Shutterstock, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are with Q1 2021 unless otherwise noted. Shutterstock operates a creative-content platform offering images, footage, music, 3D models, and creative design software, with e-commerce and enterprise sales channels.
Financial and operating performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $199.1 million | $183.3 million | +9% reported; +11% constant currency |
| Operating income | $31.9 million | $38.1 million | -16% |
| Net income | $26.6 million | $29.5 million | -10% |
| Diluted EPS | $0.71 | $0.79 | Lower |
| Operating margin | 16% | 21% | Lower |
| Adjusted EBITDA (non-GAAP) | $54.8 million | $56.4 million | Adjusted EBITDA margin: 27.5% vs. 30.8% |
| Operating cash flow | $22.7 million | $35.8 million | Lower |
| Free cash flow (non-GAAP) | $10.2 million | $26.8 million | Lower |
Revenue growth reflected e-commerce revenue of $127.1 million (+7%) and enterprise revenue of $72.1 million (+11%). Enterprise growth was attributed to multi-asset offerings and momentum in Shutterstock Studios and Editorial. Paid downloads decreased to 44.6 million from 45.8 million, while revenue per download rose to $4.22 from $3.96. Subscriber count increased to 359,000 from 306,000, and subscriber revenue rose to $85.4 million from $76.5 million; these subscriber metrics exclude PicMonkey.
Cost of revenue increased 12% to $69.5 million, faster than revenue, partly due to higher royalties and acquisition-related depreciation and amortization. Sales and marketing increased 27% to $53.3 million, including $6.4 million of additional marketing spend and $3.4 million of higher employee-related costs. Product development increased 27% to $13.6 million. The resulting operating margin contracted; favorable foreign-exchange results helped offset some of the operating-income decline below the operating line.
Balance sheet, cash flow, and capital allocation
- Cash and cash equivalents were $258.1 million at March 31, 2022, down from $314.0 million at year-end 2021. Current assets were $339.7 million and current liabilities $303.9 million.
- Total liabilities were $351.6 million. The company reported no long-term borrowings at quarter-end; lease liabilities were $35.9 million.
- Operating cash flow of $22.7 million was below the prior-year $35.8 million, which management attributed to lower operating income and timing of operating-expense payments. Investing cash use was $12.5 million, primarily $11.8 million in capital expenditures. Financing cash use was $65.6 million, including $38.4 million of share repurchases, $18.5 million of employee-tax withholding payments, and $8.7 million of dividends.
- The company repurchased approximately 422,000 shares at an average $90.69 per share; $34.6 million remained under the repurchase authorization. It paid a $0.24-per-share quarterly dividend and declared another $0.24 dividend for payment in June 2022.
Changes, outlook, and risks
- Q1 2022 comparisons include PicMonkey, acquired in September 2021, and a full quarter of TurboSquid, acquired in February 2021; these acquisitions also contributed to higher amortization.
- Management stated cash and cash flows from operations were expected to cover anticipated cash needs for at least the next 12 months. The filing provides no quantitative full-year revenue or earnings guidance.
- Management cited seasonality, discretionary customer spending, competition, foreign-exchange movements, and potential cost inflation as factors that could affect results. A 10% move in the U.S. dollar against foreign currencies was estimated to affect revenue by approximately 3%; the company did not hedge foreign-exchange exposure.
- Non-lease purchase obligations, primarily minimum royalty guarantees and infrastructure and business-service commitments, totaled approximately $110.3 million, including $44.3 million due for the remainder of 2022. The company reported no material active litigation and no material changes to previously disclosed risk factors.
- General and administrative expense included a $1 million donation to assist contributors in Ukraine. Management reported no goodwill impairment trigger or identified impairment of long-term investments in the quarter.
Important facts for investors to verify
- Whether subscriber growth and higher revenue per download can continue, given the decline in paid downloads and the effect of product mix and acquisitions.
- Whether increased sales, marketing, and development spending can support growth without further margin pressure.
- How operating cash flow and free cash flow develop, particularly amid payment-timing fluctuations, capital investment, dividends, and repurchases.
- The expected returns and ongoing amortization costs associated with recent acquisitions, and the fulfillment timing of the $110.3 million in non-lease obligations.
- Management’s forward outlook and the potential effects of foreign exchange, seasonality, discretionary customer budgets, competition, and inflation.