Shutterstock, Inc.

Good day and welcome to the Q2 2022 Shutterstock, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your touchtone telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Chris Hsu, Vice President, Investor Relations and Corporate Development. Please go ahead.

Thanks, Cherie. Good morning, everyone, and thank you for joining us for Shutterstock's second quarter 2022 earnings call. Joining us today is Paul Hennessy, 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 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 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. Reconciliation 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. I'd now like to turn the call over to Paul Hennessy, Chief Executive Officer.

Thanks, Chris. Good morning, everyone, and welcome to our second quarter earnings call. I'd first like to start by conveying my gratitude to my fellow colleagues at Shutterstock, for helping me get immersed in the business so quickly and seamlessly. As many of you are aware, I'm now approaching the end of my first month as Shutterstock CEO. I find myself energized by the passion and bias for action permeating throughout the organization and the opportunity to serve our customers. I also look forward to engaging with those of you in the investor community in the weeks and months ahead. I spent the past several weeks exploring in depth many of the key assets and capabilities unique to Shutterstock that allow us to maintain our leadership position in the industry and best serve our customers, contributors, employees, and shareholders. I would like to speak to each of these key assets and capabilities and finally provide an early indication of some of the strategic priorities I feel may be untapped opportunities for Shutterstock in the years ahead. The key assets and capabilities that make Shutterstock so unique include the leading content marketplace with superior depth and breadth across all categories, our recently introduced Creative Flow platform, a unique offering of content, data, and production solutions to large enterprises and small and medium-sized businesses, and an extremely talented team able to execute on the range of exciting opportunities that lie ahead. The bedrock of Shutterstock has always been our content marketplace, with industry-leading depth and breadth across content types. We have invested heavily in our content and technology stack, both organically and via acquisitions, and will continue to do so. For example, over the past several years, we've acquired the world's largest 3D model marketplace in TurboSquid, the world's largest video-first marketplace in Pond5, and we've been adding to our editorial and exclusive content most recently with the acquisition of Splash News. As a result of these investments, we have massive industry-leading scale, and have become the de facto primary destination for marketers, creatives, and professionals to come to their content needs for a range of use cases. Our marketplace is particularly well-positioned to thrive in rapidly evolving environments such as the metaverse, with our 3D model and recently added Metaverse Ready sound effects content. To put things in perspective, on our marketplace, 2.1 million customers purchase content from a community of 2.2 million contributors. That's a contributor base that is larger than our nearest competitor by 4x. What this means in real terms is that we have the freshest content from around the world, with 5 to 10 million assets being added every single quarter our content library is by far the largest and deepest by a significant margin with 484 million creative and editorial images in video we are larger than the next player by a factor of 2x including con 5 and we have more 3d models on our marketplace than any other competitor in addition to scale Ease of content discoverability and a robust ingestion process further differentiate our marketplace from the competition. In short, from a customer perspective, as a result of Shutterstock's extensive growing library and ability to surface the right content, it means that Shutterstock is the go-to destination for your content needs, whether, for example, you're a creative professional, a small business owner, or a marketing professional. In order to allow our customers to more fully leverage our content, Shutterstock has gradually transformed our content marketplace into an end-to-end, full-service creative platform. We commenced that journey with significant organic and inorganic investment in our workflow applications and data, culminating in the initial rollout of the Creative Flow platform released to our customers in the second quarter. We believe that customers will further benefit from the enhancements planned to the Creative Flow over the next several quarters. We are truly just at the beginning stages of leveraging Creative Flow to enhance the way our customers do their creative work. We believe Creative Flow will ultimately result in stronger engagement with our platform and lead to customer satisfaction and retention across all channels. We are already seeing strong customer engagement with the platform with existing Shutterstock subscribers using the platform to create and customize their downloaded content. As we get more data about Creative Flow engagement and the downstream impacts on our business, we expect to provide additional insights and metrics to investors. Creative Flow also opens up the potential for a larger total addressable market for template-driven creative design tools, thereby allowing for audience expansion into the long-tail solopreneurs and casual creatives, creating a long runway for growth. In summary, Shutterstock is well-positioned to meet the varied needs of customers in a more complete way by providing the connective tissue that helps our customers transform a piece of content into performant creative. Shutterstock's enterprise sales channel is another unique asset that has performed strongly and will be key to our success going forward. We are seeing exceptional traction across a range of strategic solutions that we're bringing to our customer base, both large enterprise corporations as well as SMDs. Our sales force is truly global, and we are able to deliver end-to-end creative solutions to customers on a scale that is unmatched by our competitors. We're seeing strong traction at Shutterstock Studios in creating short form and long form video for our customers as well as high interest in 3D engagements for brands. Our API platform solutions channel is seeing strong demand across content types for predictive data for scoring creative content and for computer vision applications used by large technology companies. And last but not least, we've developed a strong muscle in our sales channel for end-to-end solution selling, starting from our high-end differentiated creative content to our editorial offerings in sports and entertainment and news, including the Shutterstock archive, real-time splash newsroom subscriptions to highly sophisticated global production services. I'd like to provide a few highlights that show how all of the above is manifesting in our enterprise business. Our studios business is increasingly winning large global deals with customers across industries, like pharmaceutical and CPG, with AOV that are three times greater than last year. We're also proud of our studio's work with Allergen Aesthetics, which commenced in Q1. Through this partnership, Shutterstock is continuing its commitment to improve diversity. The partnership will cast hundreds of real people in an effort to produce thousands of powerful and inclusive royalty-free images, which will be hosted in a curated collection on the Shutterstock website later this year making our marketplace increasingly reflective of the diverse world in which we live. Leading auto tech brand Carvana enlisted Shutterstock Studios to produce an original docuseries capturing the life and career of Jimmy Johnson, one of the greatest race car drivers of all time, which is currently airing on NBC Sports. Having launched a virtual production offering, we're seeing continued growth and appetite for AR, vr and metaverse activations for brands and agencies we're experiencing healthy growth in the smb segment driven by new customer acquisition upsell and continued sales momentum with our flex product franchise overall our average revenue per customer in our enterprise channel is 20 times greater than that of our e-commerce channel as we increase wallet size and increase customers and tap into new relationships that are more strategic in nature. In summary, we see a path to sustained growth with our enterprise customers with the right investments in product and services and innovation, strategic account focus, and execution strength. Lastly, as I referenced earlier, I'm impressed by the passion of my fellow Shutterstock colleagues across the company by ensuring that we as a team are aligned on our mission, encouraging high levels of engagement and collaboration and continuing our investments in world-class talent. I believe that we will be well-positioned to grow the business across our e-commerce and enterprise sales channel. Beyond the unique assets and capabilities at Shutterstock, I'd also like to share an early look into some high-potential growth and investment opportunities based on my observations so far. Looking forward, I see a range of exciting opportunities to improve our business performance and ultimately accelerate growth. While I'll touch on these opportunities on today's call, investors should expect to hear more detail in the quarters to come as we turn our strategies into initiatives and outcomes. Firstly, my enthusiasm for the opportunity in front of us in the enterprise segment should have come across loud and clear. We have the right team and the right solution set, and now is the time to extend our enviable position by investing for growth. In order to fuel that growth, we're going to need to ensure that our customers are finding the perfect content they're looking for at Shutterstock every single time. Ultimately, world-class content is a lifeblood of Shutterstock's business and the reason why we're the dominant player in the market. In the past quarter, we closed on two transactions to further content-led innovation and growth. Pond5 is the world's largest video-first content marketplace with a diverse customer base. strong brand affinity with filmmakers and media companies, and differentiated royalty-free creative editorial and exclusive content. The acquisition adds further scale to Shutterstock's video business, which now represents approximately 20% of total revenue on a combined basis and offers a differentiated video collection and premium editorial partners such as Reuters, British Movietone, and British Film Institute. Flash news. Further bolsters our editorial business with its archival entertainment and celebrity content library consisting of over 27 million images, its network of 4,000 photographers, and its contributor and customer-facing technology platform. It is a highly complimentary addition to our newsroom offering where we offer real-time news and entertainment content from our network. Beyond integrating these two valuable acquisitions into our offering and the strong revenue synergy potential they offer, I strongly believe there's an opportunity to extend our lead by leveraging content as a key differentiator of our marketplace, delivering to our customers and enabling us to drive faster growth. To give you a sense in more specific terms of what this means for Shutterstock in the years to come, we'll be focused on One, making our content catalog smarter and more dynamic, allowing for greater discoverability and relevance for specific market segments, audiences, and use cases. Two, enhancing the quality and unique nature of the metadata that supports our content discovery and predictive performance algorithms. Three, leveraging Shutterstock Studios to create bespoke on-brand video or 3D content for our enterprise customers. Four, adding scale in new or emerging content types, such as metaverse-ready assets, as well as content that represents a highly refined finished product for users, such as industry or use case specific templates. And finally, garnering exclusive access to some of the most talented creators globally, further reinforcing the competitive moat around our business. Taken together, differentiated and compelling content is part of the flywheel that attracts more customers and more contributors to Shutterstock. As we invest for the future, we'll be mindful of the framework that we've communicated for shareholder value creation. With our strong cash flow generation profile, we believe we'll consistently return capital through execution of our M&A strategy, dividends, and share repurchases. We will invest in avenues to accelerate revenue growth with an eye on cash generation and long-term margin improvement. We will continue with our M&A strategy, allowing us to acquire businesses that add to our capabilities strategically and match our returns criteria. In conclusion, as I mentioned at the top of the call, we have the right combination of assets and capabilities to achieve our vision for Shutterstock. The broad strategy is in place. And I'll be spending the coming weeks and months ensuring that we're on the right path to improve growth in our business throughout world-class execution in areas such as customer acquisition and marketing in our e-commerce channel and further investing in our enterprise channel to power the next leg of innovation-led revenue growth. We will also be relying on data-driven tests and experiments to help learn, iterate, and adjust our strategy where warranted. I look forward to updating you in the quarters ahead. And with that, I'll hand the call over to Jared to discuss our financial performance and guidance.