Shutterstock(US:SSTK)2024-02-21 16:10Financial Data and Key Metrics Changes - In 2023, the company generated a record $241 million of EBITDA on $875 million of revenue, achieving a 6% top line growth and 27.5% EBITDA margins, with a 10% EBITDA growth [60][89] - Free cash flow was strong at $42 million, with an EBITDA to free cash flow conversion rate of 90% [55] - The company anticipates revenues and adjusted EBITDA to remain unchanged in 2024, maintaining $875 million in revenues and $241 million in EBITDA [74] Business Line Data and Key Metrics Changes - The enterprise channel grew 33% in 2023, driven by data revenues which quintupled to $104 million [60] - E-commerce revenues declined by 12% for the full year, but operational improvements are expected to stabilize and gradually return to growth in 2024 [10][79] - The company plans to report revenues across two categories: content and data distribution and services, reflecting a shift in focus [11] Market Data and Key Metrics Changes - The total addressable market (TAM) for data distribution and services is projected to grow from 16% of revenues today to 22% by 2027, with an expected annual growth rate of 10% [20][87] - The content business is expected to return to growth rates at the higher end of the industry range of 5% to 7% [53] - The generative AI data licensing market is estimated to be a $9 billion TAM by 2030, with a growth rate exceeding 20% [83] Company Strategy and Development Direction - The company is focused on capital redeployment, with 50% of free cash flow allocated to M&A and organic investments, while the remainder is split between dividends and share repurchases [16] - The company aims to leverage strengths in video, 3D, and generative content to drive growth, with a target of 10% annual revenue growth by 2027 [12][69] - Giphy is seen as a critical component in the data distribution and services model, with significant revenue potential from advertising [33][65] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving long-term targets despite macroeconomic uncertainties, emphasizing the ability to scale new product offerings [24] - The company is optimistic about returning to growth in the e-commerce segment, attributing past declines to the expiration of free trial offerings [29] - Management highlighted the importance of ethical data sourcing and legal protection in the generative AI space, which is expected to benefit the business [34] Other Important Information - The company increased its quarterly dividend by 10% to $0.30 per share, marking the fourth consecutive year of double-digit dividend increases [6] - The acquisition of Backgrid for $20 million is expected to enhance the editorial library and customer base [81] - The company is actively working on expanding its API offerings and partnerships with major cloud providers to enhance data distribution capabilities [82] Q&A Session Summary Question: Conviction on 2027 targets and macro assumptions - Management acknowledged the difficulty in predicting macro conditions but expressed confidence in returning to growth based on past performance and scaling new offerings [24][26] Question: E-commerce revenue decline and AI impact - Management attributed the decline to the end of free trial offerings and is focused on new promotional strategies to improve the business [29] Question: Giphy's role and pricing strategy - Giphy is expected to play a significant role in data distribution, with management optimistic about its revenue potential and advertising relationships [33][65] Question: Data pricing structure and competition - The pricing for data is volume-based, with negotiations tailored to customer use cases, and management is aware of competition in the data market [51] Question: 3D opportunity and partnership with NVIDIA - Management discussed ongoing work in 3D generative models and the potential for significant cost reductions in content creation [46]