Shutterstock, Inc. (NYSE: SSTK), a leading global technology company offering a creative platform for high-quality content, tools and services, today announced financial results for the third quarter ended September 30, 2020.

Commenting on the Company's performance, Stan Pavlovsky, the Company's Chief Executive Officer, said, "Shutterstock had a tremendous third quarter and I am pleased with the acceleration in revenue growth and the momentum in our subscription products. Our margins have improved significantly, providing us the confidence to make further investments in product innovation and sales and marketing to enable us to capitalize on the improving demand environment."

Third Quarter 2020 highlights compared to Third Quarter 2019:

Key Operating Metrics

• Subscribers increased 39%, to 255,000.
• Subscriber revenue increased 12% to $67.6 million.
• Average revenue per customer, increased 0.3% to $328.
• Paid downloads decreased 6% to 43.4 million.
• Revenue per download increased by $0.39 to $3.79.
• Image collection expanded 18% to approximately 350 million images.
• Footage collection expanded 25% to approximately 20 million clips.

Financial Highlights

• Revenue increased 4% to $165.2 million. On a constant currency basis, revenue increased 3%.
• Income from operations increased by $26.2 million to $29.3 million.
• Net income increased by $17.6 million to $22.6 million.
• Adjusted EBITDA increased by $25.8 million to $47.4 million.
• Diluted EPS increased by $0.48 to $0.62 per share.
• Adjusted net income per diluted share increased by $0.51 to $0.80 per share.

SHUTTERSTOCK INVESTOR RELATIONS MICRO SITE

Accessible at content.shutterstock.com/investor-report/index.html

THIRD QUARTER RESULTS

Revenue

Third quarter revenue of $165.2 million increased $6.1 million or 4% as compared to 2019. Revenue generated through our E-commerce sales channel increased 7% as compared to the third quarter of 2019, to $102.8 million, and represented 62% of total revenue in the third quarter of 2020. Revenue from our Enterprise sales channel decreased 1% as compared to the third quarter of 2019, to $62.4 million, and represented 38% of third quarter revenue in 2020.

On a constant currency basis, revenue increased 3% in the third quarter of 2020 as compared to the third quarter of 2019. On a constant currency basis, E-commerce revenue increased by 6% in the third quarter of 2020, as compared to the third quarter of 2019. Foreign currency fluctuations did not have a significant impact on Enterprise revenues in the third quarter of 2020, as compared to the third quarter of 2019.

Net income and Income per diluted share

Net income of $22.6 million, increased $17.6 million as compared to $4.9 million for the third quarter in 2019. Net income per diluted share was $0.62, as compared to $0.14 for the same period in 2019. This increase is due primarily to our margin expansion initiatives, which have resulted in lower operating expenses, and, in part, to our increased revenue in the third quarter of 2020, as compared to the third quarter of 2019.

Adjusted net income per diluted share was $0.80 as compared to $0.29 for the third quarter of 2019, an increase of $0.51 per diluted share.

Adjusted EBITDA

Adjusted EBITDA of $47.4 million for the third quarter of 2020 increased by $25.8 million, or 120%, as compared to the third quarter of 2019, due primarily to our margin expansion initiatives, and, in part, to our increased revenue. The adjusted EBITDA margin increased to 28.7% from 13.6% in the third quarter of 2019.

LIQUIDITY

Our cash and cash equivalents increased by $72.0 million to $383.1 million at September 30, 2020, as compared with $311.2 million as of June 30, 2020. This increase was driven by $63.9 million of net cash provided by our operating activities and $16.6 million provided by financing activities, partially offset by $6.7 million used in investing activities. Net cash provided by our operating activities was favorably affected by our increased operating income, in addition to changes in the timing of payments pertaining to operating expenses. Cash used in investing activities primarily consists of $6.3 million related to capital expenditures. Cash provided by financing activities consists primarily of $23.2 million of net proceeds from the Stock Offering, partially offset by $6.1 million related to the payment of the quarterly cash dividend.

Free cash flow was $57.0 million for the third quarter of 2020, an increase of $33.2 million from the third quarter of 2019. This change was primarily driven by higher cash flows from operating activities.

QUARTERLY CASH DIVIDEND

The Company declared and paid cash dividends of $0.51 per common share, or $18.2 million during the nine months ended September 30, 2020.

On October 19, 2020, the Board of Directors declared a dividend of $0.17 per share of outstanding common stock, payable on December 16, 2020 to stockholders of record at the close of business on December 3, 2020.

STOCK OFFERING

On August 14, 2020, the Company completed an offering (the "Stock Offering"), whereby 2,580,000 shares of our common stock were sold to the public at a price to the public of $48.50 per share. The Company sold 516,000 shares of common stock in the Stock Offering and its Founder and Executive Chairman of the Board sold 2,064,000 shares of common stock in the Stock Offering. The Company received net proceeds from the shares sold, of approximately $23.2 million, after deducting underwriting discounts and commissions and offering expenses payable. The Company did not receive any proceeds from the shares sold by the Company's Founder and Executive Chairman of the Board.

NON-GAAP FINANCIAL MEASURES

To supplement Shutterstock's consolidated financial statements presented in accordance with the accounting principles generally accepted in the United States, or GAAP, Shutterstock's management considers certain financial measures that are not prepared in accordance with GAAP, collectively referred to as non-GAAP financial measures, including adjusted EBITDA, adjusted net income, revenue growth (including by distribution channel) on a constant currency basis, adjusted EBITDA margin, billings and free cash flow.

Shutterstock defines adjusted EBITDA as net income adjusted for depreciation and amortization, non-cash equity-based compensation, foreign currency transaction gains and losses, expenses related to long-term incentives and contingent consideration related to acquisitions, interest income and expense and income taxes; adjusted net income as net income adjusted for the impact of non-cash equity-based compensation, the amortization of acquisition-related intangible assets, expenses related to long-term incentives and contingent consideration related to acquisitions and the estimated tax impact of such adjustments; revenue growth (including by distribution channel) on a constant currency basis as the increase in current period revenues over prior period revenues, utilizing fixed exchange rates for translating foreign currency revenues for all periods in the comparison; adjusted EBITDA margin as the ratio of adjusted EBITDA to revenue; billings as revenue adjusted for the change in deferred revenue during the period; and free cash flow as cash provided by operating activities, adjusted for capital expenditures, content acquisition, and, with respect to the three months ended March 31, 2020, a payment associated with long-term incentives related to our 2017 acquisition of Flashstock. These figures have not been calculated in accordance with GAAP and should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results. Shutterstock cautions investors that non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly-titled measures presented by other companies.

Shutterstock's management believes that adjusted EBITDA, adjusted net income, revenue growth (including by distribution channel) on a constant currency basis, adjusted EBITDA margin, billings and free cash flow are useful to investors because these measures enable investors to analyze Shutterstock's operating results on the same basis as that used by management. Additionally, management believes that adjusted EBITDA, adjusted EBITDA margin and adjusted net income provide useful information to investors about the performance of the Company's overall business because such measures eliminate the effects of unusual or other infrequent charges that are not directly attributable to Shutterstock's underlying operating performance; and revenue growth (including by distribution channel) on a constant currency basis provides useful information to investors by eliminating the effect of foreign currency fluctuations that are not directly attributable to Shutterstock's operating performance. Management also believes that providing these non-GAAP financial measures enhances the comparability for investors in assessing Shutterstock's financial reporting. Shutterstock's management believes that free cash flow is useful for investors because it provides them with an important perspective on the cash available for strategic measures, after making necessary capital investments in property and equipment to support the Company's ongoing business operations and after excluding the impact of nonrecurring payments associated with long-term incentives related to our 2017 acquisition of Flashstock, and provides them with the same measures that management uses as the basis for making resource allocation decisions.

Shutterstock's management also uses the non-GAAP financial measures adjusted EBITDA, adjusted net income, revenue growth (including by distribution channel) on a constant currency basis, adjusted EBITDA margin, billings and free cash flow, in conjunction with GAAP financial measures, as an integral part of managing the business and to, among other things: (i) monitor and evaluate the performance of Shutterstock's business operations, financial performance and overall liquidity; (ii) facilitate management's internal comparisons of the historical operating performance of its business operations; (iii) facilitate management's external comparisons of the results of its overall business to the historical operating performance of other companies that may have different capital structures and debt levels; (iv) review and assess the operating performance of Shutterstock's management team and, together with other operational objectives, as a measure in evaluating employee compensation and bonuses; (v) analyze and evaluate financial and strategic planning decisions regarding future operating investments; and (vi) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments.

Reconciliations of the differences between adjusted EBITDA, adjusted net income, billings, free cash flow, and the most comparable financial measures calculated and presented in accordance with GAAP, are presented under the headings "Reconciliation of Non-GAAP Financial Information to GAAP" and "Supplemental Financial Data" immediately following the Consolidated Balance Sheets.

ABOUT SHUTTERSTOCK

Shutterstock, Inc. (NYSE: SSTK), directly and through its group subsidiaries, is a leading global provider of high-quality licensed photographs, vectors, illustrations, videos and music to businesses, marketing agencies and media organizations around the world. Working with its growing community of over 1 million contributors, Shutterstock adds hundreds of thousands of images each week, and currently has more than 340 million images and more than 19 million video clips available.

Headquartered in New York City, Shutterstock has offices around the world and customers in more than 150 countries. The company's brands also include Bigstock, a value-oriented stock media offering; Shutterstock Custom, a custom content creation platform; Offset, a high-end image collection; PremiumBeat a curated royalty-free music library; and Shutterstock Editorial, a premier source of editorial images for the world's media.

For more information, please visit www.shutterstock.com and follow Shutterstock on Twitter and on Facebook.