What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-02-14 compared with 2022-02-10 · 235 added, 133 removed, 988 unchanged (27% of the section changed)

12 unchanged sentences

In accordance with guidance issued by the SEC, companies are permitted to exclude acquisitions from their final assessment of internal control over financial reporting for the first fiscal year in which the acquisition occurred.

Our management’s evaluation of internal control over financial reporting excluded the internal control activities of PicMonkey, LLC, acquired in September 2021, as discussed in Note 3 to the Consolidated Financial Statements.

The financial results of this acquisition are included in the consolidated financial statements as of and for the year ended December 31, 2021 and represents approximately 1% of total revenues and less than 1% of total assets.

Our management’s evaluation of internal control over financial reporting excluded the internal control activities of Pond5, Inc., acquired in May 2022, as discussed in Note 3 to the Consolidated Financial Statements.

The financial results of this acquisition are included in the consolidated financial statements as of and for the year ended December 31, 2022 and represent approximately 4% and 1% of total revenues and total assets, respectively.

Based on our assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2022.

7 unchanged sentences

Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met.

Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

Further, no evaluation of controls can provide absolute

assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

Other Information.

Directors, Officers and Corporate Governance

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

Directors, Executive Officers and Corporate Governance

The information required by this item is incorporated by reference to our Proxy Statement for the 2023 Annual Meeting of Stockholders to be filed with the SEC, within 120 days after the end of the fiscal year ended December 31, 2022.

45 unchanged sentences

We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded PicMonkey, LLC (“PicMonkey”) from its assessment of internal control over financial reporting as of December 31, 2021 because it was acquired by the Company in a purchase business combination during 2021.

We have also excluded PicMonkey from our audit of internal control over financial reporting.

PicMonkey is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent less than 1% and approximately 1% respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2021.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Pond5, Inc.

(“Pond5”) from its assessment of internal control over financial reporting as of December 31, 2022 because it was acquired by the Company in a purchase business combination during 2022.

We have also excluded Pond5 from our audit of internal control over financial reporting.

Pond5 is a wholly-owned subsidiary whose total revenues and total assets excluded from management’s assessment and our audit of internal control over financial reporting represent 4% and 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2022.

Definition and Limitations of Internal Control over Financial Reporting

1 unchanged sentence

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

7 unchanged sentences

Content licenses are generally purchased on a monthly or annual basis, whereby a customer pays for a predetermined quantity of content that may be downloaded over a specific period of time, or, on a transactional basis, whereby a customer pays for individual content licenses at the time of download.

The Company recognizes revenue upon the satisfaction of performance obligations, which generally occurs when content is downloaded by a customer.

The Company recognizes revenue on both its subscription-based and transaction-based products when content is downloaded, at which time the license is provided.

The Company recognizes revenue upon the satisfaction of performance obligations.

The Company recognizes revenue on both its subscription-based and transaction-based products when content is downloaded by a customer, at which time the license is provided.

For the year ended December 31, 2022, the Company’s total revenue was $827.8 million.

3 unchanged sentences

These procedures also included, among others, evaluating the completeness, accuracy and existence of revenue recognized on a sample basis by inspecting content license arrangements and evaluating the appropriateness of the revenue recognized based on the terms of each arrangement and customer download activity.

Valuation of Customer Relationships in the PicMonkey, LLC Acquisition

As described in Note 3 to the consolidated financial statements, on September 3, 2021, the Company completed the acquisition of substantially all of the assets and assumption of certain liabilities from PicMonkey for a contractual purchase price of $109.4 million, which resulted in $28.8 million of a customer relationships intangible asset being recorded.

Fair value of the customer relationships intangible asset was determined using a multi-period excess earnings valuation method.

Determining the fair value of the customer relationships intangible asset involved the use of significant judgment, including estimates of future revenue growth rates from existing customers, research and development (“R&D”) expense adjustments, sales and marketing (“S&M”) expense adjustments, the discount rate, earnings before interest, taxes, and amortization (“EBITA”) margins and the customer attrition rate.

The principal considerations for our determination that performing procedures relating to the valuation of the customer relationships intangible asset acquired in the acquisition of PicMonkey is a critical audit matter are the significant judgment by management when developing the fair value of the customer relationships intangible asset, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to future revenue growth rates from existing customers, R&D expense adjustments, S&M expense adjustments, the discount rate, EBITA margins, and the customer attrition rate used in the valuation of the customer relationships intangible asset.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Pond5 Acquisition - Valuation of Certain Customer Relationships Intangible Assets

As described in Note 3 to the consolidated financial statements, on May 11, 2022, the Company completed its acquisition of Pond5 for approximately $218.0 million.

The acquisition resulted in $34.9 million of customer relationships being recorded, of which a significant portion relates to certain customer relationships intangible assets.

The fair value of the customer relationships intangible assets was determined using a multiple-period excess earnings method.

Determining the fair value of the customer relationships intangible assets requires management to use significant judgment and estimates, including estimates of future revenue growth rates for existing customers, the discount rate, earnings before interest, taxes, and amortization (EBITA) margins and the customer attrition rate, among others.

The principal considerations for our determination that performing procedures relating to the valuation of certain customer relationships intangible assets acquired in the acquisition of Pond5 is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of certain customer relationships intangible assets acquired;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to estimates of future revenue growth rates for existing customers, the discount rate, EBITA margins, and the customer attrition rate;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing of the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the customer relationships intangible asset and controls over the development of significant assumptions related to future revenue growth rates from existing customers, R&D expense adjustments, S&M expense adjustments, the discount rate, EBITA margins, and the customer attrition rate.

These procedures also included, among others (i) reading the purchase agreement and (ii) testing management’s process for developing the fair value of the customer relationships intangible asset.

Testing management’s process included (i) evaluating the appropriateness of the multi-period excess earnings valuation method;

(ii) testing the completeness and accuracy of data provided by management;

and (iii) evaluating the reasonableness of significant assumptions related to the future revenue growth rates from existing customers, R&D expense adjustments, S&M expense adjustments, the discount rate, EBITA

margins, and the customer attrition rate used in the valuation of the customer relationships intangible asset.

Evaluating the reasonableness of the significant assumptions related to future revenue growth rates from existing customers, R&D expense adjustments, S&M expense adjustments, EBITA margins, and the customer attrition rate involved considering (i) the past performance of the acquired business;

(ii) the consistency with external market and industry data;

(iii) and whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s multi-period excess earnings valuation method and in the evaluation of the reasonableness of the R&D expense adjustments, S&M expense adjustments, the discount rate, and the customer attrition rate significant assumptions.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the customer relationships intangible assets and controls over the development of significant assumptions related to estimates of future revenue growth rates for existing customers, the discount rate, EBITA margins, and the customer attrition rate.

These procedures also included, among others (i) reading the purchase agreement and (ii) testing management’s process for developing the fair value estimate of certain customer relationships intangible assets acquired.

Testing management’s process included (i) evaluating the appropriateness of the multiple-period excess earnings method;

(ii) testing the completeness and accuracy of underlying data used in the multiple-period excess earnings method;

and (iii) evaluating the reasonableness of the significant assumptions used by management related to estimates of future revenue growth rates for existing customers, the discount rate, EBITA margins, and the customer attrition rate.

Evaluating the reasonableness of estimates of future revenue growth rates for existing customers, EBITA margins, and the customer attrition rate involved considering (i) the past performance of the acquired business and (ii) the consistency

with external market and industry data.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the multiple-period excess earnings method and the reasonableness of the discount rate assumption.

/s/ PricewaterhouseCoopers LLP

24 unchanged sentences

Deferred revenue 187,070 180,979

Debt 50,000 —

Other current liabilities 11,445 14,180

29 unchanged sentences

General and administrative 132,644 130,758 116,568

Impairment of lease and related assets 18,664 — —

Total operating expenses 734,202 665,309 581,420

17 unchanged sentences

Net income $ 76,103 $ 91,883 $ 71,766

Foreign currency translation (loss) / gain ( 3,107 ) ( 1,461 ) 251

Other comprehensive (loss) / income ( 3,107 ) ( 1,461 ) 251

Foreign currency translation loss ( 4,651 ) ( 3,107 ) ( 1,461 )

Other comprehensive loss ( 4,651 ) ( 3,107 ) ( 1,461 )

Comprehensive income $ 71,452 $ 88,776 $ 70,305

9 unchanged sentences

Balance at December 31, 2019 38,055 $ 381 2,558 $ ( 100,027 ) $ 312,824 $ ( 6,220 ) $ 121,187 $ 328,145

Cumulative Effect of Accounting Change (See Note 1) — — — — — — ( 247 ) ( 247 )

Balance at January 1, 2020 38,055 $ 381 2,558 $ ( 100,027 ) $ 312,824 $ ( 6,220 ) $ 120,940 $ 327,898

Equity-based compensation — — — — 28,309 — — 28,309

Issuance of common stock, net of issuance costs 516 5 — — 23,148 — — 23,153

Issuance of common stock in connection with employee stock option exercises and RSU vesting 351 4 — — 1,167 — — 1,171

Common shares withheld for settlement of taxes in connection with equity-based compensation ( 119 ) ( 1 ) — — ( 4,509 ) — — ( 4,510 )

Other comprehensive income — — — — — 251 — 251

Cash dividends paid — — — — — — ( 24,401 ) ( 24,401 )

Other comprehensive loss — — — — — ( 1,461 ) — ( 1,461 )

Net income — — — — — — 71,766 71,766

Balance at December 31, 2020 38,803 389 2,558 ( 100,027 ) 360,939 ( 7,681 ) 168,305 421,925

Cumulative effect of accounting change (See Note 1)

— — — — — — ( 247 ) ( 247 )

Balance at January 1, 2020 38,055 381 2,558 ( 100,027 ) 312,824 ( 6,220 ) 120,940 327,898

Equity-based compensation — — — — 36,179 — — 36,179

Issuance of common stock, net of issuance costs 516 5 — — 23,148 — — 23,153

Issuance of common stock in connection with employee stock option exercises and RSU vesting 660 7 — — 2,141 — — 2,148

Common shares withheld for settlement of taxes in connection with equity-based compensation ( 254 ) ( 4 ) — — ( 22,722 ) — — ( 22,726 )

Repurchase of treasury shares — — 234 ( 27,169 ) — — — ( 27,169 )

Cash dividends paid — — — — — — ( 30,651 ) ( 30,651 )

22 unchanged sentences

Non-cash equity-based compensation 35,740 36,179 28,309

Impairment of lease and related assets 18,664 — —

Bad debt expense 3,697 137 2,580

11 unchanged sentences

Asset acquisitions ( 3,417 ) ( 31,639 ) ( 1,850 )

Proceeds from sale of Webdam, net — — 2,500

Long term investments — — ( 5,000 )

Acquisition of content ( 16,821 ) ( 8,874 ) ( 2,970 )

Security deposit release / (payment) ( 191 ) 140 ( 309 )

Security deposit (payment) / release ( 173 ) ( 191 ) 140

Net cash used in investing activities $ ( 275,550 ) $ ( 250,438 ) $ ( 35,310 )

4 unchanged sentences

Payment of cash dividends ( 34,589 ) ( 30,651 ) ( 24,401 )

Proceeds from credit facility 50,000 — —

Repurchase of treasury shares ( 73,488 ) ( 26,493 ) —

Payment of debt issuance costs ( 619 ) — —

Net cash used in financing activities $ ( 79,487 ) $ ( 77,722 ) $ ( 4,587 )

6 unchanged sentences

Cash paid for income taxes $ 23,444 $ 19,092 $ 8,751

Cash paid for interest $ 1,045 $ — —

See accompanying notes to consolidated financial statements

3 unchanged sentences

Description of Business

Shutterstock (the “Company” or “Shutterstock”) is a leading global creative platform offering full-service solutions, high-quality content, and creative workflow solutions for brands, businesses and media companies.

Shutterstock (the “Company” or “Shutterstock”) is a global creative platform for transformative brands and media companies.

The Company’s platform brings together users and contributors of content by providing readily-searchable content that our customers pay to license and by compensating contributors as their content is licensed.

Contributors upload their content to the Company’s web properties in exchange for royalty payments based on customer download activity.

The Company’s key offerings include:

Beyond content, customers also leverage the Company’s platform to assist with the entire creative process from ideation through creative execution.

The Company’s key content offerings include:

• Images - consisting of photographs, vectors and illustrations.

3 unchanged sentences

• Music - consisting of high-quality music tracks and sound effects, which are often used to complement images and footage.

• 3 Dimensional (“3D”) Models - consisting of 3D models, used in a variety of industries such as advertising, media and video production, gaming, retail, education, design and architecture, following the Company’s acquisition of TurboSquid, Inc.

on February 1, 2021.

See Note 3 Acquisitions.

• Creative Design Software - consisting of the Company’s online graphic design and image editing platform.

On September 3, 2021, the Company completed the acquisition of substantially all of the assets and assumption of certain liabilities from PicMonkey, LLC.

• 3 Dimensional (“3D”) Models - consisting of 3D models, used in a variety of industries such as advertising, media and video production, gaming, retail, education, design and architecture.

On May 11, 2022, the Company completed its acquisition of Pond5, Inc.

(“Pond5”), a video-first content marketplace which expands Shutterstock’s content offerings across footage, image and music.

On May 28, 2022, Shutterstock acquired SCP 2020 Limited (“Splash News”), an entertainment news network for newsrooms and media companies, which offers image and video content across celebrity, red carpet and live events.

See Note 3 Acquisitions.

17 unchanged sentences

The Company also performs ongoing financial condition evaluations for its existing customers.

As of December 31, 2021 and 2020, no single customer accounted for or exceeded 10% of accounts receivable.

As of December 31, 2022, one customer accounted for approximately 22 % of the accounts receivable balance.

No other customer accounted for or exceeded 10% of the accounts receivable balance.

As of December 31, 2021, no single customer accounted for or exceeded 10% of accounts receivable.

Additionally, no single customer accounted for or exceeded 10% of revenue for the years ended December 31, 2022, 2021 or 2020.

29 unchanged sentences

The Company establishes a chargeback allowance and sales refund reserve allowance based on factors surrounding historical credit card chargeback trends, historical sales refund trends and other information.

As of December 31, 2021 and December 31, 2020, the Company’s combined allowance for chargebacks and sales refunds was $ 0.4 million, and $ 0.5 million, respectively, which is included as a component of other current liabilities on the Consolidated Balance Sheets.

As of December 31, 2022 and December 31, 2021, the Company’s combined allowance for chargebacks and sales refunds was $ 0.4 million, which is included as a component of other current liabilities on the Consolidated Balance Sheets.

Property and Equipment

17 unchanged sentences

The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

In 2022, the Company recorded an impairment charge related to a portion of its right-of-use assets and property and equipment triggered by the Company’s decision to cease using certain office spaces.

See Note 4, Property and Equipment and Note 15, Leasing for further discussion.

There were no long-lived asset impairment charges in 2021 or 2020.

6 unchanged sentences

Subsequent to the acquisition of PicMonkey, the Company also generates revenue from the license of creative editing tools.

The Company also generates revenue from tools available through the Company’s platform.

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company recognizes revenue upon the satisfaction of performance obligations, which generally occurs when content is downloaded by a customer.

The Company recognizes revenue on both its subscription-based and transaction-based products when content is downloaded, at which time the license is provided.

For contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation based on a relative standalone selling price.

The standalone selling price is determined based on the price at which the performance obligation is sold separately, or if not observable through past transactions, is estimated taking into account available information including internally approved pricing guidelines and pricing information of comparable products.

The Company recognizes revenue upon the satisfaction of performance obligations.

The Company recognizes revenue on both its subscription-based and transaction-based products when content is downloaded by a customer, at which time the license is provided.

In addition, the Company estimates expected unused licenses for subscription-based products and recognizes the revenue associated with the unused licenses as digital content is downloaded and licenses are obtained for such content by the customer during the subscription period.

The estimate of unused licenses is based on historical download activity and future changes in the estimate could impact the timing of revenue recognition of the Company’s subscription products.

For revenue associated with the Company’s creative editing tools, revenue is recognized on a straight-line basis over the subscription period.

For revenue associated with tools available through the Company’s platform, revenue is recognized on a straight-line basis over the subscription period.

The Company expenses contract acquisition costs as incurred, to the extent that the amortization period would otherwise be one year or less.

16 unchanged sentences

For the years ended December 31, 2022, 2021 and 2020, the Company deferred $ 6.3 million, $ 7.2 million and $ 3.6 million, respectively, in royalty advances and amortized $ 7.1 million, $ 5.8 million and $ 5.5 million, respectively, in royalty advance expense which is included in cost of revenue.

As of December 31, 2021, the Company has deferred contributor royalties of $ 1.4 million, which is included in prepaid expenses and other current assets in the Consolidated Balance Sheets.

As of December 31, 2020, the balance of deferred contributor royalties was not significant.

As of December 31, 2022 and 2021, the Company has deferred contributor royalties of $ 0.6 million and $ 1.4 million, respectively, which is included in prepaid expenses and other current assets in the Consolidated Balance Sheets.

Internal sales commissions are generally paid in the month following collection or invoicing of the commissioned receivable and is reported in sales and marketing expense on the Consolidated Statements of Operations.

The Company expenses contract acquisition costs, including internal sales commissions, as incurred, to the extent that the amortization period would otherwise be one year or less.

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Product Development

1 unchanged sentence

Product development costs are primarily comprised of development personnel salaries, non-cash equity-based compensation, software and other IT equipment costs as well as allocated facility costs and related overhead.

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Advertising Costs

18 unchanged sentences

The Company grants Restricted Stock Units, Performance-based Restricted Stock Units (“PRSUs” and, collectively with Restricted Stock Units, “RSUs”) and Stock Options to directors and officers and certain other employees of the Company.

All awards are granted pursuant to the 2012 Omnibus Equity Incentive Plan (the “2012 Plan”), which is discussed further in Note 9, Equity-Based Compensation.

Awards granted prior to June 1, 2022 were granted under the Company’s Amended and Restated 2012 Omnibus Equity Incentive Plan (the “2012 Plan”).

At the Annual Meeting held on June 2, 2022, the Company’s stockholders approved the 2022 Omnibus Equity Incentive Plan (the “2022 Plan”).

Awards granted subsequent to June 2, 2022 were granted under the 2022 Plan.

The Company measures and recognizes non-cash equity-based compensation expense for all stock-based awards granted to employees based on estimated fair values.

The value portion of the award that is ultimately expected to vest is recognized as expense over the requisite service period.

The portion of the award that is ultimately expected to vest is recognized as expense over the requisite service period.

Forfeitures are accounted for as they occur.

4 unchanged sentences

To the extent that the expected levels of achievement change, stock-based compensation expense is adjusted and recorded in the Consolidated Statements of Operations and the remaining unrecognized stock-based compensation is recognized over the remaining requisite service period.

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company uses the closing price of the Company’s common stock on the date of grant to determine the fair value of RSUs.

2 unchanged sentences

The determination of the grant date fair value using an option-pricing model and simulation model requires judgment as well as assumptions regarding a number of other complex and subjective variables.

These variables include the Company’s closing market price at the grant date, the expected stock price volatility over the expected term of the awards, awards’ exercise and cancellation behaviors, risk-free interest rates, and expected dividends, which are estimated as follows:

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• Fair Value of Common Stock.

The grant date fair value for stock-based awards is based on the closing price of the Company’s common stock on the NYSE on the date of grant and fair value for all other purposes related to stock-based awards shall be the closing price of the Company’s common stock on the NYSE on the relevant date.

• Expected Term.

The expected term is estimated using the simplified method allowed under Securities and Exchange Commission (“SEC”) guidance.

In certain cases for market based awards, the Company’s expected term is based on a combination of historical data and estimates of the period of time the award will be outstanding.

• Volatility.

The volatility is estimated based on historical price volatility of the Company’s common stock.

• Risk-free Interest Rate.

The risk-free interest rate is based on the yields of U.S.

Treasury securities with maturities similar to the expected term of each award group.

• Dividend Yield.

The Company determines the dividend yield based on management’s expectations of future dividends.

The Company has historically used an expected dividend yield of zero for options granted.

If any of the assumptions used in the Black-Scholes pricing model or Monte Carlo simulation model changes significantly, the fair value for future awards may differ materially compared with the awards granted previously.

The awards granted pursuant to the 2012 Plan are subject to a time-based vesting requirement and certain award grants may also include market based or performance based vesting conditions.

The awards granted pursuant to the 2012 Plan and the 2022 Plan are subject to a time-based vesting requirement and certain award grants may also include market based or performance based vesting conditions.

While each PRSU corresponds to one target share of the Company’s stock, the number of shares that may eventually vest will be between 0 % and 150 % of a recipient’s target shares, depending on both the recipient’s continued service with the Company and the extent to which performance goals will have been achieved.

Stock option awards granted under the 2012 Plan vest over three or four years while the majority of the restricted stock units granted under the 2012 Plan vest over three years .

Awards generally vest over three or four years .

Upon the vesting of RSUs, the Company has a practice of net share settlement, to cover any required withholding taxes by retaining the number of shares with a value equal to the amount of the tax and remitting an equal amount of cash to the appropriate taxing authorities.

Employee Benefit Plans

14 unchanged sentences

In the event that actual results differ from these estimates, the Company will adjust these estimates in future periods which may result in a change in the effective tax rate in a future period.

In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income (“GILTI”) provisions of the TCJA.

The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations.

The Company treats any potential GILTI inclusions as a period cost.

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The global intangible low-taxed income (“GILTI”) provisions of the TCJA impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations.

The Company has elected to treat any potential GILTI inclusions as a period cost.

Other Non-income Taxes

2 unchanged sentences

These accruals are subject to statute of limitations requirements and review by governmental authorities.

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Treasury Stock

15 unchanged sentences

Monetary assets and liabilities that are denominated in currencies other than each entity’s functional currency are remeasured into the functional currency at the period-end exchange rates and result in transactional gains and losses.

The net impact of foreign currency transactional gains and losses on the Company’s results of operations was a loss of $ 3.2 million in 2021 and gains of $ 2.4 million and $ 0.2 million in 2020 and 2019, respectively.

The net impact of foreign currency transactional gains and losses on the Company’s results of operations were losses of $ 3.1 million and $ 3.2 million in 2022 and 2021, respectively, and a gain of $ 2.4 million in 2020.

Translation adjustments resulting from converting the foreign subsidiaries financial statements into U.S.

25 unchanged sentences

Cash equivalents include money market accounts and are classified as a level 1 measurement based on quoted prices in active markets for identical assets that the reporting entity can access at the measurement date.

As of December 31, 2021 and 2020, the Company had a balance of $ 195.1 million and $ 250.0 million, respectively, in money market accounts.

As of December 31, 2021, the Company had cash equivalent balances of $ 195.1 million.

As of December 31, 2022, the Company did not have any cash equivalent balances.

Other Fair Value Measurements

The carrying amounts of cash, accounts receivable, restricted cash, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments.

The Company’s non-financial assets, which include property and equipment, intangible assets and goodwill, are not required to be measured at fair value on a recurring basis.

However, if certain triggering events occur, or if an annual impairment test is required and the Company is required to evaluate the non-financial asset for impairment, a resulting asset impairment would require that the non-financial asset be recorded at the fair value.

Debt consists of principal amounts outstanding under our credit facility, which approximates fair value as underlying interest rates are reset regularly based on current market rates and is classified as Level 2.

The Company’s non-financial assets, which include long-lived assets, intangible assets and goodwill, are not required to be measured at fair value on a recurring basis.

See Note 15, Leasing for further discussion.

SHUTTERSTOCK, INC.

7 unchanged sentences

Investment in ZCool Technologies Limited (“ZCool”)

In 2018, the Company invested $ 15.0 million in convertible preferred shares issued by ZCool (the “Preferred Shares”), which is equivalent to a 25 % fully diluted equity ownership interest.

In 2018, the Company invested $ 15.0 million in convertible preferred shares issued by ZCool (the “Preferred Shares”).

ZCool’s primary business is the operation of an e-commerce platform in China whereby customers can pay to license content contributed by creative professionals.

6 unchanged sentences

(3) Acquisitions

On May 11, 2022, the Company completed its acquisition of all of the outstanding shares of Pond5, for approximately $ 218.0 million.

The total purchase price was paid with existing cash on hand as well as a $ 50 million drawdown on a newly established revolving credit facility (See Note 7).

In connection with the acquisition, the Company incurred approximately $ 4.0 million of transaction costs, which is included in general and administrative expenses on the Consolidated Statements of Operations.

Pond5 is a New York based company that operates a video-first content marketplace for royalty-free and editorial video.

The Company believes its acquisition of this video-first content marketplace provides expanded offerings across footage, image and music.

The identifiable intangible assets, which include customer relationships, developed technology and trade names have weighted average useful lives of approximately 14.2 years, 5 years and 10 years, respectively.

The goodwill arising from the transaction is primarily attributable to expected operational synergies and is not deductible for income tax purposes.

On May 28, 2022, the Company completed its acquisition of all of the outstanding shares of Splash News, for approximately $ 6.3 million.

The total purchase price was paid with existing cash on hand in the three months ended June 30, 2022.

In connection with the acquisition, the Company incurred approximately $ 0.3 million of transaction costs, which is included in general and administrative expenses on the Consolidated Statements of Operations.

Splash News is a United Kingdom based entertainment news network and is a source for image and video content across celebrity, red carpet and live events.

The Company believes this acquisition expands Shutterstock Editorial’s Newsroom offering for access to premium exclusive content.

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The identifiable intangible asset, developed technology, has a useful life of approximately 4 years.

The goodwill arising from the transaction is primarily attributable to expected operational synergies and is not deductible for income tax purposes.

The Pond5 and Splash News transactions were accounted for using the acquisition method and, accordingly, the results of the acquired businesses have been included in the Company’s results of operations from the respective acquisition dates.

For the twelve months ended December 31, 2022, revenue of $ 36.7 million, was included in the Consolidated Statements of Operations related to these acquired companies.

The fair value of consideration transferred in these business combinations has been allocated to the intangible and tangible assets acquired and liabilities assumed at the acquisition date, with the remaining unallocated amount recorded as goodwill.

The identifiable intangible assets of these acquisitions are being amortized on a straight-line basis.

The fair value of the customer relationships was determined using a variation of the income approach known as the multiple-period excess earnings method.

The fair value of the trade name was determined using the relief-from-royalty method, and the fair value of the developed technology was determined using the relief-from-royalty and the cost to recreate methods.

Determining the fair value of the customer relationships intangible assets requires management to use significant judgment and estimates, including estimates of future revenue growth rates for existing customers, the discount rate, earnings before interest, taxes and amortization (“EBITA”) margins and the customer attrition rate, among others.

The aggregate purchase price for these acquisitions has been allocated to the assets acquired and liabilities assumed as follows (in thousands):

Assets acquired and liabilities assumed (in thousands):

Splash News 1

Cash and cash equivalents $ 11,675 $ 180 $ 11,855

Accounts receivable 1,273 500 $ 1,773

Other assets 1,102 525 1,627

Right of use asset 1,674 — 1,674

Intangible assets:

Customer relationships 34,900 — 34,900

Trade name 5,300 — 5,300

Developed technology 27,600 1,263 28,863

Intangible assets 67,800 1,263 69,063

Goodwill 158,957 5,565 164,522

Total assets acquired $ 242,481 $ 8,033 $ 250,514

Accounts payable, accrued expenses and other liabilities ( 9,304 ) ( 1,528 ) ( 10,832 )

Contributor royalties payable ( 3,039 ) ( 3,039 )

Deferred revenue ( 3,705 ) — ( 3,705 )

Deferred tax liability ( 6,381 ) ( 189 ) ( 6,570 )

Lease liability ( 2,038 ) — ( 2,038 )

Total liabilities assumed ( 24,467 ) ( 1,717 ) ( 26,184 )

Net assets acquired $ 218,014 $ 6,316 $ 224,330

____________________________________________________

1 The allocation of the purchase price is preliminary and will be finalized within the allowable measurement period once independent valuations of the fair value of the assets acquired and liabilities assumed are completed.

During the three months ended September 30, 2022, the Company updated its preliminary allocation of the Pond5 purchase price to the assets acquired and liabilities assumed.

This resulted in a (i) $ 4.0 million increase to goodwill, (ii) a $ 4.1 million decrease to intangible assets, including a $ 7.0 million decrease to the value of customer relationships, partially offset by a $ 2.3 million increase to the value of the developed technology, and (iii) other immaterial adjustments.

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2021 Acquisitions

PicMonkey, LLC

12 unchanged sentences

TurboSquid is a Louisiana-based company that operates a marketplace offering more than one million 3D models, a marketplace for 2 dimensional (“2D”) images derived from 3D objects and a digital asset management solution.

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

believes this acquisition establishes Shutterstock as the premium destination for 3D models as well as 3D models in an easy-to-use 2D format.

The Company believes this acquisition establishes Shutterstock as the premium destination for 3D models as well as 3D models in an easy-to-use 2D format.

The identifiable intangible assets, which include customer relationships, developed technology, trade names and contributor content, have weighted average useful lives of approximately 12 years, 4.7 years, 10 years and 4 years, respectively.

8 unchanged sentences

The aggregate purchase price for these acquisitions have been allocated to the assets acquired and liabilities assumed as follows (in thousands):

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Assets acquired and liabilities assumed (in thousands):

20 unchanged sentences

Net assets acquired $ 109,395 $ 77,330 $ 186,725

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following unaudited pro forma consolidated financial information (in thousands) reflects the results of operations of the Company for the years ended December 31, 2021 and 2020, as if the PicMonkey and TurboSquid acquisitions had been completed on January 1, 2020, after giving effect to certain purchase accounting adjustments, primarily related to intangible assets and transaction costs.

Pro-Forma Financial Information (unaudited)

The following unaudited pro forma consolidated financial information (in thousands) reflects the results of operations of the Company for the twelve months ended December 31, 2022 and 2021, as if the Pond5 and Splash News acquisitions had been completed on January 1, 2021 and as if the TurboSquid and PicMonkey acquisitions had been completed on January 1, 2020, after giving effect to certain purchase accounting adjustments, primarily related to intangible assets and transaction costs.

These pro forma results have been prepared for comparative purposes only and are not necessarily indicative of what the Company’s operating results would have been, had the acquisitions actually taken place at the beginning of the previous annual period.

8 unchanged sentences

These three entities provide data driven insights through their artificial intelligence platforms.

The aggregate purchase price for these transactions was approximately $ 35 million and is subject to customary working capital and other adjustments and was paid from existing cash on hand.

Approximately $ 3.6 million of the total purchase consideration was subject to contractual holdback provisions and is expected to be paid within the next 12 months.

The aggregate purchase price for these transactions was approximately $ 35 million and is subject to customary working capital and other adjustments and was

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

paid from existing cash on hand.

Approximately $ 3.4 million of the total purchase consideration was subject to contractual holdback provisions and was paid during 2022.

The Company has accounted for these transactions as asset acquisitions and has recorded a total of $ 41 million of developed technology intangible assets, which are being amortized on a straight-line basis over a useful life of 3 years.

11 unchanged sentences

There was no loss on disposal for the years ended December 31, 2022, 2021 and 2020, respectively.

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In 2022, the Company recorded an impairment charge of $ 2.8 million primarily related to certain of its leasehold improvements triggered by the Company’s decision to cease using certain office spaces.

See Note 15, Leasing for further discussion.

Capitalized Internal-Use Software

5 unchanged sentences

As of December 31, 2022 and 2021, the Company had capitalized internal-use software of $ 50.1 million and $ 39.0 million, respectively, net of accumulated depreciation, which was included in property and equipment, net.

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(5) Goodwill and Intangible Assets

24 unchanged sentences

Amortization expense related to the intangible assets was $ 34.5 million, $ 17.1 million and $ 5.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Of these amounts, $ 13.1 million, $ 3.4 million and $ 2.3 million are included

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

in cost of revenue for the years ended December 31, 2021, 2020 and 2019, respectively, and $ 4.0 million, $ 2.4 million and $ 4.7 million are included in general and administrative expense for the years ended December 31, 2021, 2020 and 2019, respectively.

Of these amounts, $ 32.1 million, $ 13.1 million and $ 3.4 million are included in cost of revenue for the years ended December 31, 2022, 2021 and 2020, respectively, and $ 2.4 million, $ 4.0 million and $ 2.4 million are included in general and administrative expense for the years ended December 31, 2022, 2021 and 2020, respectively.

The Company determined that there was no indication of impairment for the intangible assets for all periods presented.

1 unchanged sentence

$ 38.7 million in 2023, $ 31.9 million in 2024, $ 21.6 million in 2025, $ 19.3 million in 2026, $ 13.1 million in 2027 and $ 48.5 million thereafter.

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(6) Accrued Expenses

5 unchanged sentences

Total accrued expenses $ 89,387 $ 99,529

On May 6, 2022, the Company entered into a five-year $ 100 million unsecured revolving loan facility (the “Credit Facility”) with Bank of America, N.A., as Administrative Agent and other lenders.

The Credit Facility includes a letter of credit sub-facility and a swingline facility and it also permits, subject to the satisfaction of certain conditions, up to $ 100 million of additional revolving loan commitments with the consent of the Administrative Agent.

At the Company’s option, revolving loans accrue interest at a per annum rate based on either (i) the base rate plus a margin ranging from 0.125 % to 0.500 %, determined based on the Company’s consolidated leverage ratio or (ii) the Term Secured Overnight Financing Rate (“SOFR”) (for interest periods of 1, 3 or 6 months) plus a margin ranging from 1.125 % to 1.5 %, determined based on the Company’s consolidated leverage ratio.

The Company is also required to pay an unused commitment fee ranging from 0.150 % to 0.225 %, determined based on the Company’s consolidated leverage ratio.

In connection with the execution of this agreement, the Company paid debt issuance costs of approximately $ 0.6 million.

On May 9, 2022, the Company borrowed $ 50 million for use in connection with the acquisition of Pond5, described under Note 3 (“Acquisitions”) and for general corporate purposes.

As of December 31, 2022, the Company had outstanding borrowings under the Credit Facility of $ 50 million and had a remaining borrowing capacity of $ 48 million, net of standby letters of credit.

As of December 31, 2021, the Company had no outstanding debt obligations.

For the year ended December 31, 2022, the Company recognized interest expense of $ 1.3 million.

For the year ended December 31, 2022, the Company’s annualized interest rate was 3.8 %.

On January 27, 2023, the Company fully repaid its borrowings under the Credit Facility and had a remaining borrowing capacity of $ 98 million, net of standby letters of credit.

The Credit Facility contains financial covenants and requirements restricting certain of the Company’s activities, which are usual and customary for this type of credit facility.

The Company is also required to maintain compliance with a consolidated leverage ratio and a consolidated interest coverage ratio, in each case, determined in accordance with the terms of the Credit Facility.

As of December 31, 2022, the Company was in compliance with these covenants.

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(8) Stockholders’ Equity

16 unchanged sentences

As of December 31, 2022, the Company has repurchased approximately 3.8 million shares of its common stock under the share repurchase program at an average per-share cost of approximately $ 52.97 .

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During 2021, the Company repurchased approximately 233,700 shares of its common stock at an average per share cost of $ 116.26 .

During 2020, the Company did no t repurchase any shares of its common stock under the share repurchase program.

As of December 31, 2021, there is $ 73 million of remaining authorization for purchases under the share repurchase program.

The Company expects to fund repurchases through a combination of cash on hand, cash generated by operations and future financing transactions, if appropriate.

1 unchanged sentence

Under the share repurchase program, management is authorized to purchase shares of the Company’s common stock from time to time through open market purchases or privately negotiated transactions at prevailing prices as permitted by securities laws and other legal requirements, and subject to market conditions and other factors.

During 2022 and 2021, the Company repurchased approximately 984,000 and 234,000 shares of its common stock, respectively, at an average per share cost of $ 74.02 and $ 116.26 , respectively.

As of December 31, 2022, the Company has fully utilized its authorization under the share repurchase program.

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Offering

7 unchanged sentences

Future declaration of dividends are subject to the final determination of the Board of Directors, and will depend on, among other things, the Company’s 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 the Board of Directors may deem relevant.

The Company distributes its content offerings through two primary channels:

The majority of the Company’s customers license content directly through the Company’s self-service web properties.

E-commerce customers have the flexibility to purchase a subscription-based plan that is paid on a monthly or annual basis or to license content on a transactional basis.

The Company distributes its products through two primary channels:

The majority of the Company’s customers license content and tools directly through the Company’s self-service web properties.

E-commerce customers have the flexibility to purchase subscription-based plans that are paid on a monthly or annual basis.

Customers are also able to license content on a transactional basis.

These customers generally license content under the Company’s standard or enhanced licenses, with additional licensing options available to meet customers’ individual needs.

2 unchanged sentences

These customers benefit from communication with dedicated sales professionals, service and research teams which provide a number of tailored enhancements to their creative workflows including non-standard licensing rights, multi-seat access, ability to pay on credit terms, multi-brand licensing packages, increased indemnification protection and content licensed for use-cases outside of those available on the e-commerce platform.

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the Company’s revenue by distribution channel for the years ended December 31, 2022, 2021 and 2020 (in thousands):

6 unchanged sentences

$ 176.2 million of total revenue recognized for the year ended December 31, 2022 was reflected in deferred revenue as of January 1, 2022.

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(10) Equity-Based Compensation

The Company recognizes stock-based compensation expense for all share-based payment awards including employee stock options and RSUs granted under the 2012 Plan based on the fair value of each award on the grant date.

The Company recognizes stock-based compensation expense for all share-based payment awards including employee stock options and RSUs granted under either the 2012 Plan or the 2022 Plan based on the fair value of each award on the grant date.

The following table summarizes non-cash equity-based compensation expense, net of forfeitures, by line item included in the Company’s Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020 (in thousands):

19 unchanged sentences

The number of shares of common stock available under the 2012 Plan was automatically increased by approximately 1,093,000 and 1,087,000 shares on January 1, 2022 and 2021, respectively, pursuant to the automatic increase provisions of the 2012 Plan.

This plan expired on June 2, 2022.

2022 Omnibus Equity Incentive Plan

On June 2, 2022, the Company’s stockholders approved the 2022 Omnibus Equity Incentive Plan (the “2022 Plan”).

The 2022 Plan provides for the grant of incentive stock options to Company employees, and for the grant of non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares (collectively, “Awards”) to employees, officers, directors, consultants and advisors of the Company.

The maximum aggregate number of shares that may be issued under the 2022 Plan is 4,000,000 shares of our common stock and is subject to adjustment in connection with changes in capitalization, reorganization and change in control events.

Shares subject to Awards granted under the 2022 Plan that expire unexercised or are forfeited, will become available for future grant under 2022 Plan.

However, shares used to pay the exercise price of an Award or to satisfy the tax withholding obligations related to an Award will not

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

become available for future grant under the 2022 Plan.

Awards granted subsequent to June 2, 2022 were granted under the 2022 Plan.

Stock Option Awards

4 unchanged sentences

Options exercised ( 47,642 ) 38.39

Options canceled or expired ( 41,551 ) 39.07

Options outstanding at December 31, 2022 831,364 $ 61.32

7 unchanged sentences

The intrinsic value of stock options exercised for the years ended December 31, 2022, 2021 and 2020 was approximately $ 1.1 million, $ 3.0 million and $ 0.5 million, respectively.

The following weighted average assumptions were used in the fair value calculation for the years ended December 31, 2020 and 2019.

No stock option awards were granted during the year ended December 31, 2021.

The following weighted average assumptions were used in the fair value calculation for the year ended December 31, 2020.

No stock option awards were granted during the years ended December 31, 2022 and 2021.

Year Ended December 31,

11 unchanged sentences

In the event that the market condition remains unsatisfied upon completion of the requisite service period, no charge will be reversed.

As of December 31, 2021, the total unrecognized compensation charge related to 2012 Plan non-vested options is approximately $ 0.9 million, which is expected to be recognized through fiscal year 2023.

SHUTTERSTOCK, INC.

22 unchanged sentences

Foreign currency (loss) / gain $ ( 1,338 ) $ ( 3,303 ) $ 3,067

Interest income 137 1,190 4,221

Interest expense ( 1,336 ) — —

Other 87 ( 67 ) 1,190

1 unchanged sentence

(12) Income Taxes

The Company’s geographical breakdown of its income / (loss) before income taxes is as follows (in thousands):

The Company’s geographical breakdown of its income before income taxes is as follows (in thousands):

Year Ended December 31,

57 unchanged sentences

Gross reductions for tax positions of prior years ( 191 ) ( 158 ) ( 81 )

Gross expirations — — ( 912 )

Balance of unrecognized tax benefits at December 31 $ 13,021 $ 10,229 $ 9,592

7 unchanged sentences

The Company is currently under examination by the U.S.

Internal Revenue Service for tax year 2017 and 2018 and Wisconsin for years 2015 - 2018.

Internal Revenue Service for the tax years 2017 through 2021.

The Company is no longer subject to U.S.

federal tax examinations for years before 2017, or state and local tax examinations by tax authorities for years before 2015.

federal, state and local tax examinations by tax authorities for years before 2016.

As of December 31, 2022, the Company has $ 37.5 million in tax net operating loss carryforwards in US and foreign tax jurisdictions which are available to reduce future income taxes and the majority of this amount relates to jurisdictions with an indefinite carryforward period.

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2021, the Company has $ 38.2 million in tax net operating loss carryforwards in US and foreign tax jurisdictions which are available to reduce future income taxes and the majority of this amount relates to jurisdictions with an indefinite carryforward period.

As of December 31, 2022, the Company had approximately $ 16.5 million of undistributed earnings attributable to its foreign subsidiaries.

34 unchanged sentences

Europe 12,079 7,460

Rest of world 149 263

Rest of the world 203 149

Total long-lived tangible assets $ 54,548 $ 48,074

Included in North America is the United States, which comprises 73 % and 76 % of total long-lived tangible assets as of December 31, 2022 and 2021, respectively.

Ireland, included in Europe in the above table, accounted for 11 % of total long-lived tangible assets as of December 31, 2021.

Included in Europe is Ireland, which comprised 17 % and 11 % of total long-lived tangible assets as of December 31, 2022 and 2021, respectively.

No other country accounts for more than 10% of the Company’s long-lived tangible assets in any period presented.

2 unchanged sentences

Operating lease costs, including insignificant costs related to short-term leases, were $ 10.7 million, $ 10.2 million and $ 10.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.

The Company made cash payments for operating leases of $ 9.7 million for the year ended December 31, 2021, which were included in cash flows from operating activities within the Consolidated Statements of Cash Flows.

In addition, for the year ended December 31, 2021, the Company also recorded right-of-use assets of $ 1.4 million obtained in exchange for lease obligations.

The Company’s operating leases have a weighted average remaining lease term of 6.75 years and a weighted average discount rate of 6.1 %.

The Company made cash payments for operating leases of $ 9.4 million, $ 9.7 million and $ 10.0 million for the years ended December 31, 2022, 2021 and 2020, respectively, which were included in cash flows from operating activities within the Consolidated Statements of Cash Flows.

In addition, for the years ended December 31, 2022 and 2021, the Company recorded right-of-use assets of $ 6.0 million and $ 1.4 million, respectively, which were obtained in exchange for lease obligations.

For the years ended December 31, 2022 and 2021, the Company’s operating leases have a weighted average remaining lease term of 5.7 years and 6.8 years, respectively, and a weighted average discount rate of 6.1 %.

Balance sheet information for the Company’s leases as of December 31, 2022, is as follows:

4 unchanged sentences

Total lease liabilities $ 44,521 $ 45,330

Lease Commitments

SHUTTERSTOCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Lease Commitments

Future undiscounted lease payments for the Company’s operating lease liabilities and a reconciliation of these payments to its lease liabilities at December 31, 2022 are as follows (in thousands):

8 unchanged sentences

The Company is also party to a letter of credit as a security deposit for this leased facility, in the amount of $ 1.7 million.

Impairment of Lease and Related Assets

In the fourth quarter of 2022, the Company completed an analysis of leased-office usage and (i) ceased using certain of its office space, including two floors of its headquarters in New York City as well as (ii) abandoned certain other smaller office spaces.

This triggered the recognition of an $ 18.7 million impairment charge, of which $ 15.9 million and $ 2.8 million relates to right-of-use assets and property and equipment, respectively.

The Company calculated the fair value of the right-of-use asset and property and equipment for the impacted office spaces based on estimated future discounted cash flows using significant unobservable inputs.

These inputs include (i) the length of time necessary to market the office space and commence receiving sub-lease income, (ii) the anticipated amount of sub-lease income and tenant improvement allowances, and (iii) a discount rate incorporating risks associated with these projected cash flows.

This fair value measurement is classified as Level 3 in the fair value hierarchy.

The Company fully impaired the Right-of-use assets and Property and equipment associated with the abandoned smaller office spaces.

(16) Commitments and Contingencies

3 unchanged sentences

2023 $ 48,600

Thereafter 200

Total non-lease unconditional obligations $ 93,000

29 unchanged sentences

S-1/A 333-181376 2.2 October 5, 2012

2.3 Agreement and Plan of Merger, dated as of May 10, 2022.

8-K 001-35669 2.1 May 11, 2022

3.1 Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect.

10 unchanged sentences

10-K 001-35669 10.2 February 27, 2015

10.3 § 2012 Employee Stock Purchase Plan and Form of Subscription Agreement.

S-1/A 333-181376 10.3 June 29, 2012

10.3 § 2022 Omnibus Equity Incentive Plan and Form of Award Agreement

14A 001-35669 N/A April 21, 2022

10.4 § Shutterstock, Inc.

68 unchanged sentences

8-K 001-35669 10.1 November 18, 2019

10.23 § Employment Agreement, dated November 4, 2019, between the Company and Pietro Silvio

10.23(a) § Employment Agreement, dated November 4, 2019, between the Company and Pietro Silvio

10-Q 001-35669 10.2 July 28, 2020

10.23(b) § Separation Agreement and General Release, between the Company and Peter Silvio, dated September 1, 2022

8-K 001-35669 10.1 September 7, 2022

10.24 § Employment Agreement, dated May 8, 2022, by and between the Company and Paul J.

8-K 001-35669 10.2 May 11, 2022

10.25 § Employment Agreement, dated January 12, 2023 , by and between the Company and John Caine

8-K 001-35669 10.1 January 17, 2023

10.26 Credit Agreement, dated as of May 6, 2022, by and among Shutterstock, Inc., as borrower, certain subsidiary guarantors, certain financial institutions, as lenders, and Bank of America, N.A., as administrative agent for such lenders.

8-K 001-35669 10.1 May 11, 2022

10.27 § 2022 Nonqualified Deferred Compensation Plan

10-Q 001-35669 10.2 October 25, 2022

21.1 ** List of Subsidiaries.

20 unchanged sentences

February 14, 2023 By:

/s/ STAN PAVLOVSKY

Stan Pavlovsky

Chief Executive Officer

Each person whose individual signature appears below hereby authorizes and appoints Stan Pavlovsky and Jarrod Yahes, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his or her substitute or substitutes may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated.

Each person whose individual signature appears below hereby authorizes and appoints Paul J.

Hennessy and Jarrod Yahes, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his or her substitute or substitutes may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

1 unchanged sentence

Jonathan Oringer

/s/ STAN PAVLOVSKY Chief Executive Officer and Director (Principal Executive Officer) February 10, 2022

Stan Pavlovsky

HENNESSY Chief Executive Officer and Director (Principal Executive Officer) February 14, 2023

/s/ JARROD YAHES Chief Financial Officer (Principal Financial Officer) February 14, 2023

7 unchanged sentences

EVANS Director February 14, 2023

HENNESSY Director February 10, 2022

/s/ ALFONSE UPSHAW Director February 14, 2023

1 unchanged sentence

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 9A. Controls and Procedures