Shutterstock, Inc.

Good day and thank you for standing by. Welcome to the Shutterstuck, Inc. Fourth Quarter 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 this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, 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 fourth quarter 2022 earnings call. Joining us today is Paul Hennessey, 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 2023 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 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 for 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 in our press release and in our 10-K. I'd now like to turn the call over to Paul Hennessy, Chief Executive Officer.

Thanks, Chris, and good morning, everyone. Thank you for joining us today. Today we'll be discussing Shutterstock's 2022 results and 2023 outlook. We'd also like to provide an update on some of the exciting developments in our end-to-end creative platform across both our e-commerce and enterprise channels. Shutterstock closed out 2022 with $828 million in revenue and $218 million in EBITDA, well ahead of our expectations and guidance. Overall, despite growth in North America and rest of world, We saw weakness in Europe, where growth was negative 4% for the year. This weakness in Europe was most evident in our e-commerce channel. Overall, our e-commerce channel was up 2% in 2022, with revenue growth in North America offset by a decline in Europe and the rest of the world. Meanwhile, our enterprise channel grew 15% in 2022, its second consecutive year of double-digit growth. This growth reflects continued momentum driven by our multi-asset and multi-touchpoint relationships with large enterprises across North America, Europe, and rest of the world, as well as continued innovation in our product offerings. Looking ahead to 2023, our team is excited to capitalize on our strengths. As an end-to-end creative partner, Shutterstock is well-positioned to ultimately offer more value to our customers and to achieve sustained growth. Since joining as CEO last year, I've been talking about our content library, our creative flow platform, our enterprise capabilities, and our highly engaged team as the key drivers of differentiation and value creation at Shutterstock. This quarter, we leveraged these strengths to bring differentiated value to our customers. Today, I want to talk about how Shutterstock is not only embracing AI, but also commercializing it. for the benefit of both our e-commerce customers within our Creative Flow Suite and our enterprise customers with our computer vision offering. Furthermore, I'd like to provide a few examples of how our broader end-to-end creative platform has really resonated with our enterprise customers. In January, we formally launched our AI image generation platform to all of our customers across both our e-commerce and enterprise channels. Shutterstock's AI image generator allows anyone to create high-quality visuals ready in seconds simply by describing what they're looking for. There are three truly unique differentiators which set Shutterstock apart in terms of bringing this innovative capability to our customers, namely ease and quality, convenience, and confidence. Ease and quality. Our image generator has been designed for creative use cases to produce unique, varied, and high quality images from just a single word input or short, simple phrases. We have built into the user interface an intuitive style picker and integrated support for over 20 languages. We offer the ability to discover and license stock content and generative content in the same platform with a single plan. which is a unique capability in the market today. Convenience. We have immediately integrated this capability and put it into the hands of existing customers, making Generative available in all our subscriptions, pack products, and enterprise offerings. Confidence. Customers have peace of mind when it comes to licensing content that's created on our Generative AI platform by virtue of being powered by properly commercially licensed training data. Also, our customers know that we're paying creators and have uniquely structured our contributor fund to compensate artists for the revenue generated by Shutterstock in connection with the licensing of generative AI content and of our training data. In short, we believe that Shutterstock's AI image generation platform is uniquely positioned at the intersection of creativity and productivity. I'd now like to turn your attention to our e-commerce channel specifically. Beyond the ease of use and peace of mind I described just now, we also have integrated our generative AI platform with creative flow for e-commerce customers. As a result, AI image generation is a seamless part of our customer's creative journey. To illustrate, after creating a generative AI image, a customer can edit it in our creative app, tag, store, and search for them in catalog and amplify them on various social channels using our calendar in plan. We are encouraged by the engagement we've seen in a short period of time. Our early reads that we're seeing about 75% of the generative AI traffic come from potential new customers and 25% from existing customers engaging with the new technology. And users have already created over 3 million generative assets in just the past two weeks since launch. While we're excited by this large-scale and early engagement, we're currently focused on incremental monetization opportunities. Also on the e-commerce front, I'm very excited about the newest addition to our leadership team, with John Kane joining us last week as the global head of e-commerce. John is a seasoned executive with a proven track record of successfully leading e-commerce businesses. He was most recently at NerdWallet and Vroom, and has almost 10 years of experience at Priceline.com. John will be focused on driving growth in our e-commerce channel, and as such, will be partnering closely with our product, marketing, and business operations team. With its unique combination of workflow applications and content, including now generative AI content, Shutterstock has a solid foundation upon which to continue building and evolving, and we look forward to John's contributions. I'd now like to provide an update on our enterprise channel. We continue to see sustained growth in our enterprise channel underpinned by, one, extremely strong customer retention, which is now in the mid-90s. Two, solid growth in our subscription bookings, which were up 27% for the year. And three, an acceleration in large enterprise deals valued at more than $100,000, which grew 24% for the year. We are also investing in high-profile branding events such as Cannes, Sundance, and South by Southwest to drive awareness and demand for our enterprise offering. Clearly, our performance in enterprise in 2022 and in the fourth quarter was exceptionally strong, and our end-to-end creative platform is resonating with our enterprise clients. I'd like to provide a few examples of how our products and offerings are being applied in increasingly diverse use cases. Amazon Web Services wanted to showcase some of the ways in which its customers and partners are using AWS. To that end, Shutterstock Studios produced a collection of 30-second animated videos to highlight how these customers and partners use AWS to solve business challenges. Shutterstock partnered with Allergen in its initiative to promote inclusion in aesthetic medicine by producing a collection of images that includes a range of people of varying gender, color, race, age, and abilities. This diverse gallery is available for download and is a great example of how Shutterstock is embracing inclusive representation. On the editorial front, Shutterstock provides must-have content in connection with breaking news and celebrity entertainment news, often on an exclusive basis. Since our acquisition of Splash News, we're seeing increased demand for our content and coverage from the global media companies like the Daily Mail, News UK in Ireland, the New York Post, and TMZ. With Pond5, we continue to see demand from large streaming platforms and TV and film production studios. Companies like Netflix, Disney, and Discovery Channel all rely on Pond5 as their source for the critical ingredients that goes into their creative endeavors. Our enterprise business has also been signing computer vision partnerships by leveraging Shutterstock AI and our massive pool of licensable metadata. Subsequent to establishing our partnership with OpenAI and LG, which I discussed last quarter, we've announced an additional partnership with Meta. in which our data content library and associated metadata is being licensed to train their generative AI models and to enhance their machine learning capabilities. Today, Shutterstock AI content library that we use for model training consists of 600 million images, 45 million videos, 2 million music tracks, and over a million 3D models. It is massive, diverse, and transparently licensable. Looking ahead, we believe we can leverage our leading position as a licensing partner to commercialize our data across more use cases that go beyond generative AI applications. In closing, as this management team drives the business forward, we're striking a prudent balance between investing for growth during this time of massive innovation in AI in our industry and remaining nimble in the event of continued economic challenges. Looking ahead, I'm excited for what's in store in 2023 as we continue to deliver value to our customers with the content, tools, and data in our end-to-end creative platform, spanning generative AI, computer vision, and much more. And I look forward to seeing many of you in person at our Investor Day here in New York at the Empire State Building in a few weeks. I'll now hand the call over to Jared to discuss our financial performance and our guidance.