What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-02-10 compared with 2021-02-11 · 21 added, 193 removed, 14 unchanged (94% of the section changed)

5 unchanged sentences

Unregistered Sales of Equity Securities

We did not sell any unregistered equity securities during the three months ended December 31, 2020 .

We did not sell any unregistered equity securities during the year ended December 31, 2021 .

Dividend Policy

4 unchanged sentences

Issuer Purchases of Equity Securities

Equity Compensation Plan Information

The information required by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2020.

Selected Financial Data.

We have derived the Consolidated Statements of Operations data for the years ended December 31, 2020, 2019 and 2018 and the Consolidated Balance Sheet data as of December 31, 2020 and 2019 from our audited consolidated financial statements included elsewhere in this filing.

We have derived the Consolidated Statements of Operations data for the years ended December 31, 2017 and 2016 and the Consolidated Balance Sheet data as of December 31, 2018, 2017 and 2016 from our audited consolidated financial statements not included in this filing.

To obtain further information about our historical results, including our historical acquisitions, for which results of operations are included in our consolidated financial statements, you should read the following selected consolidated financial data in conjunction with our consolidated financial statements and related notes, the information in the section of this filing titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the other financial information included elsewhere in this filing.

Our historical results are not necessarily indicative of our future results.

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:

Cost of revenue 259,573 278,176 267,671 233,102 203,129

Sales and marketing 159,241 181,730 166,448 146,464 126,626

Product development 46,038 57,216 58,897 52,486 47,789

General and administrative 116,568 113,246 97,782 98,710 70,987

Total operating expenses 581,420 630,368 590,798 530,762 448,531

Income from operations 85,266 20,155 32,452 26,349 45,786

Gain on Sale of Webdam — — 38,613 — —

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

Net income per common share (diluted) $ 1.97 $ 0.57 $ 1.54 $ 0.47 $ 0.91

Weighted-average common shares outstanding (basic) 35,844 35,285 34,935 34,627 35,114

Weighted-average common shares outstanding (diluted) 36,369 35,581 35,420 35,291 35,861

_______________________________________________________________________________

(1) Effective January 1, 2018 we adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”) using the modified retrospective approach.

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

(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.

(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);

transaction gains and losses primarily related to cash balances of subsidiaries denominated in a currency other than the subsidiaries’ functional currencies;

and interest income and expense, which is not material in any period presented.

(4) Included in the 2017 provision for income taxes were provisional amounts for the specific tax effects of the TCJA, as it related to changes to existing United States tax law which included numerous provisions that affect businesses.

These provisional amounts represented the Company’s reasonable estimates at that time.

During 2018, the Company completed its analysis of certain income tax effects of the TCJA and did not make any significant adjustments to estimates previously recorded.

As of December 31,

2020 2019 2018 2017 2016

(in thousands)

Consolidated Balance Sheet Data:

Cash and cash equivalents $ 428,574 $ 303,261 $ 230,852 $ 253,428 $ 224,190

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

Total liabilities 307,719 302,367 244,821 263,191 215,082

Total stockholders’ equity $ 421,925 $ 328,145 $ 286,667 $ 314,585 $ 286,696

___________________________________________________________________________________________________________________________________

(1) During the year ended December 31, 2017, we liquidated our short-term investments, which consisted primarily of short-term commercial paper.

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, 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,

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)

$ 3.68 $ 3.43 $ 3.40 $ 3.13 $ 2.88

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

Images 360 314 242 170 116

Footage 21 17 13 9 6

_______________________________________________________________________________

(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.

(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.

Effective January 1, 2018 we adopted ASU 2014-09 using the modified retrospective approach.

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

(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 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;

accordingly, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies.

Shutterstock’s management uses these non-GAAP financial measures, 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.

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 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.

Additionally, our methods for measuring non-GAAP financial measures may differ from other companies’ similarly titled measures.

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 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:

Depreciation and amortization 41,359 49,915 45,652 35,490 19,946

Non-cash equity-based compensation 28,309 22,815 23,869 24,958 28,080

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

Gain on Sale of Webdam — — (38,613) — —

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 %

_______________________________________________________________________________

(1) Included in other adjustments, net is 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, and interest income and expense.

Adjusted Net Income

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:

Non-cash equity-based compensation 28,309 22,815 23,869 24,958 28,080

Tax effect of non-cash equity-based compensation (6,653) (5,363) (5,434) (9,175) (10,048)

Acquisition-related amortization expense 2,261 4,691 3,841 4,801 4,309

Tax effect of acquisition-related amortization expense (531) (1,034) (874) (1,766) (1,584)

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)

Gain on Sale of Webdam — — (38,613) — —

Tax effect of gain on Sale of Webdam — — 10,996 — —

Impairment of a long-term investment asset — — 5,881 — —

Tax effect of impairment of long-term investment asset — — (999) — —

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

Adjusted net income per diluted common share $ 2.62 $ 1.23 $ 1.57 $ 1.16 $ 1.54

Weighted average diluted shares 36,369 35,581 35,420 35,291 35,861

(1) Represents expenses related to long-term incentives and contingent consideration related to the Webdam, PremiumBeat and Flashstock acquisitions.

(2) Represents approximately $3.7 million of non-cash charges related to a remeasurement of deferred tax assets related to the change in U.S.

tax rates from 35% to 21% and approximately $0.8 million of cash charges related to a one-time U.S.

transition tax on unrepatriated foreign earnings.

Revenue Growth (including by distribution channel) on a Constant Currency Basis

We define revenue growth (including by distribution channel) on a constant currency basis (expressed as a percentage) 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.

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 %

Revenue growth on a constant currency basis 2 % 6 % 11 % 13 % 18 %

E-commerce reported revenue (in thousands) $ 412,521 $ 392,241 $ 365,730 $ 332,376 $ 318,916

E-commerce revenue growth 5 % 7 % 10 % 4 % 6 %

E-commerce revenue growth on a constant currency basis 5 % 9 % 9 % 5 % 7 %

Enterprise reported revenue (in thousands) $ 254,165 $ 258,282 $ 254,809 $ 208,713 $ 164,384

Enterprise revenue growth (2) % 1 % 22 % 27 % 39 %

Enterprise revenue growth on a constant currency basis (2) % 3 % 21 % 26 % 42 %

(1) 2016 - 2018 reported revenue also includes amounts from Webdam, which was sold in February 2018.

Webdam revenues are predominantly denominated in US Dollars.

Free Cash Flow

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,

The table below presents shares of our common stock which we acquired during the three months ended December 31, 2021:

ISSUER PURCHASES OF EQUITY SECURITIES

Period (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid Per Share (or Unit) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1)

(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs (1)

October 1 - 31, 2021 63,000 $ 119.61 63,000

November 1 - 30, 2021 62,800 119.30 62,800

December 1 - 31, 2021 66,000 110.35 66,000

191,800 $ 116.32 191,800 $ 72,833,453

(in thousands)

Net cash provided by operating activities $ 165,072 $ 102,646 $ 102,202 $ 108,037 $ 100,723

Capital expenditures (25,630) (26,081) (34,890) (55,062) (39,959)

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)

_______________________________________________________________________________

(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.

(1) We purchased shares of our common stock in open market purchases pursuant to share repurchases authorized by our Board of Directors.

In October 2015, our Board of Directors authorized the repurchase of up to $100 million of our common stock, and in February 2017, our Board of Directors approved an increase to the share repurchase program, authorizing us to repurchase an additional $100 million of our outstanding common stock.

As of December 31, 2021, $72.8 million remained available for purchase under this authorization.

During the third quarter of 2021, we acquired 41,900 shares at an average price per share of $115.95.

Equity Compensation Plan Information

The information required by this item is incorporated by reference to our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2021.

Performance Graph

The graph below matches Shutterstock, Inc.'s cumulative 5-Year total shareholder return on common stock with the cumulative total returns of the NYSE Composite index and the S&P Internet Software & Services Select index.

The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from 12/31/2016 to 12/31/2021.

Shutterstock, Inc.

NYSE Composite

S&P Software & Services Select Industry

The stock price performance included in this graph is not necessarily indicative of future stock price performance.

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