Shutterstock(US:SSTK)2023-04-25 16:32Financial Performance and Key Metrics - Revenue for Q1 2023 was $215 million, representing an 8% year-on-year growth and exceeding expectations, with a 10% growth on a constant currency basis [10][25] - EBITDA reached a record $70 million, growing 27% year-on-year, resulting in a 32% margin [25][40] - Free cash flow was $51 million, allowing the company to fully repay a $50 million revolver while maintaining a strong cash balance of $96 million [14][25] Business Line Performance - Enterprise revenue grew by 33% in Q1 2023, driven by strong subscription bookings and data partnerships [10][26] - Subscription bookings increased by 20%, now representing 34% of total bookings, up from 28% a year ago [18] - E-commerce revenue declined by 6%, primarily due to weak demand in Europe, impacting subscriber count [11][17] Market Data and Key Indicators - The company is experiencing a surge in customer engagement with its generative AI offerings, with approximately 10,000 new accounts created daily [19][102] - The enterprise sales channel is evolving, with a focus on cross-selling multiple content types and enhancing service offerings [48][104] Company Strategy and Industry Competition - The company is investing heavily in generative AI and has partnered with NVIDIA to enhance its 3D capabilities, which is expected to lower production costs and expand use cases [6][10] - The strategic focus is on multi-year partnerships that include content licensing and creative services, aiming for long-term growth [7][28] Management Commentary on Operating Environment and Future Outlook - Management remains cautious about the e-commerce channel, attributing current weaknesses to macroeconomic factors rather than product issues [17][44] - The company raised its 2023 revenue growth guidance to 2% to 3% and expects continued EBITDA margin expansion [46] Other Important Information - The deferred revenue balance decreased to $181 million from $187 million, reflecting the softness in e-commerce [14] - The company is seeing a growing trend among large companies to develop their own generative AI models, which aligns with its strategic focus [71][82] Q&A Session Summary Question: What is the game plan for the e-commerce channel given the current performance? - Management believes the decline is primarily macro-driven and is experimenting with various strategies to improve performance [44][102] Question: Can you quantify the organic growth excluding Pond5? - Management provided baseline figures, indicating that Pond5 contributes approximately $11 million to $12 million quarterly [47] Question: How are companies using AI for commercial purposes? - There is a mix of users experimenting with AI and those using it for commercial purposes, with high engagement levels noted [112][126] Question: What is the outlook for gross margins moving forward? - Future gross margin improvements may come from increased software offerings, which do not incur the same costs as content [120]