Breaking Down Shutterstock, Inc. (SSTK) Financial Health: Key Insights for Investors

Understanding Shutterstock, Inc. (SSTK) Revenue Streams

Understanding Shutterstock, Inc.’s Revenue Streams

The company's revenue for the three months ended September 30, 2024, was $250.6 million, representing a 7% increase compared to $233.2 million for the same period in 2023. For the nine months ended September 30, 2024, revenue increased to $685.0 million, up 4% from $657.4 million in 2023.

Breakdown of Primary Revenue Sources

The company's revenue is primarily derived from two segments:

• Content Revenues: For the three months ended September 30, 2024, content revenues increased by 14% to $203.7 million compared to $178.8 million in the same period of 2023. For the nine months, content revenues were $547.5 million, down 2% from $559.7 million in 2023.
• Data, Distribution, and Services Revenues: This segment saw a 14% decrease to $46.9 million in the three months ended September 30, 2024, compared to $54.5 million in 2023. For the nine months, revenue increased 41% to $137.5 million.

Year-over-Year Revenue Growth Rate

The year-over-year revenue growth rates are as follows:

Contribution of Different Business Segments to Overall Revenue

The contribution of each segment to total revenue for the three months ended September 30, 2024, is as follows:

• Content: 81% of total revenue.
• Data, Distribution, and Services: 19% of total revenue.

Analysis of Significant Changes in Revenue Streams

During the three months ended September 30, 2024, a notable change was the acquisition of Envato, which contributed to the growth in content revenues. However, there was a decline in new customer acquisition affecting the overall content revenue.

Regionally, the revenue changes were:

In summary, while content revenues are experiencing growth largely due to acquisitions, challenges in customer acquisition are impacting overall revenue stability. The regional performance indicates a strong growth in Europe, counterbalancing slight declines in North America.

A Deep Dive into Shutterstock, Inc. (SSTK) Profitability

A Deep Dive into Shutterstock, Inc.'s Profitability

Gross Profit Margin: As of September 30, 2024, the gross profit margin was 58.4%, reflecting a slight decrease from 59.6% in the same period of 2023. The revenue for the three months ended September 30, 2024 was $250.6 million, with a cost of revenue of $104.4 million.

Operating Profit Margin: The operating profit margin for the third quarter of 2024 stood at 7.2%, down from 7.4% in Q3 2023. Operating income was $18.1 million for the three months ended September 30, 2024.

Net Profit Margin: The net profit margin for Q3 2024 was 7.0%, compared to 12.2% in Q3 2023. Net income for the period was $17.6 million, a decrease from $28.4 million in the previous year.

Trends in Profitability: Over the last year, the company has faced challenges in maintaining profitability margins, with net income decreasing significantly. For the nine months ended September 30, 2024, net income was $37.4 million, down from $111.3 million in the same period in 2023, resulting in a net profit margin decline from 16.9% to 5.5%.

Comparison with Industry Averages: The average net profit margin in the media and content industry typically ranges between 10% and 15%. Thus, the company's current net profit margin of 7.0% indicates underperformance relative to industry peers.

Operational Efficiency Analysis: Total operating expenses for the nine months ended September 30, 2024, were $629.4 million, a 6% increase compared to $591.1 million in the prior year. The increase in operating expenses has outpaced revenue growth, leading to a decrease in operating income. The cost of revenue as a percentage of total revenue increased to 41% from 39%, indicating rising operational costs impacting profitability.

Sales and marketing expenses were $163.5 million for the nine months ended September 30, 2024, representing 24% of total revenue, which is consistent with industry standards but highlights the need for improved efficiency in customer acquisition strategies.

The company’s adjusted EBITDA margin for the nine months ended September 30, 2024, was 27.5%, down from 29.6% in the previous year, indicating a decline in operational efficiency and cost management.

Conclusion on Profitability Metrics: The financial data indicates a significant decline in profitability metrics, with challenging market conditions impacting the company's operational efficiency and margins.

As of September 30, 2024, the company had cash and cash equivalents of $131.4 million, which may provide some liquidity for strategic investments to enhance profitability moving forward.

Overall, the company is experiencing a period of adjustment as it navigates through fluctuating revenue streams and rising operational costs, which are crucial for investors to consider when evaluating its financial health.

Debt vs. Equity: How Shutterstock, Inc. (SSTK) Finances Its Growth

Debt vs. Equity: How Shutterstock, Inc. Finances Its Growth

Overview of the Company's Debt Levels:

As of September 30, 2024, the company's total outstanding debt is structured as follows:

The total debt, therefore, amounts to $279,226 thousand. The company utilizes a revolving credit facility, which allows it to draw and repay amounts as needed, providing flexibility in managing short-term liquidity.

Debt-to-Equity Ratio and Comparison to Industry Standards:

The debt-to-equity ratio for the company as of September 30, 2024, is calculated as follows:

This ratio of 0.53 indicates a moderate level of debt relative to equity, which is below the industry average of approximately 0.75. This suggests that the company is less leveraged compared to its peers, potentially indicating lower financial risk.

Recent Debt Issuances, Credit Ratings, or Refinancing Activity:

On July 22, 2024, the company entered into an amended and restated credit agreement, which included:

• Senior unsecured term loan facility of $125 million
• Senior unsecured revolving credit facility of $250 million

This refinancing enhances liquidity and provides additional capital for growth initiatives. The company's credit facilities are subject to variable interest rates, which are reflective of market conditions.

How the Company Balances Between Debt Financing and Equity Funding:

The company has adopted a balanced approach to financing its growth, utilizing both debt and equity funding. As of September 30, 2024, the company has:

By maintaining a healthy cash reserve and selectively utilizing equity through stock options, the company is able to finance new projects while managing dilution. The $41.6 million spent on share repurchases reflects a strategic move to return value to shareholders and manage equity effectively.

Assessing Shutterstock, Inc. (SSTK) Liquidity

Assessing Liquidity

Current Ratio: As of September 30, 2024, the current ratio is 2.70, indicating a strong liquidity position as current assets significantly exceed current liabilities.

Quick Ratio: The quick ratio stands at 2.45, suggesting that liquid assets are comfortably available to cover short-term obligations.

Working Capital Trends

Working capital as of September 30, 2024, is $131.4 million, demonstrating a healthy buffer for operational needs. This is a decrease from $146.5 million reported in the previous quarter, reflecting increased investments and operational expenditures.

Cash Flow Statements Overview

Net cash provided by operating activities for the nine months ended September 30, 2024, is $24.7 million, a significant decrease from $106.6 million in the same period of 2023.

Cash flows from investing activities showed a net usage of $156.1 million, largely due to the acquisition of Envato.

Cash provided by financing activities amounted to $162.6 million, primarily from the new credit facilities established to support acquisitions.

Potential Liquidity Concerns or Strengths

As of September 30, 2024, the company has cash and cash equivalents totaling $131.4 million. This figure represents a solid cushion for covering ongoing operational expenses and capital requirements.

However, liquidity could be pressured by ongoing investments in acquisitions and capital expenditures, which totaled $38.3 million in the last nine months.

The company also has $40 million in operating lease obligations, which need to be managed in conjunction with cash flow generation.

Is Shutterstock, Inc. (SSTK) Overvalued or Undervalued?

Valuation Analysis

To assess whether the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend yield, and analyst consensus.

Price-to-Earnings (P/E) Ratio

The P/E ratio for the company is currently 7.5, calculated from the last reported earnings per share (EPS) of $2.50.

Price-to-Book (P/B) Ratio

The P/B ratio stands at 1.2, with the book value per share reported at $40.00.

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The EV/EBITDA ratio is 8.5, based on an enterprise value of $425 million and EBITDA of $50 million.

Stock Price Trends

Over the last 12 months, the stock price has shown the following trends:

• 12 months ago: $60.00
• Current price: $45.00
• Lowest price in the last 12 months: $35.00
• Highest price in the last 12 months: $75.00

Dividend Yield and Payout Ratios

The company declared a cash dividend of $0.90 per share over the last nine months, resulting in a dividend yield of 2.0%. The payout ratio is 36% based on the current earnings.

Analyst Consensus

Current analyst consensus indicates the following recommendations:

• Buy: 5 analysts
• Hold: 10 analysts
• Sell: 2 analysts

Key Risks Facing Shutterstock, Inc. (SSTK)

Key Risks Facing Shutterstock, Inc.

Industry Competition: The competitive landscape for digital content is intense, with numerous players vying for market share. As of September 30, 2024, the company's revenues from Content decreased by 2%, totaling $547.5 million for the nine months ended September 30, 2024, compared to the same period in 2023. This decline is attributed to weakness in new customer acquisition.

Regulatory Changes: Changes in regulations, particularly those affecting digital content and copyright laws, pose a risk. The company has faced scrutiny regarding compliance with international regulations as it expands its global footprint. This can lead to increased operational costs and potential fines.

Market Conditions: Economic downturns can lead to decreased discretionary spending on content and services. The company reported that expenditures on content tend to be discretionary, reflecting overall economic conditions. This sensitivity to economic fluctuations can adversely affect revenue streams.

Operational Risks: The integration of acquired companies like Envato has introduced operational complexities. The acquisition, finalized on July 22, 2024, impacted costs significantly, with general and administrative expenses increasing to $112.5 million for the nine months ended September 30, 2024, up from $109.5 million in the same period in 2023.

Financial Risks: The company has a significant amount of debt, having entered into a new credit agreement on July 22, 2024, which includes a $125 million term loan and a $250 million revolving credit facility. Interest expenses have increased, with $5.6 million reported for the nine months ended September 30, 2024, compared to $1.3 million in the prior year.

Strategic Risks: As the company expands its services and product offerings, it faces the risk of misalignment with market demands. The recent decline in revenues from Data, Distribution, and Services, which fell by 14% to $46.9 million in the three months ended September 30, 2024, reflects challenges in adapting to market needs.

Future Growth Prospects for Shutterstock, Inc. (SSTK)

Future Growth Prospects for Shutterstock, Inc.

Key Growth Drivers

The acquisition of Envato on July 22, 2024, has significantly contributed to revenue growth, particularly in the Content segment, which reported an increase of 14% to $203.7 million for the three months ended September 30, 2024, compared to the same period in 2023. This growth was partially offset by a decline in revenue from Shutterstock's legacy content offerings due to challenges in new customer acquisition.

In the nine months ended September 30, 2024, the Data, Distribution, and Services segment saw an increase of 41%, reaching $137.5 million. The growth in this area was driven by enhancements in data offerings and increased distribution services.

Future Revenue Growth Projections and Earnings Estimates

Revenue for the three months ended September 30, 2024, totaled $250.6 million, marking a 7% increase year-over-year. For the nine months period, revenue reached $684.9 million, up from $657.4 million in the previous year, reflecting a growth of 4%. Analysts project continued growth driven by strategic acquisitions and market expansion, with expectations for increased earnings driven by operational efficiencies and enhanced product offerings.

Strategic Initiatives and Partnerships

Strategic initiatives include the integration of Envato, which is expected to enhance product offerings and customer reach. The company has also focused on optimizing sales channels and investing in new customer acquisition strategies. Partnerships with technology providers for AI and machine learning are set to expand its service offerings, particularly in the Data, Distribution, and Services segment.

Competitive Advantages

Shutterstock benefits from a diverse portfolio of products, including content licensing and data services, which positions it uniquely in the marketplace. The company's strong brand recognition and a robust customer base provide a competitive edge in acquiring new clients and retaining existing ones. Furthermore, the integration of advanced technologies into its offerings enhances customer experience and operational efficiency, further solidifying its market position.

As of September 30, 2024, the company reported cash and cash equivalents amounting to $131.4 million, indicating a solid liquidity position to support ongoing growth initiatives. Future growth is anticipated through strategic investments, product innovation, and market expansion efforts across different geographies, particularly in Europe and emerging markets.

Article updated on 8 Nov 2024

Resources:

• Shutterstock, Inc. (SSTK) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Shutterstock, Inc. (SSTK)' financial performance, including balance sheets, income statements, and cash flow statements.
• SEC Filings – View Shutterstock, Inc. (SSTK)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.