Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Shutterstock Inc (SSTK, Financial) reported record third quarter revenues of $251 million, representing a 7.4% year-over-year growth.
- The acquisition of Envato has been successful, contributing $38 million to content revenues and exceeding expectations.
- AI-generated content is driving growth, with subscribers to the Generative Plus product increasing monthly.
- Data Distribution and Services achieved revenues of $47 million, with strong demand from large global technology companies.
- The GIPHY business is experiencing impressive growth, with daily views reaching approximately 19 billion, and a new partnership with TikTok is expected to enhance monetization opportunities.
Negative Points
- Excluding Envato's contribution, content revenues declined by 7% year-over-year, indicating challenges in organic growth.
- The departure of CFO Jarrod Yahes may lead to transitional challenges as the company adjusts to new leadership.
- Sales and marketing expenses are expected to increase in the fourth quarter, which could impact profitability.
- The business faces limited visibility and lumpiness in the Data Distribution segment, making forecasting challenging.
- General and administrative expenses increased to 13% of revenue, partly due to $3.2 million in Envato transaction costs.
Q & A Highlights
Q: What was the revenue contribution from GIPHY in Q3, and how does the TikTok partnership affect its monetization potential?
A: Jarrod Yahes, CFO, stated that GIPHY's run rate revenues were about $20 million when acquired, and it has been consolidated into the Data Distribution and Services segment, showing sequential growth. Paul Hennessy, CEO, mentioned that while specifics of the TikTok deal can't be disclosed, the increased GIF usage and engagement are expected to enhance monetization, aligning with previous revenue growth projections for GIPHY.
Q: Can you elaborate on the sequential improvement in the content business excluding Envato, and the expected trajectory?
A: Paul Hennessy, CEO, noted that while he can't specify when positive growth will occur, the content business is improving with changes like eliminating free trials and reintroducing smaller packs. The decline rate has decreased from -10% to -7%, and Q4 is expected to be better. AI integration is also contributing positively, with existing and new customers increasing their use of traditional stock content.
Q: What visibility do you have into the data pipeline for Q4 and 2025, and how is the business progressing?
A: Jarrod Yahes, CFO, explained that while the data business is lumpy with limited visibility, they are pleased with the land-and-expand opportunities with existing customers. The business is expected to finish the year with over $100 million in revenue, exceeding initial expectations, and they are optimistic about the durability and visibility of this segment.
Q: How is the Envato acquisition performing, and what growth potential do you see?
A: Paul Hennessy, CEO, expressed increased optimism about Envato's growth potential post-acquisition, citing improvements in customer experience and rebranding efforts that have driven new subscriber growth. Envato is performing beyond initial expectations, and the company is bullish on its product market fit.
Q: Regarding AI and data sales, are you seeing incremental purchases from existing customers, and how is the distribution strategy evolving?
A: Jarrod Yahes, CFO, confirmed that existing customers are purchasing refresh data and some are re-licensing initial data sets. The company is also seeing opportunities with new, industry-specific AI applications. They are expanding their sales force globally and exploring partnerships with venture capital firms and service providers to enhance distribution.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
