Shutterstock, Inc.

Good morning, ladies and gentlemen, and welcome to the Q2 2021 Shutterstock, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone phone. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Chris Hsu, VP, Investor Relations and Corporate Development.

Thank you, Phyllis. Good morning, everyone, and thank you for joining us for Shutterstock's second quarter 2021 earnings call. Joining us today is Stan Pawlowski, Shutterstock's Chief Executive Officer, and Jared Yates, Shutterstock's Chief Financial Officer. Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements, including without limitation, the impact of COVID-19 on our business, the long-term effects of investments in our business, the future success and financial impact of new and existing product offerings, our ability to consummate acquisitions and integrate the businesses we have acquired or may acquire into our existing operations, our future growth, margins, and profitability, our long-term strategy, and our performance targets. Actual results or trends could differ materially from our forecast. For more information, please refer to today's press releases and the reports we file with the SEC from time to time, including the risk factors discussed in our most recently filed 10-Q and our annual 10-K for discussions of important risk factors that could cause actual results to differ materially from any forward-looking statements we may make on this call. We'll be discussing certain non-GAAP financial measures today including adjusted EBITDA and adjusted EBITDA margin, adjusted net income, adjusted net income per diluted share, revenue growth including by distribution channel on a constant currency basis, billings and free cash flow. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the financial tables included with today's press release in our 10Q, which are posted on the investor relations section of our website. Finally, please refer to the brief information deck we posted on our website that contains supporting materials for today's call. With that, I'll turn the call over to Stan.

Thank you, Chris. Good morning, everyone, and thank you for joining Shutterstock's second quarter 2021 earnings call. We're happy to report that the company has seen another strong quarter in terms of growth. This morning, I'll be discussing the key drivers of growth. However, before doing that, I'd first like to talk in more detail about the exciting announcement that you saw this morning in connection with the formation of Shutterstock.ai and the acquisition of three AI-driven creative intelligence platforms. As backdrop, in previous quarters, I've spoken about Shutterstock's three strategic pillars, workflow innovation, fresh and relevant content, and data and insights to drive performance. Shutterstock.ai and its three acquisitions represent a very important and tangible advancement with respect to our plans for data and insights. This is a major milestone for us that will reshape our product offerings and ultimately our addressable market in the years to come. In broad terms, Shutterstock.ai will offer two discrete solutions, predictive performance and computer vision solutions. The acquisitions we announced this morning relate to our predictive performance offering, which will be rolled out to both e-commerce and enterprise customers gradually over the next six to 12 months. We believe that our predictive performance offering will address a major customer pain point by delivering actionable, data-driven recommendations. These recommendations will be embedded in a comprehensive yet intuitive workflow that enables customers to test, analyze, and optimize their content prior to deployment. With these acquisitions, Shutterstock will be able to score our content library to predict performance. As a result, marketers will no longer be guessing or solely using intuition and selecting their content for campaign or other marketing purposes, but rather they will have predictive insights baked into our offerings. This means that Shutterstock customers can pick and choose within our content library with the benefit of predictive insights that will help drive performance for them. These insights will be delivered via either general models, which will not rely on any customer specific campaign data, or custom models, which will leverage an individual customer's historic campaign data. Lastly, the Shutterstock predictive performance solution does not rely on third-party cookie-based identity data since it relies on contextual targeting. I'd like to talk more specifically about our three acquisitions and the critical components each company contributes. On a combined basis, Pattern 89, DataSign, and ShotsR will help us deliver on our vision for predictive performance. Each company represents an important piece of the overall puzzle. Pattern 89 is an Indianapolis-based company. Customers rely on Pattern 89's SaaS solution to analyze past campaign data, predict future campaign performance, and optimize their media spend in real time, rather than relying on A-B tests or educated guesses. The analytics are focused on a myriad of creative dimensions such as colors used, text sentiment, presence of people, and presence of specific objects. Pattern 89 is a product-led organization, and its platform provides Shutterstock with a front-end workflow and a back-end campaign data feed alongside strong product and tech talent. DataSign is based in London. DataSign is particularly strong in areas such as machine learning and natural language processing, which drive the analytics on the back end to understand and optimize the creative elements of an ad. These back end strengths are highly additive to Pattern 89's front end in terms of both technology and talent. We are excited about the combination of these uniquely complementary platforms. Last but not least, Denver-based Schotzer has built a repository of survey data, which informs the company's proprietary audience models. These audience models will allow Shutterstock to generate what we call resonance scores, which are predictions on how well a particular digital asset will resonate for a given audience segment. Unlike Pattern 89 and DataSign, Schotzer doesn't need specific customer campaign data to generate its predictions. This is particularly critical in addressing the cold start problem in instances where a customer may not yet have a deep data set of historic campaign data. I am extremely excited for the advancement against our product roadmap that these three acquisitions represent. I look forward to updating you on our progress on our data and insight strategy in the quarters ahead. Now that we've reviewed our predictive performance offering and the three acquisitions that power that offering, I want to turn to computer vision. Helping AI models see and understand digital imagery is a large and growing market. Today, a number of our customers are looking to train their own AI models for use cases such as self-driving cars and robotics. To that end, Shutterstock's computer vision offering leverages and commercializes our extensive dataset, which includes a collection of more than 400 million images, videos, music tracks, and 3D models, and associated metadata. In short, Shutterstock has built a proprietary process for tagging assets over our 17-year history, which gives us one of the richest datasets in the marketplace which we continue to enrich. Switching gears to revenue and overall demand environment, digital marketing spend is exhibiting continued strong momentum across channels and use cases. SMBs, large enterprise corporates, and agencies are all spending again with an eye on growth and new customer acquisition. The result for Shutterstock was revenue growth of 19% in the second quarter, and constant currency organic revenue growth of 12%, a meaningful acceleration. Subscriber KPIs were exceptional, with subscriber count growing 44% and subscriber revenue growth of 25%. E-commerce was up 23% in Q2 2021, driven by balanced growth across image, footage, and music, as well as the strong performance of TurboSquid 3D. Meanwhile, enterprise saw a true inflection in its momentum, with revenue growth accelerating to 13%. This significant acceleration in enterprise revenue growth was driven by Booking's momentum, both in our large agency and corporate businesses, supported by products like Shutterstock Studios, and our small and medium businesses, supported by innovative new products such as SMB Flex which allows customers to buy multiple assets within a single subscription. We are truly pleased with enterprise revenue and Booking's growth and are increasingly confident that this revenue channel has turned the corner in terms of sustainable growth. In closing, based on our strong record second quarter and confidence in the continuation of the economic recovery, we are raising our revenue and EBITDA guidance for 2021. We could not be more excited about the potential of Shutterstock.ai and the unique offering we will bring to market, garnering us access to a large and fast-growing market. Furthermore, we expect to bring several more exciting innovations to market this year around tools and creative workflows that we think our customers will love. while continuing to provide Shutterstock customers access to fresh and relevant content, which will soon be uniquely augmented with data and insights to drive performance. And now, I'll turn the call over to Jarrett.