in the long-term sustainability of margin improvements and the ability to drive revenue growth [43] Other Important Information - The company repurchased $16 million of shares, completing a $100 million authorization, reducing total shares outstanding by 200,000 [32] - A deferred revenue balance of $174 million increased by $3 million from the previous year, affected by foreign exchange rates [33] Q&A Session Summary Question: Higher margin guidance sustainability - Management indicated that the margin levels are expected to be durable and sustainable, with ongoing efforts to improve gross margins [42][43] Question: Customer demand for AI-generated content - Management noted significant excitement around AI technology, with a focus on providing a platform for exploration and creativity [54] Question: Competitive landscape changes - Management stated that they are focused on their strategy and have not noticed significant changes in the competitive landscape, aside from macroeconomic issues [56] Question: Subscriber behavior amid macro headwinds - No uptick in churn was observed, but new customer demand is focused in Europe, particularly in ecommerce [72] Question: Growth rate differences between North America and Europe - Management highlighted a significant divide in growth rates, with North America growing 15% and Europe 6% on a constant currency basis, attributing some of the difference to foreign exchange [80] Question: Impact of AI on competitive dynamics - Management believes they are well-positioned to lead the change in the industry rather than be changed by it, emphasizing their comprehensive platform [91]

PART I. FINANCIAL INFORMATION This section presents Shutterstock's unaudited condensed consolidated financial statements and management's financial analysis [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Shutterstock's unaudited condensed consolidated financial statements and related notes for specified periods [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and equity at specific dates Consolidated Balance Sheet Highlights (in thousands) | Item | Sep 30, 2022 | Dec 31, 2021 | Change | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Cash and cash equivalents | $76,244 | $314,017 | $(237,773) | -75.7% | | Total current assets | $161,052 | $388,215 | $(227,163) | -58.5% | | Total assets | $840,180 | $851,710 | $(11,530) | -1.4% | | Total current liabilities | $360,073 | $333,784 | $26,289 | 7.9% | | Debt | $50,000 | $— | $50,000 | N/A | | Total liabilities | $409,597 | $383,228 | $26,369 | 6.9% | | Total stockholders' equity | $430,583 | $468,482 | $(37,899) | -8.1% | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) This section details the company's revenues, expenses, and net income over specific reporting periods Consolidated Statements of Operations Highlights (in thousands, except per share data) | Item | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :----------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue | $204,096 | $194,439 | $610,100 | $567,632 | | Net income | $23,040 | $16,029 | $69,057 | $74,997 | | Basic EPS | $0.64 | $0.44 | $1.91 | $2.05 | | Diluted EPS | $0.64 | $0.43 | $1.88 | $2.01 | - Revenue increased by **5%** for the three months ended September 30, 2022, and by **7%** for the nine months ended September 30, 2022, compared to the respective prior periods. Net income increased by **44%** for the three months ended September 30, 2022, but decreased by **8%** for the nine months ended September 30, 2022[18](index=18&type=chunk) [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents total change in equity from non-owner sources, including net income and other comprehensive items Consolidated Statements of Comprehensive Income (in thousands) | Item | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income | $23,040 | $16,029 | $69,057 | $74,997 | | Foreign currency translation loss | $(6,101) | $(1,842) | $(11,932) | $(1,552) | | Comprehensive income | $16,939 | $14,187 | $57,125 | $73,445 | - Foreign currency translation loss significantly increased for both the three and nine months ended September 30, 2022, impacting comprehensive income[21](index=21&type=chunk) [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in the company's equity accounts, including net income, dividends, and repurchases Changes in Stockholders' Equity (in thousands) | Item | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :------------------------------------------------ | :-------------------------- | :-------------------------- | | Balance at December 31, 2021/2020 | $468,482 | $421,925 | | Equity-based compensation | $23,958 | $26,639 | | Repurchase of treasury shares | $(72,812) | $(4,858) | | Cash dividends paid | $(26,004) | $(23,000) | | Other comprehensive loss | $(11,932) | $(1,552) | | Net income | $69,057 | $74,997 | | Balance at September 30, 2022/2021 | $430,583 | $474,896 | - Total stockholders' equity decreased from **$468.5 million** at December 31, 2021, to **$430.6 million** at September 30, 2022, primarily due to significant treasury share repurchases (**$72.8 million**) and cash dividends paid (**$26.0 million**), partially offset by net income and equity-based compensation[24](index=24&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section reports the cash generated and used by operating, investing, and financing activities over a period Consolidated Statements of Cash Flows (in thousands) | Activity | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $97,289 | $161,858 | | Net cash used in investing activities | $(257,905) | $(242,407) | | Net cash used in financing activities | $(70,277) | $(46,426) | | Net decrease in cash and cash equivalents | $(237,773) | $(127,995) | | Cash and cash equivalents, end of period | $76,244 | $300,579 | - Net cash provided by operating activities decreased significantly from **$161.9 million** in 2021 to **$97.3 million** in 2022. Investing activities saw increased cash usage, primarily due to business combinations, while financing activities also used more cash, driven by higher share repurchases and debt proceeds[26](index=26&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations of accounting policies, acquisitions, debt, equity, and other financial disclosures - Shutterstock is a leading global creative platform, offering images, footage, music, 3D models, and creative design software. Recent acquisitions include Pond5 (video-first content marketplace) and Splash News (entertainment news network) in May 2022, expanding content offerings and editorial capabilities[28](index=28&type=chunk)[29](index=29&type=chunk)[32](index=32&type=chunk) Allowance for Doubtful Accounts (in thousands) | Item | Sep 30, 2022 | Dec 31, 2021 | | :-------------------------- | :----------- | :----------- | | Allowance for doubtful accounts | $3,498 | $1,910 | | Bad debt expense (9 months) | $993 | $182 | - Revenue is primarily recognized from content licenses (subscription and transactional) and creative tools. The company acts as the principal in transactions, recognizing revenue gross of contributor royalties[40](index=40&type=chunk)[41](index=41&type=chunk)[44](index=44&type=chunk) Acquisition Details (in thousands) **Pond5 & Splash News Acquisitions (May 2022):** | Item | Pond5 | Splash News | Total | | :-------------------------- | :------ | :---------- | :------ | | Purchase Price | $218,014 | $6,316 | $224,330 | | Goodwill | $158,957 | $5,565 | $164,522 | | Intangible Assets | $67,800 | $1,263 | $69,063 | | Revenue Contribution (3 months ended Sep 30, 2022) | N/A | N/A | $13,100 | | Revenue Contribution (9 months ended Sep 30, 2022) | N/A | N/A | $20,300 | **PicMonkey & TurboSquid Acquisitions (2021):** | Item | PicMonkey | TurboSquid | Total | | :-------------------------- | :-------- | :--------- | :------ | | Purchase Price | $109,395 | $77,330 | $186,725 | | Goodwill | $71,607 | $59,491 | $131,098 | | Intangible Assets | $44,700 | $21,500 | $66,200 | Goodwill and Intangible

Shutterstock, Inc. (NYSE:SSTK) Q2 2022 Earnings Conference Call July 26, 2022 8:30 AM ET Company Participants Chris Suh - VP, IR and Corporate Development Paul J. Hennessy - CEO Jarrod Yahes - CFO Conference Call Participants Bernie McTernan - Needham & Company Andrew Boone - JMP Securities Youssef Squali - Truist Securities Nat Schindler - Bank of America Operator Good day and welcome to the Q2 2022 Shutterstock, Inc. Earnings Conference Call. At this time all participants are in a listen-only mode. After ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________________________________________________________________________ FORM 10-Q ___________________________________________________________________________________________________ 350 Fifth Avenue, 21st Floor (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SEC ...

Financial Data and Key Metrics Changes - Shutterstock reported a revenue growth of 9% year-over-year, or 11% on a constant currency basis, for Q1 2022 [7][23] - Subscription revenue reached a record 43% of total revenue, up from previous quarters, with overall subscriber count increasing by 17% [11][31] - Gross margin declined by approximately 114 basis points to 65.1% year-over-year, largely due to higher non-cash M&A amortization expenses [24] - Adjusted EBITDA margins were 27.5%, down by 300 basis points from the previous year, mainly driven by increased marketing spend [27] Business Line Data and Key Metrics Changes - The enterprise channel grew by 11% year-over-year, reflecting strong performance in FLEX team products and Shutterstock Studios [7][24] - E-commerce revenue grew by 7% year-over-year, or 9% on a constant currency basis, aligning with expectations [10][23] - The FLEX team subscription and FLEX Premium products are now key offerings for small and medium businesses, contributing to overall growth [8] Market Data and Key Metrics Changes - The company experienced a 2% foreign exchange headwind to revenues, primarily due to the depreciation of the euro and GBP [39][52] - Approximately 1% of revenues were derived from Russia and Ukraine, which the company has factored into its expectations for the year [20][39] Company Strategy and Development Direction - Shutterstock is focusing on integrating new applications and enhancing its product offerings, including AI-powered search and creative tools [13][18] - The company plans to introduce a creative flow subscription targeting casual creatives, which will include various applications and a free tier of content [17] - The strategy aims to position Shutterstock as a full-service partner for enterprise customers, enhancing customer retention and engagement [10][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth prospects despite headwinds from foreign exchange and geopolitical issues [32][39] - The company is maintaining its full-year revenue growth guidance of 8% to 10%, with expectations for margin stability [32][33] - Management highlighted the importance of product differentiation and sustained growth through new applications and strategic solutions [21][33] Other Important Information - Shutterstock made a $1 million donation to support contributors in Ukraine, which impacted EBITDA margins for the quarter [27][19] - The company repurchased 422,000 shares for $38.4 million during the quarter, reducing total shares outstanding [28] Q&A Session Summary Question: FX impact on revenue and integration of PicMonkey - Management quantified the FX impact at approximately $1 million for the quarter and discussed ongoing integration plans for PicMonkey [39][40] Question: User education on new applications - Management outlined plans for user education through site marketing and content creation to drive discovery of new applications [46][47] Question: Guidance and revenue growth offsets - Management indicated strong performance in the enterprise channel and confidence in product roadmap as offsets to revenue headwinds [51] Question: Competition in the stock content market - Management acknowledged the competitive landscape but emphasized Shutterstock's unique data and content library advantages [54] Question: Inclusion of PicMonkey subscribers in metrics - Management confirmed that PicMonkey subscribers have not yet been included in subscriber counts, awaiting annualization of the acquisition [58]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Q1 2022 and 2021, detailing balance sheets, operations, cash flows, and notes, with key changes in assets, net income, and financing cash usage [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $258,112 | $314,017 | | Total current assets | $339,719 | $388,215 | | Total assets | $795,978 | $851,710 | | Total current liabilities | $303,886 | $333,784 | | Total liabilities | $351,555 | $383,228 | | Total stockholders' equity | $444,423 | $468,482 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Consolidated Statements of Operations Summary (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Revenue | $199,132 | $183,281 | | Income from operations | $31,918 | $38,118 | | Net income | $26,572 | $29,514 | | Diluted EPS | $0.71 | $0.79 | - For Q1 2022, **revenue increased by 8.7%** year-over-year, while **net income decreased by 10.0%** year-over-year[18](index=18&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows Summary (in thousands) | Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $22,723 | $35,828 | | Net cash used in investing activities | $(12,525) | $(81,213) | | Net cash used in financing activities | $(65,574) | $(19,371) | | Net decrease in cash and cash equivalents | $(55,905) | $(64,648) | - The significant increase in cash used in financing activities in Q1 2022 was primarily due to **$38.4 million in treasury share repurchases**, which did not occur in Q1 2021[27](index=27&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail accounting policies, revenue recognition, the TurboSquid acquisition, revenue breakdowns by channel and geography, and shareholder equity activities - Key offerings include Images, Footage, Music, **3D Models (from TurboSquid acquisition)**, and **Creative Design Software (from PicMonkey acquisition)**[33](index=33&type=chunk) - On February 1, 2021, the company acquired TurboSquid, Inc. for approximately **$77.3 million in cash**, establishing Shutterstock as a premium destination for 3D models[51](index=51&type=chunk)[52](index=52&type=chunk) Revenue by Distribution Channel (in thousands) | Channel | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | E-commerce | $127,070 | $118,400 | | Enterprise | $72,062 | $64,881 | | **Total Revenues** | **$199,132** | **$183,281** | Revenue by Customer Location (in thousands) | Region | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | North America | $79,943 | $64,309 | | Europe | $62,553 | $62,277 | | Rest of the world | $56,636 | $56,695 | | **Total revenue** | **$199,132** | **$183,281** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2022 financial performance, noting a 9% revenue increase to $199.1 million, driven by E-commerce and Enterprise growth, but a 16% operating income decline due to rising expenses, alongside liquidity and non-GAAP measures [Key Operating Metrics](index=23&type=section&id=Key%20Operating%20Metrics) Key Operating Metrics Comparison | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Subscribers (end of period) | 359,000 | 306,000 | | Subscriber revenue (in millions) | $85.4 | $76.5 | | Paid downloads (in millions) | 44.6 | 45.8 | | Revenue per download | $4.22 | $3.96 | - The number of subscribers grew by **17.3%** year-over-year, and **revenue per download increased by 6.6%**, primarily due to changes in product mix[115](index=115&type=chunk)[142](index=142&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) - Revenue increased by **$15.9 million (9%)** in Q1 2022 compared to Q1 2021, with **11% growth on a constant currency basis**[139](index=139&type=chunk) - Total operating expenses increased by **$22.1 million (15%)**, primarily due to a **$11.4 million (27%) increase in Sales and Marketing** and a **$2.9 million (27%) increase in Product Development expenses**[138](index=138&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) - Income from operations decreased by **$6.2 million (16%)** to **$31.9 million** in Q1 2022 from $38.1 million in Q1 2021[138](index=138&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) - As of March 31, 2022, the company held **$258.1 million in cash and cash equivalents**[154](index=154&type=chunk) - In Q1 2022, the company repurchased approximately **422,000 shares of common stock for $38.4 million** and paid **cash dividends of $8.7 million**[159](index=159&type=chunk)[169](index=169&type=chunk) - Net cash provided by operating activities decreased to **$22.7 million** in Q1 2022 from $35.8 million in Q1 2021, impacted by lower operating income and timing of expense payments[166](index=166&type=chunk) [Non-GAAP Financial Measures](index=31&type=section&id=Non-GAAP%20Financial%20Measures) Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Line Item | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net income | $26,572 | $29,514 | | Depreciation and amortization | $15,065 | $10,091 | | Non-cash equity-based compensation | $7,826 | $8,210 | | Other adjustments, net | $(758) | $2,462 | | Provision for income taxes | $6,104 | $6,142 | | **Adjusted EBITDA** | **$54,809** | **$56,419** | Reconciliation of Net Income to Adjusted Net Income (in thousands) | Line Item | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net income | $26,572 | $29,514 | | Non-cash equity-based compensation | $7,826 | $8,210 | | Acquisition-related amortization expense | $6,045 | $1,099 | | Tax effects of adjustments | $(3,259) | $(2,187) | | **Adjusted net income** | **$37,184** | **$36,636** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are foreign currency fluctuations, interest rates, and inflation, with foreign exchange risk being most significant due to 33% of Q1 2022 revenue in foreign currencies - Revenue denominated in foreign currencies constituted approximately **33% of total revenue** for Q1 2022[189](index=189&type=chunk) - A **10% change in the U.S. dollar exchange rate** against foreign currency revenues would result in an approximate **3% impact on total revenue**[189](index=189&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) As of March 31, 2022, the CEO and CFO concluded disclosure controls were effective, with no material changes to internal control over financial reporting during the quarter - As of March 31, 2022, the CEO and CFO concluded that disclosure controls and procedures were **effective at a reasonable assurance level**[196](index=196&type=chunk) - No material changes in internal control over financial reporting were identified during the quarter[197](index=197&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is not a party to any material active litigation and anticipates no material adverse effects from ordinary course claims on its financial condition or operations - The company is not currently a party to any material active litigation and expects no material adverse effect from ordinary course matters on its business[199](index=199&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's 2021 Annual Report on Form 10-K were identified during the quarter - No material changes to the risk factors described in the company's 2021 Form 10-K occurred during Q1 2022[200](index=200&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details common stock repurchases in Q1 2022, including 421,979 shares bought back at an average of $90.69, with $34.6 million remaining for future purchases Issuer Purchases of Equity Securities (Q1 2022) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | January 2022 | 60,000 | $96.38 | | February 2022 | 168,215 | $90.22 | | March 2022 | 193,764 | $89.33 | | **Total** | **421,979** | **$90.69** | - As of March 31, 2022, **$34.6 million remained available** for purchase under the company's share repurchase authorization[203](index=203&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Interactive Data Files (XBRL) - Exhibits filed include **CEO and CFO certifications** pursuant to Sarbanes-Oxley Act Sections 302 and 906, and **XBRL data files**[207](index=207&type=chunk)

Financial Data and Key Metrics Changes - Shutterstock reported a 16% revenue growth for the full year 2021, the highest annual growth rate since 2016 [7] - For the fourth quarter, revenue grew 14%, with e-commerce revenue increasing by 16% and enterprise revenue growing by 10% [26] - Gross margins for the full year were 64.1%, up 300 basis points from 61.1% in 2020, while Q4 gross margin declined by approximately 150 basis points to 61.9% year-over-year [27] - Adjusted EBITDA margins increased to 25% for the full year 2021, up from 23.2% in 2020, with a 19% margin in Q4 [31][45] - GAAP diluted earnings per share for the full year was $2.46, representing a growth of 25% [32] Business Line Data and Key Metrics Changes - E-commerce channel grew 19% in 2021, with a 22% increase in subscribers and a 20% growth in subscription revenue [7][8] - The enterprise channel saw an 11% growth in 2021, recovering from a 2% decline in 2020, driven by strength in core image and footage business [11][12] - The number of enterprise deals with an average order value greater than $100,000 grew almost 80% in 2021 [16] Market Data and Key Metrics Changes - The deferred revenue balance increased to $181 million, up almost $10 million from the third quarter and over $31 million from Q4 2020, representing a growth of 21% [34] - Currency is expected to have a negative impact of 2% on revenue growth in 2022, contrasting with a positive impact of 1% in 2021 [42][43] Company Strategy and Development Direction - The company is focused on transforming into a creative platform leveraging content, data, and workflow applications, with plans to introduce new products in the e-commerce channel in early 2022 [21][22] - Strategic acquisitions in 2021 are expected to contribute to growth, particularly in 3D revenues from TurboSquid and enhanced offerings from PicMonkey [17][18] - The company aims to attract new customer segments, including non-professional creative enthusiasts, through new creative power tools [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business for 2022, highlighting the acceleration of revenue growth and enhanced profitability in 2021 [23][45] - The company anticipates organic growth returning to normalized levels throughout 2022, with revenue guidance set between $835 million to $850 million [40][41] - Management emphasized the importance of customer engagement and retention through enhanced subscription offerings and workflow integration [21] Other Important Information - The company announced a 14% increase in its quarterly dividend to $0.24 per share, reflecting positive cash flow results in 2021 [35] - Share repurchase program is expected to increase from $75 million to $100 million annually, allowing for the buyback of approximately 3% of outstanding shares each year [37] Q&A Session Summary Question: Addressing customer needs with new subscription products - Management acknowledged that pricing and packaging of content will continue to drive growth, particularly with new content types and workflow integration [50] Question: Trends in customer content and computer vision revenue - Management clarified that various businesses do not conform neatly to traditional revenue models, and they are focused on maintaining unit pricing while adding value to subscriptions [54] Question: Integration of TurboSquid and new customer types - Management indicated that they will enable 3D services within enterprise, catering to agencies and other clients, and will launch services similar to their 2D content offerings [57] Question: Insights from the brand campaign - Management noted that they learned about the effectiveness of different channels and will focus on high ROI channels while launching new products that require customer education [59]

Part I [Business Overview](index=4&type=section&id=Item%201.%20Business) Shutterstock, Inc. is a leading global creative platform providing full-service solutions, high-quality content, and creative workflow tools - Shutterstock is a **global creative platform** offering **full-service solutions**, **high-quality content**, and **creative workflow solutions** for brands, businesses, and media companies[14](index=14&type=chunk) - Key offerings include **images, footage, music, 3D models** (via TurboSquid acquisition in Feb 2021), and **creative design software** (via PicMonkey acquisition in Sep 2021)[18](index=18&type=chunk) - In July 2021, **Shutterstock.AI acquired Pattern89, Datasine Limited, and assets from Shotzr, Inc.** to develop **predictive performance capabilities using AI** for data-informed content decisions[15](index=15&type=chunk) - The company benefits from **network effects**, attracting customers with an **extensive content library** and contributors with a **global customer base**, facilitated by trust and seamless workflow integration[16](index=16&type=chunk) - Sales are diversified across **E-commerce** (majority, subscription/transactional) and **Enterprise** (tailored solutions, API integration) channels[25](index=25&type=chunk)[26](index=26&type=chunk) Revenue by Sales Channel (in thousands) | Year Ended December 31, | 2021 | 2020 | 2019 | | :---------------------- | :-------- | :-------- | :-------- | | E-commerce | $490,212 | $412,521 | $392,241 | | Enterprise | $283,203 | $254,165 | $258,282 | | **Total Revenue** | **$773,415** | **$666,686** | **$650,523** | - As of **December 31, 2021**, Shutterstock had over **2.0 million approved contributors** and served over **2.0 million customers** in more than **150 countries**[28](index=28&type=chunk)[32](index=32&type=chunk) - The content library includes over **400 million images** and **24 million footage clips** as of December 31, 2021[230](index=230&type=chunk) - The company protects its **intellectual property** through **patents, trademarks, copyrights, domain name registrations, and trade secret protections**, and offers **indemnification** to customers for licensed content[57](index=57&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk)[56](index=56&type=chunk) - The industry is **highly competitive with low barriers to entry**, facing competitors like Getty Images, AdobeStock, and providers of free content[67](index=67&type=chunk)[92](index=92&type=chunk) - As of **December 31, 2021**, Shutterstock had **1,148 full-time employees**, with approximately **68% in North America** and **27% in Europe**[69](index=69&type=chunk) - Operating results may fluctuate **seasonally**, with expected **decreases in Q3** due to summer vacations and **increases in Q4** for holiday marketing campaigns[74](index=74&type=chunk) [Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) The company faces multiple risks in supply chain, regulations, and international trade - The COVID-19 pandemic has had and could continue to have a **material adverse effect** on operations, customer spending, demand for products, and talent retention, with the extent of future impact remaining uncertain[79](index=79&type=chunk)[85](index=85&type=chunk) - The success of the business depends on the ability to **attract and retain customers and contributors**; failure to do so, or if customers reduce spending or contributors reduce participation, would harm the business[88](index=88&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) - The industry is **highly competitive with low barriers to entry**, and ineffective competition could adversely affect operating results[92](index=92&type=chunk) - Failure to **innovate technologically**, develop new products/services, or enhance existing ones to meet customer requirements could impair revenue growth[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk) - Risks related to intellectual property include **unforeseen costs from infringement claims**, **potential liability from indemnification claims**, **changes in IP regulations**, and **inability to prevent misuse of content**[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[142](index=142&type=chunk) - International operations expose the company to risks such as **foreign currency fluctuations**, **legal/political restrictions**, **compliance with foreign laws**, and difficulties in managing global expansion[161](index=161&type=chunk)[162](index=162&type=chunk)[166](index=166&type=chunk) - **Evolving government regulation** of the internet, e-commerce, **data privacy** (e.g., GDPR, CCPA, CPRA), and **tax laws** (e.g., TCJA, OECD BEPS) could **negatively impact the business and increase costs**[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) [Unresolved Staff Comments](index=39&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report - **No unresolved staff comments**[209](index=209&type=chunk) [Properties](index=40&type=section&id=Item%202.%20Properties) Shutterstock's corporate headquarters is located in New York, New York, where it leases approximately 103,000 square feet of office space until 2029 - Corporate headquarters in New York, NY, with a lease for approximately **103,000 square feet** expiring in **2029**[211](index=211&type=chunk) - Other office facilities globally support sales, marketing, technology, and customer service, with leases expiring between **2022 and 2029**[211](index=211&type=chunk) [Legal Proceedings](index=40&type=section&id=Item%203.%20Legal%20Proceedings) Shutterstock is not currently a party to any material active litigation, but may face claims in the ordinary course of business - Not currently a party to any **material active litigation**[213](index=213&type=chunk) - Periodically subject to claims regarding **intellectual property rights, employment matters, privacy issues**, and other ordinary course business matters[213](index=213&type=chunk) - Management believes the final disposition of existing matters will not have a **material adverse effect** on business, results of operations, financial condition, or cash flows[213](index=213&type=chunk) [Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Shutterstock, Inc - **Not applicable**[214](index=214&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=41&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Shutterstock's common stock is listed on the NYSE, with a quarterly cash dividend initiated in 2020 and an active share repurchase program - Common stock is listed on the **New York Stock Exchange (NYSE)** under the symbol '**SSTK**'[215](index=215&type=chunk) - As of **February 4, 2022**, there were **3 holders of record** of common stock[215](index=215&type=chunk) - No unregistered equity securities were sold during the year ended **December 31, 2021**[216](index=216&type=chunk) - A quarterly cash dividend was initiated on **February 11, 2020**, and is expected to continue, subject to Board determination[217](index=217&type=chunk) Issuer Purchases of Equity Securities (Q4 2021) | Period | Total Number of Shares (or Units) Purchased | Average Price Paid Per Share (or Unit) | | :-------------------- | :------------------------------------------ | :------------------------------------- | | October 1 - 31, 2021 | 63,000 | $119.61 | | November 1 - 30, 2021 | 62,800 | $119.30 | | December 1 - 31, 2021 | 66,000 | $110.35 | | **Total** | **191,800** | **$116.32** | - As of **December 31, 2021**, **$72.8 million** remained available for purchase under the share repurchase program[220](index=220&type=chunk) Cumulative 5-Year Total Shareholder Return (12/2016 to 12/2021) | Index | 12/2016 | 12/2017 | 12/2018 | 12/2019 | 12/2020 | 12/2021 | | :---------------------------------- | :------ | :------ | :------ | :------ | :------ | :------ | | Shutterstock, Inc. | 100.00 | 90.55 | 80.21 | 95.52 | 162.09 | 252.80 | | NYSE Composite | 100.00 | 118.73 | 108.10 | 135.68 | 145.16 | 175.18 | | S&P Software & Services Select Industry | 100.00 | 128.04 | 139.67 | 189.86 | 289.96 | 313.09 | [Selected Financial Data](index=42&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is reserved and contains no information - This item is **reserved**[225](index=225&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a detailed analysis of Shutterstock's financial condition and results of operations for the fiscal years ended December 31, 2021, 2020, and 2019 [Overview and Recent Developments](index=43&type=section&id=Overview%20and%20Recent%20Developments) Shutterstock is a global creative platform offering content and workflow solutions, with strategic acquisitions in AI and design software, serving millions of customers and contributors - Shutterstock is a **leading global creative platform** offering **full-service solutions, high-quality content, and creative workflow solutions**[228](index=228&type=chunk) - Key offerings include **images, footage, music, 3D models** (acquired TurboSquid in Feb 2021), and **creative design software** (acquired PicMonkey in Sep 2021)[228](index=228&type=chunk) - In July 2021, **Shutterstock.AI acquired Pattern89, Datasine Limited, and assets from Shotzr, Inc.** to develop **predictive performance capabilities using AI**[229](index=229&type=chunk) - As of **December 31, 2021**, the content collection included over **400 million images** and **24 million footage clips**[230](index=230&type=chunk) - In **2021**, **63% of revenue** came from the E-commerce channel, and **37%** from the Enterprise channel[231](index=231&type=chunk)[233](index=233&type=chunk) [COVID-19 Update](index=44&type=section&id=COVID-19%20Update) The COVID-19 pandemic has impacted Shutterstock's operations through office closures and travel restrictions, though services have generally been delivered remotely - Operations **impacted by office closures and travel restrictions**, but services generally **delivered remotely**[236](index=236&type=chunk) - Economic uncertainty from COVID-19 affected customer marketing budgets in **2020 and 2021**[236](index=236&type=chunk) [Key Operating Metrics](index=44&type=section&id=Key%20Operating%20Metrics) Shutterstock monitors several key operating metrics to evaluate business performance and guide strategic decisions, including subscribers, revenue per customer, paid downloads, and content library size Key Operating Metrics | Metric | 2021 | 2020 | 2019 | | :-------------------------------------- | :-------- | :-------- | :-------- | | Subscribers (end of period) | 343,000 | 281,000 | 194,000 | | Subscriber revenue (in millions) | $317.5 | $265.3 | $236.5 | | Average revenue per customer (last twelve months) | $368 | $333 | $330 | | Paid downloads (in millions) | 180.0 | 180.0 | 187.8 | | Revenue per download | $4.16 | $3.68 | $3.43 | | Content in our collection (end of period, in millions): | | | | | Images | 400 | 360 | 314 | | Footage clips | 24 | 21 | 17 | - Subscribers are defined as customers purchasing monthly recurring products for at least **three continuous months**, excluding TurboSquid and PicMonkey acquisitions[238](index=238&type=chunk) - Paid downloads **exclude custom content, free content, and computer vision offerings**[241](index=241&type=chunk) - Content in collection includes **approved images and footage** on shutterstock.com, **excluding API-licensed content, custom content, and editorial-use-only content**[243](index=243&type=chunk) [Basis of Presentation](index=45&type=section&id=Basis%20of%20Presentation) Revenue is primarily generated from content licensing and creative editing tools, recognized upon download or over subscription periods, with expenses categorized into cost of revenue, sales, marketing, product development, and general and administrative - Revenue is primarily from **content licensing** (subscription or transactional) and **creative editing tools** (post-PicMonkey acquisition)[244](index=244&type=chunk) - Revenue is **recognized upon satisfaction of performance obligations**, generally when content is downloaded[245](index=245&type=chunk) - Cost of revenue includes **royalties, credit card fees, content review, customer service, infrastructure**, and depreciation/amortization[249](index=249&type=chunk) - Sales and marketing expenses cover **third-party marketing, advertising, branding, PR, and sales force costs**[250](index=250&type=chunk) - Product development expenses include **personnel, vendor costs for design/development, and IT equipment**[251](index=251&type=chunk) - General and administrative expenses include **executive, finance, legal, HR personnel, professional fees, bad debt**, and depreciation[252](index=252&type=chunk) [Results of Operations](index=47&type=section&id=Results%20of%20Operations) Shutterstock reported a 16% revenue increase to $773.4 million in 2021, driven by acquisitions and subscription growth, with net income rising 28% to $91.9 million [Comparison of the Years Ended December 31, 2021 and December 31, 2020](index=48&type=section&id=Comparison%20of%20the%20Years%20Ended%20December%2031%2C%202021%20and%20December%2031%2C%202020) In 2021, Shutterstock's revenue increased by 16% to $773.4 million, primarily due to acquisitions and growth in the subscription business, with net income rising by 28% to $91.9 million Consolidated Statements of Operations Data (2021 vs 2020, in thousands) | Metric | 2021 | 2020 | $ Change | % Change | | :-------------------------- | :---------- | :---------- | :---------- | :------- | | Revenue | $773,415 | $666,686 | $106,729 | 16 % | | Cost of revenue | $277,659 | $259,573 | $18,086 | 7 % | | Sales and marketing | $204,878 | $159,241 | $45,637 | 29 % | | Product development | $52,014 | $46,038 | $5,976 | 13 % | | General and administrative | $130,758 | $116,568 | $14,190 | 12 % | | Total operating expenses | $665,309 | $581,420 | $83,889 | 14 % | | Income from operations | $108,106 | $85,266 | $22,840 | 27 % | | Other (expense) / income, net | $(3,370) | $4,257 | $(7,627) | (179)% | | Income before income taxes | $104,736 | $89,523 | $15,213 | 17 % | | Provision for income taxes | $12,853 | $17,757 | $(4,904) | (28)% | | Net income | $91,883 | $71,766 | $20,117 | 28 % | - Revenue increased by **16%** (**15% constant currency**) to **$773.4 million** in **2021**, driven by **2021 acquisitions** (TurboSquid, PicMonkey) and a **22% growth in subscribers**[258](index=258&type=chunk)[259](index=259&type=chunk) - Revenue per download increased by **13%** to **$4.16** in **2021**, primarily due to changes in product mix[261](index=261&type=chunk) - Sales and marketing expenses increased by **29%** to **$204.9 million**, mainly due to higher marketing spend (**$31.7 million**) and employee-related costs (**$11.3 million**)[264](index=264&type=chunk) - The effective tax rate decreased to **12.3%** in **2021** from **19.8%** in **2020**, influenced by discrete items like windfall tax benefits from equity-based compensation and a capital loss transaction[268](index=268&type=chunk)[269](index=269&type=chunk) [Comparison of the Years Ended December 31, 2020 and December 31, 2019](index=50&type=section&id=Comparison%20of%20the%20Years%20Ended%20December%2031%2C%202020%20and%20December%2031%2C%202019) In 2020, Shutterstock's revenue increased by 2% to $666.7 million, primarily driven by a 45% growth in subscribers and a 12% increase in subscriber revenue Consolidated Statements of Operations Data (2020 vs 2019, in thousands) | Metric | 2020 | 2019 | $ Change | % Change | | :-------------------------- | :---------- | :---------- | :---------- | :------- | | Revenue | $666,686 | $650,523 | $16,163 | 2 % | | Cost of revenue | $259,573 | $278,176 | $(18,603) | (7)% | | Sales and marketing | $159,241 | $181,730 | $(22,489) | (12)% | | Product development | $46,038 | $57,216 | $(11,178) | (20)% | | General and administrative | $116,568 | $113,246 | $3,322 | 3 % | | Total operating expenses | $581,420 | $630,368 | $(48,948) | (8)% | | Income from operations | $85,266 | $20,155 | $65,111 | 323 % | | Other income, net | $4,257 | $4,761 | $(504) | (11)% | | Income before income taxes | $89,523 | $24,916 | $64,607 | 259 % | | Provision for income taxes | $17,757 | $4,808 | $12,949 | 269 % | | Net income | $71,766 | $20,108 | $51,658 | 257 % | - Revenue increased by **2%** to **$666.7 million** in **2020**, primarily driven by a **45% growth in subscribers** and **12% growth in subscriber revenue**[272](index=272&type=chunk) - Paid downloads decreased by **4%** to **180.0 million** in **2020**, partially attributed to COVID-19 impact on customer utilization[276](index=276&type=chunk) - Cost of revenue decreased by **7%** to **$259.6 million**, due to lower royalty expense and content procurement costs, partially offset by higher hosting and credit card fees[278](index=278&type=chunk) - Sales and marketing expenses decreased by **12%** to **$159.2 million**, driven by a **$21.1 million decline** in marketing spend and reduced travel costs due to COVID-19[279](index=279&type=chunk) - The effective tax rate was **19.8%** in **2020**, up from **19.3%** in **2019**, primarily due to increased pre-tax income[284](index=284&type=chunk) [Liquidity and Capital Resources](index=52&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2021, Shutterstock had $314.0 million in cash and cash equivalents, primarily funding operations through cash flow, with significant uses for acquisitions, dividends, and share repurchases - Cash and cash equivalents totaled **$314.0 million** as of **December 31, 2021**[288](index=288&type=chunk) - Primary uses of cash include **funding operations, capital expenditures, content acquisitions, business combinations, cash dividends, and share repurchases**[289](index=289&type=chunk) - In **August 2020**, Shutterstock completed a stock offering, selling **516,000 shares** and receiving net proceeds of approximately **$23.2 million**[290](index=290&type=chunk) - Declared and paid cash dividends of **$0.84 per share**, totaling **$30.7 million**, in **2021**[291](index=291&type=chunk) - As of **December 31, 2021**, **$73 million** remained authorized for purchases under the share repurchase program[295](index=295&type=chunk) - Net share settlement for RSUs resulted in **$22.7 million** withheld for taxes in **2021**, reducing dilutive impact[296](index=296&type=chunk)[297](index=297&type=chunk) Cash Flows Summary (in thousands) | Cash Flow Activity | 2021 | 2020 | 2019 | | :-------------------------------- | :---------- | :---------- | :---------- | | Net cash provided by operating activities | $216,372 | $165,072 | $102,646 | | Net cash used in investing activities | $(250,438) | $(35,310) | $(27,234) | | Net cash used in financing activities | $(77,722) | $(4,587) | $(1,696) | - Cash used in investing activities in **2021** included **$181.6 million** for TurboSquid and PicMonkey acquisitions, and **$31.6 million** for AI asset acquisitions[306](index=306&type=chunk) - Cash used in financing activities in **2021** primarily for dividends (**$30.7 million**), share repurchases (**$26.5 million**), and tax withholding for equity awards (**$22.7 million**)[310](index=310&type=chunk) [Contractual Obligations and Commitments](index=54&type=section&id=Contractual%20Obligations%20and%20Commitments) As of December 31, 2021, Shutterstock had total contractual obligations of $104.3 million, comprising operating lease and purchase obligations, and provides customer indemnifications Future Minimum Payments Under Non-Cancelable Operating Leases and Purchase Obligations (as of Dec 31, 2021, in thousands) | Obligation Type | Total | Less Than 1 Year | 1 - 3 Years | 3 - 5 Years | More Than 5 Years | | :------------------------ | :---------- | :--------------- | :---------- | :---------- | :---------------- | | Operating lease obligations | $56,187 | $8,694 | $14,400 | $14,974 | $18,119 | | Purchase obligations | $48,100 | $28,600 | $17,100 | $2,400 | $0 | | **Total** | **$104,287** | **$37,294** | **$31,500** | **$17,374** | **$18,119** | - The ESB Lease for the New York City headquarters expires in **2029**, with approximately **$50.4 million** in undiscounted future minimum lease payments[313](index=313&type=chunk) - Customer indemnification obligations range from **$10,000 to $250,000**, with some uncapped exceptions, and are covered by insurance[314](index=314&type=chunk)[315](index=315&type=chunk) [Off-Balance Sheet Arrangements](index=55&type=section&id=Off-Balance%20Sheet%20Arrangements) As of December 31, 2021, Shutterstock had no material off-balance sheet arrangements - No **material off-balance sheet arrangements** as of **December 31, 2021**[316](index=316&type=chunk) [Non-GAAP Financial Measures](index=55&type=section&id=Non-GAAP%20Financial%20Measures) Shutterstock uses non-GAAP financial measures, including Adjusted EBITDA and Free Cash Flow, to provide additional insights into its financial results, excluding certain non-recurring or non-operating items to better reflect underlying business performance - Non-GAAP measures include **Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted Net Income per diluted common share, revenue growth (including by distribution channel) on a constant currency basis, and Free Cash Flow**[317](index=317&type=chunk) - These measures are used by management to **monitor performance, facilitate comparisons, evaluate management, analyze planning decisions, and prepare budgets**[319](index=319&type=chunk) Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | 2021 | 2020 | 2019 | | :-------------------------- | :---------- | :---------- | :---------- | | Net income | $91,883 | $71,766 | $20,108 | | Depreciation and amortization | $48,771 | $41,359 | $49,915 | | Non-cash equity-based compensation | $36,179 | $28,309 | $22,815 | | Other adjustments, net | $3,370 | $(4,257) | $(1,332) | | Provision for income taxes | $12,853 | $17,757 | $4,808 | | **Adjusted EBITDA** | **$193,056** | **$154,934** | **$96,314** | | Adjusted EBITDA margin | 25.0 % | 23.2 % | 14.8 % | Reconciliation of Net Income to Adjusted Net Income (in thousands) | Metric | 2021 | 2020 | 2019 | | :---------------------------------------------- | :---------- | :---------- | :---------- | | Net income | $91,883 | $71,766 | $20,108 | | Non-cash equity-based compensation | $36,179 | $28,309 | $22,815 | | Tax effect of non-cash equity-based compensation | $(8,502) | $(6,653) | $(5,363) | | Acquisition-related amortization expense | $13,334 | $2,261 | $4,691 | | Tax effect of acquisition-related amortization expense | $(3,133) | $(531) | $(1,034) | | Acquisition-related long-term incentives and contingent consideration | $0 | $0 | $3,430 | | Tax effect of acquisition-related long-term incentives and contingent consideration | $0 | $0 | $(910) |\ | **Adjusted net income** | **$129,761** | **$95,152** | **$43,737** | | Adjusted net income per diluted common share | $3.48 | $2.62 | $1.23 | | Weighted average diluted shares | 37,324 | 36,369 | 35,581 | Revenue Growth on a Constant Currency Basis | Metric | 2021 | 2020 | 2019 | | :-------------------------------------- | :---- | :---- | :---- | | Reported revenue growth | 16 % | 2 % | 4 % | | Revenue growth on a constant currency basis | 15 % | 2 % | 6 % | | E-commerce reported revenue growth | 19 % | 5 % | 7 % | | E-commerce revenue growth on a constant currency basis | 16 % | 5 % | 9 % | | Enterprise reported revenue growth | 11 % | (2)% | 1 % | | Enterprise revenue growth on a constant currency basis | 10 % | (2)% | 3 % | Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow (in thousands) | Metric | 2021 | 2020 | 2019 | | :---------------------------------------------- | :---------- | :---------- | :---------- | | Net cash provided by operating activities | $216,372 | $165,072 | $102,646 | | Capital expenditures | $(28,125) | $(25,630) | $(26,081) | | Content acquisitions | $(8,874) | $(2,970) | $(3,344) | | Payments related to long-term incentives related to acquisitions | $0 | $7,759 | $0 | | **Free Cash Flow** | **$179,373** | **$144,231** | **$73,221** | [Critical Accounting Policies and Estimates](index=58&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Shutterstock's critical accounting policies and estimates involve significant management judgment and assumptions, particularly in revenue recognition, accounts receivable, valuation of acquired goodwill and intangible assets, and income taxes - Critical accounting policies and estimates include **revenue recognition, allowance for doubtful accounts, valuation of acquired goodwill and intangible assets, and accounting for income taxes**[331](index=331&type=chunk) - Revenue recognition involves **estimating expected unused licenses** for subscription-based products, impacting the timing of revenue[333](index=333&type=chunk) - Allowance for doubtful accounts is determined by evaluating **accounts receivable aging, historical loss rates, specific customer situations, and economic environments**[337](index=337&type=chunk) - Valuation of acquired goodwill and intangible assets requires **significant judgment and estimates**, including **future revenue growth, expense adjustments, discount rates, and customer attrition**[344](index=344&type=chunk) - Income tax accounting involves **deferred tax assets/liabilities, valuation allowances, and unrecognized tax benefits**, requiring significant management judgment[340](index=340&type=chunk)[341](index=341&type=chunk)[342](index=342&type=chunk) [Recent Accounting Pronouncements](index=60&type=section&id=Recent%20Accounting%20Pronouncements) Shutterstock adopted ASU 2016-13 (Credit Losses) effective January 1, 2020, ASU 2019-12 (Income Taxes) effective January 1, 2021, and early adopted ASU 2021-08 (Business Combinations) effective January 1, 2021 - Adopted **ASU 2016-13 (Credit Losses)** effective **January 1, 2020**, resulting in a cumulative-effect adjustment of **$0.2 million**, net of tax, in retained earnings[462](index=462&type=chunk) - Adopted **ASU 2019-12 (Income Taxes)** effective **January 1, 2021**, with **no material impact** on consolidated financial statements[464](index=464&type=chunk) - Early adopted **ASU 2021-08 (Business Combinations)** effective **January 1, 2021**, with **no material impact**[465](index=465&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Shutterstock is exposed to market risks primarily from foreign currency exchange rate fluctuations, as approximately 35% of its revenue in 2021 was denominated in non-U.S. currencies - Approximately **35% of total revenue** in **2021** was denominated in foreign currencies (**Euro, British pound, Australian dollar, Japanese yen**)[347](index=347&type=chunk) - A **10% change** in the U.S. dollar exchange rate against foreign currencies could impact revenue by approximately **3%**[347](index=347&type=chunk) Historical Revenue by Currency (in thousands) | Currency | 2021 (U.S. Dollars) | 2020 (U.S. Dollars) | 2019 (U.S. Dollars) | | :------------------------ | :------------------ | :------------------ | :------------------ | | Euro | $152,290 | $138,128 | $133,341 | | British pounds | $57,851 | $49,402 | $48,307 | | All other non-U.S. currencies | $57,342 | $49,630 | $47,471 | | **Total foreign currency** | **$267,483** | **$237,160** | **$229,119** | | U.S. dollar | $505,932 | $429,526 | $421,404 | | **Total revenue** | **$773,415** | **$666,686** | **$650,523** | - The company **does not currently use derivatives** to hedge foreign currency exchange risk[348](index=348&type=chunk) - Interest rate risk is **not significant** as cash and cash equivalents are primarily bank balances and money market funds, and there were **no long-term borrowings** as of **December 31, 2021**[350](index=350&type=chunk) - Inflation has **not had a material effect** on the business, financial condition, or results of operations[351](index=351&type=chunk) [Financial Statements and Supplementary Data](index=61&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The consolidated financial statements and accompanying notes are incorporated by reference from pages F-2 through F-32 of this Annual Report on Form 10-K - Consolidated financial statements and accompanying notes are incorporated by reference from **pages F-2 through F-32**[352](index=352&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=64&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance, including the Code of Business Conduct and Ethics, is incorporated by reference from the company's definitive proxy statement for the 2022 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement for the **2022 Annual Meeting of Stockholders**[365](index=365&type=chunk) - A **Code of Business Conduct and Ethics** applies to all directors, officers, and employees, available on the investor relations website[366](index=366&type=chunk) [Executive Compensation](index=64&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's definitive proxy statement for the 2022 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement for the **2022 Annual Meeting of Stockholders**[367](index=367&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=64&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from the company's definitive proxy statement for the 2022 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement for the **2022 Annual Meeting of Stockholders**[368](index=368&type=chunk) [Certain Relationships And Related Transactions And Director Independence](index=64&type=section&id=Item%2013.%20Certain%20Relationships%20And%20Related%20Transactions%20And%20Director%20Independence) Information regarding certain relationships and related transactions, and director independence, is incorporated by reference from the company's definitive proxy statement for the 2022 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement for the **2022 Annual Meeting of Stockholders**[369](index=369&type=chunk) [Principal Accounting Fees and Services](index=64&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's definitive proxy statement for the 2022 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement for the **2022 Annual Meeting of Stockholders**[370](index=370&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=65&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, financial statement schedules, and exhibits included as part of this Annual Report on Form 10-K - Includes the **Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations, Comprehensive Income, Stockholders' Equity, Cash Flows, and Notes to Consolidated Financial Statements**[372](index=372&type=chunk) - Financial statement schedules have been **omitted** because the required information is included in the consolidated financial statements or notes[372](index=372&type=chunk) - An **Exhibit Index** immediately precedes the signature page[373](index=373&type=chunk) [Form 10-K Summary](index=65&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item indicates that no Form 10-K Summary is provided - **No Form 10-K Summary is provided**[374](index=374&type=chunk)

Financial Performance - Revenue increased by 18% to $1944 million compared to Q3 2020[10] - On a constant currency basis, revenue increased 17%[10] - Net income decreased 29% to $160 million[10] - Adjusted EBITDA decreased 6% to $444 million[10] - Adjusted net income per diluted share decreased by 13% to $070[10] - Free cash flow was $443 million in Q3 2021 compared to $570 million in Q3 2020[11] Operating Metrics - Subscribers increased 32% to 336000[14] - Subscriber revenue increased 21% to $815 million[14] - Average revenue per customer (LTM) increased 10% to $361[14] - Paid downloads increased 2% to 443 million[14] 2021 Guidance - The company revised its full-year 2021 revenue guidance to $765 - $770 million, representing a year-over-year growth of 1475% to 155%[38] - Adjusted EBITDA is expected to be $185 - $191 million[38] - Adjusted net income per diluted share is projected to be $318 to $329[38]

Financial Data and Key Metrics Changes - Shutterstock reported an 18% year-over-year revenue growth in Q3 2021, with e-commerce and enterprise channels both contributing significantly to this growth [11][27] - Gross margin improved by 70 basis points year-over-year to 64%, consistent with the previous quarter [29] - GAAP diluted earnings per share was $0.43, while adjusted diluted earnings per share was $0.70 [33] Business Line Data and Key Metrics Changes - E-commerce revenue grew 18% year-over-year, driven by strong performance in subscription offerings [28] - The enterprise channel experienced a 17% year-over-year growth, marking its fastest growth since 2018 [13][29] - Subscriber count increased by 32%, and subscriber revenues rose by 21% [40] Market Data and Key Metrics Changes - The deferred revenue balance increased to $171 million, indicating strong future revenue growth potential [36] - The company recognized $1 million in revenue from PicMonkey, contributing to overall revenue growth [28] Company Strategy and Development Direction - The acquisition of PicMonkey is expected to enhance Shutterstock's offerings and expand its customer base [14][15] - The launch of Creative Flow aims to integrate AI-driven workflow applications, enhancing customer collaboration and content management [17][23] - The company is focused on transforming into a leading creative platform, leveraging content, data, and workflow applications [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued growth of the enterprise business, despite anticipated slower growth in e-commerce due to tougher comparisons [45][49] - The company plans to increase its full-year revenue guidance, projecting revenue between $765 million and $770 million [45] - Management acknowledged the challenges posed by changes in advertising dynamics but noted that their business model is less impacted due to its focus away from direct advertising revenue [80][81] Other Important Information - Sales and marketing expenses increased to 28% of revenues, driven by investments in marketing and higher sales commissions [30] - The company plans to grow its dividend in line with cash flow growth and has commenced a $75 million share buyback program [38][39] Q&A Session Summary Question: Clarification on Q4 guidance and organic growth - Management indicated that the Q4 guidance reflects a slowdown in organic growth due to tougher comparisons and highlighted ongoing efforts to improve e-commerce growth rates [53][54] Question: Impact of acquisitions on growth - Management discussed the long-term growth potential from acquisitions like PicMonkey and TurboSquid, emphasizing the expansion of customer offerings and retention strategies [55][56] Question: Insights on marketing spend and ROI - Management acknowledged the longer measurement window for brand marketing spend but expressed confidence in the momentum of the creator economy and the importance of brand repositioning [68][69] Question: Performance of FLEX subscription products - Management noted that the FLEX product has expanded average revenue per customer significantly and has attracted new customers beyond initial expectations [77][78] Question: Market conditions and potential weaknesses - Management stated that their business model is less affected by advertising revenue changes, although they are adapting to new marketing attribution challenges [80][81] Question: Allocation of PicMonkey revenue - PicMonkey revenue will be reported under the e-commerce channel, and it will enhance existing subscriptions by integrating creative capabilities into the Creative Flow platform [84][86] Question: Future acquisition pipeline - Management expressed optimism about the acquisition pipeline, focusing on both product roadmap acceleration and content acquisition opportunities [88][89]