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Shutterstock Reports Third Quarter 2012 Financial Results

November 15, 2012

NEW YORK, Nov. 15, 2012 /PRNewswire/ — Shutterstock, Inc. (NYSE: SSTK) a leading global provider of commercial digital imagery, today announced financial results for the third quarter ended September 30, 2012.

(Logo: http://photos.prnewswire.com/prnh/20120514/NY06418LOGO )

“We are very pleased with our operating results in the third quarter and for 2012 to date,” said CEO Jon Oringer. “We continue to see strong growth in both volume and revenue across all geographies and all of our product offerings.”

Operating Metrics

                                      Three Months
                                    Ended September
                                           30,
                                   ----------------
                                     2012             2011
                                     ----             ----
                                      (in millions,
                                     except revenue
                                      per download)
    Number of paid downloads         18.7             14.8
    Revenue per download            $2.26            $2.10
    Images in collection (end of
     period)                         21.7             16.2

Revenue

Revenue for the third quarter was $42.3 million, a 36% increase from the third quarter of 2011. The Company experienced growth in all product lines and in all major global territories.

Net Income

GAAP net income for the third quarter of 2012 was $8.7 million as compared to $5.7 million in the third quarter of 2011. GAAP net income available to common members for the third quarter of 2012 was $6.6 million or $0.31 per share as compared to $4.3 million or $0.20 per share in the third quarter of 2011.

Non-GAAP net income for the third quarter of 2012 was $9.4 million as compared to $6.3 million in the third quarter of 2011. Non-GAAP net income excludes the after tax impact of non-cash equity based compensation expense.

Adjusted EBITDA

Adjusted EBITDA for the third quarter of 2012 was $10.3 million, as compared to $6.9 million in the third quarter of 2011.

Cash

The Company’s cash balance was $28.8 million at September 30, 2012 as compared to $14.1 million as of December 31, 2011. The Company also had short-term debt of $12.0 million and no long-term debt as of September 30, 2012. The Company generated $14.0 million of cash from operations in the third quarter of 2012 and $32.9 million of cash from operations in the first nine months of 2012.

Also, during the third quarter, the Company incurred planned capital expenditures related primarily to the purchase of computer servers and networking equipment, and to a lesser extent leasehold improvements, resulting in a cash outlay of approximately $0.6 million. Cash outlays in this category for the first nine months of 2012 totaled $3.5 million.

Free cash flow for the third quarter of 2012 was $13.4 million as compared to $8.3 million in the third quarter of 2011.

On October 16, 2012, the Company completed its initial public offering that resulted in net proceeds to the Company of $81.8 million after deducting underwriting discounts and commissions.

Financial Outlook

The Company’s current financial and operating expectations for the fourth quarter of 2012, full year 2012 and full year 2013 are as follows:

Fourth Quarter 2012

  • Revenue of $44 – $45 million
  • Adjusted EBITDA of $9.0 – $9.5 million
  • Non-cash equity-based compensation expense of approximately $8 million
  • Effective and cash tax rate of 43%
  • Fully diluted adjusted weighted average share count of approximately 34 million

Full Year 2012

  • Revenue of $164 – $166 million
  • Adjusted EBITDA of $32.5 – $33.0 million
  • Fully diluted adjusted weighted average share count of approximately 32 million

Other Full Year 2012 Assumptions

  • Amortization of intangibles of approximately $0.3 million
  • Depreciation of approximately $2.5 million
  • Non-cash equity-based compensation expense of approximately $11 million
  • Capital expenditures of approximately $5.0 million

Full Year 2013

  • We are increasing our expectations for revenue to $204 – $208 million
  • We are increasing our expectations for adjusted EBITDA to $44 – $45 million
  • Fully diluted share count of approximately 35.5 million
  • Capital expenditures related to network servers and technology of approximately $5 million
  • Capital expenditures for leasehold improvements related to a headquarters office expansion/relocation of approximately $6 million

Earnings Teleconference Information

The Company will discuss its third quarter 2012 financial results during a teleconference today, November 15, 2012, at 5:00 PM ET. To participate, please call 800-706-7749 or 617-614-3474. Please use the conference ID: 3816 7173.

For recorded conference replay starting at 6:00 p.m. ET on November 15, 2012 until November 29, 2012 please call 888-286-8010 or 617-801-6888. Please use the conference ID: 3780 8719.

Non-GAAP Financial Measures

Shutterstock considers adjusted EBITDA, non-GAAP net income, and free cash flow to be important financial indicators of the Company’s operational strength and the performance of its business. Shutterstock defines adjusted EBITDA as earnings adjusted for interest income/(expense), income taxes, depreciation, amortization and non-cash equity-based compensation; non-GAAP net income as net income excluding the after tax impact of non-cash equity based compensation expense; and free cash flow as cash provided by (used in) operating activities adjusted for capital expenditures and interest income/(expense). These figures are non-GAAP financial measures and should be considered in addition to results prepared in accordance with generally accepted accounting principles (GAAP), and should not be considered as a substitute for, or superior to, GAAP results. In addition, adjusted EBITDA, non-GAAP net income, and free cash flow should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions; accordingly, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies.

A reconciliation of the differences between adjusted EBITDA, non-GAAP net income, and free cash flow, and the most comparable financial measure calculated and presented in accordance with GAAP, is presented under the heading “Reconciliation of Non-GAAP Financial Information to GAAP” immediately following the Consolidated Statements of Operations included below.

Historical Operating Metrics

                               Three Months Ended
                   9/30/10                  12/31/10          3/31/11 6/30/11 9/30/11 12/31/11 3/31/12 6/30/12 9/30/12
                   -------                  --------          ------- ------- ------- -------- ------- ------- -------
                    (in millions, except revenue per download)
    Number of paid
     downloads        11.1                      12.5             13.3    14.4    14.8     16.2    17.6    18.3    18.7
    Revenue per
     download        $1.89                     $1.91            $1.92   $2.01   $2.10    $2.14   $2.13   $2.22   $2.26
    Images in our
     library (end
     of period)       12.3                      13.3             14.4    15.3    16.2     17.4    18.8    20.2    21.7

Amortization of Intangible Assets and Depreciation

Included in the accompanying financial results are expenses related to the amortization of intangible assets, as follows (in thousands):

                                Three Months        Nine Months
                                    Ended              Ended
                               September 30,      September 30,
                               2012          2011        2012   2011
                               ----          ----        ----   ----
    Cost of revenue              $8            $8         $24    $24
    General and administrative   55            53         163    159
       Total                    $63           $61        $187   $183
                                ===           ===        ====   ====

Included in the accompanying financial results are expenses related to depreciation, as follows (in thousands):

                                Three Months
                                    Ended         Nine Months Ended
                               September 30,         September 30,
                               2012          2011           2012    2011
                               ----          ----           ----    ----
    Cost of revenue            $401          $168           $984    $411
    General and administrative  264           181            717     439
       Total                   $665          $349         $1,701    $850
                               ====          ====         ======    ====

Adjusted Weighted Average Shares Reconciliation

The following table presents a reconciliation of weighted average shares to adjusted weighted average shares. The adjusted shares give effect to our reorganization from a New York limited liability company to a Delaware corporation on October 5, 2012. The adjusted weighted average shares measure is similar to the expected weighted average shares measure post-reorganization and its sole purpose is for use in calculating adjusted EBITDA per share:

                      Three Months Ended     Nine Months Ended
                        September 30,          September 30,
                            2012               2011       2012       2011
                            ----               ----       ----       ----
    Weighted average
     shares           20,882,191         21,380,178 20,957,222 21,678,381
    Incremental
     shares
     representing
     conversion of
     profits interest
     awards              541,305            571,749    545,893    589,979
    Preferred
     interest shares   6,960,730          7,126,726  6,985,741  7,226,127
    Adjusted weighted
     average shares   28,384,226         29,078,653 28,488,855 29,494,487
                      ==========         ========== ========== ==========

About Shutterstock

Shutterstock is a leading global provider of high-quality licensed photographs, vectors, illustrations and videos to businesses, marketing agencies and media organizations around the world. Headquartered in New York City, Shutterstock works closely with its growing contributor community of photographers, videographers, illustrators and designers to curate a global marketplace for royalty-free imagery. Shutterstock adds tens of thousands of rights-cleared images each week, and with more than 21 million images currently available, the Company recently surpassed 250 million image downloads. Shutterstock also owns Bigstock, a value-oriented stock agency that offers both credit and simple Pay As You Go purchase options.

For more information, please visit http://www.shutterstock.com, and follow Shutterstock on Twitter or on Facebook.

Safe Harbor Provision

The statements contained in this press release that are not purely historical are forward looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, including statements regarding the Company’s expectations, predictions, beliefs, hopes, intentions or strategies regarding the future. Forward looking statements include statements regarding the Company’s business strategy, timing of, and plans for, the introduction of new products and enhancements, future sales, market growth and direction, competition, market share, revenue growth, operating margins and profitability. All forward looking statements included in this document are based upon information available to the Company as of the date hereof. Actual events or results could differ materially from those contained in the Company’s current projections or forward-looking statements. It is routine for internal projections and expectations to change as the quarter progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which the Company bases its expectations may change prior to the end of the quarter. Although these expectations may change, the Company assumes no obligation to update any such forward looking statement, whether as a result of new information, future developments or otherwise. Factors that could cause or contribute to such differences include the Company’s inability to continue to attract customers and contributors to its online marketplace for commercial digital imagery; a decrease in repeat customer purchases; a reduction in customer spending; a decrease in contributor participation in the Company’s marketplace; the Company’s inability to evaluate its future prospects; competitive factors; the Company’s inability to prevent the misuse of its imagery; assertions by third parties of infringement or other violations of intellectual property rights by the Company; the Company’s inability to increase market awareness of the Company and its services; the Company’s inability to increase the percentage of its revenues that come from larger companies; the Company’s inability to effectively manage its growth; the Company’s inability to continue expansion into international markets; failure to respond to technological changes or upgrade the Company’s website and technology systems; failure to adequately protect the Company’s intellectual property; general economic conditions worldwide; and other factors and risks discussed in the Company’s Final Prospectus dated October 10, 2012 and other reports filed by the Company from time to time with the Securities and Exchange Commission. Forward-looking statements in this release are made pursuant to the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995.

                                           Shutterstock Images LLC
                                         Consolidated Balance Sheets
                                               (In Thousands)

                                                             September 30, 2012           December 31, 2011
                                                             ------------------           -----------------
                                                                 (Unaudited)
    ASSETS
    Current assets:
                               Cash and cash
                               equivalents                                       $28,793                    $14,097
                               Credit card
                               receivables                                         2,100                        964
                               Accounts
                               receivable,
                               net                                                 1,377                        647
                               Prepaid
                               expenses and
                               other
                               current
                               assets                                              5,151                      1,554
                               Deferred tax
                               assets                                                807                        644
                               Due from
                               related
                               party                                                   -                        168
                                                                                     ---
    Total current assets                                                          38,228                     18,074

    Property and equipment, net                                                    5,402                      3,844
    Intangibles, net                                                               1,045                      1,029
    Goodwill                                                                       1,423                      1,423
    Deferred tax assets                                                              146                         58
    Other assets                                                                     427                        427
                                                                                     ---                        ---
    Total assets                                                                 $46,671                    $24,855
                                                                                 =======                    =======

    LIABILITIES, REDEEMABLE PREFERRED MEMBERS'
     INTEREST AND MEMBERS' DEFICIT
    Current liabilities:
                               Accounts
                               payable                                            $2,325                     $1,838
                               Accrued
                               expenses                                           13,728                     10,875
                               Contributor
                               royalties
                               payable                                             6,734                      5,261
                               Deferred
                               revenue                                            36,214                     28,451
                               Term loan
                               debt                                               12,000
                               Other
                               liabilities                                            95                         85
                                                                                     ---
    Total current liabilities                                                     71,096                     46,510

    Other non-current liabilities                                                  5,454                      2,548
                                                                                   -----                      -----
    Total liabilities                                                             76,550                     49,058
                                                                                  ------                     ------

    Commitment and contingencies

    Redeemable preferred members' interest                                        27,675                     33,725
    Members' deficit:
                               Common
                               members'
                               interest                                            5,699                      5,699
                               Accumulated
                               deficit                                           (63,253)                   (63,627)
                                                                                --------
    Total members' deficit                                                       (57,554)                   (57,928)
                                                                                 -------                    -------
    Total liabilities, redeemable preferred
     members' interest, and members' deficit                                     $46,671                    $24,855
                                                                                 =======                    =======
                                                                               Shutterstock Images LLC
                                                                        Consolidated Statements of Operations
                                                              (In thousands, except for share and per share information)
                                                                                      Unaudited

                                                                                                                          Three Months Ended                Nine Months Ended
                                                                                                                            September 30,                     September 30,
                                                                                                                            -------------                     -------------
                                                                                         2012                       2011                  2012                         2011
                                                                                         ----                       ----                  ----                         ----

    Revenue                                                                           $42,260                    $31,156              $120,459                      $85,543

    Operating expenses:
                                                                      Cost of revenue                  16,208                11,373                 46,312                        32,529
                                                                      Sales and marketing               9,633                 8,493                 32,760                        22,329
                                                                      Product development               3,992                 2,811                 11,062                         7,066
                                                                       General and
                                                                       administrative                   3,536                 2,539                 11,430                         6,836
                                                                                                        -----
    Total operating expenses                                                           33,369                     25,216               101,564                       68,760
                                                                                       ------                     ------               -------                       ------
    Income from operations                                                              8,891                      5,940                18,895                       16,783
    Other income / (expense), net                                                          (3)                         1                     2                            8
    Income before income taxes                                                          8,888                      5,941                18,897                       16,791
    Provision for income taxes                                                            146                        253                   374                          715
                                                                                          ---                        ---                   ---                          ---
    Net income                                                                         $8,742                     $5,688               $18,523                      $16,076
    Less:
                                                                       Preferred interest
                                                                       distributed                      2,263                 1,313                  6,050                         6,188
                                                                       Preferred interest
                                                                       discount accretion                   -                     -                      -                         4,058
                                                                       Undistributed earnings
                                                                       (loss) to
                                                                       participating members              (77)                  109                 (1,419)                       (3,183)
                                                                                                         ----
    Net income available to common members                                             $6,556                     $4,266               $13,892                       $9,013

    Net income (loss) per basic share available to common members:
      Distributed                                                                       $0.32                      $0.18                 $0.87                        $0.86
      Undistributed                                                                     (0.01)                      0.02                 (0.20)                       (0.44)
      Basic                                                                             $0.31                      $0.20                 $0.67                        $0.42
                                                                                        =====                      =====                 =====                        =====

    Net income (loss) per diluted share available to common members:
      Distributed                                                                       $0.32                      $0.18                 $0.87                        $0.86
      Undistributed                                                                     (0.01)                      0.02                 (0.20)                       (0.44)
                                                                                        -----                       ----                 -----                        -----
      Diluted                                                                           $0.31                      $0.20                 $0.67                        $0.42
                                                                                        =====                      =====                 =====                        =====

    Weighted average shares outstanding:
                                                                      Basic                        20,882,191            21,380,178             20,957,222                    21,678,381
                                                                      Diluted                      20,882,191            21,380,178             20,957,222                    21,678,381
                                         Shutterstock Images LLC
                                  Consolidated Statements of Cash Flows
                                              (In thousands)
                                               (unaudited)

                                              Nine Months Ended
                  September 31,
                  -------------
                                                              2012         2011
                                                              ----         ----

    CASH FLOWS FROM OPERATING
     ACTIVITIES
    Net income                                             $18,523      $16,076
    Adjustments to reconcile net
     income to net cash provided
     by operating activities:
    Depreciation and amortization                            1,888        1,033
    Deferred taxes                                            (251)         236
    Non-cash equity-based
     compensation                                            2,827        1,390
    Bad debt reserve                                           131            -
    Changes in operating assets
     and liabilities:
    Credit card receivable                                  (1,136)        (299)
    Accounts receivable                                       (861)        (349)
    Prepaid expenses and other
     current and non-current
     assets                                                 (1,066)        (935)
    Due from member                                            168          (37)
    Accounts payable and other
     liabilities                                             3,429        3,229
    Contributors payable                                     1,473        1,212
    Deferred revenue                                         7,763        7,908
                                                             -----        -----
    Net cash provided by
     operating activities                                  $32,888      $29,464
    CASH FLOWS FROM INVESTING
     ACTIVITIES
    Capital expenditures                                    (3,268)      (2,742)
    Acquisition of patents                                    (193)         (25)
    Security deposit receipt                                    38            -
                                                               ---          ---
    Net cash used in investing
     activities                                            $(3,423)     $(2,767)
    CASH FLOWS FROM FINANCING
     ACTIVITIES
       Term loan facility                                   12,000            -
    Payment of term loan fee                                   (30)           -
    Payment of deferred offering
     fees                                                   (2,539)           -
    Members' distributions                                 (24,200)     (24,750)
                                                           -------      -------
    Net cash used in financing
     activities                                            (14,769)     (24,750)
    Net increase in cash and cash
     equivalents                                           $14,696       $1,947
    Cash and cash equivalents-
     Beginning                                              14,097        6,544
    Cash and cash equivalents-
     Ending                                                $28,793       $8,491
                                                           =======       ======
    Supplemental Disclosure of
     Cash Information:
    Cash paid for:
    Income taxes                                              $300       $1,226
    Non-cash financing
     activities:
    Preferred members' interest
     accretion                                         $         -       $4,058
                                                                                                      Shutterstock Images LLC
                                                                                      Reconciliation of Non-GAAP Financial Information to GAAP
                                                                                     (In thousands, except for share and per share information)
                                                                                                             Unaudited

    Unaudited Supplemental Data
    ---------------------------
                                                                             The following information is not a financial measure under generally accepted
                                                                             accounting principles (GAAP). In addition, it should not be construed as an
                                                                             alternative to any other measures of performance determined in accordance with
                                                                             GAAP, or as an indicator of our operating performance, liquidity or cash flows
                                                                             generated by operating, investing and financing activities as there may be
                                                                             significant factors or trends that it fails to address. We present this financial
                                                                             information because we believe that it is helpful to some investors as one
                                                                             measure of our operations. We caution investors that non-GAAP financial
                                                                             information, by its nature, departs from traditional accounting conventions;
                                                                             accordingly, its use can make it difficult to compare our results with our
                                                                             results from other reporting periods and with the results of other companies.

                                                                                                          Three Months Ended                          Nine Months Ended
                                                                                                            September 30,                               September 30,
                                                                                                            -------------                               -------------
                                                                                                                              2012                                        2011                                     2012             2011
                                                                                                                              ----                                        ----                                     ----             ----
    Net income in accordance with generally accepted accounting principles
                                                                                          $8,742                            $5,688                                     $18,523                                  $16,076
                                                                            Add/(less):
                                                                             (a) Depreciation and
                                                                             amortization                                      728                                         410                                    1,888            1,033
                                                                             (b) Non-cash equity
                                                                             based compensation                                670                                         599                                    2,827            1,390
                                                                             (c) Interest
                                                                             (income)/expense,
                                                                             net                                                 3                                          (1)                                      (2)              (8)
                                                                             (d) Provision for
                                                                             income taxes                                      146                                         253                                      374              715
                                                                                                                               ---
    Adjusted EBITDA (1)                                                                                                    $10,289                                      $6,949                                  $23,610          $19,206
                                                                                                                           =======                                      ======                                  =======          =======
    Adjusted EBITDA per diluted common share                                                                                 $0.49                                       $0.33                                    $1.13            $0.89
                                                                                                                             =====                                       =====                                    =====            =====
    Adjusted EBITDA per diluted common share (2)                                                                             $0.36                                       $0.24                                    $0.83            $0.65
                                                                                                                             =====                                       =====                                    =====            =====

    Weighted average shares                                                                                             20,882,191                                  21,380,178                               20,957,222       21,678,381
                                                                                                                        ==========                                  ==========                               ==========       ==========
    Adjusted weighted average shares (2)                                                                                28,384,226                                  29,078,653                               28,488,855       29,494,487
                                                                                                                        ==========                                  ==========                               ==========       ==========

                                                                                                          Three Months Ended                          Nine Months Ended
                                                                                                            September 30,                               September 30,
                                                                                                            -------------                               -------------
                                                                                                                              2012                                        2011                                     2012             2011
                                                                                                                              ----                                        ----                                     ----             ----
    Net income                                                                                                              $8,742                                      $5,688                                  $18,523          $16,076
                                                                             (a) Non-cash equity
                                                                             based compensation                                670                                         599                                    2,827            1,390
                                                                             (b) Adjustment for
                                                                             the tax impact of
                                                                             certain Non-GAAP
                                                                             adjustments
                                                                                              (11)                                        (26)                                        (56)                               (59)
    Non-GAAP net income                                                                                                     $9,401                                      $6,261                                  $21,294          $17,407
                                                                                                                            ======                                      ======                                  =======          =======

                                                                                                          Three Months Ended                          Nine Months Ended
                                                                                                            September 30,                               September 30,
                                                                                                            -------------                               -------------
                                                                                                                              2012                                        2011                                     2012             2011
                                                                                                                              ----                                        ----                                     ----             ----
    Net cash provided by operating activities                                                                              $13,966                                      $9,517                                  $32,888          $29,464
                                                                             Interest income/
                                                                             (expense), net                                     (3)                                          1                                        2                8
                                                                            Capital expenditures                              (597)                                     (1,213)                                  (3,461)          (2,767)
    Free cash flow                                                                                                         $13,372                                      $8,303                                  $29,425          $26,689
                                                                                                                           =======                                      ======                                  =======          =======

    Adjusted EBITDA                                                                                                        $10,289                                      $6,949                                  $23,610          $19,206
                                                                            Add/(less):
                                                                             (a) Changes in
                                                                             operating assets
                                                                             and liabilities                                 3,841                                       2,746                                    9,770           10,729
                                                                             (b) Provision for
                                                                             income taxes                                     (146)                                       (253)                                    (374)            (715)
                                                                             (c) Deferred income
                                                                             taxes                                             (96)                                         74                                     (251)             236
                                                                             (d) Provision for
                                                                             doubtful accounts                                  81                                           -                                      131                -
                                                                             (e) Other
                                                                             (income)/expense,
                                                                             net                                                (3)                                          1                                        2                8
                                                                                                                               ---
    Net cash provided by operating activities                                                                              $13,966                                      $9,517                                  $32,888          $29,464
                                                                                                                           =======                                      ======                                  =======          =======

    (1)  Earnings/(loss) before interest income/(expense), income taxes, depreciation, amortization, non-cash equity-based compensation and other non-cash charges.
    (2) The adjusted shares give effect to our reorganization from a New York limited company to a Delaware corporation and includes incremental shares for profit interest awards and preferred shares that
     are excluded from the weighted average shares.
    Media Contacts:
    Meagan Kirkpatrick            Denise Garcia
    Shutterstock, Inc.            ICR
    mkirkpatrick@shutterstock.com denise.garcia@icrinc.com

SOURCE Shutterstock, Inc.


Source: PR Newswire