Shutterstock, Inc. (SSTK)

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Shutterstock (SSTK)

Q4 2017 Earnings Conference Call

February 22, 2018 08:30 AM ET


Michael Mestrandrea - Director of Corporate Finance and IR

Jonathan Oringer - Founder, CEO and Chairman

Steven Berns - COO and CFO


Brian Fitzgerald - Jefferies

Youssef Squali - SunTrust

Lloyd Walmsley - Deutsche Bank

Masumi Nishida - Citi



Good day, ladies and gentlemen, and welcome to the Shutterstock, Inc. fourth quarter 2017 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host Mr. Michael Mestrandrea, Director of Corporate Finance and Investor Relations. Sir you may begin.

Michael Mestrandrea

Thank you, operator. Good morning, everyone, and thank you for joining us for Shutterstock's fourth quarter and full year 2017 earnings call. Joining me today is Jon Oringer, our Founder, Chief Executive Officer and Chairman; and Steven Berns, our Chief Operating Officer and Financial Officer.

During this call, management may make forward-looking statements that are subject to risk, uncertainty, including predictions, expectations, estimates and other information. These include statements relating to long term effects of our investment in our business, the future success and financial impact to new and existing product offerings, our future growth and profitability, our long term strategy, growth potential, future results of efforts to reduce our expense footprint and implementation of large scale business solutions, new recognition rules and 2018 guidance.

Our actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. Please refer to today's press release and the reports and documents we file from time-to-time with the U.S. Securities and Exchange Commission, including the section entitled Risk Factors in the company's annual report on Form 10-K the year ended December 31, 2017, for discussions of important risk factors that could cause actual results to differ materially from those discussed in any forward-looking statements we may make on this call.

On this call, we refer to adjusted EBITDA, adjusted net income, revenue growth on a constant currency basis and free cash flow which are non-GAAP financial measures. You can find a description of these items along with the reconciliation of most directly comparable GAAP financial measures in today's earnings release and in our Form 10-K, which are posted on our Investor Relations site.

We believe that the uses of the measures in conjunction with GAAP financial measures allows investors to consider our operating results on the same basis used by management. This provides them with an important additional insight about the company's overall business and operating performance, and it enhances the comparability in assessing our financial reporting. However, these non-GAAP measures should not be considered as a substitute for or superior to financial information prepared in accordance with GAAP.

And with that, I’d like to turn the call over to Jon.

Jonathan Oringer

Thanks, Mike. Thanks everyone for joining us today for Shutterstock's fourth quarter and year end 2017 earnings call. We continue to make solid progress in the evolution of our business from a marketplace to accretive platform. We’re seeing continued operational momentum from our many initiatives including our upgraded technology platform, the transformation of our operating structure to focus business units and the introduction of new products, features and functionality for our customers.

In addition we continue to build and strengthen our team every day. Overall I am pleased with the improvement in our revenue performance in the fourth quarter. Although margins this quarter and for the full year were impacted by the infrastructure and platform investments we have made in our business. We’re confident these critical investments will have a long term positive impact on our financial results.

Also while being an important long-term investment we look forward to see some of this positive impact in 2018. In the fourth quarter of 2017 on a constant currency basis revenue grew approximately 12.6%, compared to the fourth quarter of 2016 and adjusted EBITDA was $23.3 million compared to $25.9 million in 2016.

In addition on a year-over-year basis during the fourth quarter of 2017, our customer base grew by 9.5% to just over $1.8 million customers. Paid downloads increased by 4% to 43.9 million, we grew revenue per download by 7% on a constant currency basis and we expanded our image library by 46%. So over 170 million images and increased our video library by 47% to more than 9 million clips.

As we discussed on prior calls over the last few years we made investment that we believe transforms our marketplace into a platform that provides and enterprises, with the content types and tools they need to collaboratively design and build creative projects. While these investments have impacted our short-term profitability, we’ve already begun to see positive tangible results in the form of user growth and retention, and expect to continue to benefit from these investments over the long-term.

In 2017, we achieved several important objectives more than 1.8 million active paying customers contributed to our revenue in 2017, and more than 350,000 approved contributors made their content available on our platform. By the end of 2017, we had more than 170 million images and 9 million video clips available for license.

Across our products, as we continue to focus on our customers’ workflow. We launched several feature to increase engagement. We now track and test many parts of our customer experience and at times can be running many AB test simultaneously. These test measure impact to life time value, product mix, order value, download success and engagements, and the winning experiments get pushed live into production.

Read the rest of this transcript for free on seekingalpha.com