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Shutterstock’s IPO Performance

Posted on Wednesday, Jan 9th 2013

New York–based Shutterstock (NYSE:SSTK) filed its S-1 earlier this summer and came out with its IPO early last quarter. The company’s offer was received positively by the market, which has not been kind to many new-age digital stocks. Recently, Shutterstock announced the results of its first quarter as a public company. Here is a quick assessment of how it has fared.

Shutterstock’s Financials
Shutterstock offers commercial digital imagery to organizations for use in visual communications. The company’s revenue model comprises both a subscriber-based model and sale of images to single-use buyers. During the last quarter, Shutterstock saw revenues grow 36% over the year to $42.3 million. The number of paid downloads increased from 14.8 million a year ago to 18.7 million in the quarter. The average revenue per download also grew, by 8% over the year to $2.26 per image. Shutterstock continued to add to its digital library and now hosts a collection of 21.7 million images, compared with 16.2 million a year ago. Net income in the quarter grew 49% to $9.4 million.

For the current quarter, Shutterstock projects revenues of $44 million-$45 million. It expects to end the year with revenues of $164 million-$166 million and an adjusted EBITDA of $32.5 million-$33 million. It is optimistic about growth and projects next fiscal year’s revenues at $204 million-$208 million, with an adjusted EBITDA of $44 million-$45 million.

Shutterstock’s Mobile Expansion
Shutterstock is focused on expanding its presence in the mobile device segment. Recently, it announced the launch of a universal iOS app that will cater to both iPhones and iPads. Through the freely downloadable app, users will be able to access Shutterstock’s digital library. Besides using Shutterstock’s advanced search capabilities, the app also comes with features that include the ability to filter images by color, orientation, and license type. Users will be able to click photographs through their mobile device and search the Shutterstock collection for images by color.

Shutterstock’s Growth Strategy
Shutterstock is focusing on three key areas for growth – international expansion, growth within emerging content types, and expansion to large enterprises. As part of its international growth, it has a list of more than 550,000 active customers spread across 150 countries. It sells images in 10 different languages, and its list of 35,000 photographers, videographers, illustrators, and designers is spread across 100 countries. The company continues to invest in localizing its proprietary search technology so that international customers will be able to find the image they need irrespective of the language they speak. During the quarter, Shutterstock tested changes to its search algorithm in a foreign language and saw meaningful impact on search success and conversion rates. It will be rolling out these changes to various regions.

Video footage is included among the emerging content types that Shutterstock is working on. According to management, the influx of inexpensive HD video camera options and the availability of global broadband penetration has increased the amount of video footage that is available. Besides seeing an increase in the contributions to its library, Shutterstock is also working to improve video discovery and video search algorithms to help simplify customers’ searches for videos. As of the most recent quarter, more than 70% of the Fortune 500 companies were already Shutterstock clients. However, the company needs to increase revenues earned from that segment.

Despite the progress discussed above, Shutterstock still faces competition from other players in the market, including Getty Images and Bill Gates’s Corbis Images. Getty Images claims to have the largest collection of digital media available to users. It also provides users with access to a selection of audio files, content that is not prevalent on Shutterstock’s portal. Corbis Images also has a collection of more than 1oo million high-resolution images. Shutterstock will need to continue to build its database of digital content to be able to compete with these players.

The stock is trading at $25.83 with a market capitalization of $848.21 million. It touched a high of $28.63 soon after listing at $17 per share in October 2012.

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