What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2021-02-11 compared with 2020-02-13 · 67 added, 32 removed, 140 unchanged (41% of the section changed)

7 unchanged sentences

Dividend Policy

Historically, the Company did not pay regular quarterly dividends on its Common Stock.

On August 1, 2018, the Company’s Board of Directors declared a Special Dividend of $3.00 per share, which was paid on August 29, 2018 to stockholders of record at the close of business on August 15, 2018.

The aggregate payment made in connection with the Special Dividend was $104.9 million .

On February 11, 2020 , our Board of Directors declared a quarterly cash dividend of $0.17 per share of outstanding common stock, payable on March 19, 2020 to stockholders of record at the close of business on March 5, 2020 .

We currently expect to continue to pay comparable cash dividends on a quarterly basis in the future.

Future declaration of dividends are subject to the final determination of our Board of Directors, and will be based on our future financial condition, results of operations, capital requirements, capital expenditure requirements, contractual restrictions, anticipated cash needs, business prospects, provisions of applicable law and other factors our Board of Directors may deem relevant.

On February 11, 2020, our Board of Directors approved the initiation of a quarterly cash dividend.

We currently expect to continue to pay cash dividends on a quarterly basis in the future.

Future declaration of dividends are subject to the final determination of our Board of Directors, and will depend on, among other things, our future financial condition, results of operations, capital requirements, capital expenditure requirements, contractual restrictions, anticipated cash needs, business prospects, provisions of applicable law and other factors our Board of Directors may deem relevant.

The dividend policy may be suspended or canceled at the discretion of our Board of Directors at any time.

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Year Ended December 31,

2020 2019 2018 2017 2016

(in thousands, except per-share data)

Consolidated Statements of Operations Data:

$ 666,686 $ 650,523 $ 623,250 $ 557,111 $ 494,317

Operating expenses:

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Other income / (expense), net (3)

4,257 4,761 (4,952) 3,732 (1,289)

Income before income taxes 89,523 24,916 66,113 30,081 44,497

Provision for income taxes (4)

17,757 4,808 11,426 13,354 11,869

Net income $ 71,766 $ 20,108 $ 54,687 $ 16,727 $ 32,628

Net income per common share (basic) $ 2.00 $ 0.57 $ 1.57 $ 0.48 $ 0.93

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(2) Includes non-cash equity-based compensation of $28.3 million, $22.8 million, $23.9 million, $25.0 million, and $28.1 million for the years ended December 31, 2020, 2019, 2018, 2017, and 2016, respectively.

Includes non-operating changes in fair value of contingent consideration related to the Webdam (2015) and PremiumBeat (2016 and 2015) acquisitions;

(3) Includes non-operating changes in fair value of contingent consideration related to the PremiumBeat (2016) acquisition;

charges related to the impairment of a long-term investment asset (2018);

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As of December 31,

2020 2019 2018 2017 2016

(in thousands)

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Short term investments (1)

— — — — 54,972

Working capital 232,141 131,086 83,418 94,727 136,341

Property and equipment, net 50,906 58,834 76,188 85,698 56,101

Total assets 729,644 630,512 531,488 577,776 501,778

Deferred revenue 149,843 141,922 139,604 157,803 122,235

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Non-GAAP Financial Measures and Key Operating Metrics

To supplement our consolidated financial statements presented in accordance with the accounting principles generally accepted in the United States, or GAAP, we consider 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 (expressed as a percentage), and free cash flow, as well as certain key operating metrics.

To supplement our consolidated financial statements presented in accordance with the accounting principles generally accepted in the United States, or GAAP, our 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 EBITDA margin, adjusted net income, adjusted net income per diluted common share, revenue growth (including by distribution channel) on a constant currency basis (expressed as a percentage), and free cash flow, as well as certain key operating metrics.

These non-GAAP financial measures and key operating metrics are included solely to provide investors with additional information regarding our financial results and are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly-titled measures presented by other companies.

Key Operating Metrics

Year Ended December 31,

Non-GAAP Financial Measures (1) (in thousands):

Adjusted EBITDA

Adjusted net income

Free cash flow (2)

Revenue growth on a constant currency basis

Key Operating Metrics (in millions, except revenue per download):

Paid downloads (3)

2020 2019 2018 2017 2016

Key Operating Metrics:

Subscribers (end of period) (1)

281,000 194,000 * * *

Subscriber revenue (in millions) (2)

$ 265.3 $ 236.5 * * *

Average revenue per customer (trailing twelve months) (3)

$ 333 $ 330 * * *

Paid downloads (in millions) (4)

180.0 187.8 179.6 172.0 167.9

Revenue per download (5)

Content in our collection (end of period) (5) :

$ 3.68 $ 3.43 $ 3.40 $ 3.13 $ 2.88

See “Non-GAAP Financial Measures” below as to how we define and calculate adjusted EBITDA, adjusted net income, revenue growth (including by distribution channel) on a constant currency basis and free cash flow and for a reconciliation from net income, net cash from operating activities and revenue growth, the most directly comparable financial measures presented on a GAAP basis, to these non-GAAP financial measures and a discussion about the limitations of these financial measures.

On January 1, 2017, we adopted Accounting Standard Update 2016-09 (“ASU 2016-09”) which changed the way we report the excess tax benefit related to the exercise and vesting of equity-based compensation awards in the statement of cash flows.

As a result of this adoption, we have reclassified amounts that were reported prior to adoption.

As a result of this reclassification, the amounts of free cash flow reported is decreased by $0.4 million and increased by $1.7 million for the years ended December 31, 2016 and 2015, respectively, from amounts previously reported.

Paid downloads is the number of paid content downloads that our customers make during a given period.

Content in our collection (end of period, in millions) (6) :

Images 360 314 242 170 116

Footage 21 17 13 9 6

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(1) Subscribers is defined as those customers who purchase one or more of our monthly recurring products for a continuous period of at least three months, measured as of the end of the reporting period.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating Metrics—Subscribers” for more information as to how we define and calculate subscribers.

(2) Subscriber revenue is defined as the revenue generated from subscribers during the period.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating Metrics—Subscriber Revenue” for more information as to how we define and calculate subscriber revenue.

(3) Average revenue per customer is calculated by dividing total revenue for the trailing twelve-month period by customers.

Customers is defined as total active, paying customers that contributed to total revenue over the trailing twelve-month period.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating Metrics—Average Revenue per Customer” for more information as to how we define and calculate average revenue per customer.

(4) Paid downloads is the number of downloads that our customers make in a given period of our photographs, vectors, illustrations, footage or music tracks.

Paid downloads exclude custom content and downloads of content that are offered to customers for no charge, including our free image of the week.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating Metrics—Paid Downloads” for more information as to how we define and calculate paid downloads.

Revenue per download is the amount of content-related revenue recognized in a given period divided by the number of paid downloads in that period.

(5) Revenue per download is the amount of content-related revenue recognized in a given period divided by the number of paid downloads in that period excluding revenue from custom content and the impact of revenue that is not derived from or associated with content licenses.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating Metrics—Revenue per Download” for more information as to how we define and calculate revenue per download.

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Historical revenue totals reflect those previously reported and have not been restated.

Represents images (photographs, vectors and illustrations) and footage (in number of clips) at the end of the period.

(6) Represents approved images (photographs, vectors and illustrations) and footage (in number of clips) in our library on shutterstock.com at the end of the period.

This collection metric excludes content that is not uploaded directly to our site but is available for license by our customers through an application program interface, custom content and certain content that may be licensed for editorial use only.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating Metrics—Content in our Collection” for more information as to how we define and calculate images and footage in our collection.

* Information not available

Non-GAAP Financial Measures

These non-GAAP financial measures 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.

In addition, adjusted EBITDA, adjusted net income, revenue growth (including by distribution channel) on a constant currency basis and free cash flow should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address.

These non-GAAP financial measures have not been calculated in accordance with GAAP and should be considered only in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP measures.

In addition, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income per diluted common share, revenue growth (including by distribution channel) on a constant currency basis (expressed as a percentage) and free cash flow should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address.

We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions;

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(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;

(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;

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and (vi) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments.

Management believes that adjusted EBITDA, adjusted net income and revenue growth (including by distribution channel) on a constant currency basis 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 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, with respect to 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 business.

Management believes that adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income per diluted common share, revenue growth (including by distribution channel) on a constant currency basis (expressed as a percentage) 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, adjusted net income and adjusted net income per diluted common share 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.

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 provides them with the same measures that management uses as the basis for making resource allocation decisions.

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.

Our use of non-GAAP financial measures has limitations as an analytical tool, and these measures should not be considered in isolation or as a substitute for an analysis of our results as reported under GAAP, as the excluded items may have significant effects on our operating results and financial condition.

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When evaluating our performance, these non-GAAP financial measures should be considered alongside other financial performance measures, including various cash flow metrics, net income and our other GAAP results.

Our method for calculating adjusted EBITDA, adjusted net income, revenue growth (including by distribution channel) on a constant currency basis and free cash flow, as well as a reconciliation of the differences between adjusted EBITDA, adjusted net income, revenue growth (including by distribution channel) on a constant currency basis and free cash flow, and the most comparable financial measures calculated and presented in accordance with GAAP, is presented below.

Our method for calculating adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income per diluted common share, revenue growth (including by distribution channel) on a constant currency basis and free cash flow, as well as a reconciliation of the differences between adjusted EBITDA, adjusted net income, revenue growth (including by distribution channel) on a constant currency basis and free cash flow, and the most comparable financial measures calculated and presented in accordance with GAAP, is presented below.

Adjusted EBITDA

We define adjusted EBITDA as net income adjusted for depreciation and amortization, non-cash equity-based compensation, foreign currency transaction gains and losses, charges related to the impairment of a long-term investment asset, expenses related to long-term incentives and contingent consideration related to acquisitions, interest income and expense, income taxes and the gain on Sale of Webdam.

We define adjusted EBITDA margin as the ratio of adjusted EBITDA to revenue.

The following is a reconciliation of net income to adjusted EBITDA for each of the periods indicated:

Year Ended December 31,

2020 2019 2018 2017 2016

(in thousands)

Net income $ 71,766 $ 20,108 $ 54,687 $ 16,727 $ 32,628

Add / (less) Non-GAAP adjustments:

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Other adjustments, net (1)

(4,257) (1,332) 8,093 (2,480) 2,940

Provision for income taxes 17,757 4,808 11,426 13,354 11,869

1 unchanged sentence

Adjusted EBITDA $ 154,934 $ 96,314 $ 105,114 $ 88,049 $ 95,463

Adjusted EBITDA margin 23.2 % 14.8 % 16.9 % 15.8 % 19.3 %

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We define 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, the gain on Sale of Webdam, charges related to the impairment of a long-term investment asset, the estimated tax impact of such adjustments, and a one-time tax expense due to the TCJA.

We define adjusted net income per diluted common share as adjusted net income divided by weighted average diluted shares.

The following is a reconciliation of net income to adjusted net income for each of the periods indicated:

Year Ended December 31,

2020 2019 2018 2017 2016

(in thousands)

Net income $ 71,766 $ 20,108 $ 54,687 $ 16,727 $ 32,628

Add / (less) Non-GAAP adjustments:

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Acquisition-related long-term incentives and contingent consideration (1)

— 3,430 3,141 1,252 2,925

Tax effect of acquisition-related long-term incentives and contingent consideration — (910) (832) (460) (1,075)

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One-time effect of the Tax Cuts and Jobs Act on the provision for income taxes (2)

— — — 4,507 —

Adjusted net income $ 95,152 $ 43,737 $ 55,663 $ 40,844 $ 55,235

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Year Ended December 31,

2020 2019 2018 2017 2016

Reported revenue (in thousands) (1)

$ 666,686 $ 650,523 $ 623,250 $ 557,111 $ 494,317

Revenue growth 2 % 4 % 12 % 13 % 16 %

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Free Cash Flow

We define free cash flow as our cash provided by operating activities, adjusted for capital expenditures and content acquisition.

We define free cash flow as our cash provided by operating activities, adjusted for capital expenditures and content acquisition, and, with respect to the twelve months ended December 31, 2020, a payment associated with long-term incentives related to our 2017 acquisition of Flashstock.

The following is a reconciliation of net cash provided by operating activities to free cash flow for each of the periods indicated:

Year Ended December 31,

2020 2019 2018 2017 2016

(in thousands)

2 unchanged sentences

Content acquisitions (2,970) (3,344) (3,838) (2,961) (8,045)

Payments related to long-term incentives related to acquisitions 7,759 — — — —

Free Cash Flow (1)

$ 144,231 $ 73,221 $ 63,474 $ 50,014 $ 52,719

(1) On January 1, 2017, we adopted Accounting Standard Update 2016-09 (“ASU 2016-09”) which changed the way we report the excess tax benefit related to the exercise and vesting of equity-based compensation awards in the statement of cash flows.

As a result of this adoption, we have reclassified amounts that were reported prior to adoption.

As a result of this reclassification, free cash flow reported decreased by $0.4 million for the year ended December 31, 2016, from amounts previously reported.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity