Shutterstock(SSTK) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Shutterstock's Q2 2020 revenues were $159 million, down 2% year-over-year, and down 1% on a constant currency basis [11][26] - Adjusted EBITDA was $37 million, representing a margin of 23%, up from 15% in the previous year, marking a record quarterly EBITDA for the company [23][30] - Gross margins improved to 60%, up approximately 200 basis points from 58% in Q2 2019 [27][30] - GAAP net income was $19 million or $0.53 per diluted share, compared to $11.8 million or $0.33 per diluted share in Q2 2019 [30] Business Line Data and Key Metrics Changes - E-commerce channel revenue increased 2% to $98.2 million, while Enterprise channel revenue decreased 6% to $61.1 million [26] - Subscriber count increased by 30% to 223,000, with subscriber revenue rising 8% to $62.6 million, representing 39% of total revenues [34][35] - Paid downloads declined by 6% to $44 million, but revenue per download increased by $0.17 to $3.61 [37] Market Data and Key Metrics Changes - The North America and European regions saw a decline of 3%, while the rest of the world, including Asia, grew modestly [11] - The European geography has not yet recovered to 2019 levels, indicating ongoing challenges in that market [26] Company Strategy and Development Direction - The company is focusing on workflow innovation, content services, and data and insights to deliver strong returns for shareholders [10] - Significant investments are being made in platform solutions and global expansion of sales and technical integration teams [12] - The introduction of new subscription products in music and multi-asset offerings is planned for the second half of the year [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to overall quarterly revenue growth by Q4 2020, contingent on the resolution of the pandemic [41] - The company aims for year-over-year margin expansion of at least 50 basis points in 2020 compared to 2019 [43] - Management acknowledged the need for continued investment in marketing and brand building to support new subscription products [16][41] Other Important Information - The company introduced three new KPIs to track the transition towards a subscription-based model [22] - Free cash flow for Q2 was $22.4 million, up from $19.8 million in Q2 2019 [31] - The company is actively looking for M&A opportunities to enhance its business and expand its market presence [39][96] Q&A Session Summary Question: Performance relative to expectations and future EBITDA margins - Management noted strong performance in the SMB sector and the introduction of new subscription products contributed to revenue outperformance [53] - Future EBITDA margins are expected to benefit from operational leverage in G&A and sales and marketing expenses [56][58] Question: Drivers of higher revenue per download - Higher revenue per download was attributed to reduced utilization and the subscription nature of revenues [61] Question: Enterprise segment growth drivers - Growth in the Enterprise segment is expected from new services and deeper penetration into existing accounts [66][70] Question: Changes to contributor royalty payouts - Management clarified that gross margins were impacted by various factors, including lower download activity and automation in content ingestion [74][76] Question: Growth in subscriber numbers - Subscriber growth is driven by new lower-priced subscription products targeting the prosumer segment [82]