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Getty Images (GETY) - 2024 Q3 - Quarterly Report
GETYGetty Images (GETY)2024-11-07 21:28
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Litigation and Legal Risks - Getty Images is involved in multiple lawsuits in New York State Supreme Court, alleging breaches of the Warrant Agreement, with potential monetary damages that could materially affect the company's financial condition[73] - Getty Images is suing Stability AI for unauthorized reproduction of approximately 12 million images, seeking monetary damages and injunctive relief[74] - Getty Images is also pursuing legal action against Stability AI in the High Court of England & Wales for copyright infringement, trademark infringement, and other claims, with a trial date set for late June or early July 2025[75][76] - The company has made litigation reserves for the Initial Warrant Litigation but does not currently believe a material loss is probable[77] - Getty Images may be required to pay up to 18.1millionin2024aspartofataxappealprocessinCanada,withapotentialmaximumoutcomeof18.1 million in 2024 as part of a tax appeal process in Canada, with a potential maximum outcome of 26.4 million if the appeal is unsuccessful[80] - The company's financial condition could be materially affected by unfavorable outcomes in ongoing litigation and regulatory proceedings[77] - The company is subject to certain legal proceedings and claims incidental to the operation of its business, but does not anticipate a material adverse impact on its financial results[214] Financial Performance and Metrics - Total revenue for Q3 2024 increased by 4.9% to 240.5millioncomparedto240.5 million compared to 229.3 million in Q3 2023[129] - Creative revenue decreased by 7.9% to 133.7million,drivenbydeclinesinPremiumAccesssubscriptionsandALCcreditsales[130][131]−Editorialrevenueincreasedby16.1133.7 million, driven by declines in Premium Access subscriptions and ALC credit sales[130][131] - Editorial revenue increased by 16.1% to 92.8 million, driven by growth in Sport, News, and Entertainment sectors[131][133] - Other revenue surged by 239.3% to 14.1million,primarilyduetoa5−yearCreativecontentdealwithanexistingcustomer[134]−Costofrevenueincreasedby5.214.1 million, primarily due to a 5-year Creative content deal with an existing customer[134] - Cost of revenue increased by 5.2% to 64.1 million, maintaining a consistent percentage of total revenue at 26.6%[136] - SG&A expenses rose by 3.0% to 100.1million,drivenbyhighertravelandstaffcosts[138][139]−Depreciationexpenseincreasedby7.9100.1 million, driven by higher travel and staff costs[138][139] - Depreciation expense increased by 7.9% to 14.9 million due to capital investments in software development[141] - Amortization expense decreased by 91.9% to 0.6millionasseveralintangibleassetsbecamefullyamortized[143]−Lossonlitigationdecreasedsignificantlyby97.00.6 million as several intangible assets became fully amortized[143] - Loss on litigation decreased significantly by 97.0% to 3.2 million compared to 106.1millioninQ32023[144]−Interestexpenseincreasedby5.4106.1 million in Q3 2023[144] - Interest expense increased by 5.4% to 34.0 million due to the maturity of the interest rate swap[147] - Unrealized foreign exchange losses of 28.7millionforQ32024,comparedtogainsof28.7 million for Q3 2024, compared to gains of 16.5 million in Q3 2023, driven by EUR fluctuations related to EUR Term Loans[150] - Other non-operating income increased to 1.5millioninQ32024from1.5 million in Q3 2024 from 1.1 million in Q3 2023, primarily due to higher U.S. interest rates[151] - Income tax expense decreased by 6.6milliontoabenefitof6.6 million to a benefit of 1.2 million in Q3 2024, with an effective tax rate of 33.0% compared to (41.3%) in Q3 2023[154] - Total revenue for the nine months ended September 30, 2024, was 692.0million,a0.2692.0 million, a 0.2% increase from 690.6 million in the same period in 2023[155] - Creative revenue decreased by 5.2% to 410.4millionfortheninemonthsendedSeptember30,2024,drivenbydeclinesinALCcreditsalesandultrapacks[156]−Editorialrevenueincreasedby4.5410.4 million for the nine months ended September 30, 2024, driven by declines in ALC credit sales and ultra packs[156] - Editorial revenue increased by 4.5% to 255.8 million for the nine months ended September 30, 2024, driven by growth in sports coverage[157] - Other revenue increased by 101.1% to 25.7millionfortheninemonthsendedSeptember30,2024,primarilyduetodataaccessandlicensingdeals[158]−Costofrevenuewas25.7 million for the nine months ended September 30, 2024, primarily due to data access and licensing deals[158] - Cost of revenue was 187.4 million for the nine months ended September 30, 2024, representing 27.1% of total revenue, a slight decrease from 27.2% in 2023[161] - Depreciation expense increased by 8.9% to 43.9millionfortheninemonthsendedSeptember30,2024,duetocapitalinvestmentsinsoftwaredevelopment[166]−Amortizationexpensedecreasedby92.143.9 million for the nine months ended September 30, 2024, due to capital investments in software development[166] - Amortization expense decreased by 92.1% to 1.7 million for the nine months ended September 30, 2024, as several intangible assets became fully amortized[167] - Cash provided by operating activities decreased by 20.6% to 78.6millionfortheninemonthsendedSeptember30,2024,comparedto78.6 million for the nine months ended September 30, 2024, compared to 99.0 million for the same period in 2023[182][183] - Cash used in investing activities increased by 37.0% to 57.4millionfortheninemonthsendedSeptember30,2024,drivenbytheacquisitionofMotorsportImagesLLCandMotorsport.com,Inc.[182][185]−Cashusedinfinancingactivitiesincreasedby29.857.4 million for the nine months ended September 30, 2024, driven by the acquisition of Motorsport Images LLC and Motorsport.com, Inc.[182][185] - Cash used in financing activities increased by 29.8% to 53.9 million for the nine months ended September 30, 2024, compared to 41.5millionforthesameperiodin2023[182][186]−NetlossforthethreemonthsendedSeptember30,2024,was41.5 million for the same period in 2023[182][186] - Net loss for the three months ended September 30, 2024, was 2.527 million, compared to a net loss of 18.448millionforthesameperiodin2023[206]−AdjustedEBITDAforthethreemonthsendedSeptember30,2024,was18.448 million for the same period in 2023[206] - Adjusted EBITDA for the three months ended September 30, 2024, was 80.629 million, with a margin of 33.5%, compared to 80.282millionandamarginof35.080.282 million and a margin of 35.0% for the same period in 2023[206] - Capex for the three months ended September 30, 2024, was 12.482 million, compared to 12.416millionforthesameperiodin2023[206]−AdjustedEBITDAlesscapexforthethreemonthsendedSeptember30,2024,was12.416 million for the same period in 2023[206] - Adjusted EBITDA less capex for the three months ended September 30, 2024, was 68.147 million, compared to 67.866millionforthesameperiodin2023[206]−NetincomemarginforthethreemonthsendedSeptember30,2024,was−1.167.866 million for the same period in 2023[206] - Net income margin for the three months ended September 30, 2024, was -1.1%, compared to -8.0% for the same period in 2023[206] Operational and Market Risks - Getty Images faces risks related to the use of AI technologies, including potential harm to its brand, reputation, and intellectual property[86] - The company is subject to risks from international operations, including political, regulatory, and economic uncertainties[87] - Getty Images is exposed to risks from technological interruptions, cybersecurity breaches, and the inability to protect proprietary information[87] - The company qualifies as a "smaller reporting company" due to the market value of its Class A common stock held by non-affiliates being less than 250 million[84] - The company's 5-year interest rate swap with a notional amount of 355.0millionmaturedonFebruary19,2024,andnonewinterestratehedgingarrangementshavebeenenteredintosince[208]−Therehavebeennomaterialchangesinthecompany′smarketriskexposuresforthequarterendedSeptember30,2024,comparedtothosediscussedinthe2023Form10−K[209]ContentandCustomerMetrics−GettyImagesoffersover593millionvisualassets,with11millionnewassetsaddedeachquarterand2.7billionsearchesannually[97]−Thecompanyhasalmost720,000purchasingcustomersglobally,withwebsitesin23languages[97]−GettyImagesemploysover110staffphotographersandvideographers,anddistributescontentfromover576,000contributorsand340premiumcontentpartners[98]−Creativecontentrepresents59.3355.0 million matured on February 19, 2024, and no new interest rate hedging arrangements have been entered into since[208] - There have been no material changes in the company's market risk exposures for the quarter ended September 30, 2024, compared to those discussed in the 2023 Form 10-K[209] Content and Customer Metrics - Getty Images offers over 593 million visual assets, with 11 million new assets added each quarter and 2.7 billion searches annually[97] - The company has almost 720,000 purchasing customers globally, with websites in 23 languages[97] - Getty Images employs over 110 staff photographers and videographers, and distributes content from over 576,000 contributors and 340 premium content partners[98] - Creative content represents 59.3% of revenue for the nine months ended September 30, 2024, with 55.5% generated through annual subscription products[101] - Editorial content represents 37.0% of revenue for the nine months ended September 30, 2024, with 52.5% generated through annual subscription products[101] - Annual subscriptions now comprise approximately 53% of total revenue for the nine months ended September 30, 2024[115] - Contributors generated annual royalties of nearly 220 million for the trailing twelve months ending September 30, 2024[109] - Total purchasing customers decreased by 12.9% to 719 thousand for the last twelve months ended September 30, 2024, compared to 826 thousand for the same period in 2023[191][193] - Total active annual subscribers increased by 47.7% to 298 thousand for the last twelve months ended September 30, 2024, compared to 202 thousand for the same period in 2023[191][195] - Paid download volume decreased by 0.7% to 94 million for the last twelve months ended September 30, 2024, compared to 95 million for the same period in 2023[191][196] - Annual subscriber revenue retention rate decreased to 92.2% for the last twelve months ended September 30, 2024, from 94.5% for the same period in 2023[191][200] - Image collection grew by 7.2% to 563 million as of September 30, 2024, compared to 525 million as of September 30, 2023[191][201] - Video collection grew by 17.2% to 31 million as of September 30, 2024, compared to 27 million as of September 30, 2023[191][201] - Video attachment rate increased to 16.4% for the last twelve months ended September 30, 2024, from 13.7% for the same period in 2023[191][203] Internal Controls and Reporting - The company's disclosure controls and procedures were effective as of September 30, 2024, in recording, processing, summarizing, and reporting required information[212] - There have been no changes in the company's internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, the internal control over financial reporting during the quarter ended September 30, 2024[213] Foreign Currency and Taxation - The company recognized net foreign currency translation adjustment gains of 7.5millionduringtheninemonthsendedSeptember30,2024[124]−Netunrealizedforeigncurrencytransactionlossesof7.5 million during the nine months ended September 30, 2024[124] - Net unrealized foreign currency transaction losses of 9.8 million were recognized for the nine months ended September 30, 2024[125] - Getty Images may be required to pay up to 18.1millionin2024aspartofataxappealprocessinCanada,withapotentialmaximumoutcomeof18.1 million in 2024 as part of a tax appeal process in Canada, with a potential maximum outcome of 26.4 million if the appeal is unsuccessful[80] AI and Technological Initiatives - Getty Images launched Generative AI by Getty Images and Generative AI by iStock in September 2023 and January 2024, respectively[111] - Getty Images faces risks related to the use of AI technologies, including potential harm to its brand, reputation, and intellectual property[86]