Shutterstock Reports Second Quarter 2014 Financial Results

Shutterstock Reports Second Quarter 2014 Financial Results

- Second quarter revenue increased 41% from prior year, to $80.2 million

- Adjusted EBITDA increased 25% to $16.8 million

- Quarterly paid downloads increased 30% to a record 31.5 million

- Collection grew 42%; currently exceeds 40 million images, 1.9 million video clips

- Music licensing launched during the quarter

- Total customer count exceeds 1 million

NEW YORK, Aug. 7, 2014 /PRNewswire/ -- Shutterstock, Inc. (NYSE: SSTK), a leading global provider of commercial digital imagery and music, today announced financial results for the second quarter ended June 30, 2014.

http://photos.prnewswire.com/prnvar/20120514/NY06418LOGO

"Our second quarter results showed continued consistent growth and expansion in key metrics," said Founder and CEO Jon Oringer. "The launch of music licensing, a first for Shutterstock, was also a great step forward in expanding our product offering to businesses of all sizes."



Operating Metrics


Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------

2014 2013 2014 2013
---- ---- ---- ----

(in millions, except revenue (in millions, except revenue
per download) per download)

Number of paid downloads 31.5 24.3 61.2 46.7

Revenue per download (1) $2.52 $2.33 $2.49 $2.31

Images in our collection (end of period) 38.8 27.3 38.8 27.3


(1) Revenue per download metric excludes the impact of revenue not associated with content downloads.
Revenue

Revenue for the second quarter of 2014 was $80.2 million, a 41% increase from $56.8 million in the second quarter of 2013.

Net Income

Net income for the second quarter of 2014 was $4.9 million as compared to $6.9 million in the second quarter of 2013. Net income available to common stockholders for the second quarter of 2014 was $4.9 million or $0.14 per share on a fully diluted basis as compared to $6.8 million or $0.20 per share on a fully diluted basis in the second quarter of 2013.

Non-GAAP net income for the second quarter of 2014 was $9.0 million or $0.25 per share, as compared to $7.8 million or $0.23 per share in the second quarter of 2013. Non-GAAP net income is defined as net income excluding the after tax impact of non-cash equity-based compensation.

Adjusted EBITDA

Adjusted EBITDA for the second quarter of 2014 was $16.8 million as compared to $13.4 million in the second quarter of 2013. Adjusted EBITDA is defined as net income adjusted for interest income/(expense), income taxes, depreciation, amortization and non-cash equity-based compensation.



Cash

The Company's cash and cash equivalents and short term investments balance was $235.8 million at June 30, 2014 as compared to $209.8 million as of December 31, 2013. The Company generated $21.2 million of cash from operations in the second quarter, as compared to $4.0 million in the second quarter of 2013.

Also, during the second quarter, the Company incurred planned capital expenditures related primarily to the purchase of computer servers and networking equipment in the amount of $3.9 million.

Free cash flow for the second quarter of 2014 was $17.3 million as compared to $2.1 million in the second quarter of 2013. Free cash flow is defined as cash provided by/(used in) operating activities adjusted for capital expenditures and interest income/(expense).

Financial Outlook

The Company's current financial and operating expectations for the third quarter of 2014 and increased expectations for full year 2014 are as follows:



Third Quarter 2014


-- Revenue of $81 - $83 million
-- Adjusted EBITDA of $15.5 - $16.5 million
-- Non-cash equity-based compensation expense of approximately $7.0 million
-- An effective tax rate of approximately 40%
-- Capital expenditures of approximately $4 million
Full Year 2014


-- Revenue of $323 - $327 million
-- Adjusted EBITDA of $68.0 - $69.5 million
-- Non-cash equity-based compensation expense of approximately $23 million
-- An effective tax rate of approximately 40%
-- Capital expenditures of approximately $20 million, including the
approximately $7.6 million of capital expenditures related to the
buildout of the Company's new headquarters


Earnings Teleconference Information

The Company will discuss its second quarter 2014 financial results during a teleconference today, August 7, 2014, at 5:00 PM ET. The conference call can be accessed at (866) 318-8617 or (617) 399-5136 (outside the US), conference ID# 527 711 87. The call will also be broadcast simultaneously at http://investor.shutterstock.com.

Following completion of the call, a recorded replay of the webcast will be available on Shutterstock's website. To listen to the telephone replay, call toll-free (888) 286-8010 or (617) 801-6888 (outside the US), conference ID# 298 595 13. The telephone replay will be available from 7:00 PM ET August 7 through August 14, 2014.

Additional investor information can be accessed at http://investor.shutterstock.com.

Non-GAAP Financial Measures

Shutterstock considers adjusted EBITDA, non-GAAP net income, and free cash flow to be important financial indicators of the Company's operational strength and the performance of its business. Shutterstock defines adjusted EBITDA as net income adjusted for interest income/(expense), income taxes, depreciation, amortization and non-cash equity-based compensation; non-GAAP net income as net income excluding the after tax impact of non-cash equity-based compensation; and free cash flow as cash provided by/(used in) operating activities adjusted for capital expenditures and interest income/(expense). These figures are non-GAAP financial measures and should be considered in addition to results prepared in accordance with generally accepted accounting principles (GAAP), and should not be considered as a substitute for, or superior to, GAAP results. In addition, adjusted EBITDA, non-GAAP net income, and free cash flow should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions; accordingly, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies.

A reconciliation of the differences between adjusted EBITDA, non-GAAP net income, and free cash flow, and the most comparable financial measure calculated and presented in accordance with GAAP, is presented under the heading "Reconciliation of Non-GAAP Financial Information to GAAP" immediately following the Consolidated Statements of Cash Flows included below.



Historical Operating Metrics


6/30/12 9/30/12 12/31/12 3/31/13 6/30/13 9/30/13 12/31/13 3/31/14 6/30/14
------- ------- -------- ------- ------- ------- -------- ------- -------

(in millions, except revenue per download)

Number of paid downloads 18.3 18.7 21.4 22.4 24.3 25.4 28.0 29.7 31.5

Revenue per download(1) $2.22 $2.26 $2.30 $2.28 $2.33 $2.35 $2.43 $2.45 $2.52

Images in collection (end of period) 20.2 21.7 23.3 25.1 27.3 29.7 32.2 35.4 38.8


(1) Revenue per download metric excludes the impact of revenue not associated with content downloads.
Non-Cash Equity-Based Compensation

Included in the accompanying financial results are expenses related to non-cash equity-based compensation, as follows (in thousands):



Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------

2014 2013 2014 2013
---- ---- ---- ----

Cost of revenue $368 $110 $617 $165

Sales and marketing 968 304 1,870 507

Product development 1,775 329 2,724 584

General and administrative 3,145 811 4,182 1,314

Total $6,256 $1,554 $9,393 $2,570
====== ====== ====== ======
Amortization of Intangible Assets and Depreciation of Property and Equipment

Included in the accompanying financial results are expenses related to the amortization of intangible assets, as follows (in thousands):



Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------

2014 2013 2014 2013
---- ---- ---- ----

Cost of revenue $29 $7 $41 $15

General and administrative 138 48 177 97

Total $167 $55 $218 $112
==== === ==== ====
Included in the accompanying financial results are expenses related to the depreciation of property and equipment, as follows (in thousands):



Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------

2014 2013 2014 2013
---- ---- ---- ----

Cost of revenue $1,106 $542 $2,003 $952

General and administrative 808 347 1,411 661

Total $1,914 $889 $3,414 $1,613
====== ==== ====== ======
About Shutterstock

Shutterstock, Inc. (NYSE: SSTK) is a leading global provider of high-quality licensed photographs, vectors, illustrations, video footage and music to businesses, marketing agencies and media organizations around the world. Working with its growing community of over 60,000 contributors, Shutterstock adds hundreds of thousands of images each week, and currently has available more than 40 million images and 1.9 million video clips.

Headquartered in New York City, with offices in Amsterdam, Berlin, Chicago, Denver, London, Paris and San Francisco, Shutterstock has customers in more than 150 countries. The Company owns Bigstock, a value-oriented stock media agency; Offset, a high-end image collection; Skillfeed, an online marketplace for learning; and WebDAM, a leading provider of hosted digital asset management tools.

For more information, please visit http://www.shutterstock.com, and follow Shutterstock on Twitter and on Facebook.

Safe Harbor Provision

The statements contained in this press release that are not purely historical are forward looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, including statements regarding the Company's expectations, predictions, beliefs, hopes, intentions or strategies regarding the future. Forward looking statements include statements regarding the Company's business strategy, timing of, and plans for, the introduction of new products and enhancements, future sales, market growth and direction, competition, market share, revenue growth, operating margins and profitability. All forward looking statements included in this document are based upon information available to the Company as of the date hereof. Actual events or results could differ materially from those contained in the Company's current projections or forward-looking statements. It is routine for internal projections and expectations to change as the quarter progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which the Company bases its expectations may change prior to the end of the quarter. Although these expectations may change, the Company assumes no obligation to update any such forward looking statement, whether as a result of new information, future developments or otherwise. Factors that could cause or contribute to such differences include the Company's inability to continue to attract customers and contributors to its online marketplace for commercial digital imagery; a decrease in repeat customer purchases or in content contributed to our online marketplace; the Company's inability to successfully operate in a new and rapidly changing market and to evaluate its future prospects; competitive factors; the Company's inability to prevent the misuse of its imagery; assertions by third parties of infringement or other violations of intellectual property rights by the Company; the Company's inability to increase market awareness of the Company and its services; the Company's inability to effectively manage its growth; the Company's inability to increase the percentage of its revenues that come from larger companies; the Company's inability to continue expansion into international markets; various income tax and other tax liabilities; failure to respond to technological changes or upgrade the Company's website and technology systems; failure to adequately protect the Company's intellectual property; general economic conditions worldwide; and other factors and risks discussed under the heading "Risk Factors" in the Company's latest Annual Report on Form 10K filed on February 28, 2014, and other reports filed by the Company from time to time with the Securities and Exchange Commission. Forward-looking statements in this release are made pursuant to the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995.



Shutterstock, Inc.

Consolidated Balance Sheets

(In thousands, except par value amount)

(unaudited)


June 30, 2014 December 31, 2013
------------- -----------------


ASSETS

Current assets:

Cash and cash equivalents $180,851 $155,355

Short-term investments 54,997 54,429

Credit card receivables 2,898 2,083

Accounts receivable, net 11,119 6,081

Prepaid expenses and other current assets 19,819 19,809

Deferred tax assets, net 4,340 5,431
----- -----

Total current assets 274,024 243,188

Property and equipment, net 27,575 20,256

Intangibles assets, net 4,546 853

Goodwill 10,186 1,423

Deferred tax assets, net 15,097 10,720

Other assets 1,891 2,048
-----

Total assets $333,319 $278,488
========


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $5,483 $4,164

Accrued expenses 22,473 23,638

Contributor royalties payable 10,845 9,180

Deferred revenue 66,437 52,100

Other liabilities 822 2,846
--- -----

Total current liabilities 106,060 91,928

Other non-current liabilities 11,794 3,961
------

Total liabilities 117,854 95,889
-------


Commitment and contingencies

Stockholders' equity:

Common stock, $0.01 par value; 200,000 shares
authorized; 353 351
35,334 and 35,071 shares outstanding as of June 30,
2014 and
December 31, 2013, respectively

Additional paid-in capital 150,495 127,443

Accumulated comprehensive income 44 9

Retained earnings 64,573 54,796
------ ------

Total stockholders' equity 215,465 182,599
-------

Total liabilities and stockholders' equity $333,319 $278,488
========










Shutterstock, Inc.

Consolidated Statements of Operations

(In thousands, except for share and per share data)

(unaudited)


Three Months Ended Six Months Ended

June 30, June 30,
-------- --------

2014 2013 2014 2013
---- ---- ---- ----


Revenue $80,238 $56,809 $153,016 $107,926


Operating expenses:

Cost of revenue 32,047 21,768 61,159 41,589

Sales and marketing 20,492 13,314 39,768 25,292

Product development 9,275 5,060 17,052 9,615

General and administrative 9,994 5,734 17,508 10,514


Total operating expenses 71,808 45,876 135,487 87,010
------ ------ ------- ------

Income from operations 8,430 10,933 17,529 20,916

Other (expense) income, net (19) 20 2 8
--- --- --- ---

Income before income taxes 8,411 10,953 17,531 20,924

Provision for income taxes 3,550 4,090 7,753 8,496
----- ----- ----- -----

Net income $4,861 $6,863 $9,778 $12,428

Less:

Preferred interest distributed - - - -

Undistributed earnings to participating
stockholder 10 22 21 41


Net income available to common stockholders $4,851 $6,841 $9,757 $12,387
====== ====== ====== =======


Net income per basic share available to common stockholders:

Undistributed $0.14 $0.20 $0.28 $0.37

Basic $0.14 $0.20 $0.28 $0.37
===== ===== ===== =====


Net income per diluted share available to common stockholders:

Undistributed $0.14 $0.20 $0.27 $0.37
----- ----- ----- -----

Diluted $0.14 $0.20 $0.27 $0.37
===== ===== ===== =====


Weighted average shares outstanding:

Basic 35,148,876 33,471,679 35,089,254 33,435,439


Diluted 35,874,789 34,040,934 35,857,899 33,903,898










Shutterstock, Inc.

Reconciliation of Non-GAAP Financial Information to GAAP

(In thousands, except for share and per share information)

(Unaudited)



Unaudited Supplemental Data
---------------------------

The following information is not a financial measure under generally accepted accounting principles (GAAP). In addition, it
should not be construed as an alternative to any other measures of performance determined in accordance with GAAP, or as an
indicator of our operating performance, liquidity or cash flows generated by operating, investing and financing activities as
there may be significant factors or trends that it fails to address. We present this financial information because we believe
that it is helpful to some investors as one measure of our operations. We caution investors that non-GAAP financial
information, by its nature, departs from traditional accounting conventions; accordingly, its use can make it difficult to
compare our results with our results from other reporting periods and with the results of other companies.


Three Months Ended Six Months Ended

June 30, June 30,
-------- --------

2014 2013 2014 2013
---- ---- ---- ----


Net income $4,861 $6,863 $9,778 $12,428

Add/(less):

(a) Depreciation and amortization 2,081 944 3,632 1,725

(b) Write-off of property and equipment - - 367 -

(c) Non-cash equity based compensation 6,256 1,554 9,393 2,570

(d) Other expense (income), net 19 (20) (2) (8)

(e) Provision for income taxes 3,550 4,090 7,753 8,496
-------------

Adjusted EBITDA (1) $16,767 $13,431 $30,921 $25,211
======= ======= ======= =======

Adjusted EBITDA per diluted common share $0.47 $0.39 $0.86 $0.74
===== ===== ===== =====


Weighted average diluted shares 35,874,789 34,040,934 35,857,899 33,903,898
========== ========== ========== ==========


Three Months Ended Six Months Ended

June 30, June 30,
-------- --------

2014 2013 2014 2013
---- ---- ---- ----

Net income $4,861 $6,863 $9,778 $12,428

(a) Non-cash equity based compensation 6,256 1,554 9,393 2,570

(b) Non-cash equity based compensation tax benefit (2,161) (580) (3,148) (1,044)

Non-GAAP net income $8,956 $7,837 $16,023 $13,954
====== ====== ======= =======

Non-GAAP net income per diluted common share $0.25 $0.23 $0.45 $0.41
===== ===== ===== =====


Weighted average diluted shares 35,874,789 34,040,934 35,857,899 33,903,898
========== ========== ========== ==========


Three Months Ended Six Months Ended

June 30, June 30,
-------- --------

2014 2013 2014 2013
---- ---- ---- ----

Net cash provided by operating activities $21,158 $4,024 $36,787 $17,814

Other (expense) income, net (19) 20 2 8

Capital expenditures (3,899) (1,859) (14,780) (2,986)

Free cash flow $17,278 $2,145 $22,005 $14,820
======= ====== ======= =======


Adjusted EBITDA $16,767 $13,431 $30,921 $25,211

Add/(less):

(a) Changes in operating assets and liabilities 12,181 (3,053) 24,478 4,838

(b) Provision for income taxes (3,550) (4,090) (7,753) (8,496)

(c) Deferred income taxes (2,072) (1,435) (2,474) (3,127)

(d) Excess tax benefit from exercise of stock options (2,376) (1,009) (8,721) (1,009)

(e) Provision for doubtful accounts/chargeback/sales
refund reserves 187 160 294 264

(f) Other (expense) income, net (19) 20 2 8

(g) Amortization of financing fees - - - 125

(h) Change in fair value of contingent consideration 40 - 40 -

Net cash provided by operating activities $21,158 $4,024 $36,787 $17,814
======= ====== ======= =======


(1) Earnings/(loss) before interest income/(expense), income taxes, depreciation, amortization, disposals, non-cash equity

based compensation and other non-cash charges.




Logo - http://photos.prnewswire.com/prnh/20120514/NY06418LOGO

SOURCE Shutterstock, Inc.

Photo:http://photos.prnewswire.com/prnh/20120514/NY06418LOGO
http://photoarchive.ap.org/
Shutterstock, Inc.

CONTACT: Meagan Kirkpatrick, Shutterstock, Inc., +1-646-402-2854, kirkpatrick@shutterstock.com; Denise Garcia, ICR, denise.garcia@icrinc.com

Web Site: http://www.shutterstock.com


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