Shutterstock, Inc. Q4 FY2023 earnings call

• 2023 results: Record $241M EBITDA on $875M revenue, 6% top line growth, 27.5% EBITDA margins, 10% EBITDA growth. • Enterprise channel: 33% growth, data revenues quintupled to $104M, excluding data grew 8% with 12% in Q4. • E-commerce: Declined 12%, but operational improvements are stabilizing the business with initiatives to drive recovery. • Generative AI: Focused on monetization, deployed multiple image generation APIs, expect 3D generative capabilities in 2023. • 2027 framework: Shift to content and data distribution/services categories. Content business to return to growth leveraging video, 3D, generative content. Acquired Backgrid to expand editorial library. Data distribution and services: Data business a preferred training data provider, expanding delivery model via cloud marketplaces; Giphy platform reaches 1B daily users, with native advertising potential; Studios business growing rapidly with opportunities in virtual production and games development. • Long-term targets: Aim for 10% revenue growth by 2027, EBITDA margin to 30%, $1.2B revenue and $350M EBITDA by 2027.

In 2023, Shutterstock generated $875 million in revenue and $241 million in EBITDA. The enterprise channel grew 33%, with data revenues quintupling to $104 million in 2023. Excluding data, enterprise grew 8% in 2023, with 12% growth in Q4 2023. The e-commerce channel declined 12% in 2023. Video, 3D, music, and other non-image revenues as a percentage of total content revenue increased from 25% to 35%. Content business generated $737 million in revenue in 2023, and data distribution and services already account for 16% of total revenue.

• 2024: Expect revenues and adjusted EBITDA to be unchanged at $875M and $241M. Content revenues flat with gradual improvement from negative to positive each quarter. Data distribution and services unchanged in 2024 but set for growth. • 2027: Aim for $1.2B revenue, 10% revenue growth, EBITDA margin to 30%, $350M EBITDA, with data distribution and services growing from 16% to 22% of total revenue.

• Macro environment uncertainty could impact business growth. • Competition in the content and data markets could affect market share. • Execution of growth strategies for data distribution, services, and new content types may not meet expectations. • Transition in data revenue recognition from upfront licensing to ratable over time could impact financial results.

Q: Love to get your level of conviction on the 2027 targets and macro environments assumed and when content revenue comes back to growth?

A: Paul Hennessy stated they have conviction in the 2027 targets as they know how to grow the business, with content business expected to return to growth leveraging existing strengths. Jarrod Yahes added content business with 3D, video, and music is growing double-digits at 12%.

Q: E-commerce revenue down 16%, why don't you believe AI platforms are structurally hurting that business?

A: Paul Hennessy said they aren't seeing customers at scale wanting to buy AI generated content, and softness in e-commerce is related to free trial offering running its course. They're moving away from free trial and will find new ways to promote to small customers.

Q: 3D opportunity and partnership with NVIDIA?

A: Jarrod Yahes said they've been working on 3D generative model, expect to bring it to market early in 2024, with potential to lower content creation costs across use cases like gaming and film development, already in testing with alpha customers.

Q: Giphy and data sales pricing and competition?

A: Paul Hennessy said Giphy plays a large role in data distribution services, with potential in the hundreds of millions. Jarrod Yahes talked about data pricing being volume-based, differential by content type, and competition with companies taking shortcuts, but they believe their business is a tailwind as enterprise customers need rightfully acquired training data.