Shutterstock(US:SSTK)2024-05-02 20:47PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents Shutterstock, Inc.'s unaudited consolidated financial statements as of March 31, 2024, detailing balance sheets, operations, cash flows, and notes on key acquisitions Consolidated Balance Sheets As of March 31, 2024, total assets slightly decreased to $1.029 billion, driven by lower cash, while total liabilities decreased and stockholders' equity increased Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $1,028,503 | $1,036,015 | | Cash and cash equivalents | $71,811 | $100,490 | | Goodwill | $402,787 | $383,325 | | Total Liabilities | $487,228 | $508,921 | | Deferred revenue | $198,041 | $203,463 | | Debt | $30,000 | $30,000 | | Total Stockholders' Equity | $541,275 | $527,094 | Consolidated Statements of Operations Q1 2024 revenue remained flat at $214.3 million, but net income significantly decreased by 51% to $16.1 million due to a 13% increase in total operating expenses Q1 2024 vs. Q1 2023 Statement of Operations (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | $214,315 | $215,280 | | Total operating expenses | $197,569 | $174,911 | | Income from operations | $16,746 | $40,369 | | Net income | $16,121 | $32,843 | | Diluted EPS | $0.45 | $0.90 | Consolidated Statements of Cash Flows Net cash from operating activities sharply decreased to $8.3 million in Q1 2024, leading to a net decrease in cash of $28.7 million after investing and financing activities Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $8,300 | $66,775 | | Net cash used in investing activities | $(16,528) | $(15,937) | | Net cash used in financing activities | $(18,629) | $(70,667) | | Net decrease in cash and cash equivalents | $(28,679) | $(19,322) | Notes to Consolidated Financial Statements These notes detail accounting policies and financial items, highlighting the Backgrid acquisition for $20 million, growth in 'Data, Distribution, and Services' revenue, and the planned Envato acquisition for $245 million - On February 1, 2024, the Company acquired Backgrid for approximately $20 million in cash, resulting in $19.8 million of goodwill346369 Revenue by Product Offering (in thousands) | Offering | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Content | $173,830 | $193,984 | | Data, Distribution, and Services | $40,485 | $21,296 | | Total Revenue | $214,315 | $215,280 | Revenue by Customer Location (in thousands) | Region | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | North America | $110,427 | $99,140 | | Europe | $55,400 | $59,034 | | Rest of the world | $48,488 | $57,106 | | Total revenue | $214,315 | $215,280 | - On May 1, 2024, the Company agreed to acquire Envato for approximately $245 million, funded by a new credit facility and expected to close in Q3 2024140141 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial performance, noting flat revenue with a shift from 'Content' to 'Data, Distribution, and Services', declining income due to higher costs, and details on liquidity and the Envato acquisition - The company's business comprises two main offerings: 'Content' (images, footage, music, 3D models) and 'Data, Distribution, and Services' (metadata licenses, Giphy advertising, Shutterstock Studios)146147 - On May 1, 2024, the company agreed to acquire Envato, an online marketplace, for approximately $245 million, funded by a new credit facility and expected to close in Q3 2024156157 Key Operating Metrics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Subscribers (end of period) | 499,000 | 559,000 | | Paid downloads (in millions) | 35.0 | 42.7 | | Revenue per download | $4.97 | $4.41 | | Average revenue per customer (LTM) | $418 | $356 | Results of Operations Q1 2024 revenue was $214.3 million, with 'Content' revenue down 10% offset by 'Data, Distribution, and Services' up 90%, leading to a 59% drop in operating income due to 13% higher expenses - Content revenues decreased by 10% to $173.8 million, primarily due to weakness in new customer acquisition188 - Data, Distribution, and Services revenues increased by 90% to $40.5 million, driven by 73% growth in the data offering189 - Cost of Revenue increased by 13% ($10.0 million) due to higher hosting, employee, and D&A costs, largely from Giphy and Backgrid acquisitions192 - Sales and Marketing expenses increased by 18% ($8.7 million) due to a $5.5 million increase in brand and performance marketing spend193 - Product Development expenses increased by 37% ($5.6 million), primarily driven by Giphy employee-related costs194 Liquidity and Capital Resources As of March 31, 2024, the company held $71.8 million in cash, with $67 million available on its credit facility, and paid a $0.30 per share dividend - Cash and cash equivalents totaled $71.8 million as of March 31, 2024201 - The company has a $100 million credit facility with $30 million drawn and $67 million available as of March 31, 2024210 - A quarterly cash dividend of $0.30 per share was paid in Q1 2024, with a similar dividend declared for Q2 2024203204 - No shares were repurchased in Q1 2024; $71.8 million remains authorized under the 2023 Share Repurchase Program207 Non-GAAP Financial Measures Q1 2024 non-GAAP results show Adjusted EBITDA decreased to $56.0 million with margin at 26.1%, Adjusted Net Income at $40.6 million, and Adjusted Free Cash Flow significantly lower at $11.2 million Non-GAAP Financial Measures Reconciliation (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income | $16,121 | $32,843 | | Adjusted EBITDA | $55,977 | $69,764 | | Adjusted EBITDA Margin | 26.1% | 32.4% | | Adjusted Net Income | $40,640 | $47,134 | | Adjusted Net Income per Diluted Share | $1.13 | $1.29 | | Adjusted Free Cash Flow | $11,246 | $50,868 | - Adjustments to derive non-GAAP figures primarily include depreciation & amortization, non-cash equity-based compensation, and non-recurring Giphy retention compensation expenses230231232 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency fluctuations, with 28% of Q1 2024 revenue in foreign currencies, while interest rate and inflation risks are not material - Revenue denominated in foreign currencies was approximately 28% of total revenue for Q1 2024, down from 30% in Q1 2023239 - A hypothetical 10% change in the USD exchange rate against all foreign currency revenues would impact total revenue by approximately 3%239 - Interest rate risk from the $30 million outstanding on the Credit Facility is not considered material, as a 10% change in rates would not significantly impact interest expense243 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that as of March 31, 2024, the company's disclosure controls and procedures were effective at the reasonable assurance level246 - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2024247 PART II. OTHER INFORMATION Legal Proceedings The company is not currently involved in any material active litigation, and existing claims are not expected to have a material adverse effect - The company is not currently party to any material active litigation and does not expect existing matters to have a material adverse effect on its business249 Risk Factors No material changes occurred to the risk factors previously disclosed in the 2023 Form 10-K - During the three months ended March 31, 2024, there were no material changes to the risk factors as described in the 2023 Form 10-K250 Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - None251 Signatures The report was signed on May 2, 2024, by Jarrod Yahes, Chief Financial Officer, and Steven Ciardiello, Chief Accounting Officer262