PART I. FINANCIAL INFORMATION This section covers unaudited financial statements, management's analysis, market risk, and internal controls [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Shutterstock's unaudited consolidated financial statements, including balance sheets, income statements, cash flows, and notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of September 30, 2021, total assets increased to $841.2 million from $729.6 million at the end of 2020, primarily driven by Goodwill and Intangible Assets from acquisitions, while total liabilities rose to $366.3 million and total stockholders' equity grew to $474.9 million Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | $375,676 | $489,070 | | **Goodwill** | $219,822 | $89,413 | | **Intangible assets, net** | $130,196 | $25,765 | | **Total Assets** | **$841,177** | **$729,644** | | **Total Current Liabilities** | $315,454 | $256,929 | | **Total Liabilities** | **$366,281** | **$307,719** | | **Total Stockholders' Equity** | **$474,896** | **$421,925** | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) For Q3 2021, revenue increased 17.7% year-over-year to $194.4 million, but net income declined to $16.0 million due to higher operating expenses, while for the nine-month period, revenue grew 16.9% to $567.6 million and net income increased 63.4% to $75.0 million Statement of Operations Summary (in thousands, except EPS) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $194,439 | $165,227 | $567,632 | $485,742 | | **Income from Operations** | $22,169 | $29,347 | $93,512 | $57,673 | | **Net Income** | $16,029 | $22,582 | $74,997 | $45,887 | | **Diluted EPS** | $0.43 | $0.62 | $2.01 | $1.27 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2021, net cash from operating activities significantly increased to $161.9 million, while cash used in investing activities surged to $242.4 million due to acquisitions, and financing activities used $46.4 million, resulting in a net decrease in cash to $300.6 million Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $161,858 | $100,225 | | **Net cash used in investing activities** | $(242,407) | $(22,088) | | **Net cash (used in) / provided by financing activities** | $(46,426) | $1,674 | | **Net (decrease) / increase in cash** | $(127,995) | $77,253 | [Note 3: Acquisitions](index=12&type=section&id=Note%203%3A%20Acquisitions) In 2021, the company made several strategic acquisitions, including PicMonkey for approximately $110 million, TurboSquid for approximately $77.3 million, and three AI-focused entities for about $35 million, to expand its offerings and data capabilities - Completed the acquisition of PicMonkey, an online graphic design and image editing platform, for approximately **$110 million** in cash[51](index=51&type=chunk) - Acquired TurboSquid, a marketplace for 3D models, for approximately **$77.3 million** in cash[54](index=54&type=chunk) - Completed asset acquisitions of three AI entities (Pattern89, Inc., Datasine Limited, and assets from Shotzr, Inc.) for an aggregate purchase price of approximately **$35 million**[65](index=65&type=chunk) [Note 8: Revenue](index=17&type=section&id=Note%208%3A%20Revenue) Revenue is generated through E-commerce and Enterprise channels, with E-commerce revenue growing 20% to $360.8 million and Enterprise revenue growing 12% to $206.8 million for the nine months ended September 30, 2021 Revenue by Distribution Channel (in thousands) | Channel | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | **E-commerce** | $121,707 | $102,816 | $360,822 | $300,716 | | **Enterprise** | $72,732 | $62,411 | $206,810 | $185,026 | | **Total Revenues** | **$194,439** | **$165,227** | **$567,632** | **$485,742** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, strategic acquisitions, key operating metrics, and liquidity, highlighting revenue and net income trends [Overview and Recent Developments](index=23&type=section&id=Overview%20and%20Recent%20Developments) Shutterstock is expanding its platform beyond traditional stock content through strategic acquisitions like TurboSquid for 3D models and PicMonkey for creative design software, and by forming Shutterstock.AI to commercialize its data library and develop predictive tools - The company's content collection has grown to over **390 million images** and **23 million footage clips** as of September 30, 2021, serving over **2.0 million active paying customers** in the last twelve months[117](index=117&type=chunk) - Launched Shutterstock.AI after acquiring Pattern89, Datasine, and assets from Shotzr to commercialize data assets and develop predictive performance capabilities using artificial intelligence[115](index=115&type=chunk)[116](index=116&type=chunk) [Key Operating Metrics](index=25&type=section&id=Key%20Operating%20Metrics) The company's key operating metrics showed positive trends in Q3 2021, with subscribers increasing 31.8% year-over-year to 336,000, average revenue per customer rising to $361, and revenue per download increasing to $4.20, indicating higher value transactions Key Operating Metrics Comparison | Metric | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | **Subscribers (end of period)** | 336,000 | 255,000 | | **Subscriber revenue (in millions)** | $81.5 | $67.6 | | **Average revenue per customer (LTM)** | $361 | $328 | | **Paid downloads (in millions)** | 44.3 | 43.4 | | **Revenue per download** | $4.20 | $3.79 | [Results of Operations](index=28&type=section&id=Results%20of%20Operations) In Q3 2021, revenue grew 18% year-over-year to $194.4 million, but income from operations fell 24% to $22.2 million due to a 49% increase in sales and marketing expenses, while for the nine-month period, revenue grew 17% to $567.6 million and income from operations increased 62% to $93.5 million - Q3 2021 revenue increased **18% YoY**, with E-commerce revenue growing **18%** and Enterprise revenue growing **17%**[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) - Q3 2021 sales and marketing expenses increased by **$17.8 million**, or **49%**, primarily due to a **$13.0 million** increase in marketing spend and higher commissions[155](index=155&type=chunk) - For the nine months ended Sep 30, 2021, income from operations increased **62%** to **$93.5 million**, and net income increased **63%** to **$75.0 million** compared to the prior year period[163](index=163&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) The company ended Q3 2021 with $300.6 million in cash and cash equivalents, having used cash for strategic acquisitions totaling $213.2 million, $23.0 million in dividends, and $4.2 million in share repurchases during the first nine months of 2021, with management confident in sufficient liquidity for the next 12 months - Cash and cash equivalents totaled **$300.6 million** as of September 30, 2021[183](index=183&type=chunk) - During the nine months ended Sep 30, 2021, the company paid **$23.0 million** in dividends and repurchased approximately **41,900 shares** for **$4.2 million**; **$95 million** remains available under the share repurchase program[185](index=185&type=chunk)[188](index=188&type=chunk)[198](index=198&type=chunk) - Net cash used in investing activities for the first nine months of 2021 was **$242.4 million**, primarily consisting of **$181.8 million** for business combinations and **$31.4 million** for asset acquisitions[196](index=196&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is foreign currency exchange rate fluctuation, as approximately 35% of its revenue for the first nine months of 2021 was foreign currency denominated, with a hypothetical 10% U.S. dollar exchange rate change impacting total revenue by approximately 3% - Revenue denominated in foreign currencies was approximately **35%** of total revenue for the nine months ended September 30, 2021[221](index=221&type=chunk) - A hypothetical **10%** change in the exchange rate of the U.S. dollar against all foreign currencies would result in an approximate **3%** impact on total revenue[221](index=221&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) As of September 30, 2021, the company's CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable assurance level, and the company is integrating the internal controls of its recently acquired businesses - Management concluded that as of September 30, 2021, the company's disclosure controls and procedures were effective at the reasonable assurance level[229](index=229&type=chunk) - The company is in the process of integrating the acquired businesses from 2021 into its overall internal control over financial reporting process[230](index=230&type=chunk) PART II. OTHER INFORMATION This section includes information on legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material active litigation, and management does not believe that the final disposition of any existing matters will have a material adverse effect on its financial condition or operations - The company is not currently a party to any material active litigation and does not expect existing matters to have a material adverse effect on the business[232](index=232&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors affecting the company during the three months ended September 30, 2021, as compared to those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020 - During the three months ended September 30, 2021, there were no material changes to the risk factors as described in the company's 2020 Form 10-K[233](index=233&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section provides an index of the exhibits filed with the Form 10-Q, including CEO and CFO certifications required by the Sarbanes-Oxley Act and the company's interactive data files (XBRL) - The Exhibit Index lists required filings, including CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906, and XBRL data files[236](index=236&type=chunk)

Financial Data and Key Metrics Changes - Company reported a revenue growth of 19% in Q2 2021, with constant currency organic revenue growth of 12% [21][26] - Adjusted EBITDA margin expanded by 460 basis points to 27.9% due to accelerated revenue growth and improved gross margin [34] - GAAP diluted earnings per share was $0.79, while adjusted diluted EPS was $1.02, representing growth of 49% and 65% respectively [34] Business Line Data and Key Metrics Changes - E-commerce revenue grew by 23%, driven by balanced growth across image, footage, and music, with TurboSquid contributing significantly [22][28] - Enterprise revenue growth accelerated to 13%, up from 5% in the previous quarter, supported by new product introductions and bookings momentum [23][28] - Subscriber count increased by 44%, and subscriber revenue grew by 25%, indicating strong demand for subscription products [40] Market Data and Key Metrics Changes - Revenue growth was 23% in North America, 24% in Europe, and 11% in the rest of the world, with European growth driven by the UK, Germany, and France [29] - The company experienced a 2% increase in paid downloads, with revenue per download rising to $4.17 [40] Company Strategy and Development Direction - The formation of Shutterstock.AI and the acquisition of three AI-driven platforms represent a strategic pivot towards data and insights, enhancing product offerings [9][18] - The company aims to integrate predictive performance and computer vision solutions into its offerings, addressing customer pain points in content selection [10][19] - Future product developments will focus on enhancing subscription products with data-driven insights to improve customer retention [43][65] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continuation of economic recovery and raised revenue and EBITDA guidance for 2021 [24][48] - The company anticipates a moderation in e-commerce growth rates in the latter half of the year due to tougher comparables [50] - Management highlighted the importance of AI in driving future growth and improving customer retention [68] Other Important Information - The company plans to pay a quarterly dividend of $0.21 per share and has initiated a $75 million annual share buyback program [37][38] - The deferred revenue balance increased by over $8 million from the previous quarter, indicating strong future revenue potential [36] Q&A Session Summary Question: Guidance and Revenue Expectations - Analyst inquired about the guidance for Q3 and Q4, noting that the high end of the guidance implies potential revenue stagnation [58] - Management responded that they are confident in the guidance raise, but acknowledged tougher comparables in the latter half of the year [59][60] Question: Business Evolution and AI Impact - Analyst asked about the strategic pivot towards AI and how the business might evolve in the next few years [58] - Management confirmed the pivot towards a technology platform, focusing on data-enabled solutions to enhance customer decision-making [63][65] Question: AI's Impact on Growth - Analyst questioned the potential impact of AI on revenue growth in 2022 [67] - Management indicated that while specific guidance for 2022 is not provided, they expect significant benefits from AI integration over the next 12 to 18 months [69] Question: Enterprise Growth and SMB FLEX - Analyst sought clarification on the sustainability of enterprise growth and the impact of new products like SMB FLEX [70] - Management highlighted successful product introductions and a segmented sales approach as key drivers of enterprise growth [71][72] Question: Competitive Landscape and TurboSquid Integration - Analyst asked about competitive differentiation in AI and the integration of TurboSquid [75] - Management noted that while many companies leverage AI, Shutterstock's focus on creative performance and data-driven recommendations sets it apart [76][79]

Financial Performance - Shutterstock's revenue increased by 19% to $189.912 million in the second quarter of 2021 compared to the second quarter of 2020[10, 22] - On a constant currency basis, revenue increased by 16%[10] - Net income increased by 55% to $29.454 million[10, 22] - Adjusted EBITDA increased by 43% to $53.063 million[10, 22] - Free cash flow was $61.692 million in Q2 2021, compared to $22.383 million in Q2 2020[11, 25] Operating Metrics - Subscribers increased by 44% to 321,000[14, 29] - Subscriber revenue increased by 25% to $78.1 million[14, 29] - Average revenue per customer (LTM) increased by 9% to $356[14, 29] - Image library expanded by 12% to over 380 million images[14] - Footage library expanded by 16% to over 22 million footage clips[14] 2021 Guidance - The company revised its full year 2021 revenue guidance to $740 - $750 million, representing a year-over-year growth of 11% to 12.5%[32, 33] - Adjusted EBITDA is expected to be $175 - $180 million[32, 33] - Adjusted net income per diluted share is projected to be $2.80 to $2.95[32, 33]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Unaudited consolidated financial statements for Q2 2021 show total assets at **$795.9 million**, stockholders' equity at **$465.3 million**, and significant growth in H1 2021 revenue and net income [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$795.9 million** by June 30, 2021, driven by acquisitions, with liabilities at **$330.5 million** and equity at **$465.3 million** Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $411,046 | $428,574 | | Goodwill | $149,069 | $89,413 | | Intangible assets, net | $46,409 | $25,765 | | **Total assets** | **$795,852** | **$729,644** | | Deferred revenue | $161,935 | $149,843 | | **Total liabilities** | **$330,518** | **$307,719** | | **Total stockholders' equity** | **$465,334** | **$421,925** | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Q2 2021 revenue grew **19%** to **$189.9 million** (net income up **55%**), while H1 2021 revenue rose **16%** to **$373.2 million** (net income up **153%**) Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2021 | Q2 2020 | YoY Change | H1 2021 | H1 2020 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $189,912 | $159,230 | +19.3% | $373,193 | $320,515 | +16.4% | | Income from operations | $33,225 | $22,545 | +47.4% | $71,343 | $28,326 | +151.9% | | Net income | $29,454 | $18,987 | +55.1% | $58,968 | $23,305 | +153.0% | | Diluted EPS | $0.79 | $0.53 | +49.1% | $1.58 | $0.65 | +143.1% | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) H1 2021 operating cash flow nearly tripled to **$107.2 million**, investing activities used **$91.0 million** (TurboSquid acquisition), and financing used **$33.7 million** Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $107,216 | $36,343 | | Net cash used in investing activities | $(90,963) | $(15,438) | | Net cash used in financing activities | $(33,745) | $(14,905) | | **Net (decrease) / increase in cash** | **$(17,528)** | **$5,283** | - The significant increase in cash used for investing activities was driven by a **$72.2 million** payment for a business combination (TurboSquid)[27](index=27&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail the **$77.3 million** TurboSquid acquisition, E-commerce as the primary revenue channel, **$15.3 million** H1 2021 dividends, and subsequent **$35 million** AI platform acquisitions - 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[54](index=54&type=chunk)[55](index=55&type=chunk) Revenue by Distribution Channel (Six Months Ended June 30, in thousands) | Channel | 2021 | 2020 | | :--- | :--- | :--- | | E-commerce | $239,115 | $197,900 | | Enterprise | $134,078 | $122,615 | | **Total Revenues** | **$373,193** | **$320,515** | Revenue by Geography (Six Months Ended June 30, in thousands) | Region | 2021 | 2020 | | :--- | :--- | :--- | | North America | $133,263 | $113,229 | | Europe | $127,055 | $106,003 | | Rest of the world | $112,875 | $101,283 | | **Total revenue** | **$373,193** | **$320,515** | - In July 2021, after the quarter ended, the Company acquired Pattern89 Inc., Datasine Limited, and assets from Shotzr, Inc. for aggregate cash consideration of approximately **$35 million** to bolster its artificial intelligence capabilities[104](index=104&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reports strong Q2 and H1 2021 performance, with E-commerce driving revenue growth, strategic acquisitions (TurboSquid, AI platforms), and robust liquidity of **$411.0 million** cash [Overview and Recent Developments](index=21&type=section&id=Overview%20and%20Recent%20Developments) Shutterstock operates a global creative platform with over **2.0 million** customers, generating revenue via E-commerce, and acquired TurboSquid and three AI platforms for **$35 million** to form Shutterstock.AI - As of June 30, 2021, the company had over **2.0 million** active paying customers, over **1.8 million** approved contributors, and a collection of more than **380 million** images and **22 million** footage clips[109](index=109&type=chunk) - In July 2021, the company acquired three artificial intelligence entities (Pattern89, Inc., DataSine Limited, and assets from Shotzr, Inc.) for approximately **$35 million** to form Shutterstock.AI, which will commercialize data assets and develop predictive performance capabilities[115](index=115&type=chunk)[116](index=116&type=chunk) [Key Operating Metrics](index=23&type=section&id=Key%20Operating%20Metrics) Q2 2021 key metrics show subscriber growth to **321,000**, subscriber revenue of **$78.1 million**, and revenue per download increasing to **$4.17** due to product mix Key Operating Metrics Comparison | Metric | Q2 2021 | Q2 2020 | | :--- | :--- | :--- | | Subscribers (end of period) | 321,000 | 223,000 | | Subscriber revenue (in millions) | $78.1 | $62.7 | | Average revenue per customer (LTM) | $356 | $326 | | Paid downloads (in millions) | 44.9 | 44.0 | | Revenue per download | $4.17 | $3.61 | [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Q2 2021 revenue grew **19%** to **$189.9 million** (operations income up **47%**), and H1 2021 revenue increased **16%** to **$373.2 million** (operations income up **152%**) - **Q2 2021 vs Q2 2020:** - Revenue increased **19%** to **$189.9 million**[143](index=143&type=chunk) - E-commerce revenue grew **23%**, driven by increased subscriber revenue and the TurboSquid acquisition[144](index=144&type=chunk) - Enterprise revenue grew **13%**[145](index=145&type=chunk) - Sales and marketing expenses increased **29%** due to higher marketing spend and commissions[150](index=150&type=chunk) - **H1 2021 vs H1 2020:** - Revenue increased **16%** to **$373.2 million**[158](index=158&type=chunk) - Cost of revenue decreased by **3%** to **$129.6 million**, primarily due to lower royalty expenses from a change in product mix and a modified contributor compensation model[159](index=159&type=chunk) - Income from operations increased **152%** to **$71.3 million**[165](index=165&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2021, the company had **$411.0 million** in cash, funding operations, acquisitions, **$15.3 million** in dividends, and **$20.2 million** for RSU tax, with **$100 million** for share repurchases - The company had cash and cash equivalents of **$411.0 million** as of June 30, 2021[179](index=179&type=chunk) - Paid cash dividends of **$15.3 million** during the six months ended June 30, 2021. A further quarterly dividend of **$0.21** per share was declared on July 19, 2021[181](index=181&type=chunk)[182](index=182&type=chunk) - As of June 30, 2021, **$100 million** of repurchase capacity remained under the share repurchase program. No shares were repurchased in the first six months of 2021[184](index=184&type=chunk) - Total non-lease obligations as of June 30, 2021, were approximately **$45.4 million**, primarily for minimum royalty guarantees and infrastructure contracts[99](index=99&type=chunk) [Non-GAAP Financial Measures](index=33&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP measures show Q2 2021 Adjusted EBITDA at **$53.1 million** (**27.9%** margin) and H1 2021 Adjusted EBITDA at **$109.5 million**, with H1 2021 Free Cash Flow at **$88.5 million** Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Net income | $29,454 | $18,987 | $58,968 | $23,305 | | **Adjusted EBITDA** | **$53,063** | **$37,032** | **$109,482** | **$59,092** | | Adjusted EBITDA margin | 27.9% | 23.3% | 29.3% | 18.4% | Reconciliation of Net Income to Adjusted Net Income (in thousands) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Net income | $29,454 | $18,987 | $58,968 | $23,305 | | **Adjusted net income** | **$37,935** | **$22,162** | **$74,571** | **$31,321** | | Adjusted net income per diluted share | $1.02 | $0.62 | $2.00 | $0.87 | Free Cash Flow Calculation (in thousands) | Metric | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $107,216 | $36,343 | | Capital expenditures | $(15,337) | $(13,966) | | Content acquisitions | $(3,396) | $(1,577) | | **Free Cash Flow** | **$88,483** | **$28,559** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Market risk primarily stems from foreign currency exchange rates, with **36%** of H1 2021 revenue in foreign currencies; a **10%** USD change could impact total revenue by **3%**, while other risks are immaterial - Revenue denominated in foreign currencies was approximately **36%** of total revenue for the six months ended June 30, 2021. The company estimates a **10%** change in the U.S. dollar exchange rate would result in an approximate **3%** impact on total revenue[218](index=218&type=chunk) - The company does not currently use derivative financial instruments to hedge foreign currency risk[219](index=219&type=chunk) - Interest rate and inflation risks are considered to have no material effect on the business[222](index=222&type=chunk)[223](index=223&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting, while integrating the TurboSquid acquisition - As of June 30, 2021, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[226](index=226&type=chunk) - The company is currently integrating the acquired TurboSquid, Inc. business into its overall internal control over financial reporting process[227](index=227&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any material active litigation, and management anticipates no material adverse effect from ordinary course claims - The company is not currently a party to any material active litigation and believes that the outcome of existing ordinary course matters will not have a material adverse effect on its business[229](index=229&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) No material changes occurred to the risk factors previously disclosed in the company's 2020 Form 10-K - During the three months ended June 30, 2021, there were no material changes to the risk factors as described in the company's 2020 Form 10-K[230](index=230&type=chunk) [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The exhibits filed with this report include CEO and CFO certifications (Exhibits 31.1, 31.2, 32) and Interactive Data Files (XBRL)[233](index=233&type=chunk)

Financial Highlights - Revenue increased by 14% to $1833 million compared to the first quarter of 2020[11] - On a constant currency basis, revenue increased by 11%[11] - Net income increased significantly by 584% to $295 million[11] - Adjusted EBITDA increased by 156% to $564 million[11] - Net income per diluted share increased by $067 to $079[11] - Adjusted net income per diluted share increased by $072 to $098[11] - Cash provided by operating activities was $358 million in 2021, compared to $69 million in 2020[11] - Free cash flow was $268 million in 2021, compared to $62 million in 2020[12] Operating Highlights - Subscribers increased by 46% to 306000[14] - Subscriber revenue increased by 20% to $765 million[14] - Image library expanded to over 370 million images, up 12%[14] - Footage library expanded to over 21 million footage clips, up 17%[14] Liquidity and Capital Allocation - Cash and cash equivalents decreased by $646 million to $3639 million during the three months ended March 31, 2021[17] - Investing cash outflows were $812 million, primarily consisting of $722 million cash used in the acquisition of TurboSquid[17] 2021 Guidance - The company's revised revenue expectations for the full year 2021 are $720 - $730 million[38] - The company's revised YOY Growth vs 2020 expectations for the full year 2021 are 8% to 95%[38] - The company's revised Adjusted EBITDA expectations for the full year 2021 are $171 - $177 million[38] - The company's revised Adjusted Net Income per diluted share expectations for the full year 2021 are $278 to $293[38]

Shutterstock, Inc. (NYSE:SSTK) Q1 2021 Earnings Conference Call April 27, 2021 8:30 AM ET Company Participants Chris Suh - VP, IR and Corporate Development Stan Pavlovsky - CEO Jarrod Yahes - CFO Conference Call Participants Ron Josey - JMP Securities Youssef Squali - Truist Securities John Egbert - Stifel Nicolaus Bernie McTernan - Needham & Company Operator Good day and thank you for standing by. Welcome to the Shutterstock, Inc. First Quarter Earnings Conference Call. At this time, all participants are i ...

Washington, D.C. 20549 __________________________________________________________________________________________________ FORM 10-Q ___________________________________________________________________________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 or Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECU ...

| --- | --- | --- | --- | --- | |-----------------------------------|-------|-------|-------|-------| | | | | | | | shutterstsck® | | | | | | Fourth Quarter and Full Year 2020 | | | | | | February 11, 2021 | | | ● ● | | | | | | | | | | | | | | Forward-Looking Statements This presentation contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our management's beliefs and assumptions and on information currently available to managemen ...

Shutterstock, Inc. (NYSE:SSTK) Q4 2020 Earnings Conference Call February 11, 2021 8:30 AM ET Company Participants Chris Suh - Vice President of Investor Relations and Corporate Development Stan Pavlovsky - Chief Executive Officer Jarrod Yahes - Chief Financial Officer Conference Call Participants John Egbert - Stifel Nicolaus Youssef Squali - Truist Securities Ron Josey - JMP Securities Nat Schindler - Bank of America Operator Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2020 Shutterst ...

Part I [Business](index=5&type=section&id=Item%201.%20Business.) Shutterstock operates a global creative platform licensing content from over 1.6 million contributors to over 2.0 million customers, with revenue primarily from E-commerce and Enterprise channels - The company's business model is a two-sided marketplace connecting over **1.6 million content contributors** with over **2.0 million customers** in more than 150 countries as of 2020[23](index=23&type=chunk)[26](index=26&type=chunk)[241](index=241&type=chunk) - Content offerings include images, footage, music, and, as of February 2021, 3D models through the acquisition of TurboSquid, Inc[17](index=17&type=chunk) Revenue by Sales Channel (2016-2020, in thousands) | Sales Channel | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | E-commerce | $412,521 | $392,241 | $365,730 | $332,376 | $318,916 | | Enterprise | $254,165 | $258,282 | $254,809 | $208,713 | $164,384 | | Other | — | — | $2,711 | $16,022 | $11,017 | | **Total Revenue** | **$666,686** | **$650,523** | **$623,250** | **$557,111** | **$494,317** | - The number of subscribers grew by **45%** and subscriber revenue grew by **12%** from December 31, 2019 to December 31, 2020, indicating strong growth in recurring revenue streams[25](index=25&type=chunk) - The company's workforce decreased from **1,116 employees** at the end of 2019 to **967** at the end of 2020. In response to COVID-19, a mandatory work-from-home policy was implemented in March 2020[59](index=59&type=chunk)[62](index=62&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors.) The company faces material risks including the COVID-19 pandemic, intense competition, operational challenges, intellectual property issues, international regulatory complexities, and concentrated stock ownership - The COVID-19 pandemic poses a significant risk, potentially leading to decreased customer spending, reduced content contributions, and other operational disruptions[75](index=75&type=chunk) - The business is highly dependent on attracting and retaining customers and contributors in a competitive industry with low barriers to entry. Competitors include Getty Images, AdobeStock, and Canva[78](index=78&type=chunk)[84](index=84&type=chunk)[58](index=58&type=chunk) - The company is subject to extensive governmental regulation regarding data privacy and security, such as GDPR and CCPA, and any failure to comply could result in significant penalties and harm to the business[138](index=138&type=chunk)[140](index=140&type=chunk)[142](index=142&type=chunk) - Founder and Executive Chairman, Jonathan Oringer, controls approximately **36.8%** of outstanding common stock, giving him significant influence over corporate matters. Share repurchases could increase this concentration[182](index=182&type=chunk)[183](index=183&type=chunk) - International operations, which account for about **two-thirds of revenue**, expose the company to risks including foreign exchange fluctuations, compliance with diverse legal systems (e.g., FCPA, UK Bribery Act), and political instability[153](index=153&type=chunk)[154](index=154&type=chunk) [Unresolved Staff Comments](index=40&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments.) The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[202](index=202&type=chunk) [Properties](index=40&type=section&id=Item%202.%20Properties.) Shutterstock's corporate headquarters is leased in New York, NY, with other leased facilities globally, deemed adequate for current needs - The company's principal office is leased in New York, New York, with the lease agreement set to expire in **2029**[203](index=203&type=chunk) [Legal Proceedings](index=40&type=section&id=Item%203.%20Legal%20Proceedings.) The company is not currently involved in material litigation but faces various ordinary course claims, not expected to have a material adverse effect - Shutterstock is not currently involved in any material active litigation but faces various claims in the ordinary course of business[205](index=205&type=chunk) [Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable to the company's business - Not applicable[206](index=206&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 trades on the NYSE under "SSTK", with a quarterly cash dividend initiated in February 2020, and no share repurchases in Q4 2020 - The company's common stock is listed on the NYSE under the symbol **"SSTK"**[208](index=208&type=chunk) - A quarterly cash dividend policy was initiated on **February 11, 2020**[210](index=210&type=chunk) - No issuer purchases of equity securities were made in the fourth quarter of **2020**[211](index=211&type=chunk) [Selected Financial Data](index=42&type=section&id=Item%206.%20Selected%20Financial%20Data.) This section provides selected consolidated financial and operating data for 2016-2020, including GAAP and non-GAAP measures, and key operating metrics Consolidated Statements of Operations Data (2016-2020, in thousands) | | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenue** | **$666,686** | **$650,523** | **$623,250** | **$557,111** | **$494,317** | | Income from operations | $85,266 | $20,155 | $32,452 | $26,349 | $45,786 | | **Net income** | **$71,766** | **$20,108** | **$54,687** | **$16,727** | **$32,628** | | Net income per share (diluted) | $1.97 | $0.57 | $1.54 | $0.47 | $0.91 | Consolidated Balance Sheet Data (As of Dec 31, in thousands) | | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $428,574 | $303,261 | $230,852 | $253,428 | $224,190 | | Total assets | $729,644 | $630,512 | $531,488 | $577,776 | $501,778 | | Total liabilities | $307,719 | $302,367 | $244,821 | $263,191 | $215,082 | | Total stockholders' equity | $421,925 | $328,145 | $286,667 | $314,585 | $286,696 | Key Operating Metrics (2016-2020) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Subscribers (end of period, thousands) | 281 | 194 | * | * | * | | Paid downloads (millions) | 180.0 | 187.8 | 179.6 | 172.0 | 167.9 | | Revenue per download | $3.68 | $3.43 | $3.40 | $3.13 | $2.88 | | Images in collection (millions) | 360 | 314 | 242 | 170 | 116 | | Footage in collection (millions) | 21 | 17 | 13 | 9 | 6 | Reconciliation to Adjusted EBITDA (in thousands) | | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net income | $71,766 | $20,108 | $54,687 | $16,727 | $32,628 | | **Adjusted EBITDA** | **$154,934** | **$96,314** | **$105,114** | **$88,049** | **$95,463** | | Adjusted EBITDA margin | 23.2% | 14.8% | 16.9% | 15.8% | 19.3% | Reconciliation to Free Cash Flow (in thousands) | | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $165,072 | $102,646 | $102,202 | $108,037 | $100,723 | | Capital expenditures | ($25,630) | ($26,081) | ($34,890) | ($55,062) | ($39,959) | | Content acquisitions | ($2,970) | ($3,344) | ($3,838) | ($2,961) | ($8,045) | | **Free Cash Flow** | **$144,231** | **$73,221** | **$63,474** | **$50,014** | **$52,719** | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=48&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses 2020 financial performance, noting a 2% revenue increase driven by E-commerce growth, significant operating and net income surges due to expense reductions, and a strong liquidity position [Comparison of 2020 and 2019](index=55&type=section&id=Comparison%20of%20the%20Years%20Ended%20December%2031%2C%202020%20and%20December%2031%2C%202019) In 2020, revenue grew 2% to $666.7 million, driven by E-commerce, while operating expenses decreased 8%, leading to a 323% surge in operating income and 257% rise in net income Financial Performance Comparison: 2020 vs. 2019 (in thousands) | Account | 2020 | 2019 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | **$666,686** | **$650,523** | **$16,163** | **2%** | | E-commerce Revenue | $412,521 | $392,241 | $20,280 | 5% | | Enterprise Revenue | $254,165 | $258,282 | ($4,117) | (2)% | | Total operating expenses | $581,420 | $630,368 | ($48,948) | (8)% | | **Income from operations** | **$85,266** | **$20,155** | **$65,111** | **323%** | | **Net income** | **$71,766** | **$20,108** | **$51,658** | **257%** | - The decrease in operating expenses was primarily driven by a **$21.1 million** decline in marketing spend and lower royalty expenses resulting from a **4%** decline in paid downloads and a modification to contributor compensation[277](index=277&type=chunk)[278](index=278&type=chunk) [Comparison of 2019 and 2018](index=58&type=section&id=Comparison%20of%20the%20Years%20Ended%20December%2031%2C%202019%20and%20December%2031%2C%202018) In 2019, revenue increased 4% to $650.5 million, but operating expenses rose 7%, causing income from operations to fall 38% and net income to decrease 63% due to the absence of a prior-year gain Financial Performance Comparison: 2019 vs. 2018 (in thousands) | Account | 2019 | 2018 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | **$650,523** | **$623,250** | **$27,273** | **4%** | | Total operating expenses | $630,368 | $590,798 | $39,570 | 7% | | **Income from operations** | **$20,155** | **$32,452** | **($12,297)** | **(38)%** | | Gain on Sale of Webdam | — | $38,613 | ($38,613) | * | | **Net income** | **$20,108** | **$54,687** | **($34,579)** | **(63)%** | - The **63%** decline in net income in 2019 was primarily due to the non-recurrence of a **$38.6 million** pre-tax gain from the sale of the Webdam business in 2018[296](index=296&type=chunk)[287](index=287&type=chunk) [Liquidity and Capital Resources](index=60&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2020, the company maintained strong liquidity with $428.6 million in cash, supported by operating cash flow, and engaged in dividend payments, capital expenditures, and a stock offering Cash Flow Summary (in thousands) | Cash Flow Activity | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $165,072 | $102,646 | $102,202 | | Net cash used in investing activities | ($35,310) | ($27,234) | ($12,827) | | Net cash used in financing activities | ($4,587) | ($1,696) | ($109,739) | - The company completed a stock offering on **August 14, 2020**, receiving net proceeds of approximately **$23.2 million**[304](index=304&type=chunk) - In 2020, the company paid **$24.4 million** in cash dividends. In 2018, a special dividend of **$104.9 million** was paid[305](index=305&type=chunk)[307](index=307&type=chunk) Contractual Obligations as of Dec 31, 2020 (in thousands) | Obligation Type | Total | Less Than 1 Year | 1 - 3 Years | 3 - 5 Years | More Than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating lease obligations | $64,317 | $9,334 | $14,725 | $14,607 | $25,651 | | Purchase obligations | $38,637 | $26,524 | $12,113 | — | — | | **Total** | **$102,954** | **$35,858** | **$26,838** | **$14,607** | **$25,651** | [Critical Accounting Policies and Estimates](index=63&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Management identifies revenue recognition, allowance for doubtful accounts, and accounting for income taxes as critical policies requiring significant estimates and judgment - Revenue recognition for subscription products requires management to estimate expected unused licenses based on historical download activity, which could impact the timing of revenue[335](index=335&type=chunk) - The allowance for doubtful accounts was **$4.9 million** as of Dec 31, 2020, up from **$3.6 million** in 2019, determined by evaluating receivable aging, historical loss rates, and specific customer situations[340](index=340&type=chunk) - Accounting for income taxes requires significant management judgment in assessing the realizability of deferred tax assets and establishing reserves for uncertain tax positions[342](index=342&type=chunk)[343](index=343&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=66&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) The company faces market risk primarily from foreign currency exchange rates, with 36% of 2020 revenue in foreign currencies, but does not use derivatives to hedge this risk - Approximately **36%** of total revenue in 2020 was denominated in foreign currencies, primarily the Euro and British Pound[349](index=349&type=chunk) Revenue by Currency (in thousands) | Currency | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Euro | $138,128 | $133,341 | $124,732 | | British pounds | $49,402 | $48,307 | $49,561 | | All other non-U.S. currencies | $49,630 | $47,471 | $44,393 | | **Total foreign currency** | **$237,160** | **$229,119** | **$218,686** | | U.S. dollar | $429,526 | $421,404 | $404,564 | | **Total revenue** | **$666,686** | **$650,523** | **$623,250** | - The company does not have any long-term borrowings as of December 31, 2020, and does not believe interest rate or inflation risks have a material effect on its business[353](index=353&type=chunk)[354](index=354&type=chunk) [Financial Statements and Supplementary Data](index=67&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data.) This section presents the audited consolidated financial statements and notes, including the independent auditor's report, which identified revenue recognition as a critical audit matter - The independent auditor, PricewaterhouseCoopers LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting[380](index=380&type=chunk) - The auditor identified Revenue Recognition as a critical audit matter due to the significant audit effort involved in evaluating evidence related to content license arrangements and customer download activity[387](index=387&type=chunk)[389](index=389&type=chunk) - On **February 1, 2021**, subsequent to the reporting period, the company acquired TurboSquid, Inc. for approximately **$75 million** in cash[554](index=554&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=68&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure.) The company reports no changes in or disagreements with its accountants regarding accounting principles, practices, or financial disclosure - None reported[356](index=356&type=chunk) [Controls and Procedures](index=68&type=section&id=Item%209A.%20Controls%20and%20Procedures.) As of December 31, 2020, management concluded that disclosure controls and internal control over financial reporting were effective, with no material changes in Q4 2020 - Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of **December 31, 2020**[358](index=358&type=chunk)[360](index=360&type=chunk) [Other Information](index=68&type=section&id=Item%209B.%20Other%20Information.) The company reports no other information for this item - None[364](index=364&type=chunk) Part III [Directors, Executive Compensation, Security Ownership, and Principal Accountant Fees](index=69&type=section&id=Item%2010%2C%2011%2C%2012%2C%2013%2C%2014) Information for Items 10 through 14, covering governance, executive compensation, security ownership, related transactions, and accounting fees, is incorporated by reference from the 2021 proxy statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the registrant's definitive proxy statement to be filed within **120 days** of the fiscal year-end[366](index=366&type=chunk)[368](index=368&type=chunk)[370](index=370&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=70&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules.) This section lists financial statements, the independent auditor's report, and an index of all exhibits filed as part of the Form 10-K - This item lists the financial statements, notes, and exhibits filed with the Form 10-K[373](index=373&type=chunk)[375](index=375&type=chunk) [Form 10-K Summary](index=70&type=section&id=Item%2016.%20Form%2010-K%20Summary.) The company reports no information for this item - None[376](index=376&type=chunk)