Shutterstock (NYSE:SSTK) Inc. reported record revenues of $233 million in Q3 2023, marking a 14% YoY increase. The company witnessed a significant 60% growth in its enterprise channel and $46 million in revenue from its data engine, largely fueled by partnerships with Google (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN). Despite a 15% drop in the e-commerce channel, the company forecasts a recovery in the forthcoming quarters, propelled by marketing modifications, better conversion rates, and the introduction of the cost-effective Shutterstock Essentials plan.
Key takeaways from the earnings call include:
- Shutterstock's enterprise channel, excluding data, saw a robust 9% growth from FLEX subscriptions and Giphy.
- The e-commerce channel experienced a 15% decline in Q3 but is expected to stabilize and rebound in future quarters.
- Gross margins decreased due to higher royalty payments, non-cash M&A amortization, and Giphy retention compensation.
- The company anticipates revenue growth to accelerate further in Q4, driven by landmark wins and overall bookings momentum.
- Shutterstock raised its revenue growth guidance for the full year from 3-5% to 5-7%, and its adjusted EBITDA guidance from $227-235 million to $240-245 million.
- The data business is projected to see significant growth, with revenue expectations increasing to over $100 million in 2023.
Shutterstock also highlighted the potential growth of Giphy and data sales for AI and ML model training. The company is in dialogue with large companies about the value of its ethically-sourced metadata, even amidst ongoing court cases. It is also focusing on catering to smaller companies by offering a streamlined version of its data deals.
The company's Q4 guidance indicates low single-digit growth in revenue and margins in the low to mid-20s. Shutterstock revealed it has $40 million of total contract value in its pipeline, expected to contribute to revenues in 2024 and beyond. The company is confident about transitioning to a more recurring revenue recognition model, which will provide greater visibility and predictability for the business.
Shutterstock executives expressed optimism about the fresh incremental data received over the past year. They believe this data will create a more visible revenue stream for their data business, leading to more contracts and better revenue visibility in the future. The company plans to expand its total addressable market (TAM) and offerings to attract different types of customers, with about half of the $40 million in incremental bookings coming from existing customers.
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