10-Q 1 sstk-20220630.htm 10-Q sstk-20220630
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Table of Contents                            
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 __________________________________________________________________________________________________ 
FORM 10-Q
 ___________________________________________________________________________________________________ 
(Mark One)
   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended June 30, 2022
or
         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from          to         
Commission File Number: 001-35669
 _____________________________________________________________________
SHUTTERSTOCK, INC.
(Exact name of registrant as specified in its charter)
 ________________________________________________________
Delaware80-0812659
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
350 Fifth Avenue, 21st Floor
New York, NY 10118
(Address of principal executive offices, including zip code)
(646) 710-3417
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
 ______________________________________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareSSTKNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes    No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer 
Non-accelerated filerSmaller reporting company 
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of July 22, 2022, 35,968,440 shares of the registrant’s common stock, $0.01 par value per share, were outstanding.

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Table of Contents                            
Shutterstock, Inc.
FORM 10-Q
Table of Contents 

2

Table of Contents                            
FORWARD-LOOKING STATEMENTS
 
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, particularly in the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All statements other than statements of historical fact, are forward-looking. Examples of forward-looking statements include, but are not limited to, statements regarding guidance, industry prospects, future business, future results of operations or financial condition, future dividends, future stock performance, our ability to consummate acquisitions and integrate the businesses we have acquired or may acquire into our existing operations, new or planned features, products or services, management strategies and our competitive position. You can identify many forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expects,” “aims,” “anticipates,” “believes,” “estimates,” “intends,” “plans,” “predicts,” “projects,” “seeks,” “potential,” “opportunities” and other similar expressions and the negatives of such expressions. However, not all forward-looking statements contain these words. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed or implied by the forward-looking statements. Such risks and uncertainties include, among others, those discussed under the caption “Risk Factors” in our most recently filed Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (the “SEC”) on February 10, 2022 (our “2021 Form 10-K”), and in our consolidated financial statements, related notes, and the other information appearing elsewhere in the 2021 Form 10-K, this Quarterly Report on Form 10-Q and our other filings with the SEC. Given these risks and uncertainties, you should not place undue reliance on any forward-looking statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made only as of the date hereof, and we do not intend, and, except as required by law, we undertake no obligation to update any forward-looking statements contained herein after the date of this report to reflect actual results or future events or circumstances.
Unless the context otherwise indicates, references in this Quarterly Report on Form 10-Q to the terms “Shutterstock,” “the Company,” “we,” “our” and “us” refer to Shutterstock, Inc. and its subsidiaries. “Shutterstock,” “Shutterstock Editorial,” “Asset Assurance,” “Offset,” “Bigstock,” “Rex Features,” “PremiumBeat,” “TurboSquid,” “PicMonkey,” “Pattern89,” “Shotzr,” “Pond5,” “Splash News,” “Shutterstock Studios” and “Shutterstock Editor” and their logos are registered trademarks and are the property of Shutterstock, Inc. or one of our subsidiaries. All other trademarks, service marks and trade names appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.
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Table of Contents                            
PART I.     FINANCIAL INFORMATION
Item 1.        Financial Statements.
Shutterstock, Inc.
Consolidated Balance Sheets
(In thousands, except par value amount)
(unaudited)
June 30,December 31,
20222021
ASSETS
Current assets:
Cash and cash equivalents$84,046 $314,017 
Accounts receivable, net of allowance of $2,990 and $1,910
48,816 47,707 
Prepaid expenses and other current assets30,394 26,491 
Total current assets163,256 388,215 
Property and equipment, net52,549 48,074 
Right-of-use assets34,293 34,570 
Intangible assets, net185,860 123,822 
Goodwill377,654 219,816 
Deferred tax assets, net8,709 10,512 
Other assets26,247 26,701 
Total assets$848,568 $851,710 
LIABILITIES AND STOCKHOLDERSEQUITY
Current liabilities:
Accounts payable$5,889 $10,092 
Accrued expenses84,547 99,529 
Contributor royalties payable34,853 29,004 
Deferred revenue178,353 180,979 
Debt50,000  
Other current liabilities14,309 14,180 
Total current liabilities367,951 333,784 
Deferred tax liability, net4,592 2,781 
Lease liabilities37,397 36,966 
Other non-current liabilities9,535 9,697 
Total liabilities419,475 383,228 
Commitments and contingencies (Note 14)
Stockholders’ equity:
Common stock, $0.01 par value; 200,000 shares authorized; 39,482 and 39,209 shares issued and 35,981 and 36,417 shares outstanding as of June 30, 2022 and December 31, 2021, respectively
395 392 
Treasury stock, at cost; 3,501 and 2,792 shares as of June 30, 2022 and December 31, 2021, respectively
(183,800)(127,196)
Additional paid-in capital370,934 376,537 
Accumulated comprehensive loss(16,619)(10,788)
Retained earnings258,183 229,537 
Total stockholders’ equity429,093 468,482 
Total liabilities and stockholders’ equity$848,568 $851,710 
See Notes to Unaudited Consolidated Financial Statements.
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Table of Contents                            
Shutterstock, Inc.
Consolidated Statements of Operations
(In thousands, except for per share data)
(unaudited)
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
Revenue$206,872 $189,912 $406,004 $373,193 
Operating expenses:
Cost of revenue77,019 67,757 146,470 129,589 
Sales and marketing54,229 45,896 107,558 87,817 
Product development17,162 11,993 30,788 22,724 
General and administrative33,088 31,041 63,896 61,720 
Total operating expenses181,498 156,687 348,712 301,850 
Income from operations25,374 33,225 57,292 71,343 
Other (expense) / income, net(2,661)1,323 (1,903)(1,139)
Income before income taxes22,713 34,548 55,389 70,204 
Provision for income taxes3,268 5,094 9,372 11,236 
Net income$19,445 $29,454 $46,017 $58,968 
Earnings per share:
Basic$0.54 $0.81 $1.27 $1.62 
Diluted$0.53 $0.79 $1.25 $1.58 
Weighted average common shares outstanding:
Basic36,12336,57036,21336,453
Diluted36,57837,18936,89037,218
See Notes to Unaudited Consolidated Financial Statements.
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Table of Contents                            
Shutterstock, Inc.
Consolidated Statements of Comprehensive Income
(In thousands)
(unaudited)
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
Net income$19,445 $29,454 $46,017 $58,968 
Foreign currency translation (loss) / gain(4,945)64 (5,831)290 
Other comprehensive (loss) / income(4,945)64 (5,831)290 
Comprehensive income$14,500 $29,518 $40,186 $59,258 
 
See Notes to Unaudited Consolidated Financial Statements.
6

Table of Contents                            
Shutterstock, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands)
(unaudited)
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income / (Loss)
Retained
Earnings
Common StockTreasury Stock
Three Months Ended June 30, 2022SharesAmountSharesAmountTotal
Balance at March 31, 202239,352 $394 3,214 $(165,465)$373,765 $(11,674)$247,403 $444,423 
Equity-based compensation— — — — 7,044 — — 7,044 
Issuance of common stock in connection with employee stock option exercises and RSU vesting242 2 — — 566 — — 568 
Common shares withheld for settlement of taxes in connection with equity-based compensation(112)(1)— — (10,441)— — (10,442)
Repurchase of treasury shares— — 287 (18,335)— — — (18,335)
Cash dividends paid— — — — — — (8,665)(8,665)
Other comprehensive loss— — — — — (4,945)— (4,945)
Net income— — — — — — 19,445 19,445 
Balance at June 30, 202239,482 $395 3,501 $(183,800)$370,934 $(16,619)$258,183 $429,093 
Three Months Ended June 30, 2021
Balance at March 31, 202139,010 $391 2,558 $(100,027)$357,422 $(7,455)$190,173 $440,504 
Equity-based compensation— — — — 9,686 — — 9,686 
Issuance of common stock in connection with employee stock option exercises and RSU vesting244 2 — — 490 — — 492 
Common shares withheld for settlement of taxes in connection with equity-based compensation(81)(1)— — (7,194)— — (7,195)
Cash dividends paid— — — — — — (7,671)(7,671)
Other comprehensive income— — — — — 64 — 64 
Net income— — — — — — 29,454 29,454 
Balance at June 30, 202139,173 $392 2,558 $(100,027)$360,404 $(7,391)$211,956 $465,334 
Six Months Ended June 30, 2022
Balance at December 31, 202139,209 $392 2,792 $(127,196)$376,537 $(10,788)$229,537 $468,482 
Equity-based compensation— — — — 14,870 — — 14,870 
Issuance of common stock in connection with employee stock option exercises and RSU vesting503 5 — — 563 — — 568 
Common shares withheld for settlement of taxes in connection with equity-based compensation(230)(2)— — (21,036)— — (21,038)
Repurchase of treasury shares— — 709 (56,604)— — — (56,604)
Cash dividends paid— — — — — — (17,371)(17,371)
Other comprehensive loss— — — — — (5,831)— (5,831)
Net income— — — — — — 46,017 46,017 
Balance at June 30, 202239,482 $395 3,501 $(183,800)$370,934 $(16,619)$258,183 $429,093 
Six Months Ended June 30, 2021
Balance at December 31, 202038,803 $389 2,558 $(100,027)$360,939 $(7,681)$168,305 $421,925 
Equity-based compensation— — — — 17,896 — — 17,896 
Issuance of common stock in connection with employee stock option exercises and RSU vesting601 6 — — 1,795 — — 1,801 
Common shares withheld for settlement of taxes in connection with equity-based compensation(231)(3)— — (20,226)— — (20,229)
Cash dividends paid— — — — — — (15,317)(15,317)
Other comprehensive income— — — — — 290 — 290 
Net income— — — — — — 58,968 58,968 
Balance at June 30, 202139,173 $392 2,558 $(100,027)$360,404 $(7,391)$211,956 $465,334 
See Notes to Unaudited Consolidated Financial Statements.
7

Table of Contents                            
Shutterstock, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
 Six Months Ended
June 30,
 20222021
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income$46,017 $58,968 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization31,575 20,243 
Deferred taxes(3,602)1,782 
Non-cash equity-based compensation14,869 17,896 
Bad debt expense620 213 
Changes in operating assets and liabilities:
Accounts receivable(762)(6,056)
Prepaid expenses and other current and non-current assets(1,207)(5,892)
Accounts payable and other current and non-current liabilities(28,980)6,359 
Contributor royalties payable3,713 1,750 
Deferred revenue(2,669)11,953 
Net cash provided by operating activities$59,574 $107,216 
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures(20,797)(15,337)
Business combination, net of cash acquired(212,096)(72,165)
Asset acquisitions(150) 
Acquisition of content(6,999)(3,396)
Security deposit payment(281)(65)
Net cash used in investing activities$(240,323)$(90,963)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of treasury shares(56,937) 
Proceeds from exercise of stock options568 1,801 
Cash paid related to settlement of employee taxes related to RSU vesting(21,038)(20,229)
Payment of cash dividend(17,371)(15,317)
Proceeds from credit facility50,000  
Payment of debt issuance costs(619) 
Net cash used in financing activities$(45,397)$(33,745)
Effect of foreign exchange rate changes on cash(3,825)(36)
Net decrease in cash and cash equivalents(229,971)(17,528)
Cash and cash equivalents, beginning of period314,017 428,574 
Cash and cash equivalents, end of period$84,046 $411,046 
Supplemental Disclosure of Cash Information:
Cash paid for income taxes $12,700 $9,495 
Cash paid for interest90  
See Notes to Unaudited Consolidated Financial Statements.
8

Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)




(1) Summary of Operations and Significant Accounting Policies
Summary of Operations
Shutterstock, Inc. (the “Company” or “Shutterstock”) is the leading global creative platform for transformative brands and media companies. The Company’s platform brings together users and contributors of content by providing readily-searchable content that our customers pay to license and by compensating contributors as their content is licensed. Contributors upload their content to the Company’s web properties in exchange for royalty payments based on customer download activity.
The Company’s key offerings include:
Images - consisting of photographs, vectors and illustrations. Images are typically used in visual communications, such as websites, digital and print marketing materials, corporate communications, books, publications and other similar uses.
Footage - consisting of video clips, premium footage filmed by industry experts and cinema grade video effects, available in HD and 4K formats. 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. This offering became available upon the Company’s acquisition of TurboSquid, Inc. on February 1, 2021.
Creative Design Software - consisting of the Company’s online graphic design and image editing platform. This offering became available after the Company completed the acquisition of substantially all of the assets and assumption of certain liabilities from PicMonkey, LLC (“PicMonkey”) on September 3, 2021.
On May 11, 2022, the Company completed its acquisition of Pond5, Inc. (“Pond5”), a video-first content marketplace which expands Shutterstock’s content offerings across footage, image and music. On May 28, 2022, Shutterstock acquired SCP 2020 Limited (“Splash News”), an entertainment news network for newsrooms and media companies, which offers image and video content across celebrity, red carpet and live events.
Basis of Presentation
The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all information and footnotes required by GAAP for complete financial statements.
The interim Consolidated Balance Sheet as of June 30, 2022, and the Consolidated Statements of Operations, Comprehensive Income and Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021, and the Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021, are unaudited. The Consolidated Balance Sheet as of December 31, 2021, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures required by GAAP. These unaudited interim financial statements have been prepared on a basis consistent with the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, which include all normal recurring adjustments necessary to fairly state the Company’s financial position as of June 30, 2022, and its consolidated results of operations, comprehensive income, stockholders’ equity and cash flows for the three and six months ended June 30, 2022 and 2021. The financial data and the other financial information disclosed in the notes to the financial statements related to these periods are also unaudited. The results of operations for the six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2022 or for any other future annual or interim period.
These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on February 10, 2022. The unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in
9

Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



consolidation. Certain immaterial changes in presentation have been made to conform the prior period presentation to current period reporting.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements. Actual results could differ from those estimates. Such estimates include, but are not limited to, the determination of the allowance for doubtful accounts, the volume of expected unused licenses for our subscription-based products, the assessment of recoverability of property and equipment, the fair value of acquired goodwill and intangible assets, the amount of non-cash equity-based compensation, the assessment of recoverability of deferred tax assets, the measurement of income tax and contingent non-income tax liabilities and the determination of the incremental borrowing rate used to calculate the lease liability.
Cash and Cash Equivalents
The Company’s cash and cash equivalents consist primarily of bank deposits and money market funds.
Allowance for Doubtful Accounts
The Company’s accounts receivable consists of customer obligations due under normal trade terms, carried at their face value less an allowance for doubtful accounts, if required. The Company determines its allowance for doubtful accounts based on an evaluation of (i) the aging of its accounts receivable considering historical receivables loss rates, (ii) on a customer-by-customer basis, where appropriate, and (iii) the economic environments in which the Company operates.
During the six months ended June 30, 2022, the Company recorded bad debt expense of $0.6 million. As of June 30, 2022 and December 31, 2021, the Company’s allowance for doubtful accounts was approximately $3.0 million and $1.9 million, respectively. The allowance for doubtful accounts is included as a reduction of accounts receivable on the Consolidated Balance Sheets.
Chargeback and Sales Refund Allowance
The Company establishes a chargeback allowance and sales refund reserve allowance based on factors surrounding historical credit card chargeback trends, historical sales refund trends and other information. As of June 30, 2022 and December 31, 2021, the Company’s combined allowance for chargebacks and sales refunds was $0.4 million, which was included as a component of other current liabilities on the Consolidated Balance Sheets.
Revenue Recognition
The majority of the Company’s revenue is earned from the license of content. Content licenses are generally purchased on a monthly or annual basis, whereby a customer pays for a predetermined quantity of content that may be downloaded over a specific period of time, or, on a transactional basis, whereby a customer pays for individual content licenses at the time of download. Subsequent to the acquisition of PicMonkey, the Company also generates revenue from tools made available through the Company’s platform.
The Company recognizes revenue upon the satisfaction of performance obligations. For content licenses, the Company recognizes revenue on both its subscription-based and transaction-based products when content is downloaded by a customer, at which time the license is provided. In addition, the Company estimates expected unused licenses for subscription-based products and recognizes the revenue associated with the unused licenses as digital content is downloaded and licenses are obtained for such content by the customer during the subscription period. The estimate of unused licenses is based on historical download activity, and future changes in the estimate could impact the timing of revenue recognition of the Company’s subscription products. For revenue associated with tools made available through the Company’s platform, revenue is recognized on a straight-line basis over the subscription period. The Company expenses contract acquisition costs as incurred, to the extent that the amortization period would otherwise be one year or less.
Collectability is reasonably assured at the time the electronic order or contract is entered. The majority of the Company’s customers purchase products by making electronic payments with a credit card at the time of the transaction. 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. 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. 
10

Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



The Company recognizes revenue gross of contributor royalties because the Company is the principal in the transaction, as it is the party responsible for the performance obligation and it controls the product or service before transferring it to the customer. The Company also licenses content to customers through third-party resellers. Third-party resellers sell the Company’s products directly to customers as the principal in those transactions. Accordingly, the Company recognizes revenue net of costs paid to resellers.
Interest expense
Interest expense is comprised of borrowing costs on debt. In addition, interest expense includes amortization of debt issuance costs and unused commitment fees associated with the Company’s credit facility.
Debt issuance costs are recorded in prepaid expenses and other current assets and other assets in the Consolidated Balance Sheets and are amortized over the term of the credit facility.

(2) Fair Value Measurements and Long-term Investments
Fair Value Measurements
The Company had no assets or liabilities requiring fair value hierarchy disclosures as of June 30, 2022 or December 31, 2021, except as noted below.
Cash Equivalents
Cash equivalents include money market accounts and are classified as a level 1 measurement based on quoted prices in active markets for identical assets that the reporting entity can access at the measurement date. As of December 31, 2021, the Company had cash equivalent balances of $195.1 million. As of June 30, 2022, the Company did not have any cash equivalent balances.
Other Fair Value Measurements
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments. Debt consists of principal amounts outstanding under our credit facility, which approximates fair value as underlying interest rates are reset regularly based on current market rates and is classified as Level 2. The Company’s non-financial assets, which include property and equipment, intangible assets and goodwill, are not required to be measured at fair value on a recurring basis. However, if the Company is required to evaluate a non-financial asset for impairment, whether due to certain triggering events or because annual impairment testing is required, a resulting asset impairment would require that the non-financial asset be recorded at fair value.
Long-term Investments
As of June 30, 2022 and December 31, 2021, the Company’s long-term investments were in equity securities with no readily determinable fair value, totaled $20.0 million, and were reported within other assets on the Consolidated Balance Sheets. The Company uses the measurement alternative for these equity investments and their carrying value is reported at cost, adjusted for impairments or any observable price changes in ordinary transactions with identical or similar investments.
On a quarterly basis, the Company evaluates the carrying value of its long-term investments for impairment, which includes an assessment of revenue growth, earnings performance, working capital and general market conditions. As of June 30, 2022, no adjustments to the carrying values of the Company’s long-term investments were identified as a result of this assessment. Changes in performance negatively impacting operating results and cash flows of these investments could result in the Company recording an impairment charge in future periods.

(3) Acquisitions
Pond5, Inc.
On May 11, 2022, the Company completed its acquisition of Pond5, for approximately $218.3 million, subject to customary working capital adjustments. The total purchase price was paid with existing cash on hand as well as a $50 million drawdown on a newly established revolving credit facility (See Note 7). In connection with the acquisition, the Company incurred approximately $3.6 million of transaction costs, which is included in general and administrative expenses on the Consolidated Statements of Operations.
11

Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



Pond5 is a New York based company that operates a video-first content marketplace for royalty-free and editorial video. The Company believes its acquisition of this video-first content marketplace provides expanded offerings across footage, image and music.
The identifiable intangible assets, which include customer relationships, developed technology and trade names have weighted average useful lives of approximately 12.2 years, 5 years and 10 years, respectively. The goodwill arising from the transaction is primarily attributable to expected operational synergies and is not deductible for income tax purposes.

Splash News
On May 28, 2022, the Company completed its acquisition of Splash News, for approximately $6.3 million. The total purchase price was paid with existing cash on hand in the three months ended June 30, 2022. In connection with the acquisition, the Company incurred approximately $0.3 million of transaction costs, which is included in general and administrative expenses on the Consolidated Statements of Operations.
Splash News is a United Kingdom based entertainment news network and is a source for image and video content across celebrity, red carpet and live events. The Company believes this acquisition expands Shutterstock Editorial’s Newsroom offering for access to premium exclusive content.
The identifiable intangible asset, developed technology, has a useful life of approximately 4 years. The goodwill arising from the transaction is primarily attributable to expected operational synergies and is not deductible for income tax purposes.
The Pond5 and Splash News transactions were accounted for using the acquisition method and, accordingly, the results of the acquired businesses have been included in the Company’s results of operations from the respective acquisition dates. For the three months ended June 30, 2022, revenue of $7.2 million was included in the Consolidated Statements of Operations related to these acquired companies. The fair value of consideration transferred in these business combinations has been allocated to the intangible and tangible assets acquired and liabilities assumed at the acquisition date, with the remaining unallocated amount recorded as goodwill. The identifiable intangible assets of these acquisitions are being amortized on a straight-line basis. The fair value of the customer relationships was determined using a variation of the income approach known as the multiple-period excess earnings method. The fair value of the trade name was determined using the relief-from-royalty method, and the fair value of the developed technology was determined using the relief-from-royalty and the cost to recreate methods.
12

Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



The aggregate purchase price for these acquisitions has been allocated to the assets acquired and liabilities assumed as follows (in thousands):
Assets acquired and liabilities assumed (in thousands):
Pond51
Splash News1
Total
Cash and cash equivalents$11,675 $180 $11,855 
Accounts receivable1,273 500 $1,773 
Other assets1,102 525 1,627 
Right of use asset1,674  1,674 
Intangible assets:— 
Customer relationships41,900  41,900 
Trade name4,700  4,700 
Developed technology25,300 1,263 26,563 
Intangible assets71,900 1,263 73,163 
Goodwill154,949 5,565 160,514 
Deferred tax asset   
Total assets acquired$242,573 $8,033 $250,606 
— 
Accounts payable, accrued expenses and other liabilities(8,090)(1,528)(9,618)
Contributor royalties payable(3,039)(3,039)
Deferred revenue(3,705) (3,705)
Deferred tax liability(7,434)(189)(7,623)
Lease liability(2,038) (2,038)
Total liabilities assumed(24,306)(1,717)(26,023)
Net assets acquired$218,267 $6,316 $224,583 
____________________________________________________
1 The allocation of the purchase price is preliminary and will be finalized within the allowable measurement period once independent valuations of the fair value of the assets acquired and liabilities assumed are completed.

2021 Acquisitions
PicMonkey, LLC
On September 3, 2021, the Company completed the acquisition of substantially all of the assets and assumption of certain liabilities from PicMonkey, for approximately $109.4 million. The total purchase price was paid with existing cash on hand in the three months ended September 30, 2021. In connection with the acquisition, the Company incurred approximately $2 million of transaction costs, which is included in general and administrative expenses on the Consolidated Statements of Operations.
PicMonkey is a Washington-based company that operates an online graphic design and image editing platform that enables creators of any skill level to design high-quality visual assets. The Company believes this acquisition provides Shutterstock’s global customer community with professional-grade, easy-to-use design tools.
The identifiable intangible assets, which include customer relationships, developed technology and trade names, have weighted average lives of approximately 12 years, 5 years and 10 years, respectively. The goodwill arising from the transaction is primarily attributable to expected operational synergies and is expected to be deductible for income tax purposes.
TurboSquid, Inc.
On February 1, 2021, the Company completed its acquisition of TurboSquid, Inc. (“TurboSquid”), for approximately $77.3 million. The total purchase price was paid with existing cash on hand in the three months ended March 31, 2021. In connection with the acquisition, the Company incurred approximately $1.6 million of transaction costs, which is included in general and administrative expenses on the Consolidated Statements of Operations.
TurboSquid is a Louisiana-based company that operates a marketplace offering more than one million 3D models, a marketplace for 2D images derived from 3D objects and a digital asset management solution. The Company believes this
13

Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



acquisition establishes Shutterstock as the premium destination for 3D models as well as 3D models in an easy-to-use 2D format.
The identifiable intangible assets, which include customer relationships, developed technology, trade names and contributor content, have weighted average useful lives of approximately 12 years, 4.7 years, 10 years and 4 years, respectively. The goodwill arising from the transaction is primarily attributable to expected operational synergies and is not deductible for income tax purposes.

The PicMonkey and TurboSquid transactions were accounted for using the acquisition method and, accordingly, the results of the acquired businesses have been included in the Company’s results of operations from the respective acquisition dates. The fair value of consideration transferred in these business combinations has been allocated to the intangible and tangible assets acquired and liabilities assumed at the acquisition date, with the remaining unallocated amount recorded as goodwill. The identifiable intangible assets of these acquisitions are being amortized on a straight-line basis. The fair value of the customer relationships was determined using a variation of the income approach known as the multiple-period excess earnings method. The fair value of the trade names and developed technology were determined using the relief-from-royalty method, and the fair value of the contributor content was determined using the cost-to-recreate method.
The aggregate purchase price for these acquisitions has been allocated to the assets acquired and liabilities assumed as follows (in thousands):
Assets acquired and liabilities assumed (in thousands):PicMonkeyTurboSquidTotal
Cash and cash equivalents$ $5,165 $5,165 
Other assets502 1,553 2,055 
Property and equipment 472 472 
Right of use asset1,420  1,420 
Intangible assets:— 
Customer relationships28,800 9,000 37,800 
Trade name3,000 2,200 5,200 
Developed technology12,900 7,800 20,700 
Contributor content 2,500 2,500 
Intangible assets44,700 21,500 66,200 
Goodwill71,607 59,491 131,098 
Deferred tax asset2,456  2,456 
Total assets acquired$120,685 $88,181 $208,866 
Accounts payable, accrued expenses and other liabilities(780)(4,685)(5,465)
Contributor royalties payable (2,243)(2,243)
Deferred revenue(8,557) (8,557)
Deferred tax liability(533)(3,923)(4,456)
Lease liability(1,420) (1,420)
Total liabilities assumed(11,290)(10,851)(22,141)
Net assets acquired$109,395 $77,330 $186,725 


14

Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



Pro-Forma Financial Information (unaudited)
The following unaudited pro forma consolidated financial information (in thousands) reflects the results of operations of the Company for the three and six months ended June 30, 2022 and 2021, as if the Pond5 and Splash News acquisitions had been completed on January 1, 2021 and as if the TurboSquid and PicMonkey acquisitions had been completed on January 1, 2020, after giving effect to certain purchase accounting adjustments, primarily related to intangible assets and transaction costs. These pro forma results have been prepared for comparative purposes only and are not necessarily indicative of what the Company’s operating results would have been, had the acquisitions actually taken place at the beginning of the previous annual period.
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenue
As Reported$206,872 $189,912 $406,004 $373,193 
Pro Forma213,452 211,643 426,287 417,316 
Income before income taxes
As Reported$22,713 $34,548 $55,389 $70,204 
Pro Forma26,326 35,978 58,559 68,941 


(4) Property and Equipment
Property and equipment is summarized as follows (in thousands):
 As of June 30, 2022As of December 31, 2021
Computer equipment and software$240,535 $221,429 
Furniture and fixtures10,223 10,238 
Leasehold improvements19,746 19,453 
Property and equipment270,504 251,120 
Less accumulated depreciation(217,955)(203,046)
Property and equipment, net$52,549 $48,074 

Depreciation expense related to property and equipment was $8.3 million and $7.9 million for the three months ended June 30, 2022 and 2021, respectively, and $16.3 million and $15.9 million for the six months ended June 30, 2022 and 2021, respectively. Cost of revenues included depreciation expense of $7.5 million and $7.1 million for the three months ended June 30, 2022 and 2021, respectively, and $14.7 million and $14.2 million for the six months ended June 30, 2022 and 2021, respectively. General and administrative expense included depreciation expense of $0.8 million for the three months ended June 30, 2022 and 2021, and $1.6 million and $1.7 million for the six months ended June 30, 2022 and 2021, respectively.
Capitalized Internal-Use Software
The Company capitalized costs related to the development of internal-use software of $10.6 million and $7.2 million for the three months ended June 30, 2022 and 2021, respectively, and $20.1 million and $14.2 million for the six months ended June 30, 2022 and 2021, respectively. Capitalized amounts are included as a component of property and equipment under computer equipment and software on the Consolidated Balance Sheets.
The portion of total depreciation expense related to capitalized internal-use software was $7.2 million and $6.6 million for the three months ended June 30, 2022 and 2021, respectively, and $14.0 million and $13.3 million for the six months ended June 30, 2022 and 2021, respectively. Depreciation expense related to capitalized internal-use software is included in cost of revenue in the Consolidated Statements of Operations.
As of June 30, 2022 and December 31, 2021, the Company had capitalized internal-use software of $45.1 million and $39.0 million, respectively, net of accumulated depreciation, which was included in property and equipment, net.
15

Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)




(5) Goodwill and Intangible Assets
Goodwill
The Company’s goodwill balance is attributable to its Content reporting unit and is tested for impairment annually on October 1 or upon a triggering event. No triggering events were identified during the six months ended June 30, 2022.
The following table summarizes the changes in the Company’s goodwill balance during the six months ended June 30, 2022 (in thousands):
 Goodwill
Balance as of December 31, 2021$219,816 
Goodwill related to acquisitions160,514 
Foreign currency translation adjustment(2,676)
Balance as of June 30, 2022$377,654 

Intangible Assets
Intangible assets consisted of the following as of June 30, 2022 and December 31, 2021 (in thousands):
 As of June 30, 2022As of December 31, 2021
 Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Weighted
Average Life
(Years)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Amortizing intangible assets:   
Customer relationships$95,508 $(15,556)$79,952 12$55,542 $(13,906)$41,636 
Trade name15,922 (6,659)9,263 911,787 (6,805)4,982 
Developed technology92,231 (23,327)68,904 467,940 (14,214)53,726 
Contributor content44,465 (16,843)27,622 837,984 (14,632)23,352 
Patents259 (140)119 18259 (133)126 
Total$248,385 $(62,525)$185,860  $173,512 $(49,690)$123,822 

Amortization expense was $8.2 million and $2.3 million for the three months ended June 30, 2022 and 2021, respectively, and $15.3 million and $4.4 million for the six months ended June 30, 2022 and 2021, respectively. Cost of revenue included amortization expense of $7.7 million and $1.2 million for the three months ended June 30, 2022 and 2021, respectively, and $14.2 million and $2.3 million for the six months ended June 30, 2022 and 2021, respectively. General and administrative expense included amortization expense of $0.6 million and $1.1 million for the three months ended June 30, 2022 and 2021, respectively, and $1.1 million and $2.0 million for the six months ended June 30, 2022 and 2021, respectively.
The Company determined that there was no indication of impairment of the intangible assets for any period presented. Estimated amortization expense is: $19.0 million for the remaining six months of 2022, $37.7 million in 2023, $30.8 million in 2024, $20.6 million in 2025, $18.6 million in 2026, $13.1 million in 2027 and $46.1 million thereafter.

16

Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



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