Q1 2024 Earnings Summary
- Shutterstock's Data Distribution and Services (DDS) business is experiencing 90% year-over-year growth, driven by strong demand for ethically sourced content for AI and machine learning applications, positioning the company to exceed previous growth targets and making current estimates appear conservative.
- The acquisition of Envato is expected to contribute 20% to revenues and 15% to adjusted EBITDA for the full year, doubling Shutterstock's subscriber base to 1.15 million, and enhancing cross-sell opportunities with faster-growing audiences and new content types.
- Shutterstock's content business is showing positive trends, with expectations to return to growth in the back half of the year; improvements are seen in the small and medium-sized business segment due to strategic moves like eliminating free trials, leading to increased customer engagement and higher quality revenue.
- The Giphy business is currently loss-making, and while the company is investing heavily in hiring sales and business development professionals, there is uncertainty about when it will contribute meaningfully to profitability.
- The data distribution and services business is experiencing inherent lumpiness and variability in revenue recognition, potentially leading to unpredictability in financial results.
- The turnaround in the content business is not yet complete, with ongoing challenges in the small and medium-sized customer segment potentially slowing the expected return to growth.
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Guidance Increase and Envato Impact
Q: How does Envato affect your guidance?
A: We raised our guidance due to outperforming our first-quarter expectations and incorporating the Envato acquisition. We assume Envato will contribute about 20% to revenues and 15% to EBITDA for the full year, assuming the transaction closes in the third quarter. -
DDS Business Growth and Outlook
Q: Is $60 million still the right number for data sales?
A: Our Data Distribution and Services (DDS) business is outperforming, so you should assume that the $60 million we previously referenced is increasing. We've baked in 20%+ growth for DDS in our 2027 plan, but given our strong first quarter, this target looks conservative. Demand is strong for our ethically sourced content, and customers of all sizes are coming to us. -
Giphy Expenses and Profitability
Q: How will Giphy expenses trend this year?
A: While we're reimbursed for many cash expenses by Meta, all salary and bonus expenses impact our EBITDA. We're aggressively hiring for Giphy due to clear market demand. Although the business is currently making losses, revenue is growing quickly, and we expect Giphy's growth to sequentially improve our profits over the year. -
Content Business Trends and Growth
Q: What are the trends in your content business?
A: We're seeing positive trends, especially in our small and medium business segment. Since moving away from free trials and charging customers, they're paying and returning. April is looking good, and we expect year-over-year growth in content to improve each quarter, returning to growth in the back half of the year. -
Envato Cross-sell Opportunities
Q: What cross-sell opportunities come with Envato?
A: With Envato doubling our subscriber base, we see opportunities to offer content not currently available to Envato customers, enhancing retention. Envato fits nicely into our offering for small and medium-sized customers, sitting between packs and larger subscriptions. -
Scaling Giphy and Partnerships
Q: What challenges are there in scaling Giphy?
A: Restarting Giphy from a cold start involves reaching out to advertisers and getting in front of their budgets. We're making headway each month and investing in more salespeople due to high interest. We're also exploring potential third-party partnerships with large platforms to expedite monetization. -
Data Deals Revenue Recognition
Q: How are data deals recognized in revenue?
A: We're increasingly structuring data deals to recognize revenue over time, improving visibility but introducing inherent lumpiness. With DDS growing 90% year-over-year, recurring revenue is becoming a higher percentage, but variability will remain. -
Contributor Base and Content Growth
Q: What's driving growth in your content library?
A: As we accept content for data, we're seeing increased demand and supply across content types, accelerating our content flywheel. This boosts conversion rates and creates broader opportunities for data buyers. Scaling content is critical, and we're filling gaps in supply both organically and through acquisitions.