Shutterstock, Inc. Q1 FY2024 earnings call

Paul Hennessy noted the business outperformed expectations with revenue of $214 million and EBITDA of $56 million. The content business results aligned with expectations, with larger customers' demand growing while small and medium-sized customers' online demand was muted, but leading indicators suggested a return to growth in the second half of the year. The data distribution and services business had 90% growth, with the data segment benefiting from demand for ethically sourced licensed data sets; the contributor base increased by over 40% to 3.4 million, and the library grew by 34% to nearly 900 million assets. The Giphy platform was poised for growth with winning deals and average order value (AOV) increasing. The services business saw growing demand for creative and production studio solutions. Additionally, Shutterstock signed a definitive agreement to acquire Envato, which fills a product gap, expands into faster-growing audiences, and diversifies content types. Envato's Elements offers unlimited multi-asset subscriptions, expands into faster-growing audiences, and diversifies into video, audio, etc., with subscriber count set to double and subscription revenue percentage to rise.

Shutterstock's first quarter 2024 reported revenue of $214 million. The content business saw a 10% decline in revenue, in line with expectations. The data distribution and services business experienced a 90% increase, reaching $40 million, which accounted for nearly 20% of the total revenues.

Shutterstock raised its 2024 revenue guidance to a range of 5.5% to 7% growth based on the strong first quarter performance and the Envato acquisition. The Envato acquisition is growth accretive, adding approximately 20% to revenues and 15% to adjusted EBITDA on a full-year basis. Post the expected acquisition close in the third quarter, the expected leverage will be extremely low, with net debt to pro forma combined adjusted EBITDA at just 0.7x.

Actual results could materially differ from forward-looking statements due to factors such as market changes, integration challenges of acquisitions, regulatory changes affecting the data business, and competition in the digital creative assets space.

Q: How should we think about the guidance change for the addition of Envato versus organic changes?

A: Jarrod Yahes stated that they outperformed first quarter expectations, and the Envato acquisition is rolled in, contributing about 20% to revenues and 15% to EBITDA on a full-year basis.

Q: Any color on the data sales business pipeline?

A: Paul Hennessy said they are seeing significant demand, uniquely positioned with ethically sourced content, and are bullish on the data distribution and services side.

Q: Opportunities for cross-sell with the Envato acquisition?

A: Paul Hennessy said there are opportunities due to more subscribers, retentive customers, and a fit into the small and medium-sized customer offering.

Q: Assumption on Envato added to revenues and EBITDA?

A: Jarrod Yahes said the acquisition is likely to close in the back part of Q3.

Q: Trend in the content business in April?

A: Paul Hennessy said good signs are seen, with a return to growth in the second half, and is encouraged by the changes made.

Q: Demand for data beyond LLMs?

A: Jarrod Yahes said there is demand from new and existing customers, and visual media is needed for multimodal models.

Q: Challenges in scaling the Giphy business?

A: Paul Hennessy said restarting the business and reaching out to advertisers are challenges, but high interest and ascending AOV are observed.

Q: Third-party partnership for Giphy monetization?

A: Paul Hennessy said they are exploring opportunities.

Q: Data deals recognition and data revenue growth?

A: Jarrod Yahes said data deals are recognized ratably, and the data distribution and services business grew 90% year-over-year.

Q: Trends in the contributor base and library?

A: Paul Hennessy said the contributor base increased by over 40%, the library grew by 34%, and the flywheel is spinning faster.