Shutterstock, Inc.

Good day, and thank you for standing by. Welcome to the fourth quarter 2021 Shutterstock earnings conference call. At this time, all participants are in a listen-only mode. After this presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I want to hand the conference over to your speaker today, Chris Hsu, Vice President of Investor Relations and Corporate Development. Please go ahead.

Thanks, Victor. Good morning, everyone, and thank you for joining us for Shutterstock's fourth 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, including 2022 guidance. Actual results or trends could differ materially from our forecast. For more information, please refer to today's press release and the reports we file with the SEC from time to time including the risk factors discussed in our most recently filed 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 and in our 10-K. With that, I'll turn the call over to Stan.

Thanks, Chris, and good morning, everyone. And thank you for joining us for the Shutterstock's fourth quarter 2021 earnings call. Today, we'll be discussing Shutterstock's results for 2021. We'll also talk about how the acquisitions we completed in 2021, coupled with the organic investments into our business, have positioned us extremely well for 2022. Shutterstock saw 16% revenue growth in the full year 2021, our highest annual growth rate since 2016. Our e-commerce channel grew 19% in 2021 and over 10% on an organic basis. Meanwhile, our enterprise channel grew 11% year over year, a return to growth after declining in 2020. In 2021, we experienced growth across image, video, and music in our e-commerce channel, driven by outsized growth in our subscription products, resulting in 22% subscriber growth and 20% subscription revenue growth. In the fourth quarter, e-commerce revenue grew 16%, As discussed last quarter, e-commerce organic growth was low single digits in the quarter and the slowdown partially reflected the lapping of new e-commerce subscription products launched in 2020. Further, as we increasingly transition to a subscription led model, we have seen softness within our transaction customer segment. We use our products on an ad hoc project by project basis. In addition, We dedicated greater focus on new product launches for our enterprise channel last year, which was reflected in a relative slowdown in new e-commerce product launches over the course of 2021. That said, on the e-commerce subscription front, we are seeing strong traction with our mixed asset Flex 25 subscription, which was launched in October 21, with the aim of providing access to Shutterstock's image, video, and music content library in one plan that offers great value, flexibility, and customization. Within the first several months of 2022, we'll be introducing new products in our e-commerce channel, which we expect to result in organic growth returning to more normalized levels over the course of the year. I'll now switch gears to our enterprise channel. Our enterprise channel grew 11% in 2021, which reflected a powerful return to growth after declining 2% the prior year. Growth in our enterprise channel was driven by strength in our core image and footage business and further bolstered by growth in our flex products for SMBs, Shutterstock Studios, and our computer vision offering. We are very pleased with the momentum and progress we've seen in the enterprise channels. To put things in context, we have been on a journey over the past two years to reinvigorate our enterprise business, which included redefining our go-to-market approach with a greater focus on our largest accounts, expanding our presence with SMB customers, and scaling Shutterstock Studios. We also made several organizational changes, including a customer-centric and channel-centric go-to-market strategy rather than a region-based approach, adjusting our incentive plans to better align with our commercial strategy, and invested in our systems to enable us to scale. Our sharper commercial focus on growing our strategic solutions revenue streams and subscription-based revenue streams have yielded tangible results in terms of our product offering. Our strategic solutions product suite includes new offerings such as flex premium, studios, and 3D content. We're happy to report that we're seeing several indicators that point to the success of this plan, and we expect to see strong and sustainable growth in our enterprise channel going forward in 2022. Besides our revenue and bookings momentum, I would like to provide some additional proof points that lay out our progress. First, enterprise bookings retention rates improved from the low 80s in 2020 to the mid 90s in 2021. reflecting stickier customer relationships as we upsell and cross-sell strategic solutions to customers. These solutions include multi-asset subscription products, including flex products for SMBs and studio services. Enterprise subscription bookings as a percent of total enterprise bookings increased from 24% in 2019 to 29% in 2021. These subscription bookings include our new Flex subscription product, which approached 15 million of revenues on a run rate basis, a steep ramp up following the initial launch in Q2 2021. The number of enterprise deals with greater than $100,000 in AOV grew almost 80% in 2021, with an average annual value of $175,000. Looking ahead, we're very excited about our product roadmap in 2022, which will leverage the various acquisitions we consummated last year. We continue to see strong growth in 3D revenues stemming from our acquisition of TurboSquid. 3D is an exciting and dynamic content type that is seeing increasing adoption across many use cases, ranging from visual effects for the film and TV industry to video games and architecture and design. More recently, TurboSquid's 3D assets have been used by customers in the metaverse and in creating beautiful works of art captured in NFTs, where our characters and objects can be downloaded from our leading 3D marketplace and deployed into these environments. PicMonkey's intuitive platform will be a foundational element in our strategy for more deeply embedding ourselves in our customers' workflows. We will be introducing a reimagined, easier-to-use application as a part of Creative Flow that will allow our customers to create beautiful, professional designs in an easy-to-use experience. And finally, the three AI assets that Shutterstock acquired will further manifest itself in our e-commerce and enterprise offerings this year. Shutterstock's AI-powered search will transform content discovery, allowing customers to generate ranked results, which include insights based on specific marketing goals, industry, and target audience. We believe that the introduction of predictive insights fueled by AI-driven content analytics will allow our creators and marketers to back their creative intuition with insights and giving their ideas the best chance to succeed. As we've communicated in previous quarters, we're on a journey to transform Shutterstock into a creative platform leveraging content, data, and workflow applications. We believe that introducing these innovations in the form of workflow enhancements and predictive insights for our customers will also have a direct measurable impact on our business metrics, For example, we expect that more deeply embedding ourselves into our customers' workflow make our offering inherently stickier, which we believe will result in greater customer engagement and ultimately higher revenue retention rates. In addition, we believe that our new creative power tools powered by PicMonkey will drive an increase in high-margin recurring subscription revenue adding further stability and visibility into our revenue base. And finally, we believe that we will be well positioned to attract new types of customers, such as the non-professional creative enthusiast segment. We expect to have an investor day later this year in order to help investors better track and understand the progress we are making in the strategic initiatives we've embarked on. Before I turn over the call to Jared, I'd like to leave you with a few takeaways. First, we feel encouraged by our business and financial results in 2021. We accelerated revenue growth, enhanced profitability, continued to pivot towards a subscription business, and furthered our journey to transform Shutterstock into a leading creative platform, leveraging content, data, and workflow applications. Secondly, We are now firing on all cylinders with respect to our enterprise channel and feel great about our momentum, solution offering, and team going into 2022. And lastly, we have the capital and strategic intent to progress our acquisition strategy into 2022. It's an exciting and dynamic time for Shutterstock. I'm thrilled about what we achieved in 2021, and I'm even more thrilled about what's ahead for us in 2022. And with that, I'll turn the call over to Jared.