Shutterstock, Inc.

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Good day and thank you for standing by. Welcome to the Q3 2022 Shutterstock Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's 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 telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Chris Hsu, VP Investor Relations and Corporate Development. Please go ahead.

Thanks, Michelle. Good morning, everyone, and thank you for joining us for Shutterstock's third 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 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 column. 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. I'd now like to turn the call over to Paul Hennessy, Chief Executive Officer.

Thank you, Chris. Good morning, everyone, and thank you for joining us today. On our last earnings call, we identified four points of differentiation that we view as critical in our mission to delight our customers, empower our contributors, and ultimately create long-term value for our shareholders. These differentiators consist of the breadth and depth of our content library, our creative flow offering, our solutions and capabilities geared towards enterprise customers, and last but not least, our talented and highly engaged team. Today we have some exciting updates on how we're extending our video leadership position with our deal with Filmpack and our integration progress with Pond5. We will also discuss a major announcement in generative artificial intelligence that is poised to transform our industry. However, before sharing this update, I'd like to first provide some commentary on the overall demand environment that we're experiencing and our expectations looking ahead. Global macroeconomic uncertainty has resulted in softness in overall demand, and we are experiencing that most acutely in Europe and in our e-commerce channel. Comparing the second quarter to the third quarter, we see evidence of this softness in our e-commerce business, where growth went from 6% to 2%, as well as in Europe, where growth went from negative 3% to negative 5%. In contrast, we see relative ongoing strength in the United States, and in our enterprise channel. For example, this past quarter in our enterprise channel, Shutterstock partnered with well-known brands like Allergen, Amazon, Carvana, Meta, NVIDIA, and Staples. These brands are drawn to our suite of differentiated content, technology and tools, and bespoke services, leading to deeper relationships to touch not only their content and marketing efforts, but also evolve technology and data integrations. As the global economy experiences headwinds for the foreseeable future, we intend to make prudent and pragmatic approach to investing in our business to drive revenue growth and maximize on our upside opportunities, while at the same time maintaining our focus on balancing growth and margins. I'll now shift gears and provide some detail on how we're capitalizing on the leadership position we created for ourselves in video content with the acquisition of Pond5. First, we've made strong progress in integrating Pond5's content and capabilities. We are making Pond5's creative video content available for our enterprise customers in a phased manner, providing them access to a combined video library that is now more than twice the size of our nearest competitor. Furthermore, Pond5's editorial content is now available on Shutterstock.com and vice versa with Shutterstock editorial content available on Pond5. We also announced last week an exciting new partnership with Filmpak that is exclusive among our competition and adds to our content mode. Filmpak owns a library of approximately 100,000 cinema-quality video assets produced by world-class filmmakers. This collection is nothing short of stunning, and we expect it to be in high demand and sell through at premium prices. Next, as you may have seen in today's press release, we are exciting to share a major new development for Shutterstock in the nascent area of generative AI in the creative space. If you look back in history over any time period, the mediums to express creativity have continually evolved and expanded. It is only in the last 25 years where we've experienced the adoption of digital cameras and mobile phones and applications, which has fueled the democratization and growth of content creation. It is that massive growth in content and the constantly evolving set of use cases for that content that has allowed Shutterstock to grow into the scaled marketplace we are today. Beyond the adoption of content capture tools like the camera and phone, we've had a history of embracing digital content created and modified with creative design software, such as vectors and illustrations, which today represent a sizable portion of our overall revenue. and more recently content in the form of 3D models. We view generative AI as the next exciting chapter in Shutterstock's ongoing evolution, allowing our customers and our contributors to create at the speed of their imagination. This morning, Shutterstock announced the major expansion of our previously unannounced strategic partnership with OpenAI, an AI research and deployment company with the mission to ensure that artificial intelligence benefits all of humanity. In the coming months, Shutterstock will be integrating DALI 2, OpenAI's industry-leading tool for AI-generated content for the benefit of our e-commerce and enterprise customers. With direct access to OpenAI's generative AI content capabilities, Shutterstock's customers will be able to input keywords and generate unique images based on their specific criteria within Creative Flow. They will be able to seamlessly modify existing content using either our generative AI capabilities or the template-driven design tools in Creative Flow. Shutterstock is excited to play an active role in ensuring the responsible and ethical use of technology that also takes all stakeholders into consideration. In an important effort to protect the IP rights of our artists, photographers, and creators, Our terms will require that the content generated on Shutterstock's platform with DALI 2 be derived from content that exists within our own vetted library. Unique in generative AI, Shutterstock will be the first to establish the creation of a pooled contributor fund that will compensate all of our contributors for the monetization of generative AI on Shutterstock's platform. Every time a customer downloads a generative AI asset, we will fund our contributor pool payout. This is in recognition of the fact that in our view, the contributing artists are the critical stakeholder and the fundamental driver of value in the world of generative AI. As I mentioned in my blog post last month, Shutterstock is in a powerful position to promote an inclusive and ethical approach to the application of data, not only in the realm of AI applications, but also in areas such as privacy and diversity, equity and inclusion across the creative industry. We are an active participant in and a sponsor of the efforts of the World Ethical Data Foundation. Shutterstock continues to lead in developing policy, procedures, and methods to ensure that usage rights and proper licenses are secured for all featured content including generative AI. Before passing it over to Jared, I'm pleased to welcome Sejal Amin to the Shutterstock executive team. Sejal joined us about a month ago as our chief technology officer, and she brings to Shutterstock a wealth of experience spanning technology, product, and operations. We're all looking forward to working with Sejal as we continue to pursue our technical roadmap aligned with our product vision and strategy. In closing, I continue to be very excited about the capabilities and assets at hand at Shutterstock. I'm quite excited about the way we are charging ahead with integrating creativity at the speed of your imagination into creative flow and doing it in the right way. We have the right mix of unique content, workflow tools and applications, distribution capabilities, and the team to be the preferred creative partner for our customers globally. In line with our purpose to bridge the gap between idea and execution, Shutterstock is enabling its customers to create with confidence. I'll now hand the call over to Jared to discuss our financial performance. Thank you, Paul, and good morning, everyone.

Shutterstock had a third quarter with revenue growth that was below our expectations and strong profitability that was above our expectations. Revenues grew 5% in the third quarter, or 10% on a constant currency basis. Excluding the impact of Pond5, reported revenue declined 1%, while revenue grew 4% on a constant currency basis. E-commerce revenue grew 2% on a reported basis, or 6% on a constant currency basis this quarter. The growth rate in our e-commerce channel was meaningfully impacted by weakness in Europe. To give you a sense, for the company overall, Revenues in North America grew 15% this quarter, whereas we saw a decline in Europe of 5%, representing a 20% growth differential between geographies. Macro uncertainty is having a more pronounced impact on our business in Europe, with weak customer demand exacerbated by FX pressure, and the impact is being felt most acutely in our e-commerce channels. Enterprise grew 9% on a reported basis or 15% on a constant currency basis. Performance in our enterprise channel was in line with expectations, with revenue growing across all regions on a constant currency basis, including Europe. We continue to see strong momentum with large brands, with whom our end-to-end solution set spanning studios, editorial, and platform solutions, our differentiated content, and our world-class service are resounding in the markets. Gross margin, excluding DNA expense, declined by 90 basis points year-on-year, driven by FX pressures on our revenues, combined with mix shift in our business. Sales and marketing expense was 23% of revenue, compared to 28% in the third quarter of 2021. Sales and marketing expense in the third quarter of 2021 included almost $5 million of linear television advertising spent. Product development was 9% of revenue compared to 7% in the third quarter of 2021, driven by continued investment in our product offering, including the build-out of Creative Flow. G&A expenses were 15% of revenue compared to 18% in the third quarter of 2021, based on both reduction in professional fees and reflecting the strong operating leverage inherent in our business. Adjusted EBITDA for the quarter was 56 million, approaching record profitability for Shutterstock, and margins were exceptionally strong at 27.5%. Margins were up more than 450 basis points from last year, driven by prudently managing discretionary spend in the business, an additional month profit contribution upon FISE, and further G&A leverage, as previously outlined. For the third quarter, GAAP diluted EPS was $0.64 and adjusted diluted EPS was $1. Turning to our balance sheet, we had $76 million of cash at the end of the quarter. With almost record EBITDA this quarter, Shutterstock's cash flow from operations was muted by the timing of working capital due to lower AP balances and the timing of certain payments. We expect this to reverse itself in the fourth quarter. and working capital will be a contributor to operating cash flow. We currently have $50 million drawn on our revolver. However, we have the ability to draw an additional $150 million if needed. Even at higher interest rates, our revolver is currently at 4.5% and costs $2 million of interest expense per annum, giving us the flexibility to consummate further acquisitions, repurchase shares, and invest for growth in our core business. We sustained our share buyback program, taking advantage of the market conditions, and repurchased $16 million of shares, resulting in the completion of the $100 million authorization. As a result, our total shares outstanding decreased by 200,000 shares. Year to date, we've repurchased 73 million of shares outstanding, representing 2.7% of our diluted share count. Our deferred revenue balance was $174 million and increased $3 million from the third quarter of 2021. Our deferred revenue growth rate was unfavorably impacted by FX as current bookings are converted to dollars at the lower foreign exchange conversion rates. Turning to our key operating metrics for the quarter. Subscriber count was 607,000 up from 338,000 in 2021 and included 230,000 Creative Flow Plus and PicMonkey subscribers. Subscriber count grew 80% year-over-year or 12% when backing out the newly added Creative Flow Plus and PicMonkey subscribers we're reporting this quarter. Subscriber revenue increased by 8% to 87.7 million and subscriber revenue represented 43% of total revenues. the highest level ever for Shutterstock. Average revenue per customer decreased to $329, driven by the inclusion of PicMonkey revenues and customers for the first time in the third quarter. Selling more Creative Flow subscriptions will expand our subscriber base, but generally lower average revenue per customer over time. Paid downloads were down 3%, and revenue per download increased to $4.43 per download. Consistent with what we are seeing in our revenues, paid downloads were up in our enterprise channel and up in the U.S. across all channels. However, we're down in Europe and the rest of the world, bringing down the average for the corporate as a whole. Turning to our guidance for the full year. Based on the current demand environment and ongoing FX pressures, and assuming no improvement in underlying demand through the end of the year, we're lowering our 2022 revenue guidance to $815 million, equating to 5% year-over-year revenue growth or 9% growth on a constant currency basis. We are raising our EBITDA margin guidance for the full year to 26.5% from 25.0 to 25.5% and are pointing to the high end of our EBITDA range. In 2022, we should deliver approximately 12% EBITDA growth, and I'm pleased to report this will be the third consecutive year where EBITDA growth exceeds revenue growth. We are managing the business prudently in an uncertain environment and are delivering on our commitment to shareholders to drive annual margin expansion while reinvesting in our business. Consistent with past practice, we'll be providing 2023 guidance early next year. Based on current spot rates, our reported revenue growth for next year will have a 3% headwind based on the strengthening of the U.S. dollar over the course of 2022. We'll, of course, provide a more robust update early next year with the benefit of additional financial performance in the rearview mirror. Thank you so much for your time and attention, and with that, operator, we'll now open the call for any questions.

As a reminder, to ask a question, you will need to press star 11 on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from Bernie McTernan with Needham & Company. Your line is now open.

Great. Thank you for taking the questions. The higher margin guidance for the year, Jared, are these levels that you think you continue to expand upon in 23 and 24, or are they just trying to suss out if there's any one-time benefits this year that might not be recurring?

So, Bernie, we're, you know, firstly pleased with the way that we're managing the business from a profit perspective. We think we're doing things for the long term and managing that balance between growth and profitability. We're not taking shortcuts. There's a number of sustainable year-on-year efforts that we're undertaking to fundamentally improve the gross margin of the business and to continue to have operating leverage in our business. And we think these are sort of multi-year payouts for our business and for our shareholders. So in short, to answer your question, to the extent we end up the year at the 26.5% that is resident in our guidance, we do think that that's a durable and sustainable baseline to build off of. We do have targets that we've spoken about externally of getting 50 basis points of margin expansion, and we're going to continue to focus on that. So to answer your question, nothing one time that's driving that. There's a lot of opportunities to continue to build and grow that and drive the operating leverage into the future.

Great. And then, sorry, I'm multi-parter on OpenAI, but just – If you could just help us understand the use cases right now for AI generated content now versus stock and how that should change over time. And then B, AI is getting a lot of publicity right now. There's just the New York Times article, but like how prevalent is it in the marketplace? And so maybe for an example, like how would you expect your 23 content usage to be split between AI and stock? And then what are the margin implications as in assuming AI content increases in popularity?

Yeah, Bernie, as Paul, maybe I'll start with my favorite answer. I don't know. This is the first pitch of the first inning around a lot of this technology. But here's what we know. By leveraging our content library, by bringing this technology to bear, we're doing what Shutterstock always does, which is put our customers and our contributors in the way of creating great creative. And in doing so, we know how to monetize that. And so we think that this will be a constructive part of our business going forward. I don't know what the size of this is going to be in 2023. But we're building this in a way where it's contributory to revenue and to margin. And that's how we think about it. As far as use cases, I think we can let our minds wander. But bringing the two together is a critical thought. And then you add in tools that we have. And we're putting our customers in the way of continuing to do their job, whether it's on the advertising side, on the creative side, or just on whatever they're trying to execute against. Shutterstock has got the tools, the content, and now the generative images that will allow them to do even more than they could do yesterday.

Great. Thank you. Please stand by for our next question. Our next question comes from Yusuf Squally with Troost. Your line is now open.

Thank you very much. Good morning, guys. So I guess as just a follow-up to the OpenAI question, obviously, congrats on that partnership. I think that's important. But have you kind of surveyed your customers or just trying to get a sense of what kind of – is there any customer demand? I know it's obviously super early, but in architects in that partnership, was there any kind of push? from customers already or is this just something that you think will evolve over time and you want it to be there early which kind of makes a ton of sense to us but just wanted to get a sense of how you guys are thinking about it from the inside out so you said one of the things that is uh very obvious is there's a lot of hype and excitement about this technology right now um

There's a lot of people flocking to these websites to check it out, to see what it can do, and really to experiment with the art of the possible. We would love to have a lot of that engagement within Shutterstock's platform. We want our site to be a place where people come to explore, to experiment, and that's traditionally what it has been, and we want them to be able to come and explore and experiment with this technology. Whether they ultimately, at the end of the day, find the perfect photo taken with a DSLR that meets their use case requirements, or they modify something that exists with generative capabilities, or with our template-driven design tools and creative flow, we want them to have the right outcome. And so ultimately for us, it's about bringing the technology to bear, getting the engagement, having our platform be used as a place for exploration and creativity, But ultimately, whether it's the generative content or existing content from our half a billion asset content library that fits the bill for their need, you know, that's for them to decide, not for us to decide. We just need to put the right content and the tools in front of them. And I think that's been our approach, and it'll continue to be our approach.

Okay. No, that's helpful. And when did you say it'll be ready, it'll be integrated into the workflow? Did you share that with us?

So I think the phraseology, Yusuf, is in the next several months. I think you should look out for something from us towards the end of this year, beginning of next year.

Got it, excellent. And then the last question. Obviously, one of your main competitors went out, raised some or lowered their debt. Raise some capital. Any change in the competitive landscape that you've noticed in the last, say, three to six months, either from incumbents or new players or anything like that?

Yeah, what I'd say is we're focused on running our playbook because we've got a great playbook. And I haven't noticed anything particular different in our market other than the macro environmental issues that we've talked about and implications on demand broadly. But we see where we're emerging. Clearly, we are tech forward and leaning into the evolution of this technology, as we always have done. And we're going to continue to be that player.

Got it. Thanks. Thank you, Paul. Thank you, Jared. Sure. Thank you.

Please stand by for our next question. Our next question comes from Andrew Boone with JMP. Your line is now open.

Good morning, and thanks for taking my questions. Jared, you talked a little bit in that last answer about bringing editing and template tools to generative AI. Can you double-click on the tools that you expect to bring to the relationship? And really the question behind the question is, why would someone come to Shutterstock versus going directly to OpenAI to use generative AI? So what do you guys draw there in terms of the on-rampage?

Sure, so I can start with that, and then I'll pass it over to Paul. I think when you think about, Andrew, tools, we think that there are multiple ways that our customers and creatives can leverage tools to be able to modify and customize a creative to their use case. We have a fantastic suite of creative tools in our Creative Flow platform. It's a template-driven design tool suite for a broad range of use applications. Everything from social media advertising all the way to creating an image of your soccer team on a T-shirt. I mean, it's truly a phenomenal, easy-to-use template-driven design tool, and we think the market for that and the TAM for that is something that we're really excited about going after in the years to come. That template-driven design tool can be used to modify our existing content, images, as well as images that were generated with generational AIs. Moreover, this technology can be used to modify generative AI as well. And so that's something that we'll be bringing to the fore as well. And so you will basically have the ability to use both. In terms of why come to our platform, well, we think, one, our platform is a place where 2 million customers are coming to select from one of the world's largest content libraries each and every year. It's a high velocity platform with almost a couple hundred million downloads per year. So we're the destination that they are coming to today to select content. And we think that by integrating generative AI into our creative flow platform it's going to be a seamless experience for those users and so we hope this generates not only excitement but again experimentation and engagement and we think we're going to be a great destination for that yeah and and I think I think Jared covered that in great detail my answer on why come to Shutterstock is because we built the end-to-end platform

that has it all. And when you have it all, our users, our contributors, our customers can find exactly what they're looking for, create exactly what they're looking for, and do that all on our platform. And there's really not another platform that allows you to do that.

That makes sense. I think you guys updated the FAQs this morning in terms of not allowing AI-generative images on the platform, right? It sounds like this is very specific in terms of it needs to be generated with Shutterstock content and metadata to be able to enable the creator fund. Can you guys just go into more detail? And I think Geddy is in line with you guys as well, just to really flush out the thought, but talk about the IP component of generative AI. and what's different there and how you guys are viewing it and why it's not allowed on the core marketplace. Thanks so much.

Yeah, I'll start and let Jared weigh in. We've been really thoughtful about this. We want to make sure that our contributors are well protected and well compensated and that our customers are well protected and can use the assets that they get from Shutterstock with confidence. And in order to do that, we want to be able to bridge our existing content library with the OpenAI generative tools of DALI 2 so that we can know that the content that is created has a clean license and right to use. And in doing so, again, our contributors can feel great about that they will be compensated when they participate in something that is used going forward, and our customers can then execute their project without worrying about not being able to use those assets. In doing that, we create a very, very safe environment that also allows contributors to be compensated. If we play it on the other side and accept anything that has been generated, we're not sure of the true ownership. And therefore, by not knowing the true ownership, we're not able to actually pass that confidence to our customers. So we think this is a great way to create engagement for our customers. They can find what they're looking for. Our contributors can be as enthusiastic as they've always been about continuing to deliver content that will be monetized. And then as we go forward, there will be a fund created to make sure that as we... educate AI models, our contributors will be compensated for that. And if it's their creative that's used in informing those models, we think that they're entitled for compensation for that.

Can I close out with just one kind of bigger picture macro question? Just on the subscriber count, as we are facing tougher macro headwinds Have you guys seen any uptick in churn, or is there anything to note in terms of changes in subscriber behavior? And I'll end it there. Thanks so much.

Andrew, no upticks in churn that we're seeing in any material way at present. Really, the issue that we're seeing is new customer demand. And quite frankly, that new customer demand is pretty sharply focused in Europe. And we're seeing it sort of across the board in all the major countries within Europe. And it's pretty focused in on our e-commerce channel specifically. Our belief and hope is that when discretionary spend returns, there will be an uptick in demand by new customers in e-commerce in Europe. And that will help buoy our growth at this point in time. But we're pleased with the tenacity of the existing subscriber and customer base. And as you know, our goal is to really improve our customer attention over time, in particular by leveraging our Creative Flow platform. We've added a tremendous amount of value to the overall value proposition by combining this content and tools into one unified subscription. And our goal with that is to improve customer retention over time. So it's hanging in there. I wouldn't go so far as to say that it's hanging in there specifically because of creative flow, but our hope is that that really, you know, strengthens this over time and we feel quite good about it. Thank you.

Please stand by for our next question. The next question comes from Matt Schindler with Bank of America. Your line is now open.

Yes. Hi, guys. Thank you. Regarding the difference in growth rates between the 20-point swing between North America and Europe, how much of that is currency? And it sounds like some of it isn't, just looking at the numbers. And on the part that isn't, How macro-sensitive do you think your business is? I think you said in the past that this business is less macro-sensitive because compared to the cost of the advertising campaign, the cost of this piece of the creative is very small. But if we do look at something like an advertising recession, what could we see as a real impact you could see on your business?

Hey, Nat, good morning. Thanks for the question. So to your question, Your point, there is a significant swing when you look at the reported results for North America as compared to Europe. However, even when you look at constant currency, there's about an 11% delta between the growth rate in North America as compared to Europe. North America is growing about 15%, whereas Europe is growing about 6% on a constant currency basis. you know, we're seeing a pretty big divide. Some of that divide is FX to your point, but it's still, you know, sort of a, we really are seeing sort of a tale of two cities, if you will, in our business. And if you refer back to my comments on paid downloads, paid downloads are slightly down, but downloads in North America are strongly up. It's really only downloads being significantly down in Europe that's pulling down the total for the company as a whole. So it's a pretty sharp deviation in demand, and it has also sort of further deviated between the second and the third quarter. You know, Europe has certainly gotten worse between Q2 and Q3, and it's pretty obvious to us when we look at sort of the by-country data as well as kind of the new customer demand by channel and by geo.

And, Nat, I would just add, I think, Jared answered that perfectly. You asked about, you know, I think the last line of your question was like, and long-term, you know, if this is a longer-term recession. One of the things that I love about this business is its diversity. Jared discussed the diversity in geo. But we've got a diversified customer set. So we're not dependent on any one set of customers. We've got a diversified channel mix. between our e-commerce business and our enterprise channel, we've got a very diversified mix of content from images to music to video to 3D to now generative and synthetic combined images. And when you put all of those, and of course the geography is discussed, when you put all those together, the business, you know, doesn't have all of its eggs in one basket and therefore allows us to leverage the areas that are doing very, very well, you know, while maybe there might be other areas of softness across the globe.

Okay. Makes sense. Thank you.

Please hold for our next question. Our next question comes from Lauren Schenk with Morgan Stanley. Your line is now open.

Thank you. Just following up on the AI conversation, one of your competitors announcing just a few minutes ago their own partnership. I guess it's been asked a few different ways, but bigger picture, does the move to AI-generated content, and I know it's certainly up for debate whether or not it gains a lot of traction, does that change the competitive landscape or competitive dynamics of this industry over the medium to long term? Thank you.

Sure. Lauren, one thing I would note is, you know, when we announced our partnership with OpenAI today, we also mentioned that this is a partnership that has gone back really into last year. So we started working with them in terms of thinking about DALI and what that would mean for our industry. and thinking about training DALI really into last year. And one of the things we ultimately got comfortable with was that OpenAI and Shutterstock shared a lot of the same values in terms of doing things the right way. One of the things I would note is some of the companies that are out there are engaging in tactics such as screen scraping, and that's not something that ultimately we're comfortable with and we think will stand the test of time. And so we feel really good about the partnership that we chose and the partner that we are working with and that we're doing things the right way. that will create a durable business model that protects intellectual property and the rights of our contributors. And I'm not sure that throughout the ecosystem that view and that perspective is pervasive. What was the second part of your question, Lauren? Could you just repeat that?

Yeah, it's just whether or not if there is a greater adoption of IA imagery over time, if that changes sort of the competitive dynamics and landscape of the overall content market.

I don't think so. I think that we're well positioned to lead the change rather than be changed by it. And so by bringing to bear our content, by bringing to bear the new technology and our creative tools, I think we're going to be well positioned to lead what will be the next evolution of the way content is created on our platform.

Great, thank you.

Sure.

At this time, there are no further questions. I would now like to turn the conference back to Paul Hennessy for closing remarks.

Great, thanks. As you heard in our prepared remarks and throughout the Q&A, There are three areas of really tremendous upside potential in our business that we're sharply focused on as we exit the third quarter. One, we're rapidly integrating generative AI into our product offering, as discussed, with our long-term product partnership with OpenAI announced today and expect that to happen in the coming months, as we discussed. We're making aggressive moves on the back of our Pond5 acquisition to expand our video leadership position. with the absolute highest end video content and with our exclusive distribution agreement with Filmpack. And we're delivering strong profitability margins in the face of a difficult macro environment and are delivering against our framework of sustained revenue growth paired with disciplined margin management. On behalf of Shutterstock, thanks to our team and thank you all so much for your time and interest.

This concludes today's conference call. Thank you for participating. You may now disconnect.