Getty Images (GETY) - 2023 Q3 - Quarterly Report

Revenue and Subscriptions - Total purchasing customers decreased to 826,000 from 837,000 year-over-year, while total active annual subscribers increased by approximately 88% to 202,000[120]. - Creative content represented 62.7% of revenue for the nine months ended September 30, 2023, with 52.9% generated through annual subscription products[106]. - Editorial content accounted for 35.5% of revenue, with 52.9% of that revenue also coming from annual subscription products[107]. - Revenue for the three months ended September 30, 2023, was $229.3 million, a decrease of 0.5$230.5 million in the same period in 2022[138]. - Revenue from iStock annual subscriptions increased by $3.0 million, and Getty Images annual subscriptions increased by$8.5 million for the three months ended September 30, 2023[140]. - Revenue from Creative products decreased by 1.7% to $432.9 million, with significant declines in Getty Images Stills and Video ($17.3 million) and iStock subscriptions ($10.8 million)[157]. - For the nine months ended September 30, 2023, total revenue was$690.6 million, a decrease of 0.6% compared to $694.8 million in the same period in 2022[156]. - Revenue from Other products increased by 22.2$12.8 million, driven by music licensing ($0.3 million), data licensing ($0.2 million), and digital asset management services ($0.2 million)[142]. Costs and Expenses - Cost of revenue for the three months ended September 30, 2023, was$60.9 million, down 4.8% from $64.0 million in the same period in 2022[137]. - Selling, general and administrative expenses increased by 6.2$97.3 million for the three months ended September 30, 2023, compared to 91.6 million in the same period in 2022[137]. - SG&A expenses for the nine months ended September 30, 2023, increased by 20.7 million or 7.4%, with a notable increase in staff costs driven by equity-based compensation[162]. - Selling, general and administrative (SG&A) expenses increased by $5.7 million or 6.2$18.4 million, compared to a net loss of $118.1 million in the same period in 2022, a decrease of$99.7 million[137]. - The company recorded a net loss of $19.5 million for the nine months ended September 30, 2023, adjusted for noncash expenses of$100.4 million[189]. Cash Flow and Liquidity - Net cash provided by operating activities was $99.0 million for the nine months ended September 30, 2023, a decrease of 23.4$129.2 million in the prior year[189]. - Cash used in financing activities was $41.5 million for the nine months ended September 30, 2023, significantly lower than$178.6 million in the same period of 2022[191]. - The company had cash and cash equivalents of $113.5 million as of September 30, 2023, compared to$97.9 million at the end of 2022[180]. - The company expects to fund its ordinary course operating activities from existing cash and cash flows from operations for at least the next 12 months[185]. Business Combination and Financing - The company issued 66 million shares of Class A common stock for gross proceeds of $660 million as part of the Business Combination[117]. - The Business Combination resulted in gross proceeds of approximately$864.2 million, significantly reducing the company's balance sheet obligations[186]. - The Business Combination resulted in aggregate gross proceeds of approximately $864.2 million, with$615.0 million used for redeeming Redeemable Preferred Stock and $300.0 million for repaying a portion of USD Term Loans, leading to a total reduction of approximately$1.1 billion in balance sheet obligations[186]. - The company increased and extended its revolving credit facility to $150.0 million, which expires on May 4, 2028[180]. Legal and Litigation Matters - The Company recognized a loss on litigation of$106.1 million for the three months ended September 30, 2023, which includes summary judgment amounts and associated legal fees[146]. - The company recognized a loss on litigation of $60.0 million, which represents the limit of its insurance coverage for ongoing legal matters[181]. - The company recognizes litigation reserves when a loss is probable and material, with estimates subject to change based on new information[215]. - The company recognizes recoveries of losses on litigation when it is probable that such recoveries will be received from third-party insurance carriers[216]. Tax and Foreign Exchange - The company's income tax expense decreased by$27.5 million to $11.5 million for the nine months ended September 30, 2023, from$39.0 million in the prior year, with an effective income tax rate of (143.9)%[173]. - The effective tax rate is subject to significant variation due to factors such as geographical mix of pre-tax earnings and potential outcomes of tax audits[202]. - The company recognized unrealized foreign exchange gains of $2.4 million for the nine months ended September 30, 2023, compared to$71.9 million in the same period in 2022[169]. - The company recognized net foreign currency transaction gains of $2.4 million for the nine months ended September 30, 2023, compared to$71.9 million for the same period in 2022[213]. Content and Product Development - Getty Images had over 551 million visual assets available, adding more than 10 million new assets each quarter, with 2.8 billion searches annually[100]. - The image collection increased to 525 million from 484 million year-over-year, while the video collection grew to 27 million from 23 million[120]. - The company launched Unsplash+ in Q4 2022, contributing to the growth in annual subscribers[120]. - The company launched Generative AI by Getty Images in September 2023, a tool trained exclusively on Getty Images' content[126]. - The video attachment rate improved to 13.7% from 12.7% year-over-year[120]. - The video attachment rate increased from the LTM period ended September 30, 2022, to the period ended September 30, 2023, reflecting higher customer engagement with video content[125]. Revenue Recognition - Revenue is primarily derived from licensing rights to digital content, with a significant portion generated through subscription-based and credit-based sales[204]. - The company recognizes revenue gross of contributor royalties, as it is the principal in the transaction, with approximately 3% of total revenues coming from third-party delegates[206]. - Revenue for digital content licenses is recognized when content is downloaded, with estimates for unused licenses impacting revenue recognition timing[210]. - Revenue associated with unused licenses is recognized throughout the subscription or credit period based on historical download activity[210]. - The company applies a five-step approach to revenue recognition, ensuring that performance obligations are identified and transaction prices allocated accordingly[208]. - The company assesses product offerings at contract inception to identify distinct performance obligations for revenue recognition[209]. Financial Obligations - As of December 31, 2022, total contractual cash obligations amounted to $2,111,644,000, with long-term indebtedness accounting for$1,869,175,000[192]. - Operating lease obligations were reported at $71,206,000, while minimum royalty guarantee payments to content suppliers totaled$158,253,000[192]. - The company has no material letters of credit outstanding or other off-balance sheet arrangements as of September 30, 2023[195]. - The company has historically maintained predictable capital expenditures, primarily related to content creation and software development, with a significant portion being discretionary and growth-related[194].