Getty Images (GETY) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining the company's accounting policies, financial instruments, debt, equity compensation, income taxes, segment information, and legal proceedings Condensed Consolidated Balance Sheets The balance sheets provide a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific points in time Condensed Consolidated Balance Sheets (in millions) | Metric | June 30, 2025 | December 31, 2024 | Change | | :------------------------------------------------------- | :------------ | :---------------- | :----- | | Assets | | | | | Cash and cash equivalents | $110.275 | $121.173 | $(10.898) | | Accounts receivable – net | $162.659 | $151.130 | $11.529 | | Total current assets | $348.809 | $358.815 | $(10.006) | | Property and equipment, net | $187.178 | $177.292 | $9.886 | | Goodwill | $1,516.960 | $1,510.477 | $6.483 | | Intangible assets, net | $416.030 | $389.906 | $26.124 | | Total assets | $2,595.961 | $2,563.708 | $32.253 | | Liabilities | | | | | Short-term debt, net | $21.101 | $— | $21.101 | | Deferred revenue | $184.934 | $172.090 | $12.844 | | Total current liabilities | $499.682 | $453.255 | $46.427 | | Long-term debt, net | $1,341.305 | $1,314.424 | $26.881 | | Total liabilities | $1,935.949 | $1,845.368 | $90.581 | | Stockholders' Equity | | | | | Accumulated deficit | $(1,361.123) | $(1,223.482) | $(137.641) | | Total stockholders' equity | $660.012 | $718.340 | $(58.328) | - Total assets increased by $32.253 million from December 31, 2024, to June 30, 2025, while total liabilities increased by $90.581 million, leading to a $58.328 million decrease in total stockholders' equity[8] - Cash and cash equivalents decreased by $10.898 million, and short-term debt increased from zero to $21.101 million, indicating changes in liquidity and debt structure[8] Condensed Consolidated Statements of Operations This statement details the company's revenues, expenses, and net income or loss over specific periods, reflecting operational performance Condensed Consolidated Statements of Operations (in millions, except per share amounts) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Revenue | $234.882 | $229.140 | $458.959 | $451.418 | | Total operating expenses | $199.322 | $182.682 | $396.057 | $363.926 | | Income from operations | $35.560 | $46.458 | $62.902 | $87.492 | | Interest expense | $(36.556) | $(33.890) | $(69.231) | $(66.614) | | Foreign exchange (loss) gain – net | $(54.771) | $2.439 | $(79.849) | $18.861 | | Loss on extinguishment of debt | $— | $— | $(5.474) | $— | | Net (loss) income | $(34.359) | $3.689 | $(136.931) | $17.276 | | Basic EPS | $(0.08) | $0.01 | $(0.33) | $0.04 | | Diluted EPS | $(0.08) | $0.01 | $(0.33) | $0.04 | - The company reported a net loss of $(34.359) million for Q2 2025 and $(136.931) million for H1 2025, a significant decline from net income of $3.689 million and $17.276 million in the respective prior-year periods[10] - Revenue increased slightly by 2.5% for Q2 2025 and 1.7% for H1 2025, but operating expenses rose by 9.1% and 8.8% respectively, contributing to the operational income decline[10] Condensed Consolidated Statements of Comprehensive (Loss) Income This statement presents net income alongside other comprehensive income items, such as foreign currency translation adjustments, to show total comprehensive earnings Condensed Consolidated Statements of Comprehensive (Loss) Income (in millions) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income | $(34.359) | $3.689 | $(136.931) | $17.276 | | Net foreign currency translation adjustment gains (losses) | $47.719 | $(2.796) | $68.069 | $(18.402) | | Comprehensive (loss) income | $13.360 | $0.893 | $(68.862) | $(1.126) | - Comprehensive income for Q2 2025 was $13.360 million, an increase from $0.893 million in Q2 2024, primarily due to significant net foreign currency translation adjustment gains of $47.719 million[12] - For H1 2025, the company reported a comprehensive loss of $(68.862) million, a substantial decline from a loss of $(1.126) million in H1 2024, despite $68.069 million in foreign currency translation gains[12] Condensed Consolidated Statements of Stockholders' Equity This statement tracks changes in equity over time, including net income, share issuances, and other comprehensive income, reflecting ownership value Condensed Consolidated Statements of Stockholders' Equity (in millions) | Metric | Balance at Dec 31, 2024 | Balance at Mar 31, 2025 | Balance at Jun 30, 2025 | | :------------------------------------------------------- | :---------------------- | :---------------------- | :---------------------- | | Total Getty Images Holdings, Inc. Stockholders' Equity | $670.196 | $592.952 | $611.158 | | Non-controlling interest | $48.144 | $48.144 | $48.854 | | Total Stockholders' Equity | $718.340 | $641.096 | $660.012 | | Net loss (Q1 2025) | | $(102.572) | | | Net (loss) income (Q2 2025) | | | $(35.069) | | Net foreign currency translation adjustment gains | | $20.350 | $47.719 | | Equity-based compensation activity | | $4.978 | $4.253 | - Total stockholders' equity decreased from $718.340 million at December 31, 2024, to $660.012 million at June 30, 2025, primarily due to net losses incurred during the period[15] - The accumulated deficit increased by $137.641 million for the six months ended June 30, 2025, reflecting the company's net losses, while accumulated other comprehensive loss improved due to foreign currency translation gains[15] Condensed Consolidated Statements of Cash Flows This statement tracks cash inflows and outflows from operating, investing, and financing activities, providing insight into liquidity and solvency Condensed Consolidated Statements of Cash Flows (in millions) | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $21.930 | $67.971 | | Net cash used in investing activities | $(31.817) | $(44.739) | | Net cash used in financing activities | $(21.299) | $(34.774) | | Effects of exchange rates fluctuations | $20.262 | $(3.076) | | NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | $(10.924) | $(14.618) | | CASH, CASH EQUIVALENTS AND RESTRICTED CASH – End of period | $114.380 | $126.232 | - Net cash provided by operating activities decreased significantly to $21.930 million in H1 2025 from $67.971 million in H1 2024, primarily due to merger-related costs[20][221] - Net cash used in investing activities decreased to $31.817 million in H1 2025 from $44.739 million in H1 2024, mainly due to the absence of a business acquisition in 2025 compared to the prior year[20][223] Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and additional information about the figures presented in the financial statements, clarifying accounting policies and significant events Note 1 - Description of the Company and Basis of Presentation This note outlines the company's business operations, its global visual content marketplace, and the basis for preparing the financial statements - Getty Images Holdings, Inc. is a global visual content creator and marketplace, operating through its Getty Images, iStock, and Unsplash brands, serving customers worldwide[23] - On January 6, 2025, Getty Images entered into a merger agreement with Shutterstock, Inc. for a merger-of-equals transaction, with Getty Images stockholders expected to own approximately 53.0% of the combined company[24][25] - The company expensed $14.4 million and $32.4 million in legal, accounting, and other direct costs related to the proposed merger for the three and six months ended June 30, 2025, respectively[26] Note 2 - Summary of Significant Accounting Policies This note details the key accounting principles and methods used in preparing the financial statements, ensuring transparency and comparability - There have been no material changes to the significant accounting policies described in the 2024 Form 10-K[35] - Accounts receivable – net, are reported net of allowances for doubtful accounts of $6.1 million as of June 30, 2025, and $6.2 million as of December 31, 2024[36] - The company recognized foreign exchange loss, net, of $54.8 million for Q2 2025 and $79.8 million for H1 2025, compared to net gains of $2.4 million and $18.9 million for the respective 2024 periods, primarily due to EUR fluctuations[39] Note 3 - Revenue This note provides a breakdown of revenue sources, including licensing models and geographical segments, and the policies for revenue recognition - Revenue is primarily derived from licensing digital content (images, video, music) through subscription and transactional models, with recognition occurring when content is downloaded or access is provided[43][45] Revenue by Major Product (in millions) | Product Line | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Creative | $130.824 | $137.897 | $262.998 | $276.739 | | Editorial | $88.342 | $83.619 | $170.959 | $163.048 | | Other | $15.716 | $7.624 | $25.002 | $11.631 | | Total Revenue | $234.882 | $229.140 | $458.959 | $451.418 | Revenue by Region (in millions) | Region | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Americas | $136.509 | $127.957 | $268.033 | $252.366 | | Europe, the Middle East, and Africa | $73.202 | $75.686 | $141.929 | $148.601 | | Asia-Pacific | $25.171 | $25.497 | $48.997 | $50.451 | | Total Revenue | $234.882 | $229.140 | $458.959 | $451.418 | Note 4 - Derivative Instruments This note describes the company's use of derivative financial instruments, such as interest rate swaps, and their impact on financial results - The company's interest rate swap agreement, used to reduce interest rate fluctuations on debt, matured in February 2024[52] - No income or expense was recognized from derivative instruments for the three and six months ended June 30, 2025, compared to a net loss of $1.5 million for the six months ended June 30, 2024[53] Note 5 - Fair Value of Financial Instruments This note provides information on the fair value measurements of financial instruments, categorized by valuation input levels, to assess their market value Fair Value Measurements at June 30, 2025 (in millions) | (In millions) | Level 1 | Level 2 | Level 3 | Total | | :------------- | :------ | :------ | :------ | :---- | | Assets: | | | | | | Money market funds (cash equivalents) | $51.637 | $— | $— | $51.637 | | Liabilities: | | | | | | New Term Loans | $— | $525.473 | $— | $525.473 | | Senior Secured Notes | $— | $535.895 | $— | $535.895 | | Senior Unsecured Notes | $— | $295.125 | $— | $295.125 | Fair Value Measurements at December 31, 2024 (in millions) | (In millions) | Level 1 | Level 2 | Level 3 | Total | | :------------- | :------ | :------ | :------ | :---- | | Assets: | | | | | | Money market funds (cash equivalents) | $75.431 | $— | $— | $75.431 | | Liabilities: | | | | | | Old Term Loans | $— | $1,013.231 | $— | $1,013.231 | | Senior Unsecured Notes | $— | $298.965 | $— | $298.965 | - Money market funds are classified as Level 1, while New Term Loans, Senior Secured Notes, and Senior Unsecured Notes are classified as Level 2, with fair values based on market quotes from third-party sources[58][57] Note 6 - Other Assets and Liabilities This note details the composition of other long-term assets and accrued expenses, providing a more granular view of specific balance sheet items Other Long-Term Assets (in millions) | (In millions) | As of June 30, 2025 | As of December 31, 2024 | | :------------- | :------------------ | :---------------------- | | Long term note receivable from a related party | $24.000 | $24.000 | | Minority and other investments | $4.631 | $4.385 | | Equity method investment | $1.500 | $1.077 | | Other | $1.257 | $1.338 | | Total | $31.388 | $30.800 | Accrued Expenses (in millions) | (In millions) | As of June 30, 2025 | As of December 31, 2024 | | :------------- | :------------------ | :---------------------- | | Accrued compensation and related costs | $20.237 | $26.419 | | Lease liabilities | $10.392 | $11.252 | | Interest payable | $19.519 | $9.903 | | Accrued professional fees | $15.549 | $10.809 | | Other | $0.989 | $1.555 | | Total | $66.686 | $59.938 | - Interest payable significantly increased from $9.903 million at December 31, 2024, to $19.519 million at June 30, 2025, while accrued compensation and related costs decreased[60] Note 7 - Debt This note provides a detailed breakdown of the company's debt structure, including refinancing activities, new issuances, and their terms Debt (in millions) | (In millions) | As of June 30, 2025 | As of December 31, 2024 | | :------------- | :------------------ | :---------------------- | | Senior Secured Notes | $539.944 | $— | | Senior Unsecured Notes | $300.000 | $300.000 | | Old USD Term Loans | $— | $579.200 | | Old EUR Term Loans | $— | $435.190 | | New USD Term Loans | $40.056 | $— | | New EUR Term Loans | $510.190 | $— | | Adjusted for: issuance costs, premiums and discounts | $(27.784) | $0.034 | | Less short-term debt – net | $(21.101) | $— | | Long-term debt – net | $1,341.305 | $1,314.424 | - On February 21, 2025, the company refinanced its Old USD Term Loans ($579.2 million) and Old EUR Term Loans (€419.0 million) with new $580.0 million New USD Term Loans and €440.0 million New EUR Term Loans, maturing on February 21, 2030[63][64][66] - On May 5, 2025, the company exchanged $539.9 million of its New USD Term Loans for 11.250% Senior Secured Notes due 2030, which are secured by a first priority lien on substantially all loan parties' assets[68][77][79] Note 8 - Equity-based Compensation This note details the company's equity incentive plan, shares reserved for issuance, and the expense recognized for equity-based compensation - The 2022 Equity Incentive Plan has 51,104,577 shares of Class A common stock reserved for issuance, with 1,831,547 shares available as of June 30, 2025[89] - Equity-based compensation expense, net of estimated forfeitures, was $4.3 million for Q2 2025 and $9.2 million for H1 2025, a decrease from $4.4 million and $14.4 million in the respective 2024 periods[91] - The company capitalized $0.5 million (Q2 2025) and $0.9 million (H1 2025) of equity-based compensation expense related to internal-use software development[91] Note 9 - Net (Loss) Income per Share Attributable to Common Stockholders This note calculates basic and diluted net income or loss per share, reflecting the earnings available to each common stockholder Net (Loss) Income per Share (in millions, except per share amounts) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income attributable to Getty Images Holdings, Inc. - Basic | $(35.069) | $3.847 | $(137.641) | $17.302 | | Basic EPS | $(0.08) | $0.01 | $(0.33) | $0.04 | | Diluted EPS | $(0.08) | $0.01 | $(0.33) | $0.04 | | Weighted-average Class A common shares outstanding (Basic) | 413,741,878 | 408,989,273 | 413,110,883 | 407,312,262 | | Weighted-average Class A common shares outstanding (Diluted) | 413,741,878 | 414,439,239 | 413,110,883 | 414,666,363 | - Basic and diluted net loss per share were $(0.08) for Q2 2025 and $(0.33) for H1 2025, reflecting the net losses incurred[95] - In periods of net loss, diluted net loss per share is the same as basic net loss per share because potentially dilutive securities are anti-dilutive; for H1 2025, 31.9 million shares were excluded for this reason[93][95] Note 10 - Income Taxes This note explains the company's income tax provisions, including benefits, expenses, and the effective tax rate, and factors influencing tax liabilities - The company recorded an income tax benefit of $23.3 million for Q2 2025, contrasting with an expense of $12.5 million for Q2 2024[98] - For H1 2025, income tax expense was $41.3 million, compared to $23.7 million for H1 2024[99] - The effective tax rate for 2025 is expected to be a large negative percentage due to the company's pre-tax loss and non-analogous income tax expense items like foreign withholding taxes and non-deductible interest[99] Note 11 - Segment Information This note provides financial data for the company's operating segments, detailing revenue and income from operations to assess performance by business unit Segment Information (in millions) | (In millions) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Revenue | $234.882 | $229.140 | $458.959 | $451.418 | | Segment income from operations | $35.560 | $46.458 | $62.902 | $87.492 | | Other non-operating income (expense) | $(56.706) | $3.619 | $(89.352) | $20.097 | | Segment net (loss) income | $(34.359) | $3.689 | $(136.931) | $17.276 | - The company operates as a single segment, reporting a segment net loss of $(34.359) million for Q2 2025 and $(136.931) million for H1 2025, compared to net income in the prior year periods[101] - Segment income from operations decreased by 23.5% for Q2 2025 and 28.1% for H1 2025, while other non-operating income shifted to a significant expense in 2025[101] Note 12 - Legal Proceedings and Contingencies This note outlines ongoing legal disputes, including warrant litigation and copyright infringement lawsuits, and their potential financial implications for the company - The company is appealing a judgment in the Initial Warrant Litigation, where damages of $36.9 million and $51.0 million were awarded to plaintiffs, plus 9% pre-judgment interest[104] - In the Follow-On Warrant Litigation, summary judgment was granted to plaintiffs Berner and Lapp, with damages including pre-judgment interest calculated at $7.8 million, which the company has also appealed[105] - As of June 30, 2025, the company had $114.0 million in litigation reserves for warrant litigation, with a remaining insurance recovery receivable of approximately $37.6 million[107][215] - Getty Images is a plaintiff in copyright and trademark infringement lawsuits against Stability AI, Inc. in the U.S. and Stability AI Limited in the UK, alleging unauthorized use of 12.0 million images for AI model training[108][109] - The company is vigorously contesting Canadian tax assessments for 2015, with a potential payment of up to $19.1 million during the appeal process and a maximum potential outcome of $27.7 million if the CRA prevails[113][114][216][217][218] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, and future outlook, including recent developments, a business overview, detailed analysis of operating results, liquidity and capital resources, and key performance indicators, along with non-GAAP financial measures Cautionary Note Regarding Forward-Looking Statements This note advises that the report contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially from projections - The report contains forward-looking statements identified by words such as 'believe,' 'may,' 'will,' and 'expect,' which are subject to various risks and uncertainties[119] - Key risks include the inability to license third-party content, attract/retain customers, grow subscriptions, manage competition, execute business strategy, adapt to AI technologies, and navigate international market risks[120][124] - Actual events and circumstances may differ materially from assumptions due to factors beyond the company's control, including risks related to the proposed merger with Shutterstock[119][124] Recent Developments This section highlights significant recent events, including a major merger agreement and debt refinancing activities, impacting the company's strategic and financial landscape Merger Agreement with Shutterstock This section details the merger-of-equals transaction with Shutterstock, outlining ownership stakes and the consideration offered to stockholders - Getty Images entered into a merger agreement with Shutterstock on January 6, 2025, for a merger-of-equals transaction, with Getty Images stockholders expected to own approximately 53.0% of the combined company[125][126] - Shutterstock stockholders can elect to receive cash and/or Getty Images common stock, subject to proration, with options including $9.50 cash and 9.17 shares, $28.8487 cash, or 13.67237 shares of Getty Images common stock per share[126][130] - The company expensed $14.4 million and $32.4 million in merger-related costs for the three and six months ended June 30, 2025, respectively, and the transaction is subject to ongoing regulatory approvals[127][128][129] Refinancing Amendment This section describes the company's debt refinancing, including the issuance of new term loans to replace existing debt, impacting its capital structure - On February 21, 2025, the company entered a Refinancing Amendment, issuing new $580.0 million New USD Term Loans and €440.0 million New EUR Term Loans[130][132] - The proceeds from the New Term Loans were used to fully refinance the outstanding Old USD Term Loans ($579.2 million) and Old EUR Term Loans (€419.0 million)[133][140] Permitted Debt Exchange Offering This section details the company's debt exchange, converting a portion of its term loans into new senior secured notes, altering its debt profile - On May 5, 2025, the company exercised its option to exchange $539.9 million of its New USD Term Loans for newly issued 11.250% Senior Secured Notes due 2030[133] Business Overview This section provides an overview of the company's core business as a global visual content creator and marketplace, its product lines, brands, and value propositions - Getty Images is a preeminent global visual content creator and marketplace, offering a diverse collection of high-quality photos, illustrations, videos, and music licensing[134] - The company provides comprehensive content solutions, including a la carte and subscription access, generative AI services, custom content, and digital asset management tools, through its Getty Images, iStock, and Unsplash brands[136][138] - Getty Images employs over 115 staff photographers and videographers, distributes content from almost 600,000 contributors, and maintains one of the largest privately-owned photographic archives globally[139] Product Lines This section categorizes the company's revenue by content type, including creative, editorial, and other services, highlighting their contribution to total revenue - Creative content, including generative AI services, represents 57.3% of H1 2025 revenue, with 59.2% generated through annual subscription products[140][141] - Editorial content (news, sports, entertainment) accounts for 37.2% of H1 2025 revenue, with 54.7% from annual subscription products[142] - The 'Other' category, including data access, music licensing, and digital asset management, significantly increased its revenue contribution to 5.4% for H1 2025[143] Brands This section describes the company's key brands, Gettyimages.com, iStock.com, and Unsplash.com, and their respective target markets and offerings - Gettyimages.com serves enterprise agency, media, and corporate customers with premium creative and editorial content, offering exclusive content and customizable rights[144] - iStock.com targets small and medium-sized businesses and freelancers with budget-conscious e-commerce offerings of creative stills and video[145] - Unsplash.com is a platform for free stock photo downloads and paid subscriptions, catering to prosumer and semi-professional creators, with over 85 million image downloads monthly[146] Customer and Contributor Value Proposition This section outlines the benefits provided to both customers and content contributors, emphasizing content quality, licensing options, and compensation models - For customers, Getty Images offers a comprehensive suite of high-quality content, diverse licensing options, commercially-safe generative AI, cost savings on content production, and trusted copyright protection[151] - For content contributors, the company provides access to a global marketplace, creative insights, premium royalty rates, and compensation for content used in AI models[151] Macroeconomic Conditions This section addresses the potential impact of global economic uncertainties, such as inflation, interest rates, and geopolitical events, on the company's financial performance - The company acknowledges ongoing macroeconomic uncertainties, including international armed conflicts, geopolitical tensions, supply chain shortages, inflation, and interest rate pressures[148] - A deterioration in macroeconomic conditions could increase the risk of lower consumer spending, foreign currency exchange fluctuations, or other business interruptions, adversely impacting financial results[148] Components of Operating Results This section breaks down the key elements contributing to the company's operating results, including revenue, cost of revenue, and various expense categories Revenue This section explains how revenue is generated through content licensing and related services, highlighting the growing contribution of annual subscriptions - Revenue is generated by licensing content through various models (Royalty-Free, Rights-Ready) and providing related services, including Generative AI by Getty Images and iStock[149][150] - Annual subscriptions now comprise approximately 55% of total revenue for the six months ended June 30, 2025, reflecting a strategic focus on growing subscription revenue[152] Cost of revenue (exclusive of depreciation and amortization) This section details the primary components of cost of revenue, mainly royalties paid to contributors, and how it correlates with revenue growth and product mix - Cost of revenue primarily consists of royalties paid to content contributors, ranging from 20% to 50% of the license fee, depending on the license model and content use[154] - Contributors are compensated for the inclusion of their content in AI data training sets and may share in the revenue generated by AI tools[154] - The cost of revenue is expected to trend higher in absolute dollars with revenue growth, with its percentage of revenue varying modestly based on changes in product mix[155] Selling, general, and administrative expenses This section outlines the composition of SG&A expenses, including staff costs, marketing, and professional fees, and their expected trends relative to revenue - Selling, general, and administrative expenses (SG&A) primarily include staff costs, marketing expenses, occupancy costs, and professional fees[156] - SG&A expenses are expected to increase in absolute dollars but remain relatively constant as a percentage of revenue in the near term, as the company expands operations and invests in growth[157] Depreciation This section describes depreciation expense related to internally developed software, content, and equipment, and its expected stability due to ongoing investments - Depreciation expense includes internally developed software, content, and equipment depreciation, recorded on a straight-line basis[158] - Depreciation expense is expected to remain stable as the company continues to innovate and invest in its websites' design, user experience, and performance[158] Amortization This section explains amortization expense for intangible assets like customer relationships and trademarks, noting its expected insignificance in future years - Amortization expense relates to intangible assets such as acquired customer relationships and trademarks[159] - Amortization expense is expected to be insignificant in the coming years as the majority of intangible assets have been fully amortized[159] Impact of Currency Fluctuations This section differentiates between foreign currency translation adjustments affecting comprehensive income and transaction gains/losses impacting net income - Foreign currency translation adjustments are charged or credited to 'Other comprehensive income (loss)'; net gains of $68.1 million were recognized for H1 2025, compared to losses of $18.4 million for H1 2024[163] - Transaction gains and losses are included in 'Foreign exchange (loss) gain – net' in the Statements of Operations; net losses of $79.8 million were recognized for H1 2025, compared to gains of $18.9 million for H1 2024[164] Results of Operations This section provides a detailed comparative analysis of the company's financial performance for the three and six months ended June 30, 2025, versus 2024 Operating Results (in millions, except percentages) | Metric | 2025 | 2024 | $ change | % change | | :------------------------------------------------------- | :--- | :--- | :------- | :------- | | Revenue | $234.882 | $229.140 | $5.742 | 2.5 % | | Total operating expenses | $199.322 | $182.682 | $16.640 | 9.1 % | | Income from operations | $35.560 | $46.458 | $(10.898) | (23.5)% | | Foreign exchange (loss) gain – net | $(54.771) | $2.439 | $(57.210) | (2345.6)% | | Net (loss) income | $(34.359) | $3.689 | $(38.048) | (1031.4)% | - Total revenue increased by 2.5% (1.8% currency neutral) to $234.9 million, while total operating expenses increased by 9.1% to $199.3 million[167][168] - The company reported a net loss of $(34.4) million for Q2 2025, a significant decline from net income of $3.7 million in Q2 2024, largely due to a $(54.8) million foreign exchange loss[167][183] Comparison of the Three Months Ended June 30, 2025 and 2024 This section provides a detailed comparative analysis of the company's financial performance for the three months ended June 30, 2025, versus 2024 Revenue by product This section analyzes revenue changes by product line for the quarter, highlighting shifts in creative, editorial, and other content contributions Revenue by Product (in millions, except percentages) | (In millions, except percentages) | 2025 | % of revenue | 2024 | % of revenue | $ change | % change | CN % change | | :--------------------------------------- | :--- | :----------- | :--- | :----------- | :------- | :------- | :---------- | | Creative | $130.824 | 55.7 % | $137.897 | 60.2 % | $(7.073) | (5.1)% | (5.7)% | | Editorial | $88.342 | 37.6 % | $83.619 | 36.5 % | $4.723 | 5.6 % | 4.6 % | | Other | $15.716 | 6.7 % | $7.624 | 3.3 % | $8.092 | 106.1 % | 105.5 % | | Total revenue | $234.882 | 100.0 % | $229.140 | 100.0 % | $5.742 | 2.5 % | 1.8 % | - Creative revenue decreased by 5.1% (5.7% CN) to $130.8 million, primarily due to declines in ALC credit sales, ultra packs, and iStock monthly subscriptions, particularly from Agency customers[169] - Editorial revenue increased by 5.6% (4.6% CN) to $88.3 million, driven by growth in Editorial subscriptions and assignments, particularly in Sport and News[170][171] - Other revenue significantly increased by 106.1% (105.5% CN) to $15.7 million, primarily due to new data access and licensing agreements[172] Cost of revenue (exclusive of depreciation and amortization) This section examines the quarterly changes in cost of revenue, primarily royalties, and its percentage of total revenue - Cost of revenue increased to $65.6 million in Q2 2025 from $63.1 million in Q2 2024, representing 27.9% of total revenue (up from 27.5%)[174] Selling, general, and administrative expense This section analyzes the quarterly fluctuations in SG&A expenses, driven by professional fees and staff costs - SG&A expenses increased by $3.8 million (3.8%, 3.2% CN) to $105.1 million, driven by a $6.5 million increase in professional fees (AI litigation, audit fees)[175][179] - This increase was partially offset by a $2.5 million decrease in staff costs, primarily due to lower accrued bonus, healthcare, severance, and commission expenses[179] Depreciation expense This section reports the quarterly change in depreciation expense, reflecting asset usage and capital investments - Depreciation expense increased by $0.8 million (5.8%) to $15.5 million in Q2 2025[175] Amortization expense This section details the quarterly amortization expense for intangible assets, noting its stability over the period - Amortization expense remained flat at $0.6 million for Q2 2025 compared to Q2 2024[176] Loss on litigation This section discusses the quarterly loss on litigation, including interest on judgments and legal fees, and its expected continuation - Loss on litigation decreased to $2.0 million in Q2 2025 from $2.8 million in Q2 2024, consisting of interest on summary judgment, legal fees, and appeal bond amortization[177] - These expenses are expected to continue as the company navigates appeals and additional warrant cases[177] Other operating expenses – net This section highlights the significant increase in other operating expenses, primarily due to costs associated with the proposed merger - Other operating expenses – net significantly increased to $10.5 million in Q2 2025 from $0.3 million in Q2 2024, primarily driven by costs related to the proposed merger with Shutterstock[180][181] Interest expense This section analyzes the quarterly increase in interest expense, attributed to new term loans and senior notes - Interest expense increased to $36.6 million in Q2 2025 from $33.9 million in Q2 2024, primarily due to interest charges on New Term Loans, Senior Secured Notes, and Senior Unsecured Notes[182] Foreign exchange (loss) gain – net This section details the significant shift to a net foreign exchange loss for the quarter, mainly due to EUR fluctuations impacting New EUR Term Loans - The company recognized a net foreign exchange loss of $(54.8) million in Q2 2025, a significant shift from a net gain of $2.4 million in Q2 2024, primarily driven by fluctuations in the EUR related to New EUR Term Loans[183] Other non-operating (expense) income – net This section explains the shift to a net non-operating expense for the quarter, primarily due to costs from debt exchange and lower interest income - Other non-operating items shifted to a net expense of $(1.9) million in Q2 2025 from income of $1.2 million in Q2 2024, primarily due to $2.8 million in costs related to the Permitted Debt Exchange and lower interest income[184] Income taxes This section reports the income tax benefit for the quarter and explains the expected negative effective tax rate due to pre-tax losses and non-analogous expenses - The company recorded an income tax benefit of $23.3 million for Q2 2025, compared to an income tax expense of $12.5 million for Q2 2024[186] - The effective tax rate for 2025 is expected to be a large negative percentage due to the company's pre-tax loss and income tax expense items not analogous to pre-tax loss[186] Comparison of the Six Months Ended June 30, 2025 and 2024 This section provides a detailed comparative analysis of the company's financial performance for the six months ended June 30, 2025, versus 2024 Operating Results (in millions, except percentages) | Metric | 2025 | 2024 | $ change | % change | | :------------------------------------------------------- | :--- | :--- | :------- | :------- | | Revenue | $458.959 | $451.418 | $7.541 | 1.7 % | | Total operating expenses | $396.057 | $363.926 | $32.131 | 8.8 % | | Income from operations | $62.902 | $87.492 | $(24.590) | (28.1)% | | Foreign exchange (loss) gain – net | $(79.849) | $18.861 | $(98.710) | (523.4)% | | Loss on extinguishment of debt | $(5.474) | $— | $(5.474) | NM | | Net (loss) income | $(136.931) | $17.276 | $(154.207) | (892.6)% | - Total revenue increased by 1.7% (2.1% currency neutral) to $459.0 million, while total operating expenses increased by 8.8% to $396.1 million[167][188] - The company reported a net loss of $(136.9) million for H1 2025, a significant decline from net income of $17.3 million in H1 2024, driven by a $(79.8) million foreign exchange loss and a $(5.5) million loss on debt extinguishment[167][203][204] Revenue by product This section analyzes revenue changes by product line for the six-month period, detailing performance across creative, editorial, and other content categories Revenue by Product (in millions, except percentages) | (In millions, except percentages) | 2025 | % of revenue | 2024 | % of revenue | $ change | % change | CN % change | | :--------------------------------------- | :--- | :----------- | :--- | :----------- | :------- | :------- | :---------- | | Creative | $262.998 | 57.3 % | $276.739 | 61.3 % | $(13.741) | (5.0)% | (4.3)% | | Editorial | $170.959 | 37.2 % | $163.048 | 36.1 % | $7.911 | 4.9 % | 5.1 % | | Other | $25.002 | 5.4 % | $11.631 | 2.6 % | $13.371 | 115.0 % | 114.6 % | | Total revenue | $458.959 | 100.0 % | $451.418 | 100.0 % | $7.541 | 1.7 % | 2.1 % | - Creative revenue decreased by 5.0% (4.3% CN) to $263.0 million, primarily due to declines in ALC credit sales, ultra packs, Premium RF, and iStock monthly subscriptions, particularly from Agency customers[190] - Editorial revenue increased by 4.9% (5.1% CN) to $171.0 million, driven by growth in Editorial subscriptions and assignments, with double-digit growth in Sport and News[191] - Other revenue significantly increased by 115.0% (114.6% CN) to $25.0 million, primarily due to new data access and licensing agreements[192] Cost of revenue (exclusive of depreciation and amortization) This section examines the six-month changes in cost of revenue, primarily royalties, and its percentage of total revenue - Cost of revenue increased to $125.8 million in H1 2025 from $123.4 million in H1 2024, representing 27.4% of total revenue (up from 27.3%)[194] Selling, general, and administrative expense This section analyzes the six-month fluctuations in SG&A expenses, driven by professional fees and staff costs - SG&A expenses increased by $1.2 million (0.6%, 1.0% CN) to $203.3 million, driven by a $7.9 million increase in professional fees (AI litigation, audit fees)[195][197] - This increase was partially offset by a $7.0 million decrease in staff costs, primarily due to lower equity-based compensation, healthcare, commission, payroll taxes, and severance expenses[197] Depreciation expense This section reports the six-month change in depreciation expense, reflecting asset usage and capital investments - Depreciation expense increased by $1.4 million (4.9%) to $30.5 million in H1 2025[195] Amortization expense This section details the six-month amortization expense for intangible assets, noting its stability over the period - Amortization expense remained flat at $1.1 million for H1 2025 compared to H1 2024[196] Loss on litigation This section discusses the six-month loss on litigation, including interest on judgments and legal fees, and its expected continuation - Loss on litigation increased to $6.4 million in H1 2025 from $4.8 million in H1 2024, consisting of interest on summary judgment, legal fees, and appeal bond amortization[198] - These expenses are expected to continue due to ongoing appeals and additional warrant cases[198] Other operating expenses – net This section highlights the significant increase in other operating expenses for the six-month period, primarily due to costs associated with the proposed merger - Other operating expenses – net significantly increased to $28.9 million in H1 2025 from $3.4 million in H1 2024, primarily driven by costs related to the proposed merger with Shutterstock[199] Interest expense This section analyzes the six-month increase in interest expense, attributed to new term loans, senior secured notes, and senior unsecured notes - Interest expense increased to $69.2 million in H1 2025 from $66.6 million in H1 2024, primarily due to interest charges on Old Term Loans, New Term Loans, Senior Secured Notes, and Senior Unsecured Notes[200] (Loss) on fair value adjustment for swaps – net This section reports no loss on fair value adjustment for swaps in H1 2025, as the company's interest rate swaps expired in February 2024 - No loss on fair value adjustment for swaps was recognized in H1 2025, as the company's interest rate swaps expired in February 2024, compared to a net loss of $1.5 million in H1 2024[201] Foreign exchange (loss) gain – net This section details the significant shift to a net foreign exchange loss for the six-month period, mainly due to EUR fluctuations impacting term loans - The company recognized a net foreign exchange loss of $(79.8) million in H1 2025, a significant shift from a net gain of $18.9 million in H1 2024, primarily driven by fluctuations in the EUR related to Old and New EUR Term Loans[203] Loss on extinguishment of debt This section reports the loss incurred from the extinguishment of debt during the six-month period, resulting from the refinancing of old term loans - A loss on extinguishment of debt of $5.5 million was recognized for H1 2025, resulting from the refinancing of the Old Term Loans[204] Other non-operating (expense) income – net This section explains the shift to a net non-operating expense for the six-month period, primarily due to costs from debt refinance and exchange, and lower interest income - Other non-operating items shifted to a net expense of $(4.0) million in H1 2025 from income of $2.7 million in H1 2024, primarily due to costs related to debt refinance, debt exchange, and lower interest income[205] Income taxes This section reports the income tax expense for the six-month period and explains the expected negative effective tax rate due to pre-tax losses and non-analogous expenses - The company recorded an income tax expense of $41.3 million for H1 2025, compared to $23.7 million for H1 2024[208] - The effective tax rate for 2025 is expected to be a large negative percentage due to the company's pre-tax loss and income tax expense items not analogous to pre-tax loss[208] Liquidity and Capital Resources This section discusses the company's sources and uses of cash, including operating, investing, and financing activities, and its ability to meet future obligations - The company's primary liquidity sources are existing cash and cash equivalents ($110.3 million as of June 30, 2025), cash provided by operations, and amounts available under its revolving credit facility[210] - Principal liquidity needs include debt service, capital expenditures, working capital, internal growth, and strategic acquisitions and investments[211] - Existing liquidity sources are expected to be adequate to fund operating, investing, and financing activities for at least the next 12 months and the foreseeable future[212] - The company has litigation reserves of $114.0 million for warrant litigation, with a remaining insurance recovery receivable of $37.6 million, and is contesting Canadian tax assessments with a potential maximum outcome of $27.7 million[215][216][217][218] Operating Activities This section analyzes the cash generated or used by the company's core business operations, highlighting factors like merger-related costs - Cash provided by operating activities decreased significantly to $21.9 million for H1 2025, down from $68.0 million for H1 2024, primarily driven by merger-related costs[221] Investing Activities This section examines cash flows related to the acquisition and disposal of long-term assets and business acquisitions, impacting future growth - Cash used in investing activities decreased to $31.8 million for H1 2025 from $44.7 million for H1 2024, primarily due to the absence of a business acquisition in the current period[223] Financing Activities This section details cash flows from debt and equity transactions, including refinancing, principal payments, and issuance costs, affecting capital structure - Cash used in financing activities decreased to $21.3 million for H1 2025 from $34.8 million for H1 2024, reflecting debt refinancing activities including principal payments, proceeds from new debt, and debt issuance costs[224] Key Performance Indicators and Non-GAAP Financial Measures This section presents key operational metrics and non-GAAP financial measures, such as Adjusted EBITDA, to provide additional insights into business performance Key Performance Indicators This section tracks operational metrics like purchasing customers, annual subscribers, and content collection growth, reflecting business health and strategic focus Key Performance Indicators (LTM Ended June 30) | Metric | 2025 | 2024 | Increase / (Decrease) | | :-------------------------------- | :--- | :--- | :-------------------- | | LTM total purchasing customers (thousands) | 707 | 740 | (4.4)% | | LTM total active annual subscribers (thousands) | 321 | 282 | 13.8% | | LTM paid download volume (millions) | 93 | 95 | (1.7)% | | LTM annual subscriber revenue retention rate | 93.4% | 89.4% | 400 bps | | Image collection (millions) | 591 | 553 | 7.0% | | Video collection (millions) | 34 | 30 | 14.7% | | LTM video attachment rate | 16.7% | 15.6% | 110 bps | - LTM total purchasing customers decreased by 4.4% to 707,000, attributed to a shift towards more committed annual subscription products, which positively impacted annual revenue per purchasing customer (up 9.2%)[232] - LTM total active annual subscribers increased by 13.8% to 321,000, driven by expanded e-commerce subscriptions, reflecting a strategic focus on subscription offerings[234] - The LTM annual subscriber revenue retention rate increased by 400 basis points to 93.4%, reflecting stabilization and the fading impact of last year's Hollywood strikes[239] Non-GAAP Financial Measures This section provides reconciliations and explanations for non-GAAP financial measures, offering alternative views of the company's financial performance Currency Neutral Revenue This section defines currency neutral revenue as a non-GAAP measure that adjusts for foreign currency fluctuations, providing insight into underlying business growth - Currency Neutral revenue growth or decline excludes the impact of fluctuating foreign currency values by translating all local currencies using current period exchange rates[243] - This measure provides useful supplemental information regarding changes in revenue not driven by foreign currency fluctuations[244] Reconciliation of Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted EBITDA less Capex This section reconciles Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted EBITDA less Capex to net income, providing a clearer view of operational profitability Adjusted EBITDA Reconciliation (in millions) | (In millions) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income | $(34.359) | $3.689 | $(136.931) | $17.276 | | Adjusted EBITDA | $67.974 | $68.824 | $138.098 | $139.037 | | Capex | $16.114 | $15.380 | $31.817 | $29.833 | | Adjusted EBITDA less capex | $51.860 | $53.444 | $106.281 | $109.204 | | Adjusted EBITDA margin | 28.9 % | 30.0 % | 30.1 % | 30.8 % | - Adjusted EBITDA for Q2 2025 was $68.0 million (28.9% margin) and for H1 2025 was $138.1 million (30.1% margin), showing slight decreases compared to the prior year periods[246] - Adjusted EBITDA less capex was $51.9 million for Q2 2025 and $106.3 million for H1 2025, also reflecting a modest decline year-over-year[246] Reconciliation of Adjusted Net Income and Adjusted Earnings Per Share This section reconciles Adjusted Net Income and Adjusted Earnings Per Share to GAAP net income and EPS, providing a normalized view of profitability Adjusted Net Income and Adjusted EPS Reconciliation (in millions) | (In millions) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income | $(34.359) | $3.689 | $(136.931) | $17.276 | | Adjusted net income (loss) | $22.193 | $7.062 | $(36.087) | $17.718 | | Diluted earnings per share | $(0.08) | $0.01 | $(0.33) | $0.04 | | Adjusted diluted earnings per share | $0.05 | $0.02 | $(0.09) | $0.04 | - Adjusted net income for Q2 2025 was $22.193 million, up from $7.062 million in Q2 2024, while adjusted diluted EPS increased to $0.05 from $0.02[249] - For H1 2025, adjusted net loss was $(36.087) million, compared to adjusted net income of $17.718 million in H1 2024, resulting in an adjusted diluted EPS of $(0.09)[249] Critical Accounting Policies This section refers to the company's critical accounting policies, including revenue recognition and income taxes, as detailed in previous filings and notes - The company's critical accounting policies, including revenue recognition, accrued litigation reserves, and accounting for income taxes, are described in detail in the 2024 Form 10-K and Note 2 of the interim financial statements[250] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section confirms no material changes to market risk exposures since the last annual report, noting the maturity of a significant interest rate swap - There have been no material changes to market risk exposures for the quarters ended June 30, 2025, and June 30, 2024, compared to those discussed in the 2024 Form 10-K[252] - The company's 5-year interest rate swap with a notional amount of $355.0 million matured in February 2024, and no new interest rate hedging arrangements have been entered into since[251] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal controls over financial reporting - Management, with the participation of the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[253] - There have been no changes in the company's internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting during Q2 2025[254] PART II. OTHER INFORMATION This section covers additional information not included in the financial statements, such as legal proceedings, risk factors, and other disclosures Item 1. Legal Proceedings This section refers to Note 12 for detailed information on legal proceedings and claims, stating that the company does not currently anticipate a material adverse impact on its financial results from these matters - The company is subject to certain legal proceedings and claims incidental to its business operations[256] - The company does not currently anticipate that these matters will have a material adverse impact on its financial results[256] - Further information regarding legal proceedings and claims is provided in Note 12 - Legal Proceedings and Contingencies[257] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the company's 2024 Form 10-K - There have been no material changes to the risk factors disclosed in Part 1, Item 1A. of the company's 2024 Form 10-K[258] Item 5. Other Information This sect