Shutterstock, Inc.

Good day, and thank you for standing by. Welcome to the first quarter 2022 Shutterstock earnings conference call. At this time, all participant lines are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star, then 1 on your telephone keypad. Please be advised, today's conference may be recorded. If you require operator assistance during the call, please press star, then 0. I'd now like to hand the conference over to your host today, Chris Hsu, Vice President, Investor Relations and Corporate Development. Please go ahead.

Thank you, Liz. Good morning, everyone, and thank you for joining us for Shutterstock's first quarter 2022 earnings call. Joining us today is Stan Pawlowski, Shutterstock's Chief Executive Officer, and Jared Yays, 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 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 filed with the SEC from time to time, including the risk factors discussed in our most recently filed Form 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 10Q. With that, I'll turn the call over to Stan.

Thanks, Chris. Good morning, everyone, and thank you for joining us today. Today, we'll be discussing Shutterstock first quarter results, We'll also talk in more detail about Shutterstock's product roadmap, which we believe uniquely positions Shutterstock for continued growth. And finally, we wanted to address the ongoing war in Ukraine and its impact on Shutterstock, both from a contributor and customer perspective. Shutterstock grew 9% year-over-year this past quarter, or 11% on a constant currency basis. driven by a further acceleration of growth in our enterprise channel to 11% and e-commerce growth of 7% per our expectations. The 11% year-over-year growth in enterprise reflects the dramatically improved execution, the strength of our Flex family of products, and continued momentum in our studios and editorial businesses. Our Flex team subscription and Flex premium products are now a key part of our offering geared towards small and medium businesses and middle market customers. Additionally, both Shutterstock Studios and editorial businesses turned in strong quarters. Shutterstock Studios has built a strong presence and credibility in the market, which has enabled us to win multifaceted contracts for blue chip brands, increase our overall AOVs, and maintain strong customer retention while all positioning Shutterstock as a strategic, full-service partner capable of serving our customers' most complex creative needs. Our editorial business is growing at a healthy rate, driven by continuing innovation in our new newsroom offering, which we rolled out in 2021. We are especially proud of some of the great work being done by our photographers in their coverage of key entertainment and media events. In short, our increased focus on offering end-to-end enterprise solutions, such as studios and editorial, has enabled Shutterstock over the past several quarters to change the conversation with our enterprise customers and better position ourselves as a strategic partner able to meet their needs. In our e-commerce channel, we experienced 7.3% growth year over year and 9% on a constant currency basis, in line with our expectations, which we discussed last quarter. We saw the continuing shift by customers to our subscription offerings with accelerating net subscriber additions in the first quarter, driven by the Flex 25 product introduced this past October. This past quarter, our overall subscriber count grew 17%, and our subscription revenue grew 12% on a year-over-year basis, resulting in subscription revenue as a percent of total revenue reaching 43%, which was an all-time high. We also feel good about the actions we're taking to re-accelerate growth in our e-commerce channel and expect to see some positive momentum throughout 2022. These actions include introducing new content subscriptions, including a new unlimited music subscription with sound effects in Q2, enhancing the value of our content subscriptions with predictive insights and workflow applications that help our subscribers select and create better content, which I'll discuss next. As you may remember, we made several key acquisitions last year in data and workflow, and I'm happy to say that we're making exciting and tangible progress towards integrating these acquisitions and building out our core capabilities. We are entering a very exciting period of testing, learning, and rapid iteration as we bring new features and capabilities to market in Q2. Our immediate focus is on adding value for our existing content subscribers and on bringing new subscriptions and add-ons to market in the second half of the year. In early April, we released our Catalog and Plan applications to our e-commerce customers. Catalog allows customers to organize their licensed and saved content in one place. Meanwhile, Plan allows customers to stay organized, through a centralized content calendar. These value-enhancing features are available for free for our e-commerce subscribers and our enterprise customers, and we are already seeing promising early results in terms of engagement. This week, we released AI-powered search to our enterprise customers and e-commerce subscribers. These are powered by our acquisitions of Pattern 89 DataSign and Shotser. And this feature allows customers to set objectives and define target audiences as part of their search to discover content most likely to perform for their goals. Additionally, our predictive technology provides the why behind content recommendations, helping our customers understand with specificity what elements in each photo are the key drivers of performance. This predictive power is now a feature of our core search experience. In addition, this AI-powered search underpins our newly launched Predict application, which we have released to a handful of beta enterprise customers. Given the reduced reliance on third-party cookies and device IDs and the ever-expanding sea of content available from which to choose, Marketers are increasingly facing challenges in reaching their target audience with the right content. Our Predict app helps overcome this challenge by providing tools that enable our customers to select the right content asset for their specific needs. In addition, the Predict app allows our customers to collaborate within their teams to find the right content with features like shared project boards. We are also approaching a major milestone with the release of our Create application in the coming weeks. This app, powered by the technology acquired from the PicMonkey acquisition, will allow customers to access templates, customize text, remove backgrounds, make touch-ups, and handle other creative editing functions. In short, customers will be able to produce professional quality designs through an intuitive, easy-to-use interface. The catalog plan, predict and create apps are either available now or will soon be available at no charge to our e-commerce subscription customers and our enterprise customers as value-enhancing features to our existing premium products. Across both our e-commerce and enterprise channels, We believe that these applications will resonate with our existing base of creative professionals who seek to supplement or validate their intuition with data-backed insights. Moreover, as we continue to evolve these applications in 2022, they will enable us to better serve marketing professionals who will be able to generate predictive scores and insights on their own assets and leverage custom, account-based predictive scoring, and insights based on their own historic data. In addition, we plan to introduce later this year a Creative Flow subscription, which will include the catalog, plan, create, and predict apps, and will also incorporate our AI-powered search. This new product will target the casual creative segments and will include a free tier of Shutterstock content with an upsell path to Shutterstock's premium content subscriptions. We believe that this standalone Creative Flow subscription product, which will be available at lower monthly price point, represents an extension to new audiences who previously may not have had a need for stock content. In summary, Our new offering will connect our massive content library with a powerful editing and design platform, easy to use collaboration tools, and AI powered insights so that creatives and marketers can make, share, validate, and organize their creative work all in one place. This will extend Shutterstock's presence to a broader part of the creative process rather than just the contact selection phase. We encourage you to visit our investor relations microsite, which contains a link to a video that gives you a glimpse of all these capabilities. And lastly, we wanted to spend a moment addressing the war in Ukraine and any impact on our business. As an organization, we are committed to supporting our network of contributors in Ukraine. To that end, in early March, Shutterstock made a donation of $1 million to provide direct assistance to Shutterstock's thousands of contributors in Ukraine. In the first quarter, Shutterstock had approximately 2.1 million contributors, up over 20 percent from the prior year. And the content collection is massive, with 430 million assets. We have not seen any significant changes in the pattern of content submissions in this region that is meaningfully different from the rest of the world. Throughout the history of Shutterstock, we have seen the sources of our content shift globally from region to region with impressive flexibility and responsiveness to the needs of the market. And that is part of the powerful network effect that we have created with our efficient marketplace. While we do not believe our contributor supply chain will impact our revenues, we do have about 1% of revenues from the impacted region, which we believe will go away in large part, and we have factored into our expectations for the year. In conclusion, a few final takeaways before I turn over the call to Jared. First, the product rollouts in connection with our predictive performance and creative design capabilities represent the crystallization of our acquisitions from last year. Second, we believe that the recent and pending launches of our workflow applications will enable product differentiation and sustained growth in the marketplace. And finally, we are changing customers' perception of Shutterstock by offering strategic, full-service solutions and a suite of applications we are more deeply embedding us into our customers' workflows. And with that, I'll turn the call over to Jared.