The commercial power of the internet has made it essential for businesses to have an attractive digital presence. Shutterstock (NYSE:SSTK) aims to help its customers compete effectively, with a wide array of images, videos, and other content that its clients can use to produce a premium digital experience.
Coming into Thursday's first-quarter financial report, Shutterstock investors were looking forward to seeing growth pick up steam. Despite some numbers that fell short of expectations, Shutterstock is optimistic about the longer-term strategic course it's taken.
Growth continues for Shutterstock
Shutterstock's first-quarter financials showed the steady growth that the company has delivered regularly in the recent past. Sales climbed 7% to $163.3 million, which was a bit slower than the 9% growth rate that most of those following the stock were looking to see. Adjusted net income grew 17% to $12.4 million, but even though adjusted earnings rose to $0.35 per share, that fell short of the $0.42-per-share consensus forecast among investors.
The company's numbers took a one-time hit from the fact that Shutterstock sold off its Webdam digital asset management unit during the year-ago quarter. Adjusting for the sale and for adverse currency impacts, Shutterstock said that sales would have climbed more than 11%. Moreover, Shutterstock's GAAP earnings numbers were also affected by the one-time gain from the Webdam sale, which caused net income to drop significantly in unadjusted terms.
Fundamentally speaking, Shutterstock saw continued gains in its core metrics. Paid download growth accelerated to 8%, with users downloading 47.2 million pieces of content. Revenue per download inched higher by 0.6% to $3.42 per download, and the company continued to expand its library of content. You can now find more than 260 million images and 14.3 million video clips on Shutterstock, and both figures are up about 40% year over year.
Shutterstock once again saw similar performance for both of its segments. The two units changed places in terms of growth, with the e-commerce division providing 9% sales gains compared to about an 8% rise in segment revenue from enterprise customers.
In terms of cost management, Shutterstock held its expenses in check. Operating costs were higher by 4.5%, with the company primarily blaming higher royalty payments and increased spending on marketing for the boost.
Can Shutterstock keep making progress?
Founder and CEO Jon Oringer indicated that Shutterstock is moving in the right direction. "We had a solid start to 2019," Oringer said, "with continued profitable revenue growth as well as progress on key strategic initiatives." The CEO noted that customers are having a positive response to the efforts that Shutterstock is making to enhance its content and tools.
In particular, Shutterstock focused on two key strategies. First, its localization efforts included making Shutterstock's contributor site available in 21 different languages, making sure that the company can provide content that's relevant on a global scale. At the same time, the digital content giant also launched its first brand-marketing campaign in six years. With the slogan "It's not stock, it's Shutterstock," the company hopes to differentiate itself from its rivals and emphasize the quality of its creative content.
Shutterstock maintained most of its full-year guidance, including calls for sales to come in between $685 million and $695 million, which would make its growth rate between 10% and 12%. Shutterstock also sees operating income rising by double-digit percentages to between $37 million and $47 million for the year.
Shutterstock investors didn't seem entirely pleased with the report, and the stock was down 2% in premarket trading following the announcement. Yet in the long run, if the company can keep building its library and meet the needs of its clients better than its competitors could, then Shutterstock is moving in the right direction to maintain its leadership position in delivering digital content.