Shutterstock Inc
For the period ended Sep 30, 2024. Filed Oct 29, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 29, 2024
SSTK$2.97-3.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0001549346-24-000034
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-29.
0001549346-24-000045
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 175 previous paragraphs and 173 current paragraphs.
97 unchanged; 53 reworded; 23 added; 20 removed; 5 previous and 0 current paragraphs rearranged.
Tables are not compared: 12 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
The addition of Envato has:
Current report
2 Envato Subscribers and Subscriber Revenue are presented as if Envato was acquired as of the beginning of the period presented, and represent metrics incremental to amounts presented under the “Shutterstock, Inc.” heading. Envato Average revenue per customer is derived from Envato historical results over the last twelve months.
Current report
3 The Pro Forma key operating metrics are derived from (i) the Shutterstock amounts before combining with Envato and (ii) the historical Envato metrics, as discussed in footnote 2 above.
Current report
Interest Expense. Interest expense consists of interest on our debt and amortization of deferred financing fees.
Current report
Revenue increased by $17.3 million, or 7%, to $250.6 million for the three months ended September 30, 2024, compared to the same period in 2023. Revenue was not impacted on a constant currency basis in the three months ended September 30, 2024, compared to the same period in 2023.
Current report
The Company’s Content revenues increased by 14%, to $203.7 million in the three months ended September 30, 2024, compared to the same period in 2023. On a constant currency basis, Content revenues grew 13% in the three months ended September 30, 2024, compared to the same period in 2023. During the three months ended September 30, 2024, growth in our Content revenue was driven by the contribution of Envato, which was acquired on July 22, 2024. The increase was partially offset by a reduction in Content revenue generated from Shutterstock’s content offering due to weakness in new customer acquisition.
Current report
General and Administrative. General and administrative expenses increased by $6.4 million to $44.0 million in the three months ended September 30, 2024 compared to the same period in 2023. This increase was driven by an increase in professional fees and employee-related costs associated with by the Envato business, offset by a decline in the Shutterstock-legacy employee-related costs. In addition, there were $0.7 million and $1.1 million decreases from recurring and non-recurring Giphy Retention Compensation expenses, respectively. In the three months ended September 30, 2024, the Company also incurred $3.2 million of transaction costs associated with the acquisition of Envato.
Current report
Bargain Purchase Gain. In the three months ended September 30, 2023, we recorded an increase to the Giphy bargain purchase gain of $9.9 million associated with updates to deferred income tax balances recorded on the Giphy opening balance sheet.
Current report
Interest Expense. In the three months ended September 30, 2024 and September 30, 2023, we recognized interest expense of $4.5 million and $0.6 million, respectively, related to our credit facility and the amortization of deferred financing fees. Interest expense for the three months ended September 30, 2024 increased due to the borrowings under A&R Credit Agreement entered into during the quarter ended September 30, 2024 to fund the acquisition of Envato.
Current report
Income Taxes. The income tax benefit decreased by $0.7 million for the three months ended September 30, 2024, compared to the same period in 2023. Our effective tax rates yielded a net benefit of 0.5% and 2.9% for the three months ended September 30, 2024 and 2023, respectively.
Current report
For the three months ended September 30, 2024, the net effect of discrete items decreased the effective tax rate by 32.9%. The discrete items for the three months ended September 30, 2024 primarily relate to reversal of unrecognized tax benefits of $7.3 million due to the settlement of an IRS audit. Excluding discrete items, our effective tax rate would have been 32.4% for the three months ended September 30, 2024.
Current report
For the three months ended September 30, 2023, the net effect of discrete items decreased the effective tax rate by 14.9%. The discrete items for the three months ended September 30, 2023 primarily relate to the effect of the U.S. Research and Development (“R&D”) tax credit claimed on the Company’s 2022 tax return, which was substantially completed in the third quarter of 2023. Excluding discrete items, our effective tax rate would have been 12.0% for the three months ended September 30, 2023.
Current report
Comparison of the Nine Months Ended September 30, 2024 and 2023
Current report
Revenue increased by $27.6 million, or 4%, to $685.0 million in the nine months ended September 30, 2024 compared to the same period in 2023. Revenue was not impacted on a constant currency basis in the nine months ended September 30, 2024, compared to the same period in 2023.
Current report
General and Administrative. General and administrative expenses increased by $3.0 million, or 3%, to $112.5 million in the nine months ended September 30, 2024 compared to the same period in 2023. The increase was driven by an increase in professional fees associated with the acquisitions of Envato and Backgrid, and increase in employee-related costs driven by the the acquisition of Envato. This was partially offset by a decrease in bad debt expense, and a decrease in Shutterstock-legacy employee-related costs. In addition, there was a $0.3 million increase and a $1.5 million decrease from recurring and non-recurring Giphy Retention Compensation expenses, respectively. General and Administrative expenses for the nine months ended September 30, 2024 also includes $8.2 million of transaction costs for the Backgrid and Envato acquisitions.
Current report
Interest Expense. In the nine months ended September 30, 2024 and September 30, 2023, we recognized interest expense of $5.6 million and $1.3 million, respectively related to our credit facility and the amortization of deferred financing fees. Interest expense for the nine months ended September 30, 2024 increased due to borrowings under the A&R Credit Agreement entered into during the quarter ended September 30, 2024 to fund the acquisition of Envato.
Current report
Credit Facility and A&R Credit Agreement
Current report
The A&R Credit Agreement replaces our existing Credit Facility, which was fully repaid and terminated upon the effectiveness of the A&R Credit Agreement. In connection with the closing of the Credit Facility, we repaid $30 million of existing outstanding borrowings and accrued interest.
Current report
Our outstanding debt (in thousands) is reflected in the table below. We classify the Revolver as a current liability since we could draw upon and repay the outstanding amount as needed. The maturity of the Revolver is in 2029.
Current report
Our debt consists of the following (in thousands):
Current report
Based on Level 2 inputs, the carrying value of our debt approximates its fair value, as borrowings are subject to variable interest rates that adjust with changes in market rates and market conditions and the current interest rate approximates that which would be available under similar financial arrangements.
Current report
For the three and nine months ended September 30, 2024, we recognized interest expense of $4.5 million and $5.6 million, respectively. As of September 30, 2024, unamortized debt issuance cost related to the Term Loan - A&R Credit Agreement is $0.8 million.
Current report
(1)Envato Seller Obligations relate to payments made on behalf of the Envato sellers’ after the closing of the acquisition. These liabilities were funded from the acquired cash on the Envato balance sheet and are not indicative of obligations and cash flows to be incurred prospectively.
Removed paragraphs (20)
Previous report
The addition of Envato:
Previous report
•Bolsters Shutterstock’s content library with 10 million images, 6 million videos, 1 million audio clips, 0.5 million templates and 0.2 million graphics & fonts, and
Previous report
Revenue per Download
Previous report
We define revenue per download as the amount of revenue recognized in a given period divided by the number of paid downloads in that period excluding revenue from our Studios business, revenue that is not derived from or associated with content licenses and revenue associated with our data deal offering. This metric captures any changes in our pricing, including changes resulting from the impact of competitive pressures, as well as the mix of licensing options that our customers choose, some of which generate more revenue per download than others, and the impact that changes in foreign currency rates have on our pricing. Changes in revenue per download are primarily driven by the introduction of new product offerings, changes in product and sales channel mix and customer utilization of our products.
Previous report
Content in our Collection
Previous report
We define content in our collection as the total number of approved images (photographs, vectors and illustrations) and footage (in number of clips) in our library at the end of the period. We exclude content from this collection metric that is not uploaded directly to our site but is available for license by our customers through an application program interface, content from our Studios business and AI generated content. Prior to December 31, 2022, this metric only included approved images and footage clips in our library on shutterstock.com at the end of the period. We believe that our large selection of high-quality content enables us to attract and retain customers and drives our network effect.
Previous report
Revenue increased by $11.2 million, or 5%, to $220.1 million for the three months ended June 30, 2024, compared to the same period in 2023. On a constant currency basis, revenue increased approximately 6% in the three months ended June 30, 2024, compared to the same period in 2023.
Previous report
In the three months ended June 30, 2024 and 2023, we delivered 33.4 million and 38.5 million paid downloads, respectively, and our revenue per download was $5.09 and $4.71 for the three months ended June 30, 2024 and 2023, respectively. During the three months ended June 30, 2024, the decline in paid downloads is attributed to the decline in the Content business.
Previous report
General and Administrative. General and administrative expenses decreased by $1.7 million to $36.4 million in the three months ended June 30, 2024 compared to the same period in 2023. This decrease was driven by a $3.4 million decrease in employee-related costs (of which there was a $0.4 million increase from recurring Giphy Retention Compensation expenses and a $2.0 million decrease from non-recurring Giphy Retention Compensation expenses), offset by a $1.0 million increase in professional fees. In the second quarter of 2024, our transaction related acquisition costs were $3.1 million, compared to transaction related acquisition costs of $3.0 million in the second quarter of 2023.
Previous report
Comparison of the Six Months Ended June 30, 2024 and 2023
Previous report
Revenue increased by $10.2 million, or 2%, to $434.4 million in the six months ended June 30, 2024 compared to the same period in 2023. On a constant currency basis, revenue increased approximately 3% in the six months ended June 30, 2024, compared to the same period in 2023.
Previous report
In the six months ended June 30, 2024 and 2023, we delivered 68.4 million and 81.2 million paid downloads, respectively, and our revenue per download was $5.03 and $4.56 for the six months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024, the decline in paid downloads is attributed to the decline in the Content business.
Previous report
General and Administrative. General and administrative expenses decreased by $3.4 million, or 5%, to $68.5 million in the six months ended June 30, 2024 compared to the same period in 2023. This decrease was driven by a $2.0 million decrease in employee-related costs (of which there was a $0.9 million increase from recurring Giphy Retention Compensation expenses and a $0.4 million decrease from non-recurring Giphy Retention Compensation expenses), a $2.8 million decrease in bad debt expense, and a $1.5 million decrease in other expenses, related to severance expenses incurred in 2023. The decrease was partially offset by a $3.3 million increase in professional fees. In the six months ended June 30, 2024, our transaction related acquisition costs were $4.9 million, compared to transaction related acquisition costs of $3.0 million in the six months ended June 30, 2023.
Previous report
For the six months ended June 30, 2023, the net effect of discrete items decreased the effective tax rate by 7.1%. The discrete items for the six months ended June 30, 2023 relate to the non-taxable bargain purchase gain associated with the acquisition of Giphy. Excluding discrete items, our effective tax rate would have been 17.8% for the six months ended June 30, 2023.
Previous report
Revolving Credit Facility
Previous report
Amended and Restated Credit Facility
Previous report
On July 22, 2024, the Company borrowed $280 million under the A&R Credit Agreement, of which $125 million was funded from the Term Loan and $155 million funded from the Revolver.
Previous report
The A&R Credit Agreement contains customary affirmative and negative covenants, including, without limitation, covenants limiting the ability of the Company and its subsidiaries to, among other things, incur debt, grant liens, undergo certain fundamental changes, make investments, make certain restricted payments, dispose of assets, enter into transactions with affiliates, and enter into burdensome agreements, in each case, subject to limitations and exceptions set forth in the A&R Credit Agreement. The Company is also required to maintain compliance with a consolidated leverage ratio and a consolidated interest coverage ratio, in each case, determined in accordance with the terms of the A&R Credit Agreement
Previous report
The A&R Credit Agreement also contains customary events of default that include, among other things, certain payment defaults, cross defaults to other indebtedness, inaccuracy of representations and warranties, covenant defaults, change of control defaults, judgment defaults, and bankruptcy and insolvency defaults. If an event of default exists, the Administrative Agent on behalf of the lenders may require immediate payment of all obligations under the A&R Credit Agreement and may exercise certain other rights and remedies provided for under the A&R Credit Agreement, the other loan documents and applicable law. Under certain circumstances, a default interest rate will apply to certain obligations during the existence of an event of default under the A&R Credit Agreement at a per annum rate equal to 2.00% above the applicable interest rate.
Previous report
(1) The amount for the six months ended June 30, 2024 is updated to correct an error in the calculation of adjusted net income previously presented for the three months ended March 31, 2024.
Reworded paragraphs (53)
Previous wording
In addition to historical consolidated financial information, this discussion contains forward-looking statements including statements about our plans, estimates and beliefs. These statements involve risks and uncertainties and our actual results could differ materially from those expressed or implied in forward-looking statements. See “Forward Looking Statements” above. See also the “Risk Factors” disclosures contained in our 2023 Form 10-K for additional discussion of the risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements.
Current wording
In addition to historical consolidated financial information, this discussion contains forward-looking statements including statements about our plans, estimates and beliefs. These statements involve risks and uncertainties and our actual results could differ materially from those expressed or implied in forward-looking statements. See “Forward Looking Statements” above and the “Risk Factors” disclosures contained in our 2023 Form 10-K for additional discussion of the risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements.
Previous wording
Over 1.9 million active, paying customers contributed to our revenue for the twelve-month period ended June 30, 2024.
Current wording
As of September 30, 2024, our content library includes 800 million images and 55 million footage clips available for distribution in our Content and Data, Distribution and Services offerings. We believe this large selection of high-quality content enables us to attract and retain customers and drives our network effect. In addition, we had over 4.1 million active, paying customers contributing to our revenue for the twelve-month period ended September 30, 2024.
Previous wording
Our Content is distributed to customers under the following brands: Shutterstock; Pond5; TurboSquid; PicMonkey; PremiumBeat; Splash News; Bigstock; and Offset. Shutterstock, our flagship brand, includes various content types such as image, footage, music and editorial.
Current wording
Our Content is distributed to customers under the following brands: Shutterstock; Pond5; TurboSquid; PicMonkey; PremiumBeat; Splash News; Bigstock; Envato; and Offset. Shutterstock, our flagship brand, includes various content types such as image, footage, music and editorial.
Previous wording
On February 1, 2024, we acquired Backgrid USA, Inc. and Backgrid London, Ltd. (collectively “Backgrid”). Backgrid supplies media organizations with real-time celebrity content.
Current wording
On February 1, 2024, we acquired Backgrid USA, Inc. and Backgrid London, Ltd. (collectively “Backgrid”). Backgrid supplies media organizations with real-time celebrity content. On July 22, 2024, we completed our acquisition of Envato Pty Ltd. (“Envato”). Envato offers digital creative assets and templates.
Previous wording
On July 22, 2024, the Company completed its previously announced acquisition of Envato Pty Ltd. (“Envato”) pursuant to a Share Purchase Agreement (the “Purchase Agreement”) entered into on May 1, 2024, pursuant to which the Company purchased all of the issued and outstanding capital stock of Envato. The aggregate consideration paid by the Company, after customary working capital and other adjustments in accordance with the terms of the Purchase Agreement, was $250 million. We are currently in the process of valuing the assets acquired and liabilities assumed in the acquisition.
Current wording
On July 22, 2024, the Company completed its previously announced acquisition of Envato Pty Ltd. (“Envato”) pursuant to a Share Purchase Agreement (the “Purchase Agreement”) entered into on May 1, 2024, to acquire all of the issued and outstanding capital stock of Envato. The aggregate consideration paid by the Company, after customary working capital and other adjustments in accordance with the terms of the Purchase Agreement, was $250 million.
Previous wording
•Complements Shutterstock’s existing offering with Envato Elements, a leading unlimited multi-asset subscription offering,
Current wording
•Complemented Shutterstock’s existing offering with Envato Elements, a leading unlimited multi-asset subscription offering,
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•Expands Shutterstock’s reach within faster growing audiences such as freelancers, hobbyists, small businesses and agencies,
Current wording
•Expanded Shutterstock’s reach within faster growing audiences such as freelancers, hobbyists, small businesses and agencies,
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•Increases Shutterstock’s Content revenue from video, audio, graphics, fonts and templates,
Current wording
•Increased Shutterstock’s Content revenue from video, audio, graphics, fonts and templates, and
Previous wording
•Further diversifies Shutterstock into new content types including code & web themes, product mock-ups, fonts and templates (e.g. Slides, PowerPoint, Keynote, WordPress, video, designs for social posts, gaming, podcasts and print-on-demand).
Current wording
•Further diversified Shutterstock into new content types including code & web themes, product mock-ups, fonts and templates (e.g. Slides, PowerPoint, Keynote, WordPress, video, designs for social posts, gaming, podcasts and print-on-demand).
Previous wording
Subscribers, subscriber revenue and average revenue per customer from acquisitions are included in these metrics beginning twelve months after the closing of the respective business combination. Accordingly, the metrics include Subscribers, Subscriber revenue, and Average revenue per customer from Pond5 and Splash News beginning May 2023. These metrics exclude the respective counts and revenues from Giphy and Backgrid.
Current wording
Subscribers, subscriber revenue and average revenue per customer from acquisitions are included in these metrics beginning twelve months after the closing of the respective business combination. Accordingly, the metrics include Subscribers, Subscriber revenue, and Average revenue per customer from Pond5 and Splash News beginning May 2023, and, for Average Revenue per Customer, from Giphy beginning July 2024. These metrics exclude the respective counts and revenues from Backgrid and Envato.
Previous wording
The following table summarizes our key operating metrics, which are unaudited, for the three and six months ended June 30, 2024 and 2023:
Current wording
The following tables summarize our key operating metrics, which are unaudited, for the three and nine months ended September 30, 2024 and 2023:
Previous wording
1 Subscribers, Subscriber Revenue and Average Revenue Per Customer from acquisitions are included in these metrics beginning twelve months after the closing of the respective business combination. Accordingly, the metrics include Subscribers, Subscriber revenue, and Average revenue per customer from Pond5 and Splash News beginning May 2023. These metrics exclude the respective counts and revenues from our acquisitions of Giphy and Backgrid.
Current wording
1 Represents Shutterstock, Inc. key operating metrics before combining the Envato related metrics. Subscribers, Subscriber Revenue and Average Revenue Per Customer from acquisitions are included in these metrics beginning twelve months after the closing of the respective business combination. Accordingly, the metrics include Subscribers, Subscriber revenue, and Average revenue per customer from Pond5 and Splash News beginning May 2023, and, for Average Revenue per Customer, from Giphy beginning July 2024. These metrics exclude the respective counts and revenues from our acquisitions of Backgrid and Envato.
Previous wording
Data, Distribution, and Services: Our Data, Distribution, and Services offering addresses customer demand for products and services that are beyond our stock image, footage music and 3D model licenses. We have seen increased demand for access to our metadata for machine learning and generative artificial intelligence model training. We offer ethically sourced and licenseable metadata at unique scales and quality. Our metadata customer base ranges from large technology and media companies to smaller start-up organizations.
Current wording
Data, Distribution, and Services: Our Data, Distribution, and Services offering addresses customer demand for products and services that are beyond our stock image, footage music and 3D model licenses. We have seen increased demand for access to our metadata for machine learning and generative artificial intelligence model training. We offer ethically sourced and licensable metadata at unique scales and quality. Our metadata customer base ranges from large technology and media companies to smaller start-up organizations.
Previous wording
The Company’s revenues by distribution channel for the three and six months ended June 30, 2024 and 2023 are as follows (in thousands):
Current wording
The Company’s revenues by distribution channel for the three and nine months ended September 30, 2024 and 2023 are as follows (in thousands):
Previous wording
Other (Expense) / Income, Net. Other (expense) / income, net consists of non-operating costs such as foreign currency transaction gains and losses, in addition to unrealized gains and losses on investments and interest income and expense.
Current wording
Other Income, Net. Other income, net consists of non-operating costs such as foreign currency transaction gains and losses, in addition to unrealized gains and losses on investments and interest income and expense.
Previous wording
The Company’s Data, Distribution, and Services revenues increased by 129%, to $50.1 million in the three months ended June 30, 2024, compared to the same period in 2023. The increase in Data, Distribution, and Services revenues was driven by growth in our data offering, which grew 119% in the three months ended June 30, 2024 compared to the same period in 2023.
Current wording
The Company’s Data, Distribution, and Services revenues decreased by 14%, to $46.9 million in the three months ended September 30, 2024, compared to the same period in 2023. The decrease in Data, Distribution, and Services revenues was driven by a decline in our data offering, which was offset by growth in our Distribution and Services offerings.
Previous wording
Changes in our revenue by region were as follows: revenue from North America increased by $23.9 million, or 25%, to $120.1 million, revenue from Europe decreased by $5.0 million, or 9%, to $53.4 million and revenue from outside Europe and North America decreased by $7.7 million, or 14%, to $46.6 million, in the three months ended June 30, 2024 compared to the same period in 2023.
Current wording
Changes in our revenue by region were as follows: revenue from North America decreased by $2.8 million, or 2%, to $120.5 million, revenue from Europe increased by $12.9 million, or 23%, to $69.5 million and revenue from outside Europe and North America increased by $7.2 million, or 14%, to $60.6 million, in the three months ended September 30, 2024 compared to the same period in 2023.
Previous wording
Cost of Revenue. Cost of revenue increased by $16.9 million, or 10%, to $179.5 million in the six months ended June 30, 2024 compared to the same period in 2023. This increase was driven by: (i) increased depreciation and amortization expense driven by our recent acquisitions; (ii) increased royalty and content costs; (iii) higher costs associated with website hosting, hardware and software licenses; and (iv) a net increase in Giphy Retention Compensation, recurring and non-recurring expenses. We expect that our cost of revenue will continue to fluctuate in line with changes in revenue.
Current wording
Cost of Revenue. Cost of revenue increased by $10.2 million to $104.4 million in the three months ended September 30, 2024 compared to the same period in 2023. As a percentage of revenue, cost of revenue increased to 42% for the three months ended September 30, 2024, from 40% for the same period in 2023. This increase was driven by increased royalties, content expenses, and employee-related costs driven by the acquisition of Envato. These amounts were partially offset by a decrease in Shutterstock-legacy related royalties, content expenses, production costs and employee-related costs, and a decrease in recurring and non-recurring Giphy Retention Compensation. We expect that our cost of revenue will continue to fluctuate in-line with changes in revenue.
Previous wording
Sales and Marketing. Sales and marketing expenses increased by $3.5 million, or 7%, to $51.9 million in the three months ended June 30, 2024 compared to the same period in 2023. As a percentage of revenue, sales and marketing expenses increased to 24% for the three months ended June 30, 2024, from 23% for the same period in 2023. This was driven by a $3.2 million increase in employee-related costs (of which there was a $1.1 million increase from recurring Giphy Retention Compensation expenses and a $0.5 million decrease from non-recurring Giphy Retention Compensation expenses), and a $0.5 million increase in outside consultant expenses, partially offset by a $1.5 million decrease in marketing spend for brand and performance-based marketing. We expect sales and marketing expenses to continue to fluctuate as we optimize our sales channels and invest in new customer acquisition, products and geographies.
Current wording
Sales and Marketing. Sales and marketing expenses decreased by $0.8 million, or 1%, to $55.4 million in the three months ended September 30, 2024 compared to the same period in 2023. As a percentage of revenue, sales and marketing expenses decreased to 22% for the three months ended September 30, 2024, from 24% for the same period in 2023. This was driven by a decrease in Shutterstock-legacy brand and performance-based marketing expenses and a decrease in consultant expenses. This was partially offset by marketing spend and employee-related costs attributable to the Envato business. In addition, there were $0.9 million and $1.1 million increases from recurring and non-recurring Giphy Retention Compensation expenses, respectively. We expect sales and marketing expenses to continue to fluctuate as we optimize our sales channels and invest in new customer acquisition, products and geographies.
Previous wording
Product Development. Product development expenses decreased by $9.4 million to $19.9 million in the three months ended June 30, 2024 compared to the same period in 2023. The decrease in product development was driven by an $8.6 million decrease in employee-related costs (of which there was a $1.2 million increase from recurring Giphy Retention Compensation expenses and a $7.8 million decrease from non-recurring Giphy Retention Compensation expenses), and a $0.9 million decrease in outside consultant expenses. We expect product development expenses, of which a portion will be capitalized, to continue in the foreseeable future, as we pursue opportunities to invest in developing new products and internal tools and enhance the functionality of our existing products and technologies.
Current wording
Product Development. Product development expenses increased by $0.5 million to $28.6 million in the three months ended September 30, 2024 compared to the same period in 2023. The increase in product development was driven by an increase in employee-related costs associated with the Envato business, offset by a decline in Shutterstock-legacy employee-related costs. In addition, there was a $1.2 million decrease and a $2.7 million increase from recurring and non-recurring Giphy Retention Compensation expenses, respectively. We expect product development expenses, of which a portion will be capitalized, to continue in the foreseeable future, as we pursue opportunities to invest in developing new products and internal tools and enhance the functionality of our existing products and technologies.
Previous wording
Other (Expense) / Income, Net. In the three months ended June 30, 2024, other (expense) / income, net was driven by $3.6 million of unrealized losses related to our investment in Meitu, Inc. In addition, other (expense) / income, net had $1.3 million of interest income, $1.3 million of unfavorable unrealized foreign currency losses and $0.6 million of interest expense related to our credit facility. During the three months ended June 30, 2023, other (expense) / income, net substantially consisted of $0.7 million of interest income and $0.6 million of favorable unrealized foreign currency fluctuations, partially offset by $0.5 million of interest expense related to our credit facility. As we increase the volume of business transacted in foreign currencies resulting from international expansion and as currency rates fluctuate, we expect foreign currency gains and losses to continue to fluctuate.
Current wording
Other Income, Net. In the three months ended September 30, 2024, other income, net was driven by $1.6 million of unrealized gains related to our investment in Meitu, Inc. In addition, other income, net had $1.1 million of interest income and $1.2 million of unrealized foreign currency gains. During the three months ended September 30, 2023, other income, net substantially consisted of $1.9 million of interest income and $0.8 million of unrealized foreign currency losses. As we increase the volume of business transacted in foreign currencies resulting from international expansion and as currency rates fluctuate, we expect foreign currency gains and losses to continue to fluctuate.
Previous wording
The Company’s Content revenues decreased by 10%, to $343.8 million in the six months ended June 30, 2024, compared to the same period in 2023. On a constant currency basis, revenue decreased approximately 9% in the six months ended June 30, 2024, compared to the same period in 2023. The decline in our Content revenues was driven by weakness in new customer acquisition.
Current wording
The Company’s Content revenues decreased by 2%, to $547.5 million in the nine months ended September 30, 2024, compared to the same period in 2023. Foreign currency fluctuations did not have a significant impact on the Company’s Content revenues in the nine months ended September 30, 2024. The decline in our Content revenues was driven by weakness in new customer acquisition, partially offset by revenue from Envato, which was acquired on July 22, 2024.
Previous wording
The Company’s Data, Distribution, and Services revenues increased by 110%, to $90.6 million in the six months ended June 30, 2024, compared to the same period in 2023. Foreign currency fluctuations did not have a significant impact on the Company’s Data, Distribution, and Services revenues in the six months ended June 30, 2024. The increase in Data, Distribution, and Services revenues was driven by growth in our data offering, which grew 96% in the six months ended June 30, 2024.
Current wording
The Company’s Data, Distribution, and Services revenues increased by 41%, to $137.5 million in the nine months ended September 30, 2024, compared to the same period in 2023. Foreign currency fluctuations did not have a significant impact on the Company’s Data, Distribution, and Services revenues in the nine months ended September 30, 2024. The increase in Data, Distribution, and Services revenues was driven by growth in our data offering, which grew 22% in the nine months ended September 30, 2024, as well as growth in our Distribution and Services offerings.
Previous wording
Changes in our revenue by region were as follows: revenue from North America increased by $35.2 million, or 18%, to $230.5 million, revenue from Europe decreased by $8.7 million, or 7%, to $108.8 million and revenue from outside Europe and North America decreased by $16.3 million, or 15%, to $95.0 million, in the six months ended June 30, 2024 compared to the same period in 2023.
Current wording
Changes in our revenue by region were as follows: revenue from North America increased by $32.4 million, or 10%, to $351.1 million, revenue from Europe increased by $4.2 million, or 2%, to $178.2 million and revenue from outside Europe and North America decreased by $9.1 million, or 5%, to $155.6 million, in the nine months ended September 30, 2024 compared to the same period in 2023.
Previous wording
Cost of Revenue. Cost of revenue increased by $6.8 million to $91.3 million in the three months ended June 30, 2024 compared to the same period in 2023. This increase was driven by: (i) higher costs associated with website hosting, hardware and software licenses; (ii) increased depreciation and amortization expense driven by our recent acquisitions; and (iii) increased royalty and content costs. We expect that our cost of revenue will continue to fluctuate in-line with changes in revenue.
Current wording
Cost of Revenue. Cost of revenue increased by $27.1 million, or 11%, to $283.9 million in the nine months ended September 30, 2024 compared to the same period in 2023. As a percent of revenue, cost of revenue increased to 41% for the nine months ended September 30, 2024, from 39% for the same period in 2023. This increase was driven by increased royalty and content costs, costs associated with website hosting, hardware and software licenses, and employee related costs, and depreciation and amortization driven by the acquisition of Envato. We expect that our cost of revenue will continue to fluctuate in line with changes in revenue.
Previous wording
Sales and Marketing. Sales and marketing expenses increased by $12.2 million, or 13%, to $108.1 million in the six months ended June 30, 2024 compared to the same period in 2023. As a percent of revenue, sales and marketing expenses increased to 25% for the six months ended June 30, 2024, from 23% for the same period in 2023. This increase was driven by a $6.4 million increase in employee-related costs (of which there was a $2.3 million increase from recurring Giphy Retention Compensation expenses and a $0.3 million decrease from non-recurring Giphy Retention Compensation expenses), and a $4.0 million increase in performance marketing spend. We expect sales and marketing expenses to continue to fluctuate as we optimize our sales channels and invest in new customer acquisition, products and geographies.
Current wording
Sales and Marketing. Sales and marketing expenses increased by $11.4 million, or 8%, to $163.5 million in the nine months ended September 30, 2024 compared to the same period in 2023. As a percent of revenue, sales and marketing expenses increased to 24% for the nine months ended September 30, 2024, from 23% for the same period in 2023. This increase was driven by increases in employee-related costs performance marketing spend driven by the Envato business, offset by a decline in Shutterstock’s performance marketing spend. In addition, there were $3.2 million and $0.8 million increases from recurring and non-recurring Giphy Retention Compensation, respectively. We expect sales and marketing expenses to continue to fluctuate as we optimize our sales channels and invest in new customer acquisition, products and geographies.
Previous wording
Product Development. Product development expenses decreased by $3.7 million, or 8%, to $40.9 million in the six months ended June 30, 2024 as compared to the same period in 2023. This decrease in product development was driven by a $3.5 million decrease in employee-related costs (of which there was a $3.9 million increase from recurring Giphy Retention Compensation expenses and a $3.4 million decrease from non-recurring Giphy Retention Compensation expenses) for the six months ended June 30, 2024 compared to the same period in 2023. We expect product development expenses, of which a portion will be capitalized, to continue in the foreseeable future, as we pursue opportunities to invest in developing new products and internal tools and enhance the functionality of our existing products and technologies.
Current wording
Product Development. Product development expenses decreased by $3.2 million, or 4%, to $69.5 million in the nine months ended September 30, 2024 as compared to the same period in 2023. The decrease in product development was driven by a decrease in outside consultant expenses and a decrease Shutterstock-legacy employee-related costs. This was partially offset by increases in employee-related costs driven by the Envato business. In addition, there was a $2.7 million increase and a $0.7 million decrease from recurring and non-recurring Giphy Retention Compensation expenses, respectively. We expect product development expenses, of which a portion will be capitalized, to continue in the foreseeable future, as we pursue opportunities to invest in developing new products and internal tools and enhance the functionality of our existing products and technologies.
Previous wording
Bargain Purchase Gain. In the three months ended June 30, 2023, we recognized a bargain purchase gain of $41.9 million related to the acquisition of Giphy, which represents the excess of the fair value of the net assets acquired in addition to the net negative purchase price.
Current wording
Bargain Purchase Gain. In the nine months ended September 30, 2023, we recognized a bargain purchase gain of $51.8 million related to the acquisition of Giphy, which represents the excess of the fair value of the net assets acquired in addition to the net negative purchase price.
Previous wording
Other (Expense) / Income, Net. During the six months ended June 30, 2024, other (expense) / income, net substantially consisted of $1.9 million of unfavorable unrealized foreign currency fluctuations and $1.1 million of interest expense related to our credit facility, partially offset by $2.4 million of interest income. During the six months ended June 30, 2023 other (expense) / income, net consisted of $1.7 million of favorable unrealized foreign currency fluctuations and $0.8 million of interest income, partially offset by $0.7 million of interest expense related to our credit facility. As we increase the volume of business transacted in foreign currencies resulting from international expansion and as currency rates fluctuate, we expect foreign currency gains and losses to continue to fluctuate.
Current wording
Other Income, Net. During the nine months ended September 30, 2024, other income, net substantially consisted of $3.5 million of interest income and $1.7 million of unrealized gains related to our investment in Meitu, Inc., partially offset by $0.7 million of unrealized foreign currency losses. During the nine months ended September 30, 2023 other income, net consisted of $0.9 million of unrealized foreign currency gains and $2.7 million of interest income. As we increase the volume of business transacted in foreign currencies resulting from international expansion and as currency rates fluctuate, we expect foreign currency gains and losses to continue to fluctuate.
Previous wording
Income Taxes. Income tax expense increased by $7.3 million for the six months ended June 30, 2024 as compared to the same period in 2023. Our effective tax rates for the six months ended June 30, 2024 and 2023 were 46.6% and 10.7%, respectively.
Current wording
Income Taxes. Income tax expense increased by $8.0 million for the nine months ended September 30, 2024 as compared to the same period in 2023. Our effective tax rates yielded an expense of 31.4% and 7.6% for the nine months ended September 30, 2024 and 2023, respectively.
Previous wording
For the three months ended June 30, 2024, the net effect of discrete items increased the effective tax rate by 59.7%. The discrete items for the three months ended June 30, 2024 relate to shortfalls on equity award vestings and a one-time charge of $6.3 million related to the reversal of a deferred tax asset resulting from the expiration of equity awards granted to the Company’s Founder and Executive Chairman. Excluding discrete items, our effective tax rate would have been 18.4% for the three months ended June 30, 2024.
Current wording
For the nine months ended September 30, 2024, the net effect of discrete items increased the effective tax rate by 8.2%. The discrete items for the nine months ended September 30, 2024 relate to shortfalls on equity award vestings and a one-time charge of $6.3 million related to the reversal of a deferred tax asset resulting from the expiration of equity awards granted to the Company’s Founder and Executive Chairman, partially offset by the reversal of unrecognized tax benefits of $7.3 million due to the settlement of an IRS audit. Excluding discrete items, our effective tax rate would have been 23.2% for the nine months ended September 30, 2024.
Previous wording
For the three months ended June 30, 2023, the net effect of discrete items decreased the effective tax rate by 13.6%. The discrete items for the three months ended June 30, 2023 relate to the non-taxable bargain purchase gain associated with the acquisition of Giphy. Excluding discrete items, our effective tax rate would have been 16.3% for the three months ended June 30, 2023.
Current wording
For the nine months ended September 30, 2023, the net effect of discrete items decreased the effective tax rate by 8.9%. The discrete items for the nine months ended September 30, 2023 primarily relate to the non-taxable bargain purchase gain associated with the acquisition of Giphy and the effect of the U.S. Research and Development (“R&D”) tax credit claimed on the Company’s 2022 tax return, which was substantially completed in the third quarter of 2023. Excluding discrete items, our effective tax rate would have been 16.5% for the nine months ended September 30, 2023.
Previous wording
As of June 30, 2024, we had cash and cash equivalents totaling $74.9 million which consisted primarily of bank balances. Since inception, we have financed our operations primarily through cash flows generated from operations. In addition, if necessary, we have the ability to draw on our credit facility, which was obtained on May 6, 2022.
Current wording
As of September 30, 2024, we had cash and cash equivalents totaling $131.4 million which consisted primarily of bank balances. Since inception, we have financed our operations primarily through cash flows generated from operations. In addition, if necessary, we have the ability to draw on our A&R Credit Agreement dated July 22, 2024.
Previous wording
We declared and paid cash dividends of $0.60 per share of common stock, or $21.3 million during the six months ended June 30, 2024.
Current wording
We declared and paid cash dividends of $0.90 per share of common stock, or $31.9 million during the nine months ended September 30, 2024.
Previous wording
As of June 30, 2024, we have repurchased approximately 4.9 million shares of our common stock under the 2023 Share Repurchase Program at an average per-share cost of $50.49. During the six months ended June 30, 2024, we repurchased approximately 517,000 shares of our common stock at an average cost of $39.83. During the three and six months ended June 30, 2023, we repurchased approximately 80,400 shares of common stock at an average cost of $49.78 under the 2023 Share Repurchase Program. As of June 30, 2024, we had $51 million of remaining authorization for repurchases under the 2023 Share Repurchase Program.
Current wording
As of September 30, 2024, we have repurchased approximately 5.5 million shares of our common stock under the 2023 Share Repurchase Program at an average per-share cost of $48.86. During the three and nine months ended September 30, 2024, we repurchased approximately 594,400 and 1,111,500 shares of our common stock at an average cost of $35.33 and $37.42, respectively. During the three and nine months ended September 30, 2023, we repurchased approximately 351,000 and 431,000 shares of common stock at an average cost of $42.75 and $44.06, respectively, under the 2023 Share Repurchase Program. As of September 30, 2024, we had $30 million of remaining authorization for repurchases under the 2023 Share Repurchase Program.
Previous wording
On May 6, 2022, we entered into a five-year $100 million unsecured revolving loan facility (the “Credit Facility”) with Bank of America, N.A., as Administrative Agent and other lenders. The Credit Facility includes a letter of credit sub-facility and a swingline facility and it also permits, subject to the satisfaction of certain conditions, up to $100 million of additional revolving loan commitments with the consent of the Administrative Agent.
Current wording
On May 6, 2022, we entered into a five-year $100 million unsecured revolving loan facility (the “Credit Facility”) with Bank of America, N.A., as Administrative Agent and other lenders. The Credit Facility includes a letter of credit sub-facility and a swingline facility and it also permitted, subject to the satisfaction of certain conditions, up to $100 million of additional revolving loan commitments with the consent of the Administrative Agent.
Previous wording
The Envato acquisition was funded through an amended and restated credit agreement (the “A&R Credit Agreement”), which was entered into among the Company, as borrower, certain direct and indirect subsidiaries of the Company as guarantors, the lenders party thereto, and Bank of America, N.A., as Administrative Agent for the lenders. The A&R Credit Agreement provides for a five-year (i) senior unsecured term loan facility (the “Term Loan”) in an aggregate principal amount of $125.0 million and (ii) senior unsecured revolving credit facility (the “Revolver”) in an aggregate principal amount of $250.0 million. The A&R Credit Agreement provides for a letter of credit subfacility and a swingline facility.
Current wording
On July 22, 2024, we entered into an amended and restated credit agreement (the “A&R Credit Agreement”), which was entered into among us, as borrower, certain direct and indirect subsidiaries of our as guarantors, the lenders party thereto, and Bank of America, N.A., as Administrative Agent for the lenders. The A&R Credit Agreement provides for a five-year (i) senior unsecured term loan facility (the “Term Loan”) in an aggregate principal amount $125 million and (ii) senior unsecured revolving credit facility (the “Revolver”) in an aggregate principal amount of $250 million. The A&R Credit Agreement provides for a letter of credit subfacility and a swingline facility.
Previous wording
At our option, revolving loans accrue interest at a per annum rate based on either (i) the base rate plus a margin ranging from 0.125% to 0.500%, determined based on the Company’s consolidated leverage ratio or (ii) the Term Secured Overnight Financing Rate (“SOFR”) (for interest periods of 1, 3 or 6 months) plus a margin ranging from 1.125% to 1.5%, determined based on our consolidated leverage ratio. We are also required to pay an unused commitment fee ranging from 0.150% to 0.225%, determined based on the Company’s consolidated leverage ratio. In connection with the execution of this agreement, we paid debt issuance costs of approximately $0.6 million.
Current wording
At our option, loans under the A&R Credit Agreement accrue interest at a per annum rate based on either (i) the base rate plus a margin ranging from 0.375% to 0.750%, determined based on our consolidated leverage ratio or (ii) the Term Secured Overnight Financing Rate (“SOFR”) (for interest periods of 1, 3 or 6 months) plus a margin ranging from 1.375% to 1.750%, determined based on our consolidated leverage ratio, plus a credit spread of 0.100%. We are also required to pay an unused commitment fee ranging from 0.175% to 0.250%, determined based on our consolidated leverage ratio. In connection with the execution of this agreement, we paid debt issuance costs of approximately $2.2 million.
Previous wording
As of June 30, 2024 and December 31, 2023, we had $30 million of outstanding borrowings under the Credit Facility. As of June 30, 2024, we had a remaining borrowing capacity of $68 million, net of standby letters of credit.
Current wording
As of September 30, 2024, we had a remaining borrowing capacity of $94 million, net of standby letters of credit.
Previous wording
The Credit Facility contains financial covenants and requirements restricting certain of our activities, which are usual and customary for this type of loan. We are also required to maintain compliance with a consolidated leverage ratio and a consolidated interest coverage ratio, in each case, determined in accordance with the terms of the Credit Facility. As of June 30, 2024, we are in compliance with these covenants.
Current wording
The A&R Credit Agreement contains financial covenants and requirements restricting certain of our activities, which are customary for this type of credit facility. We are also required to maintain compliance with a consolidated leverage ratio and a consolidated interest coverage ratio, in each case, determined in accordance with the terms of the A&R Credit Agreement. As of September 30, 2024, we were in compliance with these covenants.
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Previous report — wording carried elsewhere
The Company’s Content revenues decreased by 9%, to $170.0 million in the three months ended June 30, 2024, compared to the same period in 2023. The decline in our Content revenues was driven by weakness in new customer acquisition.
Previous report — wording carried elsewhere
Income Taxes. Income tax expense increased by $11.6 million for the three months ended June 30, 2024, compared to the same period in 2023. Our effective tax rates were 78.1% and 2.7% for the three months ended June 30, 2024 and 2023, respectively.
Previous report — wording carried elsewhere
Bargain Purchase Gain. In the six months ended June 30, 2023, we recognized a bargain purchase gain of $41.9 million related to the acquisition of Giphy, which represents the excess of the fair value of the net assets acquired in addition to the net negative purchase price.
Previous report — wording carried elsewhere
For the six months ended June 30, 2024, the net effect of discrete items increased the effective tax rate by 27.6%. The discrete items for the six months ended June 30, 2024 relate to shortfalls on equity award vestings and a one-time charge of $6.3 million related to the reversal of a deferred tax asset resulting from the expiration of equity awards granted to the Company’s Founder and Executive Chairman. Excluding discrete items, our effective tax rate would have been 19.0% for the six months ended June 30, 2024.
Previous report — wording carried elsewhere
At the Company’s option, loans under the A&R Credit Agreement accrue interest at a per annum rate based on either (i) the base rate plus a margin ranging from 0.375% to 0.750%, determined based on the Company’s consolidated net leverage ratio or (ii) the Term SOFR rate (for interest periods of 1, 3 or 6 months) plus a margin ranging from 1.375% to 1.750%, determined based on the Company’s consolidated net leverage ratio, plus a credit spread adjustment of 0.100%.