Getty Images (GETY) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements, management's analysis, market risk, and internal controls for the reporting period Item 1. Condensed Consolidated Financial Statements (Unaudited) Getty Images reported a net loss of $102.6 million for Q1 2025, driven by foreign exchange losses, merger costs, and increased income tax expense, contrasting with a net income in the prior year Condensed Consolidated Balance Sheets Total assets remained stable at $2.57 billion, while total liabilities increased to $1.93 billion, leading to a decrease in stockholders' equity to $641.1 million as of March 31, 2025 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $2,566,503 | $2,563,708 | | Cash and cash equivalents | $114,554 | $121,173 | | Goodwill | $1,511,795 | $1,510,477 | | Total Liabilities | $1,925,407 | $1,845,368 | | Long-term debt, net | $1,308,112 | $1,314,424 | | Deferred revenue | $186,634 | $172,090 | | Total Stockholders' Equity | $641,096 | $718,340 | Condensed Consolidated Statements of Operations Q1 2025 saw a net loss of $102.6 million despite slightly increased revenue, primarily due to a $25.1 million foreign exchange loss, merger-related expenses, and higher income tax expense Q1 2025 vs Q1 2024 Statement of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue | $224,077 | $222,278 | | Income from operations | $27,342 | $41,034 | | Foreign exchange (loss) gain – net | $(25,078) | $16,422 | | (Loss) income before income taxes | $(37,979) | $24,788 | | Income tax (expense) benefit | $(64,593) | $(11,201) | | Net (loss) income | $(102,572) | $13,587 | | Diluted EPS | $(0.25) | $0.03 | Condensed Consolidated Statements of Cash Flows Net cash from operations decreased to $15.4 million in Q1 2025, with investing and financing activities also consuming cash, resulting in an overall $6.6 million decrease in cash Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $15,384 | $21,528 | | Net cash used in investing activities | $(15,706) | $(14,452) | | Net cash used in financing activities | $(12,547) | $(5,272) | | Net decrease in cash | $(6,631) | $(2,114) | Notes to Condensed Consolidated Financial Statements Notes detail the pending Shutterstock merger, significant debt refinancing, disaggregated revenue performance, and ongoing legal proceedings including warrant lawsuits and a suit against Stability AI - Entered a merger-of-equals agreement with Shutterstock on January 6, 2025, currently under regulatory review by the U.S. Department of Justice and UK Competition and Markets Authority[21][26][27] - Incurred $18.0 million in legal, accounting, and other direct costs related to the proposed Shutterstock merger during Q1 2025[23] - Refinanced existing term loans in February 2025, issuing $580.0 million USD and €440.0 million EUR New Term Loans maturing in 2030[62][63] - Involved in multiple lawsuits from former public warrant holders, with $112.4 million in litigation reserves, and suing Stability AI for alleged copyright and trademark infringement[91][93] Revenue by Product (in thousands) | Product | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Creative | $132,175 | $138,842 | | Editorial | $82,617 | $79,429 | | Other | $9,285 | $4,007 | | Total Revenue | $224,077 | $222,278 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes 0.8% revenue growth to Editorial and Other segments offsetting Creative declines, with the net loss driven by non-operational factors; a strategic shift towards subscriptions is evident in KPIs, and Adjusted EBITDA remained stable Recent Developments Major corporate actions in early 2025 include the pending merger agreement with Shutterstock and a significant debt refinancing, replacing existing term loans with new ones maturing in 2030 - Announced a merger-of-equals with Shutterstock on January 6, 2025, with Getty Images stockholders expected to own approximately 53% of the combined company post-merger[116][117] - Received a 'Second Request' from the U.S. Department of Justice for additional information regarding the Shutterstock merger, extending the HSR Act waiting period[118] - Completed debt refinancing, issuing $580.0 million in New USD Term Loans and €440.0 million in New EUR Term Loans, maturing in February 2030[120][123] Results of Operations Q1 2025 total revenue increased 0.8% to $224.1 million, driven by Editorial and Other revenue growth offsetting Creative declines; operating income fell 33.4% due to merger costs and a $25.1 million foreign exchange loss Revenue Performance by Product (Q1 2025 vs Q1 2024) | Product | Revenue Change (Reported) | Revenue Change (Currency Neutral) | Key Drivers | | :--- | :--- | :--- | :--- | | Creative | (4.8)% | (3.0)% | Decline in à la carte credit sales and Unsplash advertising | | Editorial | +4.0% | +5.6% | Growth in subscriptions, particularly in Sport and News | | Other | +131.7% | +135.5% | Increase from data access and new licensing agreements | - Other operating expenses increased by $15.3 million, primarily due to $18.0 million in costs related to the proposed Shutterstock merger[176] - Recognized a net foreign exchange loss of $25.1 million, a significant shift from a $16.4 million gain in the prior year, primarily due to EUR fluctuations[180] - Recorded a $5.5 million loss on debt extinguishment in Q1 2025 due to the refinancing of Old Term Loans[181] Liquidity and Capital Resources The company held $114.6 million in cash as of March 31, 2025, with sufficient liquidity for the next 12 months, but faces potential outlays from $112.4 million in litigation reserves and a possible $17.8 million Canadian tax payment - Liquidity sources include $114.6 million cash on hand, cash from operations, and an undrawn revolving credit facility[186] - Holds $112.4 million in litigation reserves for warrant lawsuits, with an approximate $40.0 million remaining insurance recovery receivable[190] - May be required to pay up to $17.8 million for a Canadian tax assessment appeal, though management expects to prevail[192] Key Performance Indicators and Non-GAAP Financial Measures LTM KPIs for March 31, 2025, indicate a shift to subscriptions, with purchasing customers down 7.9% but active annual subscribers up 21.2%; Adjusted EBITDA remained stable at $70.1 million with a 31.3% margin Key Performance Indicators (LTM Ended March 31) | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | LTM total purchasing customers (thousands) | 708 | 769 | (7.9)% | | LTM total active annual subscribers (thousands) | 318 | 262 | +21.2% | | LTM annual subscriber revenue retention rate | 92.7% | 90.0% | +270 bps | | LTM paid download volume (millions) | 93 | 95 | (2.7)% | - Decrease in purchasing customers is due to a shift to annual subscription products, positively impacting annual revenue per purchasing customer, which grew 13.2% to $1,329[206] Adjusted EBITDA Reconciliation (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net (loss) income | $(102,572) | $13,587 | | Non-GAAP adjustments | $172,697 | $56,625 | | Adjusted EBITDA | $70,125 | $70,212 | | Adjusted EBITDA margin | 31.3% | 31.6% | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's 5-year interest rate swap matured in February 2024, with no new hedging arrangements, and no other material changes to market risk exposures since the 2024 Form 10-K - A 5-year interest rate swap with a notional amount of $355.0 million matured on February 19, 2024, with no new interest rate hedges initiated since[226] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025[228] - No material changes were made to internal controls over financial reporting during Q1 2025[229] PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, other disclosures, and a list of exhibits Item 1. Legal Proceedings The company is subject to various legal proceedings and claims, with detailed information provided in Note 12 of the condensed consolidated financial statements - Detailed information on legal proceedings is available in Note 12 of Part I, Item 1 of the financial statements[232] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes have occurred to the risk factors disclosed in the 2024 Form 10-K[233] Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the first quarter of 2025 - No directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended March 31, 2025[234] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including the Shutterstock merger agreement, debt and indenture agreements, and officer certifications