Shutterstock, Inc. (SSTK)

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Shutterstock, Inc. (SSTK)

Q2 2018 Earnings Call

August 01, 2018 8:30 am ET


Amy Behrman - Shutterstock, Inc.

Jonathan Oringer - Shutterstock, Inc.

Steven Berns - Shutterstock, Inc.


Youssef Squali - SunTrust Robinson Humphrey, Inc.

Alex Giaimo - Jefferies LLC

Ralph Edward Schackart - William Blair & Co. LLC

Seth Gilbert - Deutsche Bank Securities, Inc.



Good day, ladies and gentlemen, and welcome to the Second Quarter 2018 Shutterstock Incorporated 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 follow at that time. As a reminder, this call is being recorded.

I would now like to turn the conference over to Amy Behrman, Senior Director of Corporate Development, Strategy and Investor Relations. You may begin.

Amy Behrman - Shutterstock, Inc.

Thank you, operator. Good morning, everyone and thank you for joining us for Shutterstock's second quarter 2018 earnings call. Joining me today is Jon Oringer, our Founder, Chief Executive Officer and Chairman; and Steven Berns, our Chief Operating and Chief Financial Officer.

During this call, management may make forward-looking statements that are subject to risk and uncertainties, including predictions, expectations, estimates and other information. These include statements relating to long-term effects of our investments in our business, the future success and financial impact of new and existing product offerings, our future growth and profitability, our long-term strategy, our growth potential, potential future results of efforts to reduce our expense footprint, and implementation of large-scale business solutions and our 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 filed 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 for the year ended December 31, 2017 and quarterly report on Form 10-Q for the quarter ended June 30, 2018 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 will refer to adjusted EBITDA, adjusted net income, revenue growth on a constant-currency basis, including and excluding Webdam, revenue per download on a constant currency basis and free cash flow, all of which are non-GAAP financial measures. You can find the description of these items, along with a reconciliation to the most directly comparable GAAP financial measure in today's earnings release, which is posted on the Investor Relations section of our website.

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

Lastly, as a reminder, we sold Webdam in the first quarter of 2018 and therefore Webdam did not contribute to our second quarter 2018 operating results. However, Webdam was included in our 2017 results and therefore some of our commentary today will specifically state that we are excluding the results of Webdam, meaning that we are excluding it from the second quarter of 2017 to provide a comparable basis to the second quarter of 2018.

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

Jonathan Oringer - Shutterstock, Inc.

Thanks, Amy, and thank you everyone for joining us today for Shutterstock's second quarter 2018 earnings call. Our second quarter showed continued improvement in revenue and profitability with revenue increasing 16.9% on an as reported basis. Excluding the impact of Webdam and the impact of foreign currency movements, second quarter revenue increased 17.7%. Adjusted EBITDA grew 31.1%, driven primarily by strong revenue growth and continued cost management efforts. The investments we have made in our technology and product offerings over the past couple of years have begun to yield promising operational and financial returns. Our e-commerce channel grew 11.6% in the quarter, the highest level of growth since the fourth quarter of 2015.

This acceleration of growth was enabled by our new technology platform and related improvements we have made. Activities that contributed to this quarter's performance included launching innovative pricing and packaging, resulting from our improved testing environment and optimization of our customer acquisition funnels.

In addition, in our continued efforts on localization, we launched customized pricing pages, landing pages and Express Checkout experiences tailored to different customer segments. We also invested in a number of global marketing initiatives to drive additional traffic and further accelerate top line growth. We plan to continue to invest in these marketing activities and expect them to pay out over time.

Our enterprise business continued its strong performance with 34.9% growth in the quarter as a result of our enhanced customer experience, features and functionality and improved site performance. The enterprise channel represented 41% of our total revenue in the quarter as compared to 36% in the same quarter of 2017.

In the second quarter, we continued to invest in a variety of tailored marketing initiatives and sales efficiency processes to support future growth. Furthermore, in the Asia-Pacific region, we continued to expand our sales capabilities by adding incremental enterprise sales resources in strategic locations.

Read the rest of this transcript on seekingalpha.com