Shutterstock (NYSE:SSTK) Misses Q2 Revenue Estimates

Adam Hejl /
2023/08/01 7:07 am EDT

Stock photography and footage provider Shutterstock (NYSE:SSTK) missed analysts' expectations in Q2 FY2023, with revenue flat year on year at $208.8 million. Shutterstock made a GAAP profit of $50 million, improving from its profit of $19.4 million in the same quarter last year.

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Shutterstock (SSTK) Q2 FY2023 Highlights:

  • Revenue: $208.8 million vs analyst estimates of $214.4 million (2.6% miss)
  • EPS (non-GAAP): $1.07 vs analyst estimates of $1.01 (6.2% beat)
  • The company lifted revenue guidance for the full year from $848.5 million to $860.5 million at the midpoint, a 1.41% increase
  • Free Cash Flow of $33.4 million, down 34.4% from the previous quarter
  • Gross Margin (GAAP): 59.6%, down from 62.8% in the same quarter last year
  • Subscribers: 0.56 million, up 188 thousand year on year

Commenting on the Company's performance, Paul Hennessy, the Company's Chief Executive Officer, said, "I'm pleased to report that, as reflected in our second quarter results and our revised full year outlook, Shutterstock is not only adapting but that it is thriving in this dynamic environment. 

Originally featuring a library that included many of founder Jon Oringer’s photos, Shutterstock (NYSE:SSTK) is now a digital platform where customers can license and use hundreds of millions of pieces of content.

Marketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission paying sellers, generating flywheel scale effects which feed back into further customer acquisition.

Sales Growth

Shutterstock's revenue growth over the last three years has been unremarkable, averaging 9.53% annually. This quarter, Shutterstock reported rather lacklustre 0.95% year-on-year revenue growth, missing analysts' expectations.

Shutterstock Total Revenue

Ahead of the earnings results, analysts covering the company were projecting sales to grow 0.14% over the next 12 months.

While most things went back to how they were before the pandemic, a few consumer habits fundamentally changed. One founder-led company is benefiting massively from this shift and is set to beat the market for years to come. The business has grown astonishingly fast, with 40%+ free cash flow margins, and its fundamentals are undoubtedly best-in-class. Still, its total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Usage Growth

As an online marketplace, Shutterstock generates revenue growth by increasing both the number of users on its platform and the average order size in dollars.

Over the last two years, Shutterstock's users, a key performance metric for the company, grew 43% annually to 0.56 million. This is among the fastest growth rates of any consumer internet company, indicating that users are excited about its offerings.

Shutterstock Subscribers

In Q2, Shutterstock added 188 thousand users, translating into 51.1% year-on-year growth.

Key Takeaways from Shutterstock's Q2 Results

With a market capitalization of $1.87 billion, Shutterstock is among smaller companies, but its $87.1 million cash balance and positive free cash flow over the last 12 months give us confidence that it has the resources needed to pursue a high-growth business strategy.

We were very impressed by Shutterstock's robust user growth this quarter. We were also glad that its full-year revenue guidance came in higher than Wall Street's expectations. On the other hand, it was unfortunate that its revenue missed analysts' expectations and its revenue growth was quite weak. In addition, the company's gross margin also deteriorated. Overall, this was a mixed quarter for Shutterstock. The stock is flat after reporting and currently trades at $51 per share.

So should you invest in Shutterstock right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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The author has no position in any of the stocks mentioned in this report.