Shutterstock(SSTK) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for Q1 2022 and 2021, detailing balance sheets, operations, cash flows, and notes, with key changes in assets, net income, and financing cash usage Consolidated Balance Sheets Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $258,112 | $314,017 | | Total current assets | $339,719 | $388,215 | | Total assets | $795,978 | $851,710 | | Total current liabilities | $303,886 | $333,784 | | Total liabilities | $351,555 | $383,228 | | Total stockholders' equity | $444,423 | $468,482 | Consolidated Statements of Operations Consolidated Statements of Operations Summary (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Revenue | $199,132 | $183,281 | | Income from operations | $31,918 | $38,118 | | Net income | $26,572 | $29,514 | | Diluted EPS | $0.71 | $0.79 | - For Q1 2022, revenue increased by 8.7% year-over-year, while net income decreased by 10.0% year-over-year[18] Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Summary (in thousands) | Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $22,723 | $35,828 | | Net cash used in investing activities | $(12,525) | $(81,213) | | Net cash used in financing activities | $(65,574) | $(19,371) | | Net decrease in cash and cash equivalents | $(55,905) | $(64,648) | - The significant increase in cash used in financing activities in Q1 2022 was primarily due to $38.4 million in treasury share repurchases, which did not occur in Q1 2021[27] Notes to Consolidated Financial Statements These notes detail accounting policies, revenue recognition, the TurboSquid acquisition, revenue breakdowns by channel and geography, and shareholder equity activities - Key offerings include Images, Footage, Music, 3D Models (from TurboSquid acquisition), and Creative Design Software (from PicMonkey acquisition)[33] - 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[51][52] Revenue by Distribution Channel (in thousands) | Channel | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | E-commerce | $127,070 | $118,400 | | Enterprise | $72,062 | $64,881 | | Total Revenues | $199,132 | $183,281 | Revenue by Customer Location (in thousands) | Region | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | North America | $79,943 | $64,309 | | Europe | $62,553 | $62,277 | | Rest of the world | $56,636 | $56,695 | | Total revenue | $199,132 | $183,281 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 financial performance, noting a 9% revenue increase to $199.1 million, driven by E-commerce and Enterprise growth, but a 16% operating income decline due to rising expenses, alongside liquidity and non-GAAP measures Key Operating Metrics Key Operating Metrics Comparison | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Subscribers (end of period) | 359,000 | 306,000 | | Subscriber revenue (in millions) | $85.4 | $76.5 | | Paid downloads (in millions) | 44.6 | 45.8 | | Revenue per download | $4.22 | $3.96 | - The number of subscribers grew by 17.3% year-over-year, and revenue per download increased by 6.6%, primarily due to changes in product mix[115][142] Results of Operations - Revenue increased by $15.9 million (9%) in Q1 2022 compared to Q1 2021, with 11% growth on a constant currency basis[139] - Total operating expenses increased by $22.1 million (15%), primarily due to a $11.4 million (27%) increase in Sales and Marketing and a $2.9 million (27%) increase in Product Development expenses[138][145][146] - Income from operations decreased by $6.2 million (16%) to $31.9 million in Q1 2022 from $38.1 million in Q1 2021[138] Liquidity and Capital Resources - As of March 31, 2022, the company held $258.1 million in cash and cash equivalents[154] - In Q1 2022, the company repurchased approximately 422,000 shares of common stock for $38.4 million and paid cash dividends of $8.7 million[159][169] - Net cash provided by operating activities decreased to $22.7 million in Q1 2022 from $35.8 million in Q1 2021, impacted by lower operating income and timing of expense payments[166] Non-GAAP Financial Measures Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Line Item | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net income | $26,572 | $29,514 | | Depreciation and amortization | $15,065 | $10,091 | | Non-cash equity-based compensation | $7,826 | $8,210 | | Other adjustments, net | $(758) | $2,462 | | Provision for income taxes | $6,104 | $6,142 | | Adjusted EBITDA | $54,809 | $56,419 | Reconciliation of Net Income to Adjusted Net Income (in thousands) | Line Item | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net income | $26,572 | $29,514 | | Non-cash equity-based compensation | $7,826 | $8,210 | | Acquisition-related amortization expense | $6,045 | $1,099 | | Tax effects of adjustments | $(3,259) | $(2,187) | | Adjusted net income | $37,184 | $36,636 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are foreign currency fluctuations, interest rates, and inflation, with foreign exchange risk being most significant due to 33% of Q1 2022 revenue in foreign currencies - Revenue denominated in foreign currencies constituted approximately 33% of total revenue for Q1 2022[189] - A 10% change in the U.S. dollar exchange rate against foreign currency revenues would result in an approximate 3% impact on total revenue[189] Item 4. Controls and Procedures As of March 31, 2022, the CEO and CFO concluded disclosure controls were effective, with no material changes to internal control over financial reporting during the quarter - As of March 31, 2022, the CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable assurance level[196] - No material changes in internal control over financial reporting were identified during the quarter[197] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not a party to any material active litigation and anticipates no material adverse effects from ordinary course claims on its financial condition or operations - The company is not currently a party to any material active litigation and expects no material adverse effect from ordinary course matters on its business[199] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's 2021 Annual Report on Form 10-K were identified during the quarter - No material changes to the risk factors described in the company's 2021 Form 10-K occurred during Q1 2022[200] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details common stock repurchases in Q1 2022, including 421,979 shares bought back at an average of $90.69, with $34.6 million remaining for future purchases Issuer Purchases of Equity Securities (Q1 2022) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | January 2022 | 60,000 | $96.38 | | February 2022 | 168,215 | $90.22 | | March 2022 | 193,764 | $89.33 | | Total | 421,979 | $90.69 | - As of March 31, 2022, $34.6 million remained available for purchase under the company's share repurchase authorization[203] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Interactive Data Files (XBRL) - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, and XBRL data files[207]