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What changed in Shutterstock, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Shutterstock, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+333 added−307 removedSource: 10-K (2024-02-26) vs 10-K (2023-02-14)

Top changes in Shutterstock, Inc.'s 2023 10-K

333 paragraphs added · 307 removed · 246 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

54 edited+18 added−12 removed77 unchanged
Biggest changeThese customers generally license content under our standard or enhanced licenses, with additional licensing options available to meet customers’ individual needs. • Enterprise: We also have a base of customers with unique content, licensing and workflow needs.
Biggest changeCustomers have the flexibility to purchase a subscription-based plan that is paid on either a monthly or annual basis, or to license content on a transactional basis via these properties. Customers who engage and buy exclusively via self-serve digital properties generally license content under our standard or enhanced licenses, with additional licensing options available to meet customers’ individual needs.
We believe that another important driver of growth is the quality of the user experience we provide on our websites, especially the efficiency and speed with which our search interfaces and algorithms help customers find and download the content that they need, the degree to which our websites have been localized for our global user base, the degree to which we make use of the large quantity of data we collect about image, footage and music and search patterns, and the security of user information on our platform.
We believe that another important driver of Content revenue growth is the quality of the user experience we provide on our websites, especially the efficiency and speed with which our search interfaces and algorithms help customers find and download the content that they need, the degree to which our websites have been localized for our global user base, the degree to which we make use of the large quantity of data we collect about image, footage and music and search patterns, and the security of user information on our platform.
Over the past several years, our investments in marketing have represented a significant percentage of revenue. This spend considers, among other things, the blended average customer lifetime value across our various purchase options so we can manage customer acquisition costs and aim to achieve targeted returns.
Over the past several years, our investments in marketing have represented a significant percentage of revenue. This spend considers, among other things, the blended average customer value across our various purchase options so we can manage customer acquisition costs and aim to achieve targeted returns.
To this end, we have invested aggressively in product development and cloud-based hosting infrastructure, and we intend to continue to invest in these areas, to the extent that we can improve the customer experience and increase the efficiency with which we deploy new products and features.
To this end, we have invested in product development and cloud-based hosting infrastructure, and we intend to continue to invest in these areas, to the extent that we can improve the customer experience and increase the efficiency with which we deploy new products and features.
We also develop and continuously invest in contributor-facing web properties, which operate in 21 languages and enable individuals and creative professionals to become contributors, upload and tag content, receive feedback on their submissions from our review team, see reports on earnings and payouts, and participate in online discussion forums with other contributors, among other activities.
We also develop and continuously invest in contributor-facing web properties, which operate in 29 languages and enable individuals and creative professionals to become contributors, upload and tag content, receive feedback on their submissions from our review team, see reports on earnings and payouts, and participate in online discussion forums with other contributors, among other activities.
In addition, the Protection of Children 10 Table of Contents From Sexual Predators Act of 1998 provides for reporting and other obligations by online service providers in the area of child pornography. • The Federal Trade Commission Act and numerous state “mini-FTC” acts, which bar “deceptive” and “unfair” trade practices, including in the contexts of online advertising and representations made in privacy policies and other online representations. • The European Union General Data Protection Regulation (“GDPR”), which governs how we can collect and process the personal data of, primarily, European Union residents. • The California Consumer Privacy Act of 2018 (“CCPA”), which governs how we can collect and process the personal data of California residents.
In addition, the Protection of Children From Sexual Predators Act of 1998 provides for reporting and other obligations by online service providers in the area of child pornography. • The Federal Trade Commission Act and numerous state “mini-FTC” acts, which bar “deceptive” and “unfair” trade practices, including in the contexts of online advertising and representations made in privacy policies and other online representations. • The European Union General Data Protection Regulation (“GDPR”), which governs how we can collect and process the personal data of, primarily, European Union residents. • The California Consumer Privacy Act of 2018 (“CCPA”), which governs how we can collect and process the personal data of California residents.
A number of U.S. federal and state and foreign laws that could have an impact on our business practices and e-commerce generally have already been adopted, including, for example: • The Digital Millennium Copyright Act (the “DMCA”), which regulates digital material and created updated copyright laws to address the unique challenges of regulating the use of digital content. • The Directive on Copyright in the Digital Single Market, which governs a marketplace for copyright in the European Union. • The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 and similar laws adopted by a number of states, which regulate the format, functionality and distribution of commercial solicitation e-mails, create criminal penalties for unmarked sexually-oriented material, and control other online marketing practices. • The Children’s Online Privacy Protection Act and the Prosecutorial Remedies and Other Tools to End Exploitation of Children Today Act of 2003, which regulate the collection or use of information, and restrict the distribution of certain materials, as related to certain protected age groups.
A number of U.S. federal and state and foreign laws that could have an impact on our business practices and e-commerce generally have already been adopted, including, for example: • The Digital Millennium Copyright Act (the “DMCA”), which regulates digital material and created updated copyright laws to address the unique challenges of regulating the use of digital content. • The Directive on Copyright in the Digital Single Market, which governs a marketplace for copyright in the European Union. • The Digital Services Act, which governs the operation of online services in the European Union. 10 Table of Contents • The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 and similar laws adopted by a number of states, which regulate the format, functionality and distribution of commercial solicitation e-mails, create criminal penalties for unmarked sexually-oriented material, and control other online marketing practices. • The Children’s Online Privacy Protection Act and the Prosecutorial Remedies and Other Tools to End Exploitation of Children Today Act of 2003, which regulate the collection or use of information, and restrict the distribution of certain materials, as related to certain protected age groups.
Our contributor website operates in 21 languages and contributors can register and upload content directly through our website or within our mobile application. We use proprietary AI driven technology along with a trained team of reviewers to complete a comprehensive evaluation of all content submissions.
Our contributor website operates in 29 languages and contributors can register and upload content directly through our website or within our mobile application. We use proprietary AI driven technology along with a trained team of reviewers to complete a comprehensive evaluation of all content submissions.
Whether providing graphic design, web design, interactive design, advertising, public relations, communications or marketing materials, these professional users and teams support organizations of various sizes including the largest global agencies, large not-for-profit organizations and Fortune 500 companies. These customers may also utilize our content library, through our Computer Vision offering, to train their AI models. • Media and Broadcast Companies.
Whether providing graphic design, web design, interactive design, advertising, public relations, communications or marketing materials, these professional users and teams support organizations of various sizes including the largest global agencies, large not-for-profit organizations and Fortune 500 companies. These customers may also utilize our content library, through our data offering, to train their AI models. • Media and Broadcast Companies.
Some of our currently and potentially significant competitors include: • other online platforms that feature marketplaces for stock content such as Getty Images and its iStockphoto offering, AdobeStock, Freepik and Storyblocks; • specialized visual content companies that are established in local, content or product-specific market segments, such as Visual China Group; • providers of commercially licensable music such as Universal Music Publishing Group, Sony/ATV Music Publishing and Warner/Chappell Music; • websites focused on providing creative workflow tools such as Canva, Picsart and Bending Spoons; • websites focused on image search and discovery such as Google Images; • providers of free images, photography, music, footage and related tools; • social networking and social media services; and • commissioned photographers and photography agencies.
Some of our currently and potentially significant competitors include: • other online platforms that feature marketplaces for stock content such as Getty Images and its iStockphoto offering, AdobeStock, Freepik and Storyblocks; • specialized visual content companies that are established in local, content or product-specific market segments, such as Visual China Group; • providers of commercially licensable music such as Universal Music Publishing Group, Sony/ATV Music Publishing and Warner/Chappell Music; • websites focused on providing creative workflow tools such as Adobe, Canva, Picsart and Bending Spoons; • websites focused on image search and discovery such as Google Images; • providers of free images, photography, music, footage and related tools; • social networking and social media services, including GIF platforms such as Alphabet’s Tenor; and • commissioned photographers and photography agencies.
Contributors are notified within the contributor portal when a content submission is not approved during the review process. This notification includes an explanation of why the image was not selected for publication. We believe that this feedback is valuable to contributors and enhances the quality of future content submissions as well as our customers’ experience.
Contributors are notified within the contributor portal when a content submission is not approved during the review process. This notification includes an 7 Table of Contents explanation of why the image was not selected for publication. We believe that this feedback is valuable to contributors and enhances the quality of future content submissions as well as our customers’ experience.
Sales and Distribution Channels Our online platform provides a freely searchable collection of content that our users can license, download and incorporate into their work. We encourage all our customers to take advantage of our creative platform’s AI-Powered search capabilities, our credit card-based payment options and the immediate digital delivery of licensed content.
Our online platform provides a freely searchable collection of content that our users can license, download and incorporate into their work. We encourage all our customers to take advantage of our creative platform’s AI-Powered search capabilities, our credit card-based payment options and the immediate digital delivery of licensed content.
We continually improve upon these internal tools to enable business growth and drive efficiency. Our systems infrastructure is hosted primarily by third-party cloud hosting providers that we believe offer scalable, reliable and secure global infrastructure. We also continue to invest in our infrastructure to improve the resiliency of our sites and systems.
We continually improve upon these internal tools to enable business growth and drive efficiency. 8 Table of Contents Our systems infrastructure is hosted primarily by third-party cloud hosting providers that we believe offer scalable, reliable and secure global infrastructure. We also continue to invest in our infrastructure to improve the resiliency of our sites and systems.
Our license agreements generally cap our indemnification obligations at amounts ranging from $10,000 to $250,000, with 9 Table of Contents exceptions for certain products for which our indemnification obligations may be uncapped. We maintain commercially reasonable insurance intended to protect against the costs of intellectual property litigation and our indemnification obligations under our license agreements.
Our license agreements generally cap our indemnification obligations at amounts ranging from $10,000 to $250,000, with exceptions for certain products for which our indemnification obligations may be uncapped. We maintain commercially reasonable insurance intended to protect against the costs of intellectual property litigation and our indemnification obligations under our license agreements.
We encourage employee engagement through regular employee events, productive communication, our global recognition program and by creating a culture of belonging. Our Diversity, Equity, and Inclusion (“DEI”) goal is to build a workforce, contributor network and content library that is representative and inclusive of the diverse global community we serve.
We encourage employee engagement through regular employee events, productive communication, our global recognition program and by creating a culture of belonging. 12 Table of Contents Our Diversity, Equity, and Inclusion (“DEI”) goal is to build a workforce, contributor network and content library that is representative and inclusive of the diverse global community we serve.
Marketing An important driver of our growth is customer acquisition, which we achieve primarily through online and offline marketing efforts and directly through our sales force. Online marketing includes paid search, online display advertising, print advertising, trade shows, email marketing, direct mail, affiliate marketing, public relations, social media and partnerships.
Marketing An important driver of our growth is customer acquisition, which we achieve primarily through online and offline marketing efforts and directly through our sales force. Marketing includes search engine optimization, paid search, online display advertising, trade shows, email marketing, direct mail, affiliate marketing, public relations, social media and partnerships.
We believe continued use of third-party cloud hosting, along with improvements to our platform, allow us to further diversify 8 Table of Contents our product offerings, reach new customers and contributors around the world and enable our developers to rapidly deploy new products, features and functionality.
We believe continued use of third-party cloud hosting, along with improvements to our platform, allow us to further diversify our product offerings, reach new customers and contributors around the world and enable our developers to rapidly deploy new products, features and functionality.
Our top 25 customers in the aggregate accounted for less than 10% of our revenue in 2022. Our customers are typically classified among three categories, as follows: • Corporate Professionals and Organizations. Marketing and communications professionals incorporate licensed content in the work they produce for their organizational or clients’ business communications.
Our top 25 customers in the aggregate accounted for less than 20% of our revenue in 2023. Our customers are typically classified among three categories, as follows: • Corporate Professionals and Organizations. Marketing and communications professionals incorporate licensed content in the work they produce for their organizational or clients’ business communications.
Human Capital The Company and its consolidated subsidiaries have 1,328 full-time employees as of December 31, 2022, as compared to 1,148 as of December 31, 2021. Approximately 63% of our global workforce is located in North America and 32% are located in Europe with the remainder located in the rest of the world.
Human Capital The Company and its consolidated subsidiaries have 1,274 full-time employees as of December 31, 2023, as compared to 1,328 as of December 31, 2022. Approximately 63% of our global workforce is located in North America and 32% are located in Europe with the remainder located in the rest of the world.
Intellectual Property We protect our intellectual property through a combination of patent, trademark, copyright and domain name registrations, as well as trade secret protections. We own a portfolio of trademarks, including “Shutterstock,” “Shutterstock Editorial,” “Asset Assurance,” “Offset,” “Bigstock,” “Rex Features,” “PremiumBeat,” “TurboSquid,” “PicMonkey,” “Pattern89,” “Shotzr,” “Pond5,” “Splash News,” “Shutterstock Studios,” and “Shutterstock Editor” and their associated logos.
Intellectual Property We protect our intellectual property through a combination of patent, trademark, copyright and domain name registrations, as well as trade secret protections. We own a portfolio of trademarks, including “Shutterstock,” “Shutterstock Editorial,” “Asset Assurance,” “Offset,” “Bigstock,” “Rex Features,” “PremiumBeat,” “TurboSquid,” “PicMonkey,” “Pattern89,” “Shotzr,” “Pond5,” “Splash News,” “Giphy,” “Shutterstock Studios,” “Shutterstock Editor,” “Shutterstock.AI” and “Creative Flow” their associated logos.
We enable users to search and discover content to meet their unique needs by searching our collection and previewing our content alongside its propensity to perform and global utilization, at no cost prior to licensing.
We enable users to search and discover content to meet their unique needs by searching our collection and previewing our content alongside its propensity to perform 5 Table of Contents and global utilization, at no cost prior to licensing.
These customers benefit from communication with our dedicated sales, 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 our e-commerce platform.
These customers benefit from communication with our dedicated sales and service 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 via self-serve environments.
The CCPA, among other things, requires companies that collect personal information about California residents to make disclosures to those residents about data collection, use and sharing practices, allows residents to opt out of certain data sharing with third parties and provides a new cause of action for data breaches.
The CCPA and CPRA, among other things, requires companies that collect personal information about California residents to make disclosures to those residents about data collection, use and sharing practices, allows residents, amongst other rights, to opt out of certain data sharing with third parties and provides a private right of action for data breaches.
Further, we continue to remain subject to uncertainty related to foreign jurisdictions’ potential reactions to the TCJA, as well as evolving regulatory views and legislation regarding taxation of e-commerce businesses such as the Organization for Economic Cooperation and Development (“OECD”) Base Erosion and Profit Shifting (“BEPS”) proposals, specifically the adoption of BEPS Action II and its ancillary impacts to other areas of TCJA related laws and regulations as well as and other country specific digital tax initiatives.
Further, we continue to remain subject to uncertainty related to foreign jurisdictions’ potential reactions to the TCJA, as well as evolving regulatory views and legislation regarding taxation of e-commerce businesses such as the Organization for Economic Cooperation and Development (“OECD”) Base Erosion and Profit Shifting (“BEPS”) proposals, specifically the adoption of Pillar Two (relating to the Global Anti-Base Erosion Model Rules) and BEPS Action II (relating to hybrid mismatch arrangements) and its ancillary impacts to other areas of TCJA related laws and regulations as well as any other country specific digital tax initiatives.
Whether photographers, videographers, illustrators, designers or musicians, our community of more than 2.3 million approved contributors as of December 31, 2022 ranges from part-time enthusiasts to full-time professionals. The content contributed by our five highest-earning contributors was together responsible for less than 2% of downloads in 2022, demonstrating the depth and diversity of our contributor population.
Whether photographers, videographers, illustrators, designers or musicians, our community of contributors ranges from part-time enthusiasts to full-time professionals. The content contributed by our five highest-earning contributors was together responsible for less than 2% of downloads in 2023, demonstrating the depth and diversity of our contributor population.
Our Customers We serve a diverse array of customers across a variety of industries, organizational sizes and geographies. For the year ended December 31, 2022, over 2.3 million customers in more than 150 countries licensed revenue-generating content, with approximately 43%, 29% and 28% of revenue coming from customers in North America, Europe and the rest of the world, respectively.
Our Customers We serve a diverse array of customers across a variety of industries, organizational sizes and geographies. For the year ended December 31, 2023, over 2.0 million customers in more than 150 countries licensed revenue-generating content, with approximately 49%, 26% and 25% of revenue coming from customers in North America, Europe and the rest of the world, respectively.
Footage is often integrated into websites, social media, marketing campaigns and cinematic productions. • 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.
Footage is often integrated into websites, social media, marketing campaigns and cinematic productions. • 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 available in a variety of formats, used in a variety of industries such as advertising, media and video production, gaming, retail, education, design and architecture. • Generative AI Content - consisting of images generated from algorithms trained with high-quality, ethically sourced content.
Provided that a customer has not breached the license agreement or any other agreement with us, we will defend, indemnify, and hold a customer harmless from direct damages attributable to breaches of the express representations and warranties provided in our license agreements. From time to time, we agree to customize our license agreements with non-standard indemnification terms.
Provided that a customer has not breached the license agreement or any other agreement with us, we will defend, indemnify, and hold a customer harmless from direct damages attributable to breaches of the express 9 Table of Contents representations and warranties provided in our license agreements.
Item 1. Business. Overview Shutterstock, Inc. (referred to herein as the “Company,” “we,” “our,” and “us”) 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.
Item 1. Business. Overview Shutterstock, Inc. (referred to herein as the “Company”, “we,” “our,” and “us”) is a leading global creative platform connecting brands and businesses to high quality content. Our 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.
We also compete for contributors on the basis of several similar factors including ease and speed of the upload and content review process; the volume of customers who license their submitted content; contributor commission models and practices; the degree to which contributors are protected from legal risk; brand recognition and reputation; the effective use of technology; the global nature of our interfaces; and customer service. 11 Table of Contents The industry in which we operate is extremely competitive and rapidly evolving, with low barriers to entry.
We also compete for contributors on the basis of several similar factors including ease and speed of the upload and content review process; the volume of customers who license their submitted content; contributor commission models and practices; the degree to which contributors are protected from legal risk; brand recognition and reputation; the effective use of technology; the global nature of our interfaces; and customer service.
PremiumBeat offers exclusive high-quality music tracks and provides producers, filmmakers and marketers the ability to search handpicked production music from the world’s leading composers. Bigstock maintains a separate content library tailored for creators seeking to incorporate cost-effective imagery into their projects.
PremiumBeat offers exclusive high-quality music tracks and provides producers, filmmakers and marketers the ability to search handpicked production music from the world’s leading composers. Splash News provides editorial image and video content across celebrity 4 Table of Contents and red carpet events. Bigstock maintains a separate content library tailored for creators seeking to incorporate cost-effective imagery into their projects.
We believe that we benefit from scale and network effects between customers and contributors. We have managed to build a world class library of images, footage clips, music and 3D models, sourced from our vast network of contributors.
We offer a whole spectrum of services at pre-production, production, live production and post-production stages. Our Marketplace: We believe that we benefit from scale and network effects between customers and contributors. We have managed to build a world class library of images, footage clips, music and 3D models, sourced from our vast network of contributors.
Competition We seek to be an integral component of the creative process for our customers based on a number of factors including the quality, relevance and breadth of content; ability to source new content; accessibility of content; distribution capabilities; ease and speed of search and fulfillment; content pricing models and practices; content licensing options and the degree to which users are protected from legal risk; brand recognition and reputation; the effective use of current and emerging technology; the global nature of our interfaces and marketing efforts, including the degree of localization; and customer service.
These events could dampen growth in the use of the internet in general, and cause Shutterstock to divert significant resources and funds to addressing these issues, and possibly require us to change our business practices. 11 Table of Contents Competition We seek to be an integral component of the creative process for our customers based on a number of factors including the quality, relevance and breadth of content; ability to source new content; accessibility of content; distribution capabilities; ease and speed of search and fulfillment; content pricing models and practices; content licensing options and the degree to which users are protected from legal risk; brand recognition and reputation; the effective use of current and emerging technology; the global nature of our interfaces and marketing efforts, including the degree of localization; and customer service.
We continued our focus on building leaders' and managers' cultural competency and inclusive leadership skills, as well as building a diverse pipeline of talent by establishing relationships with diverse talent communities and achieving greater representation in our content library through our Create Fund program. 12 Table of Contents Seasonality Our operating results may fluctuate from quarter to quarter as a result of a variety of factors.
We continued our focus on building leaders' and managers' cultural competency and inclusive leadership skills, as well as building a diverse pipeline of talent by establishing relationships with diverse talent communities and achieving greater representation in our content library through our Create Fund program.
We provide valuable tools and insights to our contributors. Our contributors can monitor download activity by content type and geography. We also provide insights into trends we see with seasonal and current customer search behaviors to help our contributors plan future content submissions accordingly.
We also provide insights into trends we see with seasonal and current customer search behaviors to help our contributors plan future content submissions accordingly.
Contributors upload their content to the Company’s web properties in exchange for royalty payments based on customer download activity. Beyond content, customers also leverage the Company’s platform to assist with the entire creative process from ideation through creative execution. Our key content offerings include: • Images - consisting of photographs, vectors and illustrations.
Contributors upload their content to our web properties in exchange for royalty payments based on customer download activity. Beyond content, customers also leverage the Company’s platform to assist with the entire creative process from ideation through creative execution. Digital content licensed to our customers for their creative needs includes images, footage, music, and 3D models (our “Content” offering).
We believe the success of this network effect is facilitated by the trust that users place in Shutterstock to maintain the quality and integrity of our branded marketplace, and our commitment to seamless integration into users’ creative workflows. 4 Table of Contents We believe that our licensing model and creative platform drive a high volume of download activity that in turn provides a high volume of search, download and other customer behavioral data that enables us to continuously improve the quality and accuracy of our proprietary search algorithms, including keyword, search localization and similar image identification, and encourages the creation and contribution of new content to meet our customers’ needs.
We believe that our licensing model and creative platform drive a high volume of download activity that in turn provides a high volume of search, download and other customer behavioral data that enables us to continuously improve the quality and accuracy of our proprietary search algorithms, including keyword, search localization and similar image identification, and encourages the creation and contribution of new content to meet our customers’ needs.
The TCJA continues to be subject to further regulatory interpretation and technical corrections by the U.S. Treasury Department and the I.R.S. and therefore, the full impact of the TCJA on our tax provision may continue to evolve.
Treasury Department and the I.R.S. and therefore, the full impact of the TCJA on our tax provision may continue to evolve.
In addition, expenditures on content by customers tend to be discretionary in nature, reflecting overall economic conditions, the economic prospects of specific industries, budgeting constraints, buying patterns and a variety of other factors, many of which are outside our control, including any impacts from COVID-19.
Finally, our Data, Distribution,and Services results will fluctuate from quarter to quarter based on the satisfaction of certain agreed to milestones with our customers In addition, expenditures on content by customers tend to be discretionary in nature, reflecting overall economic conditions, the economic prospects of specific industries, budgeting constraints, buying patterns and a variety of other factors, many of which are outside our control.
This spend considers, among other things, the blended average customer lifetime value across our various purchase options so we can manage customer acquisition costs and aim to achieve targeted returns.
Over the past several years, our investments in marketing have represented a significant percentage of revenue. This spend considers, among other things, the blended average customer value across our various purchase options so we can manage customer acquisition costs and aim to achieve targeted returns.
Our content review process is highly efficient, and our content review team generally evaluates and processes images and footage within 72 hours of submission to make them available for license on our sites, while working to continually improve our process to reduce review time.
Our content review process is highly efficient, and our content review team generally evaluates and processes images and footage to make them available for license on our sites, while working to continually improve our process to reduce review time. Contributors are required to add a descriptive title and up to 50 keywords to each image and footage submission.
TurboSquid operates a marketplace that offers more than one million 3D models and a 2 dimensional (“2D”) marketplace derived from 3D objects. Our Offset brand provides authentic and exceptional content for high-impact use cases that require extraordinary images, featuring work from top assignment photographers and illustrators from around the world.
Our Offset brand provides authentic and exceptional content for high-impact use cases that require extraordinary images, featuring work from top assignment photographers and illustrators from around the world.
For example, the State of California has enacted the CCPA, which became effective in January 2020.
For example, the State of California has enacted the CCPA, which became effective in January 2020 and was extended by the California Privacy Rights Act (“CPRA”) effective January 2023.
Customers in our enterprise sales channel may also benefit from access to (i) Shutterstock Editorial, which includes our library of editorial images and videos, (ii) Shutterstock Studios, our offering which provides custom, high-quality content matched with production tools and services at scale, and (iii) Computer Vision, our offering which provides metadata associated with our content collection, used to train AI models.
Some of these additional solutions include: (i) Shutterstock Editorial, which includes our library of editorial images and videos; (ii) Shutterstock Studios, our offering which provides custom, high-quality content matched with production tools and services at scale; (iii) our data offering which provides metadata associated with our content collection, used to train AI models; and (iv) distribution and advertising revenue generated from our Giphy assets.
We provide technical keywording assistance to contributors through our suggested keyword tools, which include a tool that leverages our proprietary AI driven technology to automatically suggest keywords based on visually similar images.
We guide our contributors to provide terms that not only describe literally the objects in the image or clip, but also what is conveyed conceptually and thematically. We provide technical keywording assistance to contributors through our suggested keyword tools, which include a tool that leverages our proprietary AI driven technology to automatically suggest keywords based on visually similar images.
Our quarterly and annual results may reflect the effects of intra-period trends in customer behavior.
Seasonality Our operating results may fluctuate from quarter to quarter as a result of a variety of factors. Our quarterly and annual results may reflect the effects of intra-period trends in customer behavior.
As the use cases for our creative solutions expand, we believe our customers are seeking alternative means to consume our offerings. As a result, we have seen continued demand for our monthly subscription products, including our suite of multi-asset subscriptions, launched in 2021.
As the use cases for our creative solutions expand, we believe our customers are seeking alternative means to consume our offerings. As a result, we have seen demand for our monthly subscription products. These monthly subscriptions provide for a fixed number of content licenses that may be used to download content during the period.
Content accepted into our collection is added to our web properties where it is available for search, selection, license and download. Contributors of content typically earn a royalty each time their work is licensed. Contributors earn royalties based on 7 Table of Contents a tiered earnings rate schedule that is tied to annual licensing volume.
Content accepted into our collection is added to our web properties where it is available for search, selection, license and download. Content accepted is also made available for delivery to our data offering partners for machine learning purposes. Contributors of content typically earn a royalty each time their work is licensed.
In addition, from a taxation perspective, there are applicable and potential government regulatory matters that may impact us. In particular, certain provisions of the Tax Cuts and Jobs Act of 2017 (the “TCJA”) have had and will continue to have a significant impact on our financial position and results of operations.
In particular, certain provisions of the Tax Cuts and Jobs Act of 2017 (the “TCJA”) have had and will continue to have a significant impact on our financial position and results of operations. The TCJA continues to be subject to further regulatory interpretation and technical corrections by the U.S.
For users who need less content, individual content licenses may also be purchased on a transactional basis, paid for at the time of download. 6 Table of Contents Customers that purchase one of our monthly recurring products for a continuous period of at least three months are considered subscribers.
For users who need less content, individual content licenses may also be purchased on a transactional basis, paid for at the time of download.
The earnings tier of the contributor at the time of licensing, as well as the purchase option under which the content was licensed, are used to calculate the royalty earnings for each licensing event. Contributors may choose to remove their content from our collection, subject to the terms of service that govern our contributor relationships.
Contributors earn royalties based on a tiered earnings rate schedule that is tied to annual licensing volume. The earnings tier of the contributor at the time of licensing, as well as the purchase option under which the content was licensed, are used to calculate the royalty earnings for each licensing event.
Our offerings are distributed to customers under the following brands: Shutterstock; Pond5; TurboSquid; Offset; PremiumBeat; Bigstock; PicMonkey; and Splash News. Shutterstock, our flagship brand, includes various content types such as image, footage, music and editorial. For customers seeking specialized solutions, Shutterstock Studios extends our offerings by providing custom, high-quality content matched with production tools and services at scale.
Customers can generate images by entering a description of their desired content into model prompts. Our Content is distributed to customers under the following brands: Shutterstock; Pond5; TurboSquid; PicMonkey; PremiumBeat; Splash News; Bigstock; and Offset. Shutterstock, our flagship brand, includes various content types such as image, footage, music and editorial.
In addition, our collection of images, footage clips, music tracks and 3D models is also distributed through our Computer Vision offering which is used by large technology companies to train AI models. Pond5 is a video-first content marketplace which expands the Company’s content offerings across footage, image and music. PicMonkey is a leading online graphic design and image editing platform.
Pond5 is a video-first content marketplace which expands the Company’s content offerings across footage, image and music. TurboSquid operates a marketplace that offers more than one million 3D models and a 2 dimensional (“2D”) marketplace derived from 3D objects. PicMonkey is a leading online graphic design and image editing platform.
Online marketing includes paid search, online display advertising, print advertising, trade shows, email marketing, direct mail, affiliate marketing, public relations, social media and partnerships. Over the past several years, our investments in marketing have represented a significant percentage of revenue.
An important driver to grow Content revenue is customer acquisition, which we achieve primarily through marketing efforts and directly through our sales force. Marketing includes search engine optimization, paid search, online display advertising, trade shows, email marketing, direct mail, affiliate marketing, public relations, social media and partnerships.
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The Company also offers its content customers additional services through our Creative Flow Applications Suite (“Creative Flow”) and an Application Programming Interface (“API”) driven infrastructure to further enhance and streamline our customers’ workflow and project management needs.
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Our Content revenues represent the majority of the Company’s business and are supported by our searchable creative platform and driven by our large contributor network. In addition, our customers have needs that are beyond traditional content license products and services.
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Creative Flow consists of the Company’s suite of workflow applications that connect our content library with a powerful editing and design platform, easy-to-use collaboration tools, and artificial intelligence (“AI”) powered insights so that creatives and marketers can make, share, validate and organize their creative work all in one place.
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These include (i) licenses to metadata associated with our images, footage, music tracks and 3D models through our data offering, (ii) distribution and advertising services from our Giphy business, which consists of GIFs (graphics interchange format visuals) that serve as a critical ingredient in text- and message- based conversations and in contextual advertising settings, (iii) specialized solutions for high-quality content matched with production tools and services through Shutterstock Studios and (iv) other tailored white-glove services (collectively, our “Data, Distribution, and Services” offerings).
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Our API allows businesses to gain access to our content without leaving their platform. Through our API, content can be integrated into the platforms of our Enterprise sales channel customers and can also be distributed to end users through our partnerships with several social media, software and marketing technology platforms.
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Our Content and Data, Distribution, and Services offering revenues are as follows (in thousands): Year Ended December 31, 2023 2022 2021 Content $ 737,264 $ 789,306 $ 757,470 Data, Distribution, and Services 137,323 38,520 15,945 Total Revenue $ 874,587 $ 827,826 $ 773,415 Our Content Offering: Our Content offering includes licenses for: • Images - consisting of photographs, vectors and illustrations.
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In October 2022, Shutterstock announced our strategic partnership with OpenAI, an AI research and deployment company. In 2023, Shutterstock integrated Dall-E 2, OpenAI’s tool for AI-generated content into the Shutterstock platform to enable our customers to input keywords and generate unique images based on their specific criteria.
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For customers seeking specialized solutions, Shutterstock Studios extends our offerings by providing custom, high-quality content matched with production tools and services at scale, leveraging assets from all brands or creating new assets as required. In 2023, we launched our AI image creator and Creative AI-powered editing tool which gives our customers the ability to modify and transform any image.
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Customer sales are diversified across the following channels: • E-commerce: The majority of our customers license content directly through our self-service web properties. Customers in our e-commerce sales channel have the flexibility to purchase a subscription-based plan that is paid on either a monthly or annual basis or to license content on a transactional basis.
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The Creative AI editing suite will empower our customers to leverage signature editing capabilities to unlock transformative possibilities in content creation and ideation.
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Our range of solutions, including the depth of our API platform integrations, appeals to a broad and diverse customer base and enables us to adapt and evolve with the needs of our more high touch clients to deliver capabilities that embed deep within their workflows. 5 Table of Contents Revenues generated from each of the sales channels are as follows (in thousands): Year Ended December 31, 2022 2021 2020 E-commerce $ 501,384 $ 490,212 $ 412,521 Enterprise 326,442 283,203 254,165 Total Revenue $ 827,826 $ 773,415 $ 666,686 An important driver of our growth is customer acquisition, which we achieve primarily through online marketing efforts and directly through our sales force.
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Signature capabilities include: • Magic Brush - modifies an image by brushing over the areas customers would like to change and simply describing what customers want to add, replace or erase. • Variations - generates alternate options of any stock or AI-generated image. • Expand Image - broadens the view of any image, as easily as if zooming out through a camera lens, to see more of the scene behind the central image. • Smart Resize - automatically changes the shape of an image to match the dimensions needed. • Background Remover - removes or replaces the background with any scene when the subject of an image is perfect, but the background is not.
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These multi-asset products are credit-based and enable customers to license images, footage and music in a single subscription. Our monthly subscriptions provide for either a fixed number of content licenses or credits that may be used to download content during the period.
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Our Data, Distribution, and Services Offering: Our Data, Distribution, and Services offering address customer demand for products and services that are beyond our Content licenses. These products and services include, among other things, the use of our metadata, leveraging our Giphy, Inc. platform, and customized Shutterstock Studios offerings.
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Our quarterly number of subscribers and subscriber revenue are as follows: * Subscribers and Subscriber Revenue from acquisitions are included in these metrics beginning twelve months after the closing of the respective business combination. Accordingly, the metrics include Subscribers and Subscriber revenue from TurboSquid beginning February 2022 and from PicMonkey beginning September 2022.
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We have seen increased demand for access to our metadata for machine learning and generative artificial intelligence model training. We offer ethically sourced and licenseable metadata at industry leading scales and quality. Our metadata customer base ranges from large technology and media companies to smaller start-up organizations. In 2023, we completed our acquisition of Giphy, Inc. (“Giphy”).
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These metrics exclude the respective counts and revenues from our acquisitions of Pond5 and Splash News.
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Giphy is a content platform that allows users to personalize casual conversations with GIFs, and generates billions of monthly impressions through over 14,000 API partners. We believe customers in all industries will look to use Giphy in marketing campaigns as another advertising outlet.
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Contributors are required to add a descriptive title and up to 50 keywords to each image and footage submission. We guide our contributors to provide terms that not only describe literally the objects in the image or clip, but also what is conveyed conceptually and thematically.
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Our Data, Distribution, and Services offering also includes high-quality production and custom content at scale provided by Shutterstock Studios (“Studios”). Studios is a cost-effective solution for brands and agencies looking to meet their content needs and create fresh dynamic digital assets. Customers can bring an idea, and our Studios team will provide a 360-degree content creation solution.
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Moreover, a new privacy law passed in California, the California Privacy Rights Act (“CPRA”), which is scheduled to take effect on January 1, 2023 (with a lookback to January 1, 2022), will significantly modify the CCPA, and will impose additional data protection obligations on companies such as ours doing business in California.
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We believe the success of this network effect is facilitated by the trust that users place in Shutterstock to maintain the quality and integrity of our branded marketplace, and our commitment to seamless integration into users’ creative workflows.
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These events could dampen growth in the use of the internet in general, and cause Shutterstock to divert significant resources and funds to addressing these issues, and possibly require us to change our business practices.
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Customers generally engage with us through the following sales channels: 6 Table of Contents • Digital: The majority of our customers access and/or license content directly through our self-service digital properties.
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Customers are also able to access content they have purchased through a live interaction or as part of a large global business license option via our self-serve digital properties. • Live Sales, Services and Client Management: We also have a base of customers with unique content, licensing, workflow and service needs.
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Access to additional solutions are also made available through our sales and client management teams.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to the Coronavirus (COVID-19) Pandemic • The effect of the COVID-19 pandemic on our operations, and the operations of our customers, partners and suppliers, has had and could have a material adverse effect on our business, financial condition, cash flows and results of operations, and the extent to which the pandemic will have a continued impact remains uncertain. 14 Table of Contents Risks Related to our Intellectual Property and Security Vulnerabilities • We rely on information technologies and systems to operate our business and maintain our competitiveness, and any failures in our technology infrastructure could harm our reputation and brand and adversely affect our business. • Technological interruptions that impair access to our web properties or the efficiency of our marketplace could harm our reputation and brand and adversely affect our business and results of operations. • We face risks resulting from the content in our collection such as unforeseen costs related to infringement claims, potential liability arising from indemnification claims, changes to intellectual property content regulations and laws and the inability to prevent or monitor misuse. • Assertions by third parties of infringement of intellectual property rights related to our technology could result in significant costs and substantially harm our business and operating results. • We collect, store, process, transmit and use personally identifiable information and other data, which subjects us to governmental regulation and other legal obligations related to privacy, information security and data protection in many jurisdictions.
Biggest changeRisks Related to our Intellectual Property and Security Vulnerabilities • We rely on information technologies and systems to operate our business and maintain our competitiveness, and any failures in our technology infrastructure could harm our reputation and brand and adversely affect our business. • Technological interruptions that impair access to our web properties or the efficiency of our marketplace could harm our reputation and brand and adversely affect our business and results of operations. 14 Table of Contents • We face risks resulting from the content in our collection such as unforeseen costs related to infringement claims, potential liability arising from indemnification claims, changes to intellectual property content regulations and laws and the inability to prevent or monitor misuse. • Assertions by third parties of infringement of intellectual property rights related to our technology could result in significant costs and substantially harm our business and operating results. • We collect, store, process, transmit and use personally identifiable information and other data, which subjects us to governmental regulation and other legal obligations related to privacy, information security and data protection in many jurisdictions.
This concentration of ownership may have an effect on matters requiring the approval of our stockholders, including elections to our board of directors and transactions that are otherwise favorable to our stockholders. • Purchases of shares of our common stock pursuant to our share repurchase program may affect the value of our common stock and diminish our cash reserves, and there can be no assurance that our share repurchase program will enhance stockholder value. • If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline. • Future sales of our common stock in the public market could cause our share price to decline. • Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control of our Company and may affect the trading price of our common stock. • There can be no assurance that we will declare dividends in the future. 15 Table of Contents • We have incurred and expect to continue to incur increased costs and our management will continue to face increased demands as a result of continuously improving our operations as a public company. • If we fail to maintain an effective system of internal control over financial reporting, we may not be able to report our financial results accurately or in a timely fashion, and we may not be able to prevent fraud; in such case, our stockholders could lose confidence in our financial reporting, which would harm our business and could negatively impact the price of our stock.
This concentration of ownership may have an effect on matters requiring the approval of our stockholders, including elections to our board of directors and transactions that are otherwise favorable to our stockholders. • Purchases of shares of our common stock pursuant to our share repurchase program may affect the value of our common stock and diminish our cash reserves, and there can be no assurance that our share repurchase program will enhance stockholder value. • If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline. • Future sales of our common stock in the public market could cause our share price to decline. • Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control of our Company and may affect the trading price of our common stock. • There can be no assurance that we will declare dividends in the future. • We have incurred and expect to continue to incur increased costs and our management will continue to face increased demands as a result of continuously improving our operations as a public company. • If we fail to maintain an effective system of internal control over financial reporting, we may not be able to report our financial results accurately or in a timely fashion, and we may not be able to prevent fraud; in such case, our stockholders 15 Table of Contents could lose confidence in our financial reporting, which would harm our business and could negatively impact the price of our stock.
Bribery Act and similar laws in other jurisdictions; • compliance with foreign laws and regulations, including with respect to disclosure requirements, privacy, consumer and data protection, marketing restrictions, human rights, rights of publicity, intellectual property, technology and content; • government regulation of e-commerce and other services and restrictive governmental actions on the distribution of content, such as filtering or removal of content; • disturbances in a specific country’s or region’s political, economic or military conditions, including potential sanctions (e.g., civil, political and economic conditions in markets including but not limited to Russia, Ukraine and the Crimean peninsula); • lower levels of consumer spending in foreign countries or lack of adoption of the internet as a medium of commerce; • longer payment cycles in some countries, increased credit risk, and higher levels of payment fraud; • reduced protection for our or our contributors’ intellectual property rights in certain countries; • laws that grant rights that may conflict with our business operations; • enhanced difficulties of integrating any foreign acquisitions; • difficulty in staffing, developing, managing and overseeing foreign operations as a result of travel distance, language and cultural differences as well as infrastructure, human resources and legal compliance costs; 31 Table of Contents • difficulty enforcing contractual rights in our license agreements; • potential adverse global tax consequences, especially those that may result from the expected proactive global development of greater efforts to identify, capture and subject to income and transactional tax, e-commerce revenue earned solely via the internet; • currency exchange fluctuations, hyperinflation, or devaluation; • strains on our financial and other systems to properly comply with, and administer, VAT, withholdings, sales and other taxes; and • higher costs associated with doing business internationally.
Bribery Act and similar laws in other jurisdictions; • compliance with foreign laws and regulations, including with respect to disclosure requirements, privacy, consumer and data protection, marketing restrictions, human rights, rights of publicity, intellectual property, technology and content; • government regulation of e-commerce and other services and restrictive governmental actions on the distribution of content, such as filtering or removal of content; • disturbances in a specific country’s or region’s political, economic or military conditions, including potential sanctions (e.g., civil, political and economic conditions in markets including but not limited to Russia, Ukraine and the Crimean peninsula); • lower levels of consumer spending in foreign countries or lack of adoption of the internet as a medium of commerce; • longer payment cycles in some countries, increased credit risk, and higher levels of payment fraud; • reduced protection for our or our contributors’ intellectual property rights in certain countries; • laws that grant rights that may conflict with our business operations; • enhanced difficulties of integrating any foreign acquisitions; • difficulty in staffing, developing, managing and overseeing foreign operations as a result of travel distance, language and cultural differences as well as infrastructure, human resources and legal compliance costs; 30 Table of Contents • difficulty enforcing contractual rights in our license agreements; • potential adverse global tax consequences, especially those that may result from the expected proactive global development of greater efforts to identify, capture and subject to income and transactional tax, e-commerce revenue earned solely via the internet; • currency exchange fluctuations, hyperinflation, or devaluation; • strains on our financial and other systems to properly comply with, and administer, VAT, withholdings, sales and other taxes; and • higher costs associated with doing business internationally.
Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in litigation, damage to our reputation, lost business and proceedings or actions against us by governmental entities or others, which could impact our operating results. 32 Table of Contents Compliance with new regulations or legislation or new interpretations of existing regulations or legislation could cause us to incur additional expenses, make it more difficult to renew subscriptions automatically, require us to display specific disclaimers, require us to obtain consent from users for certain activities, make it more difficult to attract new customers, require us to implement costly security or other measures before users can utilize our services, or otherwise require us to alter our business model, or cause us to divert resources and funds to address government or private investigatory or adversarial proceedings.
Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in litigation, damage to our reputation, lost business and proceedings or actions against us by governmental entities or others, which could impact our operating results. 31 Table of Contents Compliance with new regulations or legislation or new interpretations of existing regulations or legislation could cause us to incur additional expenses, make it more difficult to renew subscriptions automatically, require us to display specific disclaimers, require us to obtain consent from users for certain activities, make it more difficult to attract new customers, require us to implement costly security or other measures before users can utilize our services, or otherwise require us to alter our business model, or cause us to divert resources and funds to address government or private investigatory or adversarial proceedings.
Our third-party service providers, including cloud service providers could be disrupted by fire, flood, power loss, telecommunications failure, earthquakes, acts of war or terrorism, acts of God, malware (including viruses and malicious software), physical or electronic break-ins and other similar events or disruptions.
Our third-party service providers, including cloud service providers could be disrupted by fire, flood, power loss, telecommunications failure, earthquakes, pandemics, acts of war or terrorism, acts of God, malware (including viruses and malicious software), physical or electronic break-ins and other similar events or disruptions.
Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of qualified sales personnel to support our growth. Our growth creates additional challenges and risks with respect to attracting, integrating and retaining qualified employees, particularly enterprise sales leadership and sales personnel.
Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of qualified sales personnel to support our growth. Our growth creates additional challenges and risks with respect to attracting, integrating and retaining qualified employees, particularly sales leadership and sales personnel.
Our corporate governance documents include provisions that: • authorize blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock; • limit the liability of, and provide indemnification to, our directors and officers; • limit the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting; 36 Table of Contents • require advance notice of stockholder proposals and the nomination of candidates for election to our board of directors; • establish a classified board of directors, as a result of which the successors to the directors whose terms have expired will be elected to serve from the time of election and qualification until the third annual meeting following their election; • require that directors only be removed from office for cause; and • limit the determination of the number of directors on our board and the filling of vacancies or newly created seats on the board to our board of directors then in office.
Our corporate governance documents include provisions that: • authorize blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock; • limit the liability of, and provide indemnification to, our directors and officers; • limit the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting; • require advance notice of stockholder proposals and the nomination of candidates for election to our board of directors; • establish a classified board of directors, as a result of which the successors to the directors whose terms have expired will be elected to serve from the time of election and qualification until the third annual meeting following their election; • require that directors only be removed from office for cause; and • limit the determination of the number of directors on our board and the filling of vacancies or newly created seats on the board to our board of directors then in office.
The use of open source software can also carry security risks arising from unknown vulnerabilities that can be exploited by malware in unanticipated ways, which can lead to disruption and / or harm to operations and protected data. 30 Table of Contents Catastrophic events or other interruptions or failures of our information technology systems could hurt our ability to effectively provide our products and services, which could harm our reputation and brand and adversely affect our business and operating results.
The use of open source software can also carry security risks arising from unknown vulnerabilities that can be exploited by malware in unanticipated ways, which can lead to disruption and / or harm to operations and protected data. 29 Table of Contents Catastrophic events or other interruptions or failures of our information technology systems could hurt our ability to effectively provide our products and services, which could harm our reputation and brand and adversely affect our business and operating results.
While we maintain insurance coverage that is designed to address certain aspects of cyber risks, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise in the event we experience a cybersecurity incident, data breach, disruption, unauthorized access or failure of systems. 27 Table of Contents Regulatory scrutiny of privacy, data collection, use of data and data protection continues to intensify both within the United States and globally.
While we maintain insurance coverage that is designed to address certain aspects of cyber risks, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise in the event we experience a cybersecurity incident, data breach, disruption, unauthorized access or failure of systems. 26 Table of Contents Regulatory scrutiny of privacy, data collection, use of data and data protection continues to intensify both within the United States and globally.
Our overall leverage and the terms of our financing arrangements could: • limit our ability to obtain additional financing in the future for working capital, capital expenditures or acquisitions, to fund growth or for general corporate purposes, even when necessary to maintain adequate liquidity; • make it more difficult for us to satisfy the terms of our debt obligations; • limit our ability to refinance our indebtedness on terms acceptable to us, or at all; 23 Table of Contents • limit our flexibility to plan for and to adjust to changing business and market conditions and increase our vulnerability to general adverse economic and industry conditions; • require us to dedicate a substantial portion of our cash flow from operations to make interest and principal payments on our debt, thereby limiting the availability of our cash flow to fund future investments, capital expenditures, working capital, business activities and other general corporate requirements; and • increase our vulnerability to adverse economic or industry conditions.
Our overall leverage and the terms of our financing arrangements could: • limit our ability to obtain additional financing in the future for working capital, capital expenditures or acquisitions, to fund growth or for general corporate purposes, even when necessary to maintain adequate liquidity; • make it more difficult for us to satisfy the terms of our debt obligations; • limit our ability to refinance our indebtedness on terms acceptable to us, or at all; • limit our flexibility to plan for and to adjust to changing business and market conditions and increase our vulnerability to general adverse economic and industry conditions; • require us to dedicate a substantial portion of our cash flow from operations to make interest and principal payments on our debt, thereby limiting the availability of our cash flow to fund future investments, capital expenditures, working capital, business activities and other general corporate requirements; and • increase our vulnerability to adverse economic or industry conditions.
We believe that the principal competitive factors in the content industry include: quality, relevance and breadth of content; the ability to source new content; content licensing options and the degree to which users are protected from legal risk; the effective use of current and emerging technology; accessibility of content, distribution capability, and speed and ease of search and fulfillment; brand recognition and reputation; customer service; availability of additional platform features, such as 16 Table of Contents workplace tools and ability to engage with additional platform features; the global nature of a company’s interfaces and marketing efforts, including local content, languages, currencies, and payment methods; and newly emerging generative AI technologies.
We believe that the principal competitive factors in the content industry include: quality, relevance and breadth of content; the ability to source new content; content licensing options and the degree to which users are protected from legal risk; the effective use of current and emerging technology; accessibility of content, distribution capability, and speed and ease of search and fulfillment; brand recognition and reputation; customer service; availability of additional platform features, such as workplace tools and ability to engage with additional platform features; the global nature of a company’s interfaces and marketing efforts, including local content, languages, currencies, and payment methods; and newly emerging generative AI technologies.
Regardless of their merit, intellectual property and indemnification claims are time-consuming, expensive to litigate or settle and cause significant diversion of management attention and could severely harm our financial condition and reputation, and adversely affect our business. 26 Table of Contents Assertions by third parties of infringement of intellectual property rights related to our technology could result in significant costs and substantially harm our business and operating results.
Regardless of their merit, intellectual property and indemnification claims are time-consuming, expensive to litigate or settle and cause significant diversion of management attention and could severely harm our financial condition and reputation, and adversely affect our business. 25 Table of Contents Assertions by third parties of infringement of intellectual property rights related to our technology could result in significant costs and substantially harm our business and operating results.
Any cybersecurity breaches or our actual or perceived failure to comply with such legal obligations by us, or by our third-party service providers or partners, could harm our business. • Cybersecurity breaches and improper access to or disclosure of data or confidential information we maintain, or hacking or phishing attacks on our systems, could expose us to liability, protracted and costly litigation and damage our reputation. • Failure to protect our intellectual property could substantially harm our business and operating results. • Much of the software and technologies used to provide our services incorporate, or have been developed with, “open source” software, which may restrict how we use or distribute our services or require that we publicly release certain portions of our source code. • Catastrophic events or other interruptions or failures of our information technology systems could hurt our ability to effectively provide our products and services, which could harm our reputation and brand and adversely affect our business and operating results.
Any cybersecurity breaches or our actual or perceived failure to comply with such legal obligations by us, or by our third-party service providers or partners, could harm our business and subject us to regulatory scrutiny. • Cybersecurity breaches and improper access to or disclosure of data or confidential information we maintain, or hacking or phishing attacks on our systems, could expose us to liability, protracted and costly litigation, disrupt our business, and damage our reputation. • Failure to protect our intellectual property could substantially harm our business and operating results. • Much of the software and technologies used to provide our services incorporate, or have been developed with, “open source” software, which may restrict how we use or distribute our services or require that we publicly release certain portions of our source code. • Catastrophic events or other interruptions or failures of our information technology systems could hurt our ability to effectively provide our products and services, which could harm our reputation and brand and adversely affect our business and operating results.
Initially, the profit allocation rule would apply only to multinational enterprises with more than €20 billion in global annual revenues and a profit margin above 10%. The revenue threshold would be reduced to €10 billion beginning seven years after the effective date of Pillar One.
Initially, the profit allocation rule would apply only to multinational enterprises with more than €20 billion in global annual revenues and a profit margin above 10%. The revenue threshold is expected to be reduced to €10 billion beginning seven years after the effective date of Pillar One.
As of December 31, 2022, we had operations based in a number of territories outside of the United States and a significant portion of our business may be transacted in currencies other than the U.S. dollar, including the euro, the British pound, the Australian dollar and the Japanese yen.
As of December 31, 2023, we had operations based in a number of territories outside of the United States and a significant portion of our business may be transacted in currencies other than the U.S. dollar, including the euro, the British pound, the Australian dollar and the Japanese yen.
Similarly, data privacy laws have been enacted in a number of jurisdictions, including, but not limited to, the European Union, Illinois and California, which regulate the collection of certain biometric data regarding individuals, including their facial images, and the use of such data, including in facial recognition systems.
Further, data privacy laws have been enacted in a number of jurisdictions, including, but not limited to, the European Union, Illinois and California, which regulate the collection of certain biometric data regarding individuals, including their facial images, and the use of such data, including in facial recognition systems.
Risks Related to Ownership of Our Common Stock • Our operating results may fluctuate, which could cause our results to fall short of expectations and our stock price to decline. • Our stock price has been and will likely continue to be volatile. • Jonathan Oringer, our founder and Executive Chairman of the Board, owns and controls approximately 32.6% of our outstanding shares of common stock, and his ownership percentage may increase, including as a result of any share repurchases pursuant to our share repurchase program.
Risks Related to Ownership of Our Common Stock • Our operating results may fluctuate, which could cause our results to fall short of expectations and our stock price to decline. • Our stock price has been and will likely continue to be volatile. • Jonathan Oringer, our founder and Executive Chairman of the Board, owns and controls approximately 31% of our outstanding shares of common stock, and his ownership percentage may increase, including as a result of any share repurchases pursuant to our share repurchase program.
Cybersecurity breaches and improper access to or disclosure of data or confidential information we maintain, or hacking or phishing attacks on our systems, could expose us to liability, protracted and costly litigation and damage our reputation.
Cybersecurity breaches and improper access to or disclosure of data or confidential information we maintain, or hacking or phishing attacks on our systems, could expose us to liability, protracted and costly litigation, business interruption, and damage our reputation.
If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose users and customers. We may also be required to expend significant capital and other resources to protect against such cybersecurity incidents to alleviate problems caused by such incidents.
If an actual or perceived breach of our security occurs, the market perception 28 Table of Contents of the effectiveness of our security measures could be harmed and we could lose users and customers. We may also be required to expend significant capital and other resources to protect against such cybersecurity incidents to alleviate problems caused by such incidents.
If our assumptions regarding these risks and uncertainties are incorrect or change, or if we do not execute on our strategy and manage these risks and uncertainties successfully, our operating results could differ materially from our expectations and those of securities analysts and investors, our business could suffer and the trading price of our common stock could decline.
If our assumptions 20 Table of Contents regarding these risks and uncertainties are incorrect or change, or if we do not execute on our strategy and manage these risks and uncertainties successfully, our operating results could differ materially from our expectations and those of securities analysts and investors, our business could suffer and the trading price of our common stock could decline.
If we experience delays or difficulties in implementing these systems, or if we otherwise do not effectively manage our growth, we may not be able to execute on our business plan, respond to competitive pressures, take advantage of market opportunities, or satisfy customer requirements, among other things.
If 36 Table of Contents we experience delays or difficulties in implementing these systems, or if we otherwise do not effectively manage our growth, we may not be able to execute on our business plan, respond to competitive pressures, take advantage of market opportunities, or satisfy customer requirements, among other things.
We rely on third parties to provide payment processing services, including the processing of credit cards and debit cards, and it could disrupt our business if these companies became unwilling or unable to provide these services to us, 22 Table of Contents including if they were to suffer a cyberattack or security incident.
We rely on third parties to provide payment processing services, including the processing of credit cards and debit cards, and it could disrupt our business if these companies became unwilling or unable to provide these services to us, including if they were to suffer a cyberattack or security incident.
Depending on the nature of the information compromised in a cybersecurity incident, data breach or disruption or unauthorized access or failure of systems compromising our customers’, contributors’ or employees’ data, we may also have obligations to notify customers, contributors, employees or governmental bodies about the incident and we may need to provide some form of remedy and compensation for the individuals affected.
Depending on the nature of the information compromised in a cybersecurity incident, data breach or disruption or unauthorized access or failure of systems compromising our customers’, contributors’ or employees’ data, we may also have obligations to notify customers, contributors, employees or governmental bodies about the incident and we may need to provide some form of mitigation and relief for the individuals affected.
We filed registration statements on Form S-8 under the Securities Act covering shares of common stock issuable pursuant to options and shares reserved for future issuance under our 2022 Omnibus Equity Incentive Plan and our 2012 Omnibus Equity Incentive Plan.
We filed registration statements on Form S-8 under the Securities Act covering shares of common stock issuable pursuant to options and shares reserved for future issuance under our 2022 Omnibus Equity Incentive Plan and our 2012 Omnibus Equity 35 Table of Contents Incentive Plan.
We are also subject to payment card association operating rules, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply.
We are also subject to payment card association operating rules, certification requirements and rules governing electronic funds transfers, and data security standards, which could change or be reinterpreted to make it difficult or impossible for us to comply.
The TCJA eliminated the exception for 37 Table of Contents performance-based compensation, other than for certain arrangements in place before November 2, 2017, and expanded the group of employees covered by the limitation under Section 162(m).
The TCJA eliminated the exception for performance-based compensation, other than for certain arrangements in place before November 2, 2017, and expanded the group of employees covered by the limitation under Section 162(m).
In addition, a breach of any of the covenants in our outstanding debt agreements or our inability to comply with the required financial ratios could result in a default under our debt instruments, including the Credit Facility.
In addition, a breach of any of the covenants in our outstanding debt 23 Table of Contents agreements or our inability to comply with the required financial ratios could result in a default under our debt instruments, including the Credit Facility.
These customers have unique content, licensing and workflow needs and we have a dedicated sales, service and research team to provide a number of enhancements to those customers’ creative workflows including non-standard licensing rights, multi-seat access, multi-brand licensing packages and content licensed for use-cases outside of those available for license on our e-commerce platform.
Our Content and Data, Distribution, and Services enterprise customers have unique content, licensing and workflow needs and we have a dedicated sales, service and research team to provide a number of enhancements to those customers’ creative workflows including non-standard licensing rights, multi-seat access, multi-brand licensing packages and content licensed for use-cases outside of those available for license on our e-commerce platform.
We have incurred debt which could have a negative impact on our financing options and liquidity position, which could in turn adversely affect our business. As of December 31, 2022, we had $50.0 million in aggregate principal amount of total debt.
We have incurred debt which could have a negative impact on our financing options and liquidity position, which could in turn adversely affect our business. As of December 31, 2023, we had $30.0 million in aggregate principal amount of total debt.
We spend a significant amount on marketing activities to acquire new customers and retain and engage existing customers. For example, in 2022, 2021 and 2020 our marketing expenses were approximately $97.2 million, $112.9 million and $81.2 million, respectively, and we expect our marketing expenses to continue to account for a significant portion of our operating expenses.
We spend a significant amount on marketing activities to acquire new customers and retain and engage existing customers. For example, in 2023, 2022 and 2021 our marketing expenses were approximately $93.1 million, $97.2 million and $112.9 million, respectively, and we expect our marketing expenses to continue to account for a significant portion of our operating expenses.
For example, in 2022, 2021 and 2020 our product and development costs (which exclude costs that are capitalized related to internal-use software development projects), were approximately $65.4 million, $52.0 million and $46.0 million, respectively, and may continue to increase in the future as we continue to innovate.
For example, in 2023, 2022 and 2021 our product and development costs (which exclude costs that are capitalized related to internal-use software development projects), were approximately $96.2 million, $65.4 million and $52.0 million, respectively, and may continue to increase in the future as we continue to innovate.
The CPRA, which will come into effect on January 1, 2023 (with a look back to January 2022), amends and expands the CCPA to add additional disclosure obligations (including an obligation to disclose retention periods or criteria for 28 Table of Contents categories of personal information), grant consumers additional rights (including rights to correct their data, limit the use and disclosure of sensitive personal information, and opt out of the sharing of personal information for certain targeted behavioral advertising purposes), and establishes a privacy enforcement agency known as the California Privacy Protection Agency (“CPPA”).
In addition, the California Privacy Rights Act (“CPRA”), which came into effect on January 1, 2023 27 Table of Contents (with a look back to January 2022), amends and expands the CCPA to add additional disclosure obligations (including an obligation to disclose retention periods or criteria for categories of personal information), grant consumers additional rights (including rights to correct their data, limit the use and disclosure of sensitive personal information, and opt out of the sharing of personal information for certain targeted behavioral advertising purposes), and establishes a privacy enforcement agency known as the California Privacy Protection Agency (“CPPA”).
As of February 10, 2023, Jonathan Oringer, our founder, Executive Chairman of the Board, and our largest stockholder, beneficially owned approximately 32.6% of our outstanding shares of common stock. This concentration of ownership may delay, deter or prevent a change in control, and may make some transactions more difficult or impossible to complete without the support of Mr.
As of February 21, 2024, Jonathan Oringer, our founder, Executive Chairman of the Board, and our largest stockholder, beneficially owned approximately 31% of our outstanding shares of common stock. This concentration of ownership may delay, deter or prevent a change in control, and may make some transactions more difficult or impossible to complete without the support of Mr.
We have registered “Shutterstock,” “Shutterstock Editorial,” “Asset Assurance,” “Offset,” “Bigstock,” “Rex Features,” “PremiumBeat,” “TurboSquid,” “PicMonkey,” “Pattern89,” “Shotzr,” “Pond5,” “Splash News,” “Shutterstock Studios” and “Shutterstock Editor” and associated logos and other marks as trademarks in the United States and other jurisdictions and we are the registered owner of the shutterstock.com, bigstock.com, offset.com, premiumbeat.com, rexfeatures.com, turbosquid.com, picmonkey.com, pond5.com and splashnews.com internet domain names and various other related domain names.
We have registered “Shutterstock,” “Shutterstock Editorial,” “Asset Assurance,” “Offset,” “Bigstock,” “Rex Features,” “PremiumBeat,” “TurboSquid,” “PicMonkey,” “Pattern89,” “Shotzr,” “Pond5,” “Splash News,” “Shutterstock Studios,” “Shutterstock Editor,” “Shutterstock.AI” and “Creative Flow,” and associated logos and other marks as trademarks in the United States and other jurisdictions and we are the registered owner of the shutterstock.com, bigstock.com, offset.com, premiumbeat.com, rexfeatures.com, turbosquid.com, picmonkey.com, pond5.com, splashnews.com and giphy.com internet domain names and various other related domain names.
For each of the years ended December 31, 2022, 2021 and 2020, approximately 60%, 66% and 67%, respectively, of our revenue was derived from customers located outside of the United States.
For each of the years ended December 31, 2023, 2022 and 2021, approximately 54%, 60% and 66%, respectively, of our revenue was derived from customers located outside of the United States.
Pillar Two would subject multinational enterprises with annual revenue of more than €750 million to a global minimum income tax at a rate of 15%. Based on current U.S. income tax law, disparities exist between the U.S. minimum income tax under GILTI and the proposed Pillar Two framework.
Pillar Two would subject multinational enterprises with annual revenue of more than €750 million to a global minimum income tax at a rate of 15%. Based on current U.S. income tax law, disparities exist between the U.S. minimum income tax under the global intangible low-taxed income (“GILTI”) rules and the proposed Pillar Two framework.
For example, our revenues increased from $666.7 million in 2020 to $773.4 million in 2021 and to $827.8 million in 2022. Our continued growth has placed significant demands on our management and our administrative, operational and financial infrastructure and our success will depend in part on our ability to manage this growth efficiently.
For example, our revenues increased from $773.4 million in 2021 to $827.8 million in 2022 and to $874.6 million in 2023. Our continued growth has placed significant demands on our management and our administrative, operational and financial infrastructure and our success will depend in part on our ability to manage this growth efficiently.
The CCPA requires, among other things, companies that collect personal information about California residents to make new disclosures to those residents about their data collection, use and sharing practices, allows residents to opt out of certain data sharing with third parties, and provides a new cause of action for data breaches.
The CCPA requires, among other things, companies that collect personal information about California residents to make new disclosures to those residents about their data collection, use and sharing practices, allows residents to exercise certain rights regarding their personal information (including the right to opt out of certain data sharing with third parties), and provides a private right of action for data breaches.
In addition, we have encountered and expect to continue to 20 Table of Contents encounter risks and uncertainties frequently experienced by growing companies in rapidly changing markets.
In addition, we have encountered and expect to continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly changing markets.
As of February 10, 2023, we had 35,841,933 shares of common stock outstanding. All shares of our common stock are freely transferable without restriction or registration under the Securities Act, except for shares held by our “affiliates,” which remain subject to the restrictions set forth in Rule 144 under the Securities Act.
As of February 21, 2024, we had 35,544,416 shares of common stock outstanding. All shares of our common stock are freely transferable without restriction or registration under the Securities Act, except for shares held by our “affiliates,” which remain subject to the restrictions set forth in Rule 144 under the Securities Act.
Additionally, our revolving credit facility has remaining borrowing capacity of $48.0 million, net of standby letters of credit, as of December 31, 2022.
Additionally, our revolving credit facility has remaining borrowing capacity of $67.0 million, net of standby letters of credit, as of December 31, 2023.
As of December 31, 2022, our allowance for doubtful accounts was $5.8 million. If the volume of sales to enterprise customers grows, we expect to increase our allowance for doubtful accounts primarily as the result of changes in the volume of sales to customers who pay on payment terms or through resellers.
If the volume of sales to enterprise customers grows, we expect to increase our allowance for doubtful accounts primarily as the result of changes in the volume of sales to customers who pay on payment terms or through resellers.
Further, following the U.K.’s formal exit from the E.U. in January 2020, we became subject to the GDPR as incorporated into U.K. law.
Further, following the U.K.’s formal exit from the E.U. in January 2020, we became subject to the GDPR as incorporated into U.K. law. Additionally, although we are making use of the E.U.
If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings. We review our goodwill for impairment annually as of October 1st, or more frequently if and when events or changes in circumstances indicate that an impairment may exist, such as a decline in stock price and market capitalization.
We review our goodwill for impairment annually as of October 1st, or more frequently if and when events or changes in circumstances indicate that an impairment may exist, such as a decline in stock price and market capitalization.
We are currently subject to and in the future may become subject to additional compliance requirements for certain of those taxes. Where appropriate, we have made accruals for those taxes, which are reflected in our consolidated financial statements. Changes in the estimates or assumptions underlying those accruals could have an adverse effect on our financial condition.
We are currently subject to and in the future may become subject to additional compliance requirements for certain of those taxes. Where appropriate, we have made accruals for those taxes, which are reflected in our consolidated financial statements.
If our competitors use their experience and resources to provide an offering that is more attractive to customers across these categories, or if our competitors innovate and provide products faster than we can, we may be unable to compete effectively and our business will be harmed.
If our competitors use their experience and resources to provide an offering that is more attractive to customers across these categories, or if our competitors innovate and provide products faster than we can, we may be unable to compete effectively and our business will be harmed. 16 Table of Contents Many of our competitors have or may obtain significantly greater financial, marketing or other resources or greater brand awareness than we have.
Assembly Bill 5 is subject to ongoing scrutiny and amendments. In addition, independent workers have been the subject of widespread national discussion and it is possible that other jurisdictions may enact laws similar to Assembly Bill 5 or that otherwise impact our business and our relationships with independent third parties.
In addition, independent workers have been the subject of widespread national discussion and it is possible that other jurisdictions may enact laws similar to Assembly Bill 5 or that otherwise impact our business and our relationships with independent third parties. As a result, there is significant uncertainty regarding the future of the worker classification regulatory landscape.
Since 2015, the reported high and low sales prices per share of our common stock have ranged from $25.44 to $128.36 through February 10, 2023.
The trading price of our common stock has fluctuated and may continue to fluctuate substantially. Since 2015, the reported high and low sales prices per share of our common stock have ranged from $25.44 to $128.36 through February 21, 2024.
Repurchases of our shares could increase (or reduce the size of any decrease in) the market price of our common stock at the time of such repurchases. Our board has the right to amend or suspend the share repurchase program at any time or terminate the share repurchase program upon a determination that termination would be in our best interests.
Our board has the right to amend or suspend the share repurchase program at any time or terminate the share repurchase program upon a determination that termination would be in our best interests.
This could lead to more variability in operating results and could have a material adverse effect on our business, operating results, and financial condition. While we believe that there are obstacles to creating a meaningful network effect between customers and contributors, the barriers to creating a platform that allows for the licensing of content or provides workflow tools are low.
While we believe that there are obstacles to creating a meaningful network effect between customers and contributors, the barriers to creating a platform that allows for the licensing of content or provides workflow tools are low.
The loss of any key engineering, product development, marketing or sales personnel and our inability to implement a succession plan or find suitable replacements for any of these individuals could disrupt our operations and have an adverse effect on our business. 21 Table of Contents Our continued and future success is also dependent, in part, on our ability to identify, attract, retain and motivate highly skilled technical, managerial, product development, marketing, content operations and customer service personnel and to preserve the key aspects of our corporate culture.
Our continued and future success is also dependent, in part, on our ability to identify, attract, retain and motivate highly skilled technical, managerial, product development, marketing, content operations and customer service personnel and to 21 Table of Contents preserve the key aspects of our corporate culture.
The CPPA will serve as California’s chief privacy regulator, which will likely result in greater regulatory activity and enforcement in the privacy area. Other states have also considered or are considering privacy laws similar to the CCPA.
The CPPA will serve as California’s chief privacy regulator, which will likely result in greater regulatory activity and enforcement in the privacy area.
This could also trigger certain change in control provisions in our employment agreements and agreements relating to certain outstanding equity awards. 35 Table of Contents Purchases of shares of our common stock pursuant to our share repurchase program may affect the value of our common stock and diminish our cash reserves, and there can be no assurance that our share repurchase program will enhance stockholder value.
Purchases of shares of our common stock pursuant to our share repurchase program may affect the value of our common stock and diminish our cash reserves, and there can be no assurance that our share repurchase program will enhance stockholder value.
As a result, there is significant uncertainty regarding the future of the worker classification regulatory landscape. From time to time, we may be involved in lawsuits and claims that assert that certain independent contractors should be classified as our employees.
From time to time, we may be involved in lawsuits and claims that assert that certain independent contractors should be classified as our employees.
Therefore, we are subject to the third-party resellers’ ability to collect and remit payment to us. We evaluate the credit-worthiness of new customers and resellers and perform ongoing financial condition evaluations of our existing customers and resellers; however, there can be no assurance that our allowances for uncollected accounts receivable balances will be sufficient.
We evaluate the credit-worthiness of new customers and resellers and perform ongoing financial condition evaluations of our existing customers and resellers; however, there can be no assurance that our allowances for uncollected accounts receivable balances will be sufficient. As of December 31, 2023, our allowance for doubtful accounts was $6.3 million.
Additionally, the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination and security of data.
Five other states (Delaware, Iowa, New Jersey, Tennessee and Indiana) have similar comprehensive data privacy laws set to become effective by 2026. Additionally, the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination and security of data.
These fluctuations could cause our stockholders to lose all or part of their investment in our common stock since they may be unable to sell their shares at or above the price at which they purchased such shares. 34 Table of Contents The trading price of our common stock depends on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance.
The trading price of our common stock depends on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance.
Many of our competitors have or may obtain significantly greater financial, marketing or other resources or greater brand awareness than we have. Some of these competitors may be able to respond more quickly to new or expanding technology and devote more resources to product development, marketing or content acquisition than we can.
Some of these competitors may be able to respond more quickly to new or expanding technology and devote more resources to product development, marketing or content acquisition than we can. This could lead to more variability in operating results and could have a material adverse effect on our business, operating results, and financial condition.
Further, under the Inflation Reduction Act of 2022, a 1% excise tax is imposed on the fair market value of certain net stock purchases, which could increase the cost of repurchasing shares of our common stock. There can be no assurance that any share repurchases will enhance stockholder value, as the market price of our common stock may nevertheless decline.
Further, under the Inflation Reduction Act of 2022, a 1% excise tax is imposed on the fair market value of certain stock repurchases at the time of such repurchases, which could increase the cost of repurchasing shares of our common stock.
Jonathan Oringer, our founder and Executive Chairman of the Board, owns and controls approximately 32.6% of our outstanding shares of common stock, and his ownership percentage may increase, including as a result of any share repurchases pursuant to our share repurchase program.
Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business. 34 Table of Contents Jonathan Oringer, our founder and Executive Chairman of the Board, owns and controls approximately 31% of our outstanding shares of common stock, and his ownership percentage may increase, including as a result of any share repurchases pursuant to our share repurchase program.
A portion of these customers typically purchase our products on payment terms, and therefore we assume a credit risk for non-payment in the ordinary course of business. Further, in certain jurisdictions, we contract with third-party resellers that may collect payment from customers and remit such payment to us.
The non-payment or late payments of amounts due to us from certain customers may negatively impact our financial condition. A portion of our enterprise customers typically purchase our products on payment terms, and therefore we assume a credit risk for non-payment in the ordinary course of business.
Technological interruptions could result in a breach of such agreements and subject us to considerable penalties and could cause our customers to believe our service is unreliable, causing harm to our business, reputation and financial condition. 25 Table of Contents We face risks resulting from the content in our collection such as unforeseen costs related to infringement claims, potential liability arising from indemnification claims, changes to intellectual property content regulations and laws and the inability to prevent or monitor misuse.
We face risks resulting from the content in our collection such as unforeseen costs related to infringement claims, potential liability arising from indemnification claims, changes to intellectual property content regulations and laws and the inability to prevent or monitor misuse.
Risks Related to Ownership of Our Common Stock Our operating results may fluctuate, which could cause our results to fall short of expectations and our stock price to decline. Our revenue and operating results could vary significantly from quarter to quarter and year to year due to a variety of factors, many of which are outside our control.
Our revenue and operating results could vary significantly from quarter to quarter and year to year due to a variety of factors, many of which are outside our control. As a result, comparing our operating results on a period to period basis may not be meaningful.
As a result, comparing our operating results on a period to period basis may not be meaningful. Because of the risks described in this “Risk Factors” section and others, it is possible that our future results may be below our expectations and the expectations of analysts and investors.
Because of the risks described in this “Risk Factors” section and others, it is possible that our future results may be below our expectations and the expectations of analysts and investors. In such an event, the price of our common stock may decline significantly. Our stock price has been and will likely continue to be volatile.
Wayfair, Inc. , has, and will continue to, significantly increase the effort, resources and costs associated with the collection and compliance burden for sales tax.
We continue to evaluate the impact, if any, of the imposition of sales tax on customer demand for our products and results of operations. Recent legislation has, and will continue to, significantly increase the effort, resources and costs associated with the collection and compliance burden for sales tax.
Even a disruption as brief as a few minutes could have a negative impact on our marketplace activities and could result in a loss of revenue. Because some of the causes of system interruptions may be outside of our control, we may not be able to remedy such interruptions in a timely manner, or at all.
Even a disruption as brief as a few minutes could have a negative impact on our marketplace activities and could result in a loss of revenue. To date we have not had any material disruptions.
As of December 31, 2022, there was no remaining authorization for purchases under the share repurchase program. Our board may authorize additional purchases at any time. The timing and amount of any share repurchases will be determined based on market conditions, share price and other factors, and we are not obligated to repurchase any shares.
The timing and amount of any share repurchases will be determined based on market conditions, share price and other factors, and we are not obligated to repurchase any shares. Repurchases of our shares could increase (or reduce the size of any decrease in) the market price of our common stock at the time of such repurchases.
Pursuant to our share repurchase program which was publicly announced in November 2015, we were authorized to repurchase up to $100 million of our outstanding common stock. In February 2017, our Board authorized us to repurchase up to an additional $100 million of our outstanding common stock.
Pursuant to our share repurchase program which was publicly announced in June 2023, we were authorized to repurchase up to $100 million of our outstanding common stock. As of December 31, 2023, there was $71.8 million remaining authorization for purchases under the share repurchase program. Our board may authorize additional purchases at any time.
We are also subject to, or voluntarily comply with, several other laws and regulations relating to money laundering, international money transfers, privacy and information security and electronic fund transfers. If we were found to be in violation of applicable laws or regulations, we could be subject to civil and criminal penalties or forced to cease our operations.
If we were found to be in violation of applicable laws or regulations, we could be subject to civil and criminal penalties or forced to cease our operations. If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings.
We do not currently carry insurance against this risk. Although we have historically experienced minimal impact to our financial statements from credit card fraud, we may experience expense as a result of our failure to adequately control fraudulent credit.
Although we have historically experienced minimal impact to our financial statements from credit card fraud, we may experience expense as a result of our failure to adequately control fraudulent credit. 22 Table of Contents We are also subject to, or voluntarily comply with, several other laws and regulations relating to money laundering, international money transfers, privacy and information security and electronic fund transfers.
In addition, we have entered into service level agreements with some of our larger customers and strategic partners.
Because some of the causes of system interruptions may be outside of our control, we may not be able to remedy such interruptions in a timely manner, or at all. In addition, we have entered into service level agreements with some of our larger 24 Table of Contents customers and strategic partners.
Such legislation could increase our global effective tax rate and have a material effect on our financial position and results of operations. To prevent double taxation as a result of the profit allocation rule, the multilateral convention would require the removal of all existing digital services taxes and prohibit the introduction of new digital services taxes.
Since various jurisdictions have already enacted or are considering enacting digital services taxes, which could lead to inconsistent and potentially overlapping tax regimes as a result of the profit allocation rule under Pillar One, the multilateral convention would require the removal of existing digital services taxes and prohibit the introduction of new digital services taxes.
Fiscal authorities in many foreign jurisdictions have increased their scrutiny of the potential taxation of e-commerce businesses. On October 8, 2021, the OECD announced that over 130 countries had reached a two-pillar agreement to address tax challenges presented by the digitalization of the global economy.
Fiscal authorities in many foreign jurisdictions have increased their scrutiny of the potential taxation of e-commerce businesses.
To assist in the implementation of Pillar Two, the OECD published detailed model legislation on December 20, 2021, and related 33 Table of Contents commentary on March 14, 2022. The participating countries are expected to implement the OECD’s two-pillar agreement by entering into a multilateral convention and enacting domestic legislation by 2024.
To assist in the implementation of Pillar Two, the OECD published the Global Anti-Base Erosion Model Rules, a detailed model legislation in December 2021, and related commentary in March 2022. The OECD has released additional administrative guidance on the global minimum income tax in February, July and December of 2023.
We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.
We may be the target of this type of litigation in the future.
Removed
Customers in our Enterprise sales channel provided approximately 39%, 37% and 38% of our revenues in 2022, 2021 and 2020, respectively.
Added
The loss of any key engineering, product development, marketing or sales personnel and our inability to implement a succession plan or find suitable replacements for any of these individuals could disrupt our operations and have an adverse effect on our business.
Removed
Under the new test, an individual is considered an employee under the California Wage Orders unless the hiring entity establishes three criteria: (i) the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of such work and in fact; (ii) the worker performs work that is outside the usual course of the hiring entity’s business; and (iii) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.
Added
Further, in certain jurisdictions, we contract with third-party resellers that may collect payment from customers and remit such payment to us. Therefore, we are subject to the third-party resellers’ ability to collect and remit payment to us.
Removed
The non-payment or late payments of amounts due to us from certain customers may negatively impact our financial condition. Our revenue generated through sales to enterprise customers represented approximately 39% of our total revenue for the year ended December 31, 2022 and approximately 37% of our total revenue for the year ended December 31, 2021.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAdditionally, we have other office facilities in the United States and abroad related to, among other things, sales and marketing support, technology services and customer service under operating lease agreements that expire on various dates during the period from 2023 through 2029.
Biggest changeAdditionally, we have other office facilities in the United States and abroad related to, among other things, sales and marketing support, technology services and customer service under operating lease agreements that expire on various dates during the period from 2024 through 2029.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn addition, in the ordinary course of our business, we are also subject to periodic threats of lawsuits, investigations and claims. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. 38 Table of Contents Item 4.
Biggest changeIn addition, in the ordinary course of our business, we are also subject to periodic threats of lawsuits, investigations and claims. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. Item 4. Mine Safety Disclosures Not applicable. 39 Table of Contents PART II
Removed
Mine Safety Disclosures Not applicable. 39 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe dividend policy may be suspended or canceled at the discretion of our Board of Directors at any time. Issuer Purchases of Equity Securities We did not acquire any shares of our common stock during the three months ended December 31, 2022.
Biggest changeThe dividend policy may be suspended or canceled at the discretion of our Board of Directors at any time.
Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, this number is not indicative of the total number of stockholders represented by these stockholders of record. Unregistered Sales of Equity Securities We did not sell any unregistered equity securities during the year ended December 31, 2022 .
Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, this number is not indicative of the total number of stockholders represented by these stockholders of record. Unregistered Sales of Equity Securities We did not sell any unregistered equity securities during the year ended December 31, 2023 .
Equity Compensation Plan Information 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. 40 Table of Contents 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.
Equity Compensation Plan Information The information required by this item is incorporated by reference to our Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2023. 41 Table of Contents 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.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed on the New York Stock Exchange, or the NYSE, under the symbol “SSTK.” Stockholders As of February 10, 2023, there were 3 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed on the New York Stock Exchange, or the NYSE, under the symbol “SSTK.” Stockholders As of February 21, 2024, there were 3 holders of record of our common stock.
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from 12/31/2017 to 12/31/2022. 12/2017 12/2018 12/2019 12/2020 12/2021 12/2022 Shutterstock, Inc. 100.00 88.58 105.48 179.00 279.18 134.81 NYSE Composite 100.00 91.05 114.28 122.26 147.54 133.75 S&P Software & Services Select Industry 100.00 95.62 125.72 148.85 191.58 156.89 The stock price performance included in this graph is not necessarily indicative of future stock price performance.
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from 12/31/2018 to 12/31/2023. 12/2018 12/2019 12/2020 12/2021 12/2022 12/2023 Shutterstock, Inc. 100.00 119.08 202.07 315.16 152.18 142.39 NYSE Composite 100.00 125.51 134.28 162.04 146.89 167.12 S&P Software & Services Select Industry 100.00 135.93 207.60 224.16 147.51 204.92 The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Added
Issuer Purchases of Equity Securities In October 2015, our board of directors approved a share repurchase program, authorizing us to repurchase up to $100 million of our common stock and in February 2017, our Board of Directors approved an increase to the share repurchase program (collectively, the “2015 and 2017 Share Repurchase Programs”), authorizing us to repurchase up to an additional $100 million of our outstanding common stock.
Added
As of December 31, 2022, we have fully utilized our authorization for repurchases under the 2015 and 2017 Share Repurchase Programs. In June 2023, our Board of Directors approved a share repurchase program (the “2023 Share Repurchase Program”), providing authorization to repurchase up to $100 million of our common stock.
Added
During the year ended December 31, 2023, we repurchased approximately 634,500 shares of our common stock at an average per share cost of $44.45 and as of December 31, 2023, we had $71.8 million of remaining authorization for purchases under the 2023 Share Repurchase Program.
Added
The table below presents shares of our common stock which we acquired during the three months ended December 31, 2023: 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, 2023 — $ — — November 1 - 30, 2023 106,787 44.96 106,787 December 1 - 31, 2023 96,381 45.66 96,381 203,168 $ 45.29 203,168 $ 71,794,311 _______________________________________________________________________________ 40 Table of Contents (1) We purchased shares of our common stock in open market purchases pursuant to share repurchases authorized by our Board of Directors.
Added
In June 2023, our Board of Directors authorized the repurchase of up to $100 million of our common stock. As of December 31, 2023, $71.8 million remained available for purchase under this authorization. We expect to fund future repurchases, if any, through a combination of cash on hand, cash generated by operations and future financing transactions, if appropriate.
Added
Accordingly, our share repurchase program is subject to us having available cash to fund repurchases.
Added
Under the share repurchase program, management is authorized to purchase shares of our 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.
Added
As of December 31, 2023, in total we have repurchased approximately 4.4 million shares of our common stock under the 2015 and 2017 Share Repurchase Programs and the 2023 Share Repurchase Program at an average per-share cost of $51.74.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

104 edited+40 added−24 removed72 unchanged
Biggest changeThe 2021 effective tax rate differs from the U.S. federal statutory rate primarily due to the foreign-derived intangible income deduction and the impact of a capital loss transaction. 49 Table of Contents Comparison of the Years Ended December 31, 2021 and December 31, 2020 The following table presents our results of operations for the periods indicated: Year Ended December 31, 2021 2020 $ Change % Change (in thousands) Consolidated Statements of Operations Data: Revenue $ 773,415 $ 666,686 $ 106,729 16 % Operating expenses: Cost of revenue 277,659 259,573 18,086 7 Sales and marketing 204,878 159,241 45,637 29 Product development 52,014 46,038 5,976 13 General and administrative 130,758 116,568 14,190 12 Total operating expenses 665,309 581,420 83,889 14 Income from operations 108,106 85,266 22,840 27 Other (expense) / income, net (3,370) 4,257 (7,627) (179) Income before income taxes 104,736 89,523 15,213 17 Provision for income taxes 12,853 17,757 (4,904) (28) Net income $ 91,883 $ 71,766 $ 20,117 28 % Revenue Revenue increased by $106.7 million, or 16%, to $773.4 million in 2021 as compared to 2020.
Biggest changeYear Ended December 31, 2023 2022 2021 (in thousands) Consolidated Statements of Operations: Revenue $ 874,587 $ 827,826 $ 773,415 Operating expenses: Cost of revenue 352,630 314,306 277,659 Sales and marketing 214,749 203,154 204,878 Product development 96,162 65,434 52,014 General and administrative 142,646 132,644 130,758 Impairment of lease and related assets — 18,664 — Total operating expenses 806,187 734,202 665,309 Income from operations 68,400 93,624 108,106 Bargain purchase gain 50,261 — — Other income / (expense), net 3,807 (2,587) (3,370) Income before income taxes 122,468 91,037 104,736 Provision for income taxes 12,199 14,934 12,853 Net income $ 110,269 $ 76,103 $ 91,883 The following table presents the components of our results of operations for the periods indicated as a percentage of revenue: Year Ended December 31, 2023 2022 2021 Consolidated Statements of Operations: Revenue 100 % 100 % 100 % Operating expenses: Cost of revenue 40 % 38 % 36 % Sales and marketing 25 % 25 % 26 % Product development 11 % 8 % 7 % General and administrative 16 % 16 % 17 % Impairment of lease and related assets — % 2 % — % Total operating expenses 92 % 89 % 86 % Income from operations 8 % 11 % 14 % Bargain purchase gain 6 % — % — % Other income / (expense), net — % — % — % Income before income taxes 14 % 11 % 14 % Provision for income taxes 1 % 2 % 2 % Net income 13 % 9 % 12 % 48 Table of Contents Comparison of the Years Ended December 31, 2023 and December 31, 2022 The following table presents our results of operations for the periods indicated: Year Ended December 31, 2023 2022 $ Change % Change (in thousands) Consolidated Statements of Operations Data: Revenue $ 874,587 $ 827,826 $ 46,761 6 % Operating expenses: Cost of revenue 352,630 314,306 38,324 12 Sales and marketing 214,749 203,154 11,595 6 Product development 96,162 65,434 30,728 47 General and administrative 142,646 132,644 10,002 8 Impairment of lease and related assets — 18,664 (18,664) * Total operating expenses 806,187 734,202 71,985 10 Income from operations 68,400 93,624 (25,224) (27) Bargain purchase gain 50,261 — 50,261 * Other income / (expense), net 3,807 (2,587) 6,394 (247) Income before income taxes 122,468 91,037 31,431 35 Provision for income taxes 12,199 14,934 (2,735) (18) Net income $ 110,269 $ 76,103 $ 34,166 45 % * Not meaningful Revenue Revenue increased by $46.8 million, or 6%, to $874.6 million in 2023 as compared to 2022.
We expect product development expenses, of which a portion will be capitalized, to continue in the foreseeable future, as we pursue opportunities to invest in developing new products and internal tools and enhance the functionality of our existing products and technologies. General and Administrative.
We expect product development expenses, of which a portion will be capitalized, to continue in the foreseeable future, as we pursue opportunities to invest in developing new products and internal tools and enhance the functionality of our existing products and technologies. General and Administrative.
Cash used in investing activities for the year ended December 31, 2021 was $250.4 million, consisting primarily (i) $181.6 million cash used in the acquisitions of TurboSquid and PicMonkey, net of cash acquired; (ii) $31.6 million cash used in the asset acquisitions of Pattern89, Inc., Datasine Limited and assets from Shotzr, Inc.; (iii) capital expenditures of $28.1 million for internal-use software and website development costs, and purchase of software and equipment, and (iv) $8.9 million to acquire the rights to distribute certain digital content in perpetuity.
Cash used in investing activities for the year ended December 31, 2021 was $250.4 million, consisting primarily of (i) $181.6 million cash used in the acquisitions of Turbosquid and PicMonkey, net of cash acquired; (ii) $31.6 million cash used in the asset acquisitions of Pattern89, Inc., Datasine Limited and assets from Shotzr, Inc.; (iii) capital expenditures of $28.1 million for internal-use software and website development costs, and purchase of software and equipment, and (iv) $8.9 million to acquire the rights to distribute certain digital content in perpetuity.
Collectability for customers who pay on credit terms allowing for payment beyond the date at which service commences, is based on a credit evaluation for certain new customers and transaction history with existing customers.
Collectability for customers who pay on credit terms allowing for payment beyond the date at which service commences, is based on a credit evaluation for certain new customers and transaction history with existing customers.
This increase was primarily driven by (i) $4.3 million in professional fees related to our acquisitions of Pond5 and Splash News, (ii) $3.6 million increase in bad debt expense; (iii) $1.8 million related to realized foreign currency losses, (iii) $1.6 million in severance costs associated with a strategic workforce optimization initiative; and (iv) $1 million related to a donation to provide direct assistance to Shutterstock’s contributors in Ukraine.
This increase was primarily driven by (i) $4.3 million in professional fees related to our acquisitions of Pond5 and Splash News, (ii) $3.6 million increase in bad debt expense; (iii) $1.8 million related to realized foreign currency losses, (iv) $1.6 million in severance costs associated with a strategic workforce optimization initiative; and (v) $1 million related to a donation to provide direct assistance to Shutterstock’s contributors in Ukraine.
In the years ended December 31, 2022 and 2021, we delivered 173.3 million and 180.0 million paid downloads, respectively, and our revenue per download was $4.40 in 2022 compared to $4.16 in 2021. During 2022, the 6% increase in revenue per download, is primarily due to changes in product mix coupled with a reduction in paid download volumes.
In the years ended December 31, 2022 and 2021, we delivered 173.3 million and 180.0 million paid downloads, respectively, and our revenue per download was $4.40 in 2022, as compared to $4.16 in 2021. During 2022, the 6% increase in revenue per download is primarily due to changes in product mix coupled with a reduction in paid download volumes.
We define customers as total active, paying customers that contributed to total revenue over the last twelve-month period. Changes in our average revenue per customer will be driven by changes in the mix of our subscription-based products and the pricing in our transactional business.
We define customers as total active, paying customers that contributed to total revenue over the last twelve-month period. Changes in our average revenue per customer will be driven by changes in the mix of our subscription-based and transactional products as well as pricing in our transactional business.
Contributors earn royalties based on our published earnings schedule that is based on annual licensing volume, which determines the contributor’s earnings tier and the purchase option under which the content was licensed.
Content contributors generally earn royalties based on our published earnings schedule that is based on annual licensing volume, which determines the contributor’s earnings tier and the purchase option under which the content was licensed.
Cash used in investing activities for the year ended December 31, 2022 was $275.6 million, consisting primarily of (i) $211.8 million cash used in the acquisitions of Pond5 and Splash News, net of cash acquired; (ii) capital expenditures of $43.3 million for internal-use software and website development costs, and purchases of software and equipment, and (iii) $16.8 million paid to acquire the rights to distribute certain digital content in perpetuity.
Cash used in investing activities for the year ended December 31, 2022 was $275.6 million, consisting primarily (i) $211.8 million cash used in the acquisitions of Pond5 and Splash News, net of cash acquired; (ii) capital expenditures of $43.3 million for internal-use software and website development costs, and purchase of software and equipment, and (iii) $16.8 million paid to acquire the rights to distribute certain digital content in perpetuity.
We have elected to treat any potential GILTI inclusions as a period cost. 58 Table of Contents Acquisitions Business combinations are recorded at fair value and the purchase price is allocated to the assets acquired and liabilities assumed in the transaction. Assets acquired may include intangible assets such as customer relationships, trade names, developed technology and contributor content.
We have elected to treat any potential GILTI inclusions as a period cost. 60 Table of Contents Acquisitions Business combinations are recorded at fair value and the purchase price is allocated to the assets acquired and liabilities assumed in the transaction. Assets acquired may include intangible assets such as customer relationships, trade names, developed technology and contributor content.
See Notes 15 and 16 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for information regarding our lease and other non-lease commitments, respectively, as of December 31, 2022. Cash Flows The following table summarizes our cash flow data for 2022, 2021 and 2020, respectively.
See Notes 15 and 16 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for information regarding our lease and other non-lease commitments, respectively, as of December 31, 2023. Cash Flows The following table summarizes our cash flow data for 2023, 2022 and 2021, respectively.
Additionally, management believes that adjusted EBITDA, adjusted EBITDA margin, adjusted net income and adjusted net income per diluted common share provide useful information 54 Table of Contents 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.
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.
Our 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.
Our 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 our web properties in exchange for royalty payments based on customer download activity.
We believe subscriber revenue, together with our number of subscribers, provide insight into the portion of our business and growth driven by our monthly recurring products. Average Revenue Per Customer Average revenue per customer is calculated by dividing total revenue for the last twelve-month period by customers.
We believe subscriber revenue, together with our number of subscribers, provide insight into the portion of our business driven by our monthly recurring products. Average Revenue Per Customer Average revenue per customer is calculated by dividing total revenue for the last twelve-month period by customers.
Valuation allowances are established when necessary to reduce net deferred tax assets to the amount expected to be realized. 46 Table of Contents Results of Operations The following table presents our results of operations for the periods indicated. The period-to-period comparisons of results are not necessarily indicative of results for future periods.
Valuation allowances are established when necessary to reduce net deferred tax assets to the amount expected to be realized. 47 Table of Contents Results of Operations The following table presents our results of operations for the periods indicated. The period-to-period comparisons of results are not necessarily indicative of results for future periods.
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.
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 56 Table of Contents 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.
Cash used in financing activities during 2021 primarily consisted of (i) $30.7 million, related to the payment of the quarterly cash dividend; (ii) $26.5 million in connection with the repurchase of common stock under our share repurchase program, and (iii) $22.7 million, paid in settlement of tax withholding obligations related to employee stock-based compensation awards.
Cash used in financing activities during 2021 primarily consisted of (i) $30.7 million related to the payment of the quarterly cash dividend; (ii) $26.5 million in connection with the repurchase of common stock under our share repurchase 55 Table of Contents program, and (iii) $22.7 million, paid in settlement of tax withholding obligations related to employee stock-based compensation awards.
Cost of revenue increased by $36.6 million, or 13%, to $314.3 million in 2022 as compared to 2021. As a percent of revenue, cost of revenues increased to 38% for the year ended December 31, 2022, from 36% for 2021.
Cost and Expenses Cost of Revenue. Cost of revenue increased by $36.6 million, or 13%, to $314.3 million in 2022 as compared to 2021. As a percent of revenue, cost of revenues increased to 38% for the year ended December 31, 2022, from 36% for 2021.
As we increase the volume of business transacted in foreign currencies resulting from international expansion and as currency rates fluctuate, we expect foreign currency gains and losses to continue to fluctuate. During 2021, other expense, net substantially consisted of $3.3 million of expense due to foreign currency fluctuations. Income Taxes.
As we increase the volume of business transacted in foreign currencies resulting from international expansion and as currency rates fluctuate, we expect foreign currency gains and losses to continue to fluctuate. During 2021, other expense, net substantially consisted of $3.3 million of expense due to foreign currency fluctuations. 52 Table of Contents Income Taxes.
Content licenses are generally purchased by our customers on a monthly or annual subscription 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.
Content licenses are generally purchased on a monthly or annual subscription 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.
Changes in revenue per download are primarily driven by the introduction of new product offerings, changes in product mix and customer utilization of our products.
Changes in revenue per download are primarily driven by the introduction of new product offerings, changes in product and sales channel mix and customer utilization of our products.
The majority of our revenue is generated from credit card transactions and is typically settled within one to five business days. Our primary uses of cash for operating activities are for the payment of royalties to content contributors, employee-related expenditures and the payment of other operating expenses incurred in the ordinary course of business.
A significant portion of our revenue is generated from credit card transactions and is typically settled within one to five business days. Our primary uses of cash for operating activities are for the payment of royalties to content contributors, employee-related expenditures and the payment of other operating expenses incurred in the ordinary course of business.
Customer payments received 57 Table of Contents in advance of revenue recognition are contract liabilities and are recorded as deferred revenue. Customers that do not pay in advance are invoiced and are required to make payments under standard credit terms.
Customer payments received in advance of revenue recognition are contract liabilities and are recorded as deferred revenue. Customers that do not pay in advance are invoiced and are required to make payments under standard credit terms.
Accordingly, we recognize revenue net of costs paid to resellers. 45 Table of Contents Costs and Expenses Cost of Revenue.
Accordingly, we recognize revenue net of costs paid to resellers. 46 Table of Contents Costs and Expenses Cost of Revenue.
As of December 31, 2022 and 2021, we had an allowance for doubtful accounts of $5.8 million and $1.9 million, respectively. Fluctuations in our allowance for doubtful accounts are primarily attributable to changes in the aging profile of our gross accounts receivable balances and specific customer situations arising during the year. Income Taxes Our income tax expense includes U.S.
As of December 31, 2023 and 2022, we had an allowance for doubtful accounts of $6.3 million and $5.8 million, respectively. Fluctuations in our allowance for doubtful accounts are primarily attributable to changes in the aging profile of our gross accounts receivable balances and specific customer situations arising during the year. Income Taxes Our income tax expense includes U.S.
Income tax expense increased by $2.1 million, to $14.9 million in 2022 as compared to 2021. Our effective tax rates for the years ended December 31, 2022 and 2021 were approximately 16.4% and 12.3%, respectively. The 2022 effective tax rate differs from the U.S. federal statutory tax rate primarily due to the foreign-derived intangible income deduction.
Income tax expense increased by $2.1 million, to $14.9 million in 2022 as compared to 2021. Our effective tax rates for the years ended December 31, 2022 and 2021 were approximately 16.4% and 12.3%, respectively. The 2022 effective tax rate differs from the U.S. federal statutory rate primarily due to the effect of the U.S.
Changes in our revenue by region were as follows: revenue from North America increased by $62.2 million, or 21%, to $353.2 million, revenue from Europe decreased by $10.5 million, or 4%, to $243.0 million and revenue from outside Europe and North America increased by $2.6 million, or 1%, to $231.6 million, in the year ended December 31, 2022 compared to 2021. 48 Table of Contents Cost and Expenses Cost of Revenue.
Changes in our revenue by region were as follows: revenue from North America increased by $62.2 million, or 21%, to $353.2 million, revenue from Europe decreased by $10.5 million, or 4%, to $243.0 million and revenue from outside Europe and North America increased by $2.6 million, or 1%, to $231.6 million, in the year ended December 31, 2022 compared to 2021.
We expense contract acquisition costs as incurred, to the extent that the amortization period would otherwise be one year or less. Collectability is reasonably assured at the time the electronic order or contract is entered. The majority of our customers purchase products by making electronic payments with a credit card at the time of the transaction.
We expense contract acquisition costs as incurred, to the extent that the amortization period would otherwise be one year or less. Collectability is probable at the time the electronic order or contract is entered. A significant portion of our customers purchase products by making electronic payments with a credit card at the time of the transaction.
As of December 31, 2022, we had approximately $93 million in unconditional cash obligations, consisting primarily of purchase obligations related to contracts for cloud-based services, infrastructure and other business services as well as minimum 52 Table of Contents royalty guarantees in connection with certain content licenses, of which the majority is due to be paid within the next two years.
As of December 31, 2023, we had approximately $82 million in unconditional cash obligations, consisting primarily of purchase obligations related to contracts for cloud-based services, infrastructure and other business services as well as minimum royalty guarantees in connection with certain content licenses, of which the majority is due to be paid within the next two years.
This makes our collection of content one of the largest of its kind, and we delivered 173.3 million paid downloads to our customers across all of our brands during the year ended December 31, 2022. Contributors of content typically earn a royalty each time their work is licensed.
This makes our collection of content one of the largest of its kind, and we delivered 153.0 million paid downloads to our customers across all of our brands during the year ended December 31, 2023. Contributors of Content typically earn a royalty each time their work is licensed.
Our financing activities also includes proceeds from our Credit Facility, proceeds from our Stock Offering and proceeds received in connection with the exercise of stock options. Cash used in financing activities totaled $79.5 million, $77.7 million and $4.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Our financing activities also includes proceeds from and payments of our Credit Facility, proceeds from our Stock Offering and proceeds received in connection with the exercise of stock options. Cash used in financing activities totaled $102.7 million, $79.5 million and $77.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Revenue per Download We define revenue per download as the amount of revenue recognized in a given period divided by the number of paid downloads in that period excluding revenue from custom content, revenue that is not derived from or associated with content licenses and revenue associated with our Computer Vision offering.
Revenue per Download We define revenue per download as the amount of revenue recognized in a given period divided by the number of paid downloads in that period excluding revenue from our Studios business, revenue that is not derived from or associated with content licenses and revenue associated with our data offering.
Subsequent to the acquisition of PicMonkey, we also generate revenue from the license of tools available through our platform. For contracts that contain multiple performance obligations, we allocate the transaction price to each performance obligation based on a relative standalone selling price.
We also generate revenue from tools made available through our platform. For contracts that contain multiple performance obligations, we allocate the transaction price to each performance obligation based on a relative standalone selling price.
See also the “Risk Factors” disclosure in Item 1A above for additional discussion of the risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Overview and Recent Developments Shutterstock is a global creative platform for transformative brands and media companies.
See also the “Risk Factors” disclosure in Item 1A above for additional discussion of the risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Overview and Recent Developments Shutterstock is a leading global creative platform connecting brands and businesses to high quality content.
On January 30, 2023, our Board of Directors declared a quarterly cash dividend of $0.27 per share of outstanding common stock payable on March 16, 2023 to stockholders of record at the close of business on March 2, 2023. The Company currently expects to continue to pay comparable cash dividends on a quarterly basis in the future.
On January 29, 2024, our Board of Directors declared a quarterly cash dividend of $0.30 per share of outstanding common stock payable on March 14, 2024 to stockholders of record at the close of business on February 29, 2024. The Company currently expects to continue to pay comparable cash dividends on a quarterly basis in the future.
Footage is often integrated into websites, social media, marketing campaigns and cinematic productions. • 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.
Footage is often integrated into websites, social media, marketing campaigns and cinematic productions. • 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. • Generative AI Content - consisting of images generated from algorithms trained with high-quality, ethically sourced content.
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 our subscription products. For revenue associated with the license of tools available through our platform, the Company recognizes revenue on a straight-line basis over 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 our subscription products. For revenue associated with tools available 59 Table of Contents through our platform, we recognize revenue on a straight-line basis over the subscription period.
In addition, as of December 31, 2022, we had approximately $54 million in operating lease obligations with lease payments extending through 2029.
In addition, as of December 31, 2023, we had approximately $45 million in operating lease obligations with lease payments extending through 2029.
For content licenses, we recognize revenues on both a subscription-based and transaction-based products when content is downloaded by a customer, at which time the license is provided.
We recognize revenue on both our subscription-based and transaction-based products when content is downloaded by a customer, at which time the license is provided.
We expense contract acquisition costs as incurred, to the extent that the amortization period would otherwise be one year or less. Collectability is reasonably assured at the time the electronic order or contract is entered. The majority of our customers purchase products by making an electronic payment with a credit card at the time of the transaction.
We expense contract acquisition costs as incurred, to the extent that the amortization period would otherwise be one year or less. Collectability is probable at the time the electronic order or contract is entered. A significant portion of our customers purchase products by making electronic payments with a credit card at the time of the transaction.
Adjusted EBITDA We define adjusted EBITDA as net income adjusted for depreciation and amortization, non-cash equity-based compensation, impairment of lease and related assets, foreign currency transaction gains and losses, severance costs associated with strategic workforce optimizations, interest income and expense and income taxes. We define adjusted EBITDA margin as the ratio of adjusted EBITDA to revenue.
Adjusted EBITDA and Adjusted EBITDA Margin We define adjusted EBITDA as net income adjusted for depreciation and amortization, non-cash equity-based compensation, bargain purchase gain related to the acquisition of Giphy, Giphy Retention Compensation Expense - non-recurring, impairment of lease and related assets, foreign currency transaction gains and losses, severance costs associated with strategic workforce optimizations, interest income and expense and income taxes.
As of December 31, 2022, we are in compliance with these covenants. Sources and Uses of Funds We believe, based on our current operating plan, that our cash and cash equivalents, and cash from operations, will be sufficient to meet our anticipated cash needs for at least the next 12 months. Our longer-term liquidity is contingent upon future operating performance.
Sources and Uses of Funds We believe, based on our current operating plan, that our cash and cash equivalents, and cash from operations, will be sufficient to meet our anticipated cash needs for at least the next 12 months. Our longer-term liquidity is contingent upon future operating performance.
Accordingly, the metrics include Subscribers, Subscriber revenue, and Average revenue per customer from TurboSquid beginning February 2022 and from PicMonkey beginning September 2022. These metrics exclude the respective customer counts and revenues from our acquisitions of Pond5 and Splash News. Basis of Presentation Revenue The majority of our revenues are earned from licensing content.
Accordingly, the metrics include Subscribers, Subscriber revenue, and Average revenue per customer from TurboSquid beginning February 2022, from PicMonkey beginning September 2022, and from Pond5 and Splash News beginning May 2023. These metrics exclude the respective counts and revenues from our acquisition of Giphy. Basis of Presentation Revenue A significant portion of our revenues are earned from licensing content.
Since our results of operations are sensitive to the level of competition we face, increased competition could adversely affect our liquidity and capital resources. Dividends We declared and paid cash dividends of $0.96 per share of common stock, or $34.6 million during the year ended December 31, 2022.
Since our results of operations are sensitive to the level of competition we face, increased competition could adversely affect our liquidity and capital resources. Dividends We declared and paid cash dividends of $1.08 per share of common stock, or $38.7 million during the year ended December 31, 2023.
Impairment of Lease and Related Assets . Impairment of lease and related assets includes impairment charges related to a portion of the Company’s right-of-use assets and property and equipment triggered by the decision to cease using certain office spaces. Other (Expense) / Income, Net.
Impairment of Lease and Related Assets . Impairment of lease and related assets includes impairment charges related to a portion of the Company’s right-of-use assets and property and equipment triggered by the decision to cease using certain office spaces. Bargain Purchase Gain .
We believe that an increase in our number of subscribers is an indicator of engagement in our platform and potential for future growth. Subscriber Revenue We define subscriber revenue as the revenue generated from subscribers during the period.
We believe the number of subscribers is an important metric that provides insight into our monthly recurring business. We believe that an increase in our number of subscribers is an indicator of engagement in our platform and potential for future growth. Subscriber Revenue We define subscriber revenue as the revenue generated from subscribers during the period.
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 internal-use software and website development costs 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.
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 internal-use software and website development costs to support the Company’s ongoing business operations and provides them with the same measures that management uses as the basis for making resource allocation decisions.
Paid Downloads We define paid downloads as the number of downloads that our customers make in a given period of our content. Paid downloads exclude content related to custom content, downloads of content that are offered to customers for no charge, including our free image of the week, and downloads associated with our Computer Vision offering.
Paid Downloads We define paid downloads as the number of downloads that our customers make in a given period of our content. Paid downloads exclude content related to our Studios business, downloads of content that are offered to customers for no charge (including our free trials), and downloads associated with our data offering.
Year Ended December 31, 2022 2021 2020 (in thousands) Consolidated Statements of Operations: Revenue $ 827,826 $ 773,415 $ 666,686 Operating expenses: Cost of revenue 314,306 277,659 259,573 Sales and marketing 203,154 204,878 159,241 Product development 65,434 52,014 46,038 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 Income from operations 93,624 108,106 85,266 Other (expense) / income, net (2,587) (3,370) 4,257 Income before income taxes 91,037 104,736 89,523 Provision for income taxes 14,934 12,853 17,757 Net income $ 76,103 $ 91,883 $ 71,766 The following table presents the components of our results of operations for the periods indicated as a percentage of revenue: Year Ended December 31, 2022 2021 2020 Consolidated Statements of Operations: Revenue 100 % 100 % 100 % Operating expenses: Cost of revenue 38 % 36 % 39 % Sales and marketing 25 % 26 % 24 % Product development 8 % 7 % 7 % General and administrative 16 % 17 % 17 % Impairment of lease and related assets 2 % — % — % Total operating expenses 89 % 86 % 87 % Income from operations 11 % 14 % 13 % Other (expense) / income, net — % — % 1 % Income before income taxes 11 % 14 % 13 % Provision for income taxes 2 % 2 % 3 % Net income 9 % 12 % 11 % 47 Table of Contents Comparison of the Years Ended December 31, 2022 and December 31, 2021 The following table presents our results of operations for the periods indicated: Year Ended December 31, 2022 2021 $ Change % Change (in thousands) Consolidated Statements of Operations Data: Revenue $ 827,826 $ 773,415 $ 54,411 7 % Operating expenses: Cost of revenue 314,306 277,659 36,647 13 Sales and marketing 203,154 204,878 (1,724) (1) Product development 65,434 52,014 13,420 26 General and administrative 132,644 130,758 1,886 1 Impairment of lease and related assets 18,664 — 18,664 * Total operating expenses 734,202 665,309 68,893 10 Income from operations 93,624 108,106 (14,482) (13) Other expense, net (2,587) (3,370) 783 (23) Income before income taxes 91,037 104,736 (13,699) (13) Provision for income taxes 14,934 12,853 2,081 16 Net income $ 76,103 $ 91,883 $ (15,780) (17) % * Not meaningful Revenue Revenue increased by $54.4 million, or 7%, to $827.8 million in 2022 as compared to 2021.
Comparison of the Years Ended December 31, 2022 and December 31, 2021 The following table presents our results of operations for the periods indicated: Year Ended December 31, 2022 2021 $ Change % Change (in thousands) Consolidated Statements of Operations Data: Revenue $ 827,826 $ 773,415 $ 54,411 7 % Operating expenses: Cost of revenue 314,306 277,659 36,647 13 Sales and marketing 203,154 204,878 (1,724) (1) Product development 65,434 52,014 13,420 26 General and administrative 132,644 130,758 1,886 1 Impairment of long-lived assets 18,664 — 18,664 * Total operating expenses 734,202 665,309 68,893 10 Income from operations 93,624 108,106 (14,482) (13) Other expense, net (2,587) (3,370) 783 (23) Income before income taxes 91,037 104,736 (13,699) (13) Provision for income taxes 14,934 12,853 2,081 16 Net income $ 76,103 $ 91,883 $ (15,780) (17) % * Not meaningful Revenue Revenue increased by $54.4 million, or 7%, to $827.8 million in 2022 as compared to 2021.
Other currencies we transact in, including the Japanese Yen and Australian Dollar also depreciated significantly during the period. E-commerce revenues increased by 2%, to $501.4 million in 2022, as compared to 2021. On a constant currency basis, E-commerce revenues increased by 5% in 2022, as compared to 2021.
Other currencies we transact in, including the Japanese Yen and Australian Dollar also depreciated significantly during the period. Content license revenues increased by 4%, to $789.3 million in 2022 as compared to 2021. On a constant currency basis, Content revenues increased by 8% in 2022, as compared to 2021.
Net cash provided by operating activities was $158.5 million for the year ended December 31, 2022, compared to $216.4 million for the year ended December 31, 2021.
Net cash provided by operating activities was $140.6 million for the year ended December 31, 2023, compared to $158.5 million for the year ended December 31, 2022.
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 GILTI provisions of the TCJA impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations.
Revenue Recognition The majority of our revenues are earned from the license of content.
Revenue Recognition A significant portion of our revenues are earned from the license of content.
We determine our allowance for doubtful accounts based on an evaluation of the aging of our accounts receivable and on a customer-by-customer basis where appropriate. Our reserve analysis contemplates our historical loss rate on receivables, specific customer situations and the economic environments in which we operate.
We determine our allowance for doubtful accounts based on an evaluation of (i) the aging of our accounts receivable considering historical receivables loss rates, (ii) on a customer-by-customer basis, where appropriate, and (iii) the economic environments in which we operate.
Year Ended December 31, 2022 2021 2020 (in thousands) Net cash provided by operating activities $ 158,451 $ 216,372 $ 165,072 Net cash used in investing activities $ (275,550) $ (250,438) $ (35,310) Net cash used in financing activities $ (79,487) $ (77,722) $ (4,587) Operating Activities Our primary source of cash from operating activities is cash collections from our customers.
Year Ended December 31, 2023 2022 2021 (in thousands) Net cash provided by operating activities $ 140,552 $ 158,451 $ 216,372 Net cash used in investing activities $ (54,316) $ (275,550) $ (250,438) Net cash used in financing activities $ (102,704) $ (79,487) $ (77,722) Operating Activities Our primary source of cash from operating activities is cash collections from our customers.
The following is a reconciliation of net income to adjusted EBITDA for each of the periods indicated: Year Ended December 31, 2022 2021 2020 (in thousands) Net income $ 76,103 $ 91,883 $ 71,766 Add / (less) Non-GAAP adjustments: Depreciation and amortization 68,470 48,771 41,359 Non-cash equity-based compensation 35,740 36,179 28,309 Impairment of lease and related assets 18,664 — — Other adjustments, net (1) 4,163 3,370 (4,257) Provision for income taxes 14,934 12,853 17,757 Adjusted EBITDA $ 218,074 $ 193,056 $ 154,934 Adjusted EBITDA margin 26.3 % 25.0 % 23.2 % _______________________________________________________________________________ (1) Included in other adjustments, net is foreign currency transaction gains and losses, severance associated with strategic workforce optimizations and interest income and expense. 55 Table of Contents 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, impairment of lease and related assets, severance costs associated with strategic workforce optimizations and the estimated tax impact of such adjustments.
The following is a reconciliation of net income to adjusted EBITDA for each of the periods indicated: Year Ended December 31, 2023 2022 2021 (in thousands) Net income $ 110,269 $ 76,103 $ 91,883 Add / (less) Non-GAAP adjustments: Depreciation and amortization 79,729 68,470 48,771 Non-cash equity-based compensation 48,577 35,740 36,179 Bargain purchase gain (50,261) — — Giphy Retention Compensation Expense - non-recurring 31,577 — — Impairment of lease and related assets — 18,664 — Other adjustments, net (1) 8,686 4,163 3,370 Provision for income taxes 12,199 14,934 12,853 Adjusted EBITDA $ 240,776 $ 218,074 $ 193,056 Adjusted EBITDA margin 27.5 % 26.3 % 25.0 % _______________________________________________________________________________ (1) Included in other adjustments, net includes unrealized foreign currency transaction gains and losses, severance associated with strategic workforce optimizations and interest income and expense. 57 Table of Contents 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, bargain purchase gain related to the acquisition of Giphy, Giphy Retention Compensation Expense - non-recurring, impairment of lease and related assets, severance costs associated with strategic workforce optimizations and the estimated tax impact of such adjustments.
The following is a reconciliation of net income to adjusted net income for each of the periods indicated: Year Ended December 31, 2022 2021 2020 (in thousands) Net income $ 76,103 $ 91,883 $ 71,766 Add / (less) Non-GAAP adjustments: Non-cash equity-based compensation 35,740 36,179 28,309 Tax effect of non-cash equity-based compensation (1) (8,397) (8,502) (6,653) Acquisition-related amortization expense (2) 29,302 13,334 2,261 Tax effect of acquisition-related amortization expense (1) (6,886) (3,133) (531) Impairment of lease and related assets 18,664 — — Tax effect of impairment of lease and related assets (1) (4,199) — — Other $ 1,576 $ — $ — Tax effect of other (1) $ (355) $ — $ — Adjusted net income $ 141,548 $ 129,761 $ 95,152 Adjusted net income per diluted common share $ 3.87 $ 3.48 $ 2.62 Weighted average diluted shares 36,546 37,324 36,369 (1) Statutory tax rates are used to calculate the tax effect of the adjustments.
The following is a reconciliation of net income to adjusted net income for each of the periods indicated: Year Ended December 31, 2023 2022 2021 (in thousands) Net income $ 110,269 $ 76,103 $ 91,883 Add / (less) Non-GAAP adjustments: Non-cash equity-based compensation 48,577 35,740 36,179 Tax effect of non-cash equity-based compensation (1) (11,416) (8,397) (8,502) Acquisition-related amortization expense (2) 34,737 29,302 13,334 Tax effect of acquisition-related amortization expense (1) (8,163) (6,886) (3,133) Bargain purchase gain (50,261) — — Giphy Retention Compensation Expense - non-recurring 31,577 — — Tax effect of Giphy Retention Compensation Expense - non-recurring (7,421) — — Impairment of lease and related assets — 18,664 — Tax effect of impairment of lease and related assets (1) — (4,199) — Other $ 12,493 $ 1,576 $ — Tax effect of other (1) $ (2,811) $ (355) $ — Adjusted net income $ 157,581 $ 141,548 $ 129,761 Adjusted net income per diluted common share $ 4.35 $ 3.87 $ 3.48 Weighted average diluted shares 36,242 36,546 37,324 (1) Statutory tax rates are used to calculate the tax effect of the adjustments.
We exclude content from this collection metric 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.
We exclude content from this collection metric that is not uploaded directly to our site but is available for license by our customers through an application program interface, content from our Studios business and AI generated content.
As of December 31, 2022, we have repurchased approximately 3.8 million shares of our common stock under the share repurchase program at an average per-share cost of $52.97. During the year ended December 31, 2022, we repurchased approximately 984,000 shares of our common stock at an average per share cost of $74.02.
As of December 31, 2023, we have repurchased approximately 4.4 million shares of our common stock under the share repurchase program at an average per-share cost of $51.74. During the year ended December 31, 2023, we repurchased approximately 634,500 shares of our common stock at an average per share cost of $44.45.
We believe that our large selection of high-quality content enables us to attract and retain customers and drives our network effect. 44 Table of Contents The following table summarizes our key operating metrics, which are unaudited, for the years ended December 31, 2022, 2021 and 2020: Year Ended December 31, 2022 2021 2020 Subscribers (end of period) 1 586,000 343,000 281,000 Subscriber revenue (in millions) 1 $ 346.6 $ 317.5 $ 265.3 Average revenue per customer (last twelve months) 1 $ 341 $ 368 $ 333 Paid downloads (in millions) 173.3 180.0 180.0 Revenue per download $ 4.40 $ 4.16 $ 3.68 Content in our collection (end of period, in millions) Images 600 400 360 Footage clips 45 24 21 ___________________________________________________ 1 Subscribers, Subscriber Revenue and Average Revenue Per Customer from acquisitions are included in these metrics beginning twelve months after the closing of the respective business combination.
The following table summarizes our key operating metrics, which are unaudited, for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 Subscribers (end of period) 1 523,000 586,000 343,000 Subscriber revenue (in millions) 1 $ 351.5 $ 346.6 $ 317.5 Average revenue per customer (last twelve months) 1 $ 412 $ 341 $ 368 Paid downloads (in millions) 153.0 173.3 180.0 Revenue per download $ 4.72 $ 4.40 $ 4.16 Content in our collection (end of period, in millions) Images 771 719 464 Footage clips 54 47 24 ___________________________________________________ 1 Subscribers, Subscriber Revenue and Average Revenue Per Customer from acquisitions are included in these metrics beginning twelve months after the closing of the respective business combination.
Future declarations of dividends are subject to the final determination of our Board of Directors, and will depend on, among other things, our future financial condition, results of operations, capital requirements, capital expenditure requirements, contractual restrictions, anticipated cash needs, business prospects, provisions of applicable law and other factors our Board of Directors may deem relevant. 51 Table of Contents Share Repurchase Program In October 2015, our board of directors approved a share repurchase program, authorizing us to repurchase 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 up to an additional $100 million of our outstanding common stock.
Future declarations of dividends are subject to the final determination of our Board of Directors, and will depend on, among other things, our future financial condition, results of operations, capital requirements, capital expenditure requirements, contractual restrictions, anticipated cash needs, business prospects, provisions of applicable law and other factors our Board of Directors may deem relevant.
The increase in Enterprise revenues was primarily driven by growth in our Computer Vision and multi-asset product offerings, in addition to revenue generated from our acquisitions of Pond5 and Splash News, which were completed on May 11, 2022 and May 28, 2022, respectively. Enterprise revenue growth also benefited from continued momentum in Shutterstock Studios and Shutterstock Editorial.
The increase in Enterprise revenues was primarily driven by growth in our data offering, in addition to revenue generated from our acquisitions of Pond5 and Splash News. Enterprise revenue growth also benefited from continued momentum in Shutterstock Studios and Shutterstock Editorial.
Accordingly, the metrics include Subscribers, Subscriber revenue, and Average revenue per customer from TurboSquid beginning February 2022 and from PicMonkey beginning September 2022. These metrics exclude the respective customer counts and revenues from our acquisitions of Pond5 and Splash News.
Subscribers, subscriber revenue and average revenue per customer from acquisitions are included in these metrics beginning twelve months after the closing of the respective business combination. Accordingly, the metrics include Subscribers, Subscriber revenue, and Average revenue per customer from TurboSquid beginning February 2022, from PicMonkey beginning September 2022, and from Pond5 and Splash News beginning May 2023.
Since inception, we have financed our operations primarily through cash flows generated from operations. In addition, if necessary, we have the ability to draw on our credit facility, which was obtained on May 6, 2022.
Liquidity and Capital Resources As of December 31, 2023, we had cash and cash equivalents totaling $100.5 million, which primarily consisted of bank balances. Since inception, we have financed our operations primarily through cash flows generated from operations. In addition, if necessary, we have the ability to draw on our credit facility, which was obtained on May 6, 2022.
These amounts were partially offset by $23.2 million of proceeds from our Stock Offering, after deducting underwriting discounts, commissions and offering expenses paid and $1.2 million of proceeds received in connection with the exercise of stock options.
These amounts were partially offset by $2.1 million in proceeds received in connection with the exercise of stock options.
Our effective tax rates for the years ended December 31, 2021 and 2020 were approximately 12.3% and 19.8%, respectively. The 2021 effective tax rate differs from the U.S. federal statutory rate primarily due to the foreign-derived intangible income deduction and the impact of a capital loss transaction.
R&D tax credit and the foreign-derived intangible income deduction. The 2021 effective tax rate differs from the U.S. federal statutory rate primarily due to the foreign-derived intangible income deduction and the impact of a capital loss transaction.
During 2020, approximately $3.1 million of other (expense) / income, net related to favorable foreign currency fluctuations, in addition to $1.2 million of interest income. Income Taxes. Income tax expense decreased by $4.9 million to $12.9 million in 2021 as compared to 2020.
During 2022, other income / (expense), net substantially consisted of $1.3 million of expense due to foreign currency fluctuations and $1.3 million of interest expense related to the Credit Facility. Income Taxes. Income tax expense decreased by $2.7 million, to $12.2 million in 2023 as compared to 2022.
Subscribers We define subscribers 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. We believe the number of subscribers is an important metric that provides insight into our monthly recurring business and its growth.
These metrics exclude the respective counts and revenues from Giphy. Subscribers We define subscribers 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.
The Credit Facility contains financial covenants and requirements restricting certain of our activities, which are usual and customary for this type of loan. We are 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.
We are 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, 2023, we are in compliance with these covenants.
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, 2022 2021 2020 (in thousands) Net cash provided by operating activities $ 158,451 $ 216,372 $ 165,072 Capital expenditures (43,296) (28,125) (25,630) Content acquisitions (16,821) (8,874) (2,970) Payments related to long-term incentives related to acquisitions — — 7,759 Free Cash Flow $ 98,334 $ 179,373 $ 144,231 Critical Accounting Estimates Our financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP.
The following is a presentation of cash flow information and a reconciliation of net cash provided by operating activities to free cash flow for each of the periods indicated: Year Ended December 31, 2023 2022 2021 Cash flow information: (in thousands) Net cash provided by operating activities $ 140,552 $ 158,451 $ 216,372 Net cash used in investing activities $ (54,316) $ (275,550) $ (250,438) Net cash used in financing activities $ (102,704) $ (79,487) $ (77,722) Free cash flow: Net cash provided by operating activities $ 140,552 $ 158,451 $ 216,372 Capital expenditures (44,645) (43,296) (28,125) Content acquisitions (11,096) (16,821) (8,874) Cash received related to Giphy Retention Compensation 53,657 — — Free Cash Flow $ 138,468 $ 98,334 $ 179,373 Critical Accounting Estimates Our financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP.
As of December 31, 2022, more than 2.3 million approved contributors made their images, footage and music tracks available in our collection, which has grown to 600 million images and 45 million footage clips as of December 31, 2022.
Over 2.0 million active, paying customers contributed to our revenue in 2023. Our contributors made their images, footage and music tracks available in our collection, which has grown to 771 million images and 54 million footage clips as of December 31, 2023.
(2) Of these amounts, $7.5 million and $5.3 million are included in cost of revenue for the three months ended December 31, 2022 and 2021, respectively, and $27.0 million and $10.2 million are included in cost of revenue for the years ended December 31, 2022 and 2021, respectively.
(2) Of these amounts, $31.6 million, $27.0 million and $10.2 million are included in cost of revenue for the years ended December 31, 2023, 2022 and 2021, respectively. The remainder of acquisition-related amortization expense is included in general and administrative expense in the Statement of Operations.
These multi-asset products are credit-based and enable customers to license images, footage and music in a single subscription. Our monthly subscriptions provide for either a fixed number of content licenses or credits that may be used to download content during the period.
As a result, we have seen demand for our monthly subscription products. Our monthly subscriptions provide for either a fixed number of content licenses or credits that may be used to download content during the period.
Changes in our revenue by region were as follows: revenue from North America increased by $54.4 million, or 23%, to $291.0 million, revenue from Europe increased by $32.8 million, or 15%, to $253.5 million and revenue from outside Europe and North America increased by $19.5 million, or 9%, to $229.0 million, in the year ended December 31, 2021 compared to 2020.
Changes in our revenue by region were as follows: revenue from North America increased by $74.5 million, or 21%, to $427.7 million, revenue from Europe decreased by $12.0 million, or 5%, to $231.0 million and revenue from outside Europe 49 Table of Contents and North America decreased by $15.8 million, or 7%, to $215.8 million, in the year ended December 31, 2023 compared to 2022.
Other (expense) / income, net consists of non-operating costs such as foreign currency transaction gains and losses, in addition to interest income and expense. Income Taxes.
A bargain purchase gain is recognized subsequent to an acquisition, if the fair value of the net assets acquired and liabilities assumed exceeds the net consideration. Other (Expense) / Income, Net. Other (expense) / income, net consists of non-operating costs such as foreign currency transaction gains and losses, in addition to interest income and expense. Income Taxes.
General and administrative expenses increased by $14.2 million, or 12%, to $130.8 million in 2021 as compared to 2020.
General and administrative expenses increased by $10.0 million, or 8%, to $142.6 million in 2023 as compared to 2022.
During 2022, growth in our E-commerce sales channel was driven by revenue generated from our acquisitions of PicMonkey and Pond5 which were completed on September 3, 2021 and May 11, 2022, respectively. E-commerce revenue also benefited from higher subscriber revenue, which was offset by a reduction in revenue generated from our transactional products.
During 2022, growth in our E-commerce sales channel was driven by revenue generated from our acquisitions of PicMonkey and Pond5.
Beyond content, customers also leverage the Company’s platform to assist with the entire creative process from ideation through creative execution. Our key content offerings include: • Images - consisting of photographs, vectors and illustrations.
Beyond content, customers also leverage the Company’s platform to assist with the entire creative process from ideation through creative execution. Digital content licensed to our customers for their creative needs includes images, footage, music, and 3D models (our “Content” offering).
Measuring the number of paid downloads that our customers make in a given period is important because they are the primary method of delivering licensed content, which drives a significant portion of the Company’s revenue and contributor royalties.
Measuring the number of paid downloads that our customers make in a given period is important because it is a measure of customer engagement on our platform and triggers the recognition of revenue and contributor royalties.
Prior to December 31, 2022, this metric only included approved images and footage clips on shutterstock.com at the end of the period.
Prior to December 31, 2022, this metric only included approved images 45 Table of Contents and footage clips in our library on shutterstock.com at the end of the period. We believe that our large selection of high-quality content enables us to attract and retain customers and drives our network effect.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeDollars Originating Currency Euro $ 148,643 € 138,531 $ 152,290 € 129,140 $ 138,128 € 122,287 British pounds 57,144 £ 45,711 57,851 £ 42,340 49,402 £ 38,570 All other non-U.S. currencies (1) 59,204 57,342 49,630 Total foreign currency 264,991 267,483 237,160 U.S. dollar 562,835 505,932 429,526 Total revenue $ 827,826 $ 773,415 $ 666,686 (1) Includes no single currency which exceeded 5% of total revenue for any of the periods presented. 59 Table of Contents Interest Rate Fluctuation Risk Our cash and cash equivalents consist of cash and money market accounts.
Biggest changeDollars Originating Currency Euro $ 139,529 € 128,714 $ 148,643 € 138,531 $ 152,290 € 129,140 British pounds 56,679 £ 45,366 57,144 £ 45,711 57,851 £ 42,340 All other non-U.S. currencies (1) 54,839 59,204 57,342 Total foreign currency 251,047 264,991 267,483 U.S. dollar 623,540 562,835 505,932 Total revenue $ 874,587 $ 827,826 $ 773,415 (1) Includes no single currency which exceeded 5% of total revenue for any of the periods presented. 61 Table of Contents Interest Rate Fluctuation Risk Our cash and cash equivalents consist of cash and money market accounts.
Based on our foreign currency denominated revenue for 2022, we estimate that a 10% change in the exchange rate of the U.S. dollar against all foreign currency denominated revenues would impact our revenue by approximately 3%. We have established foreign subsidiaries in various countries and have concluded that the functional currency of these entities is generally the local currency.
Based on our foreign currency denominated revenue for 2023, we estimate that a 10% change in the exchange rate of the U.S. dollar against all foreign currency denominated revenues would impact our revenue by approximately 3%. We have established foreign subsidiaries in various countries and have concluded that the functional currency of these entities is generally the local currency.
A hypothetical 10% change in interest rates would not have a material impact on our interest expense as of December 31, 2022. Inflation Risk We do not believe that inflation has had a material effect on our business, financial condition or results of operations.
A hypothetical 10% change in interest rates would not have a material impact on our interest expense as of December 31, 2023. Inflation Risk We do not believe that inflation has had a material effect on our business, financial condition or results of operations.
Foreign Currency Exchange Risk Our sales to international customers are denominated in multiple currencies, including but not limited to the U.S. dollar, the euro, the British pound, the Australian dollar and the Japanese yen. Revenue denominated in foreign currencies as a percentage of total revenue was approximately 32%, 35% and 36% in 2022, 2021 and 2020, respectively.
Foreign Currency Exchange Risk Our sales to international customers are denominated in multiple currencies, including but not limited to the U.S. dollar, the euro, the British pound, the Australian dollar and the Japanese yen. Revenue denominated in foreign currencies as a percentage of total revenue was approximately 29%, 32% and 35% in 2023, 2022 and 2021, respectively.
Our historical revenue by currency is as follows (in thousands): Year Ended December 31, 2022 2021 2020 U.S. Dollars Originating Currency U.S. Dollars Originating Currency U.S.
Our historical revenue by currency is as follows (in thousands): Year Ended December 31, 2023 2022 2021 U.S. Dollars Originating Currency U.S. Dollars Originating Currency U.S.
Business transacted in currencies other than each entity’s functional currency results in transactional gains and losses. The net impacts of foreign currency transactions on our financial statements were losses of $3.1 million and $3.2 million in 2022 and 2021, respectively, and a gain of $2.4 million in 2020.
Business transacted in currencies other than each entity’s functional currency results in transactional gains and losses. The net impacts of foreign currency transactions on our financial statements was a gain of $0.7 million in 2023 and losses of $3.1 million and $3.2 million in 2022 and 2021, respectively.

Other SSTK 10-K year-over-year comparisons