Q2 2020 Shutterstock Inc Earnings Call
Good morning, My name is Jake and over your conference operator today at this time I would like to welcome everyone to the Shutterstock Q2, 2020 earnings conference call.
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Thank you at this time I would like to turn the call over to our first host Christou Vice President of corporate development and Investor Relations. Sir. Please go ahead.
Thank you operator Ah good morning ever won and thank you for joining us or Shutterstock second quarter 2020th earnings call.
[noise] today is fans have lucky, our chief Executive Officer, and Jarod gaze, our Chief Financial Officer.
Please note that some of the information over here during our discussion today will consist of forward looking statements, including without limitation the impact of polka 19 on our business.
Long term effects of investments in our business the future success and financial impact of new and interesting products that'd be true gross margins and profitability.
Long term strategy and our performance parts.
Absolutely adults or trends could different materials for my forecast for more information. Please refer to today's press release and the reports we file with the S. P. C from time to time.
Putting the risk factors discuss.
Just to be filed quarterly report on form tend to and our annual report on form 10-K for discussions of important this factors that could cause actually go up to a different materially from any forward looking statements when they make on our call.
We'll be discussing certain non gap financial address today, including adjusted EBITDA adjusted EBITDA margin adopted him that income revenue grilled, including by distribution channel and on a constant currency basis billing and three testwell.
[noise] reconciliation there'll be non got measures to the most directly comparable gap measures can be found any financial tables included with today's prestwood East and then our form tend to start posted on the Investor Relations section of our website.
Finally, please pull up to the police information that we posted on our website a complaint supporting materials for today's call as well as the new interactive microsite that is available on the I R section upset or stops website.
And now at this time I'll turn the call over a fan.
Thanks, Crafts and welcome to Shutterstock.
We look forward to your contributions as we continually increase our outreach and communications towards the best meant community.
Good morning, everyone and thank you for joining Shutterstock second quarter earnings call.
I wanted to begin by thanking all of our Shutterstock employees, who have effectively transition to working remotely and have been incredibly dedicated and focus during this time to offer continuity of service to our customers.
As a result of their efforts, we're making progress on a strategic plan focused on workflow innovation content services and data and insights, which will deliver strong returns for shareholders.
Shutterstock revenues prove to be much more resilient and the second quarter as compared to our expectations as well as relative to how we were trending at the at the end of April down high single digits.
Our second quarter 2020 revenues of 159 million are down two per cent from last year and down 1% on a constant currency basis.
Ah rest of World region, which includes Asia, who modestly this quarter, while the North America and European regions declined three per cent consistent with last quarter.
In the back half of the year, we are making investments in the long term growth of the company.
First we have redeploying capital into our platform solutions offering an undertaking significant global expansion of our sales and technical integration T.
We believes that this is a key growth area for Shutterstock as our customers look to consume Ah content services natively with an enterprise applications from add builders to website creation tools and applications.
The major investment in our platform solutions offering is mission critical and highly strategic to Shutterstock and benefit sauce and several ways.
First because we're accessing our customers customer we expect these relationships to effectively open up new market segments for us.
Second.
Customer volumes revenues and engagement levels as measured by monthly and Bhili active users tend to go up consistently.
And finally as a result of higher engagement platform solution relationships tend to result, and enhance customer retention and stickiness.
Among the key milestones we have recently achieved and the platform solutions offering is our new Microsoft adds integration, which makes our content available to all Microsoft advertisers through their add bill but.
With Facebook, we were a large launch partner for a new ads initiatives, our editor and content are available in new part of Facebook adds to help more advertisers create beautiful performance at.
We are also driving platform relationships deep into our enterprise business to make it stickier and recurring in nature by becoming more native into enterprise workflows.
For example, we just launched our platform solutions offering within snap weight watchers and business insider and just the last two weeks.
And over the past year, we have grown the number of a P. I platforms integrations come 4800 to over 6500 integrations and made it easier for enterprise customers to get access to our content and the tools. They use every day.
In addition to investing in our platform solutions offering we are planned investments and both marketing and brand building to support some of the new subscription problem products, we are rolling out.
With a range of new subscription products plan for rollout in the back half of the year and music and with multi asset product. We aim to support these products with significant reach in mind sure within our <unk> marketing efforts.
Last quarter I discuss 310 minutes that I'll be focusing on a shutterstock C E O in order to differentiate our business and position us for a long term success.
First innovation that enhances our customer workflows.
Data and insights that drive performance and content that is relevant and fresh.
This quarter.
Want to talk about a few investments we made to ensure that are content is relevant and fresh.
First we have enhanced our ability to cost effectively in just content at a lower cost using AI and automation rather than offshore and onshore manual review resources, you can see the benefit of that in our gross margins this quarter.
This automation makes us more scalable to ingest more content at the top of funnel improves our ability to reduce duplicate the content cause we expect to that we will allow us to be more nimble with respect the tailoring the content and address the needs of the market.
We have been working on this for some time and I'm proud to see this technology begin to get implemented in drive resolved.
Second as I mentioned previously clients increasingly prefer to purchase content via subscription model.
Digital advertiser space and <unk> elevated demand for thresher creative content in order to capture and retain attention from their audiences.
In order to drive towards higher performing and fresh content in the beginning of June we evolved a royalty structure to better alive or contributor incentives with our and we expect this will result in a concept library and enabling the growth.
Current and future subscription product sales.
Lastly, we are making investments to foster diversity and inclusion amongst our contributors customers and valued employees.
Seek diversity as a core principal of Shutterstock and embodies our beliefs that different.
Respective strengthen our business, we have historically focused on the diversity of our contributor community and content in our collection, but we're committed to doing more much more to amplify powerful divorced voices and our network.
This includes leveraging AI to surface more localized and diverse content, improving our talent acquisition and performance management programs to build a more diverse and inclusive workforce and launching a grant program dedicated to supporting photographers artist Videographers M musicians, who drive diversity include.
And environmental awareness initiatives.
As a company and as a leadership team, we are committed to making a long lasting impact and supportive diversity and inclusion of shutterstock and in our communities.
In order to provide more insight into the evolution of our business. We are introducing three new K P is to investors. This quarter that we track internally and believe are important for a business, particularly as we transition primarily towards a subscription based model.
We expect to always have some meaningful non subscription component of our business, including editorial and custom.
But expect that it will become a minority of our revenues over time.
Jared will share the details of these new K P. I S. As he discusses our financial results.
Lastly, we are seeing tremendous progress in our initiatives around margin expansion and we're starting to see the results flow through.
[noise] adjusted EBITDA and the second quarter was 37 million, representing a margin of 23%, which is up 15% from last which is up from 15% last year.
This performance represents records quarterly EBITDAR shutter sauce, and it is driven by several initiatives across content technology and marketing to improve the efficiency of our operations.
Before handing it over to Jarrett for a detailed for financial review I want to thank the Shutterstock team for a record performances quarter with several of our margin enhancement initiatives now executed we are focused on returning to growth while continuing to maintain our margin momentum.
And where and a great place to execute I'm M&A deals and reward shareholders with additional capital deployment on the back of our strong margin execution.
And with that I'll turn the call over to Jarrett.
Thank you stand and good morning here for one let me start by saying, we feel quite good about the second quarter and our progress against our goals.
When we reported the first quarter, we saw revenue declines of high single digits year over year in March and April which will predominantly attributable to the impact of the pandemic.
I'm pleased to report that the improved trend we saw on the last couple of weeks of April accelerated into both May and June resulting in the relatives strength, we saw it in our revenues and the second quarter.
Revenue declined two per cent and the second quarter compared to the prior year I'm just down 1% on the constant currency basis or E. Commerce channel increased cheaper sent to 90.2 million, while we're enterprise channel revenue decreased six per cent to $61.1 million.
R E Commerce channel displayed growth in North America, and the rest of the world as our customers returned to work in the multiple demand <unk> digital marketing growth and website proliferation powered our business a stand mentioned the European geography has not yet recover to 2019 levels.
Our enterprise channel was down largely as a result of lower bookings and prior quarters and we believe that we are poised to eventually achieve your for your growth in billings and deferred revenues.
The key sales leadership, we need for success is largely in place at this point and we have an improved product sweet and the articulation of our differentiated value proposition.
We do believe it will still take several quarters for the revenue growth to shine through can be enterprise channel.
In terms of our margins and profitability and the second quarter gross margins were 60 per cent up approximately 200 basis points from 58 per cent and the second quarter of 2019.
This improvement is due to a number of factors, including the automation in a I, we've been introducing into our content ingestion process.
Reductions in depreciation expense from technology platform and infrastructure costs and the reduction in royalties due to lower utilization during the pandemic.
Shelton marketing expense was 22 per cent of revenue as compared to 28 per cent and the second quarter of 2019.
The paper ability and sales and marketing expense is driven by an increased level of scrutiny and our performance marketing spend as we adhere to tight metrics around marketing return on investment.
Based on the positive demand signs, we are seeing and our progress in our plans of improving margins, where accelerating our marketing spend in the back half of the year and expect to spend significantly more on both top a funnel and performance marketing efforts to drive our subscription offerings.
Product development cost for eight per cent of revenue flat with a second quarter of 2019.
[noise] product development expenses or net of capitalized labor, which is reported it within the fixed assets on our balance sheet.
G&A expenses were 16 per cent of revenue down from 20 per cent of revenue in the second quarter of 2019.
The G N a decrease of $7.2 million is attributable to reductions in stock compensation and amortization expense, coupled with our global efforts around vendor elimination renegotiation overhead cost reductions in process automation and enterprise software platform consolidation.
Our efforts in this regard since since the beginning of the year are beginning to shine through.
Adjusted EBITDA margins increased to 23% compared to 16 per cent and the second quarter of 2019.
Q2, adjusted EBITDA of $33 million included $2.8 million, a severance expense, which impacted margins by 175 basis points.
We do not expect material severance expenses in the back half of the year.
Gap net income was $19 million or 53 cents per diluted chair and adjusted net income was $22.2 million or 62 cents per diluted sure as compared to $11.8 million or 33 cents per diluted chair and the second quarter of 2019.
Turning to a balance sheet and cash flows at the end of the quarter, we have $311 million of cash up from $296 million at March 31st 2020.
The quarterly increase in cash a $15 million was above and beyond the payment of our June dividend 17 cents for sure.
A free cash flow is $22.4 million as compared to $19.8 million and the second quarter of 2019.
<unk> your increase in free cash flow is due to improved profitability on consistent business volumes.
Or deferred revenue balance declined to 138.2 million from 138.9 million at March 31st 2019.
The change in deferred revenue is predominantly judo are enterprise business, which is not yet shown accelerated bookings in 2020.
We are this quarter, providing investors a new schedule on the Investor Relations section of our website with a reconciliation of billings to deferred revenues.
As we turned around the enterprise channels. This will first result in billings and deferred revenue growth and provided good leading indicator of our progress and getting back to growth and recognized revenues and be enterprise channel.
Stand previously mentioned, you're providing three new operating metrics this quarter that will provide insight into the grubbing subscription nature of our business.
We're also maintaining all of the previous metrics. We've traditionally provided around download volume in revenue for download as well as the size and growth of our image and footage library.
Reviewing some of our key operating metrics and associate the trends in the second quarter on a year over year basis subscribers increased 30 per cent to 223000 <unk>.
Subscriber growth was driven by video music an image subscription products is customers increasingly prefer to consume their content with a regular monthly allotment.
Subscribe of revenue increased eight per cent to 62.6 million and represents 39% of our revenues up from 36 per cent of our revenues last year.
Subscriber growth is well in excess of subscriber revenue growth due to changes in the product mixed with growth in our small subscription products being higher than growth and or a large or subscription products.
Average revenue per customer increased 0.2 per cent your for your to $326.
Our longterm strategy is to increase average revenue per customer, particularly in the enterprise channel by leveraging cross sell of our platform solution offering as well as our editorial accustomed business.
P downloads declined by six per cent to 44 million and the second quarter, mainly due to reduction activity and utilization related to the pandemic.
This resulted in revenue for download increasing by 17 cents to $3.61 per download.
Our image library expanded by 21%, who approximately 340 million images and our video library increased by 27% to approximately 19 million clips.
In terms of capital allocation Shutterstock will pay out it's next quarterly dividend 17 cents per sure on September 17th 2020.
As previously stated we plan to grow the dividend in line with earnings growth and will periodically revisit the pay out based on our cash low profile and alternative uses of capital.
With respect to our M&a's strategy, we're actively looking at assets and we're in a great position to execute.
Will continue to be disciplined is reevaluate M&A opportunities should we can be confident we have the ability to integrate the acquisitions and that they presented compelling industrial logic and strategic fit.
From a forward looking perspective on the second half of the year I'd like to provide some color on what we expect.
We are working towards getting back to overall quarterly revenue growth as a company by the fourth quarter, and we're focusing our sales and marketing investments around that.
R. A bill you could get back to growth will of course be somewhat dependent on the course that the resolution out of the pandemic takes and the impact in the various geography's in the world in which we operate.
From a margin perspective, two two margins, where exceptional and investors should expect those margins to come down in the back half of the year as we reinvest in platform solutions and sales and marketing spent.
We also expect G&A expenses on a gap basis to increase in the back half of the year based on an increase in non-cash stock compensation expense because of the strong EBITDA performance the stock comp expense tends to increase.
Well EBITDA margins will be lowered in the back half of the year then the second quarter. We are still targeting your for your margin expansion of at least 50 basis points. In 2020 is compared to calendar year 2019 were highly confident of over achieving on that target, even including the severance expense that we've occurred.
You're the date.
Lastly, we're proud rollout shredder stocks, new interactive Investor Relations microsite today on the Investor Relations section of our website.
We believe that this is the first of its kind fully interactive investor Microsite complete with videos of key members of our management team dynamic charts and graphs with our Tam and go to market approach.
An order your responses to frequently asked investor questions.
With investor interactions today, almost entirely virtual this type of investor engagement will allow investors to drill down into the parts of Shutterstock story that are most compelling by itself guided navigation rather than a static P. D F presentation.
We are pleased as a management team with the resiliency of our revenues and the second quarter as well as our execution and driving margin improvement and profitability.
In the back half of the year, we plan to reinvest some of that margin to get back to growth, while continuing to press forward with a capital allocation plans.
We appreciate your time today and thank you for joining us.
Operator, we'd now I'd like to open the line for any questions investors an analyst My house.
Thank you once again, you May press star one to ask a telephone question star one at this time.
Your question has already been answered simply press the pound key to withdraw it now.
For one moment to compile the first question.
And we have a question from Yousef Squealing Suntrust. Please go ahead.
Thank you very much just three sips, Kelly hi, guys. Congrats on on a very strong quarter and Jerry Thanks for the for the additional disclosures and the website awesome cause two questions for US first just around the outperformance relative to your expectations I was hoping.
That you maybe you can provide a little more color around maybe.
Product typed video versus image versus you know music that may have contributed any <unk> you know what kind of surprised you and a quarter that kind of ended up causing the outperformance and probably even more impressive as the bottom line I don't remember or I should say the last time I saw you guys are doing 23 per cent of your Dumbarton I think you'd have to go back to like 2000 and.
14th 2014, which was eons ago, So and I know you guys are gonna be you know kind of doubling down on some of these investments, but as you step back and and look at the business based on some of the new changes structural changes that you're making can you comment on the level of <unk>, you know kind of the potential for gross margins goes.
Forward and Uhm, just EBIT, what's the what's kind of the new long-term EBIDTA margin that you think this business can support you know X Cove it.
Clearly there was some benefits to you guys from lower T N E et cetera related to cope it but as you calm normalize all of that where where where do you think we could potentially shake out now relative to maybe six where you get you guys were thinking six months ago. Thanks.
Yeah, absolutely I'm, so used to have hey, first nice to nice to have you on the call and hope you're saying safe unhealthy.
Yeah. So from I'll take the first question and then Jared will talk a little bit about margin EBITDA going forward.
As far as revenue you know as we talked about on the call. We definitely have seen you know a lot of movement, particularly an S. M b.
Where the need for you know content and digital assets has increased.
We've also started to.
Bring on new product to market, new subscription products like new video subscription products. As an example, which is taken hold we've also brought some new smaller image subs.
Again to go after the pro Sumer in small business market.
And that has been working really well, which is consistent with the trends that you know that are more sort of secular nature.
And then you know from from revenue perspective, you know some of the.
We're not completely immune from some of the challenges that are happening for from certain customer verticals. Obviously travel has been hampers significantly media et cetera. So what we're doing in the meantime, there's really trying to help our customers with new services such as.
Custom and editorial for <unk> commercial use product.
So we've really been able to.
Pivot and it's really particularly as we went into May and June has really.
Helped us to.
Offset some of the some of the headwinds that are you know that many are facing because of the pandemic and I'll, let jarrod talk a little bit about the the margin and EBITA trends.
Great. Thanks.
So you said I think we are you know we're quite pleased with our execution year to date against our objectives for taking up the profitability of the business I think there's you know in the past and we spoke last quarter in the corner before the leverage and the model was really in N. G N a and I think we continue to believe that.
As you think about 2020 and beyond there is leverage in N. G N. A the genie that we experienced as a percentage of revenues and the second quarter of 20% is not the right level of G&A for the company and we believe that while the second quarter was quite exceptional.
This level of.
16, 17% level of G&A as a percentage of revenue is something that is going to allow us to get operating leverage on our business and expand annual EBITDA margins year on year off for at least the next several years.
The other area that I would say from a longer term perspective does have operating leverage is in the sales and marketing wine, you'll see that we've gotten a bit shrewder on sales and marketing expense.
The flip side of that is there are long term systemic reasons why sales and marketing should also decrease as a percentage of rather do you want to go forward basis, which is really the evolution of our business towards a subscription model.
As more and more of our business become subscription the need to acquire new customers via performance marketing efforts become less and it really becomes more of a retention challenge in terms of growing your business and expanding your business and so there really are longterm reason.
N Y there will be some leverage in that sales and marketing line going forward.
From a gross margin perspective, however, I would say that we do not have plans to long-term systemically take up our gross margins. You know we believe that we have a model that allows us to have cost of goods sold that effectively matches. Our revenue line, we want to be competitive.
Live in the market in terms of the pricing of our subscription products and so I don't think that wall gross margins came up this quarter as a result of several of the reasons that we mentioned that that is something that when you think from a longterm perspective should systemically go off the gross margins you would expect to be <unk>.
Table over time with meaningful leverage in the gene a line and some modest leverage in the sales and marketing line as we gradually evolve the business towards more of a subscription model.
Okay. That's helpful. Thank you guys.
Thank you.
We have a question from bread, Eric someone Needham and company.
Hi, Thanks, just a few so first let me think about the mix of your content at the moment, what what what sort of drove the higher revenue for download.
In the corner and maybe just if you could just put that in context to the higher portion of subscription revenues and sort of how we should be thinking about that going forward.
Sure. Some bread when you think about the higher revenue per download, it's really a function of reduction and utilization of the business. So as the number of paid downloads decreases because of the subscription nature of a fair amount of our revenues ultimately be are able to capture.
Those revenues without associated costs.
And so if you kind of look at what happened within the corner you know we experienced.
Pay downloads approximately a down five six per cent or six per cent rounded then we experienced an increase in revenue for download of approximately five per cent. So the two effectively mathematically offset each other because of the nature of our revenues.
Got it that's great and then.
You know you talked about seeing signals right now, they're leading me to put add dollars back to work in the second half.
I guess, the the equation of balancing growth versus profitability, maybe just talk about your longterm philosophy, there and and how you prioritize one over the other.
Yeah, I think and Ah Brad definitely it's well, it's a balance I think you know from our perspective.
You know, there's the core categories that we're in and we want to make sure that were growing at least at.
The rate of category growth being one of the large players.
And then as we you know sort of continue to innovate and move into new areas for the business adjacent areas for the business.
That's what we want to focus on.
Growth acceleration.
But is Jared mentioned you know.
The decisions were making around increasing margins.
You know, we're trying to be very surgical about that.
So for example, some of the changes around content ingestion leveraging technology.
He's or investments that have been you know kind of some time in the making.
And really don't.
Impact.
You know marketing dollars or other areas of of growth, but continue to improve the leverage in the business and we think that over time. We will continue that we have continued opportunities to do that while still being able to invest both and growth around the court.
As well as.
Leveraging are balance sheet for you know augmenting our business and investing in the future of the business. So you know we're very we're very excited about the position that we're in you know because of the the financial stability of the business.
Got it that's great and maybe just squeeze one last one and if I can just beyond the macro.
What needs to happen on the enterprise side to kind of returned to grow with you talked about kind of looking towards the trajectory maybe towards the end of the year. Early next year. There is it just I guess things like more platform solutions partnerships salesforce productivity just pick it up as those new folks get ramped maybe just talk about the the the mechanics of what can drive a return.
To growth on the enterprise side of the business. Thanks.
Yeah, no absolutely. So <unk>. The enterprise segment is made up of several parts of our business including platform solutions.
As well as S M B and and are.
Top tier clients.
And our strategy is you know going forward for the top to your clients. We are definitely have several initiatives to increase the average order value or the size of those deals and that's through a combination of providing tongue T N T and solutions.
So you'll see as we had further into this year that we're continuing to launch new services into the enterprise.
We think we have some tailwind when it comes to the small and medium segment, particularly because of the trends that that exist.
Around the move to digital and the acceleration of E Commerce.
And so we're seeing that both in our S M b as well as platform solution segment.
So really I guess, what what I would say is we are.
And the and the high end or the top tier clients, we have a lot of room for penetration into sort of both landing and expanding those accounts and we're we're seeing signals of that.
As well as you know taking advantage of.
Some of the more sort of industry trends around S. M. B and then from a platform solutions perspective really excited about that part of our business and is Jared talked about and I talked about and my opening remarks, we're gonna continue to invest heavily in that part of our business because you know where at.
A lot of value for our partners as well as you know really creating a network effect.
In in from an audience development perspective for the Shutterstock offering so we'll be continuing to innovate within within our a P. I within platform solutions to bring new products and services to all of our partners.
Got it that's that's great. Thanks.
Thank you we have a question from Boyd Wamsley with Deutsche Bank.
[noise]. Thanks have a couple I guess firstly.
Can you talk about changes to the royalty payouts two contributors and did you have a full quarter benefit from that and gross margin or should we expect gross margins to increase in the second half around that and I guess related to that.
Are there gonna be seasonal variances in gross margin to account for kind of Fry rising payouts over the course of the year.
To contributors and then the second one on the enterprise side I know you guys have been doing some go to market changes on how you use kind of sorts new customers can you talk about how that how that's going.
And how critical is that that kind of getting that brought her in enterprise segment back to grow. Thanks.
Yeah absolutely.
So first on the on the gross margins in the contributor royalty change one of the things that I really want to make sure is as clear as that there's there's several things.
That are impacting gross margins, including hosting costs of our data centers content ingestion costs credit card fees royalties.
Big part of a benefit that we experienced this quarter is actually due to lower download activity.
As well as the automation of the content ingestion process as compared to sort of doing it manually. So when we look at.
There are several variables that are that are impacting gross margins some of which.
We expect.
Well, we'll continue on others.
No Barry based on what's happening in the business the product mix, you know et cetera, I'll, let jarrod talk about kind of.
I'll, let you talk about sort of the longer term and you know the rest of the year and then I'll take the the enterprise question.
Sure. So I think you know as I mentioned when I gave the talk over regarding EBITDA margins longterm.
We really are focused on making sure that we're able to maintain or a gross margins that we have a strong matching between our revenues as well as our costs of goods sold.
And most importantly that were enabling a successful expansion of the subscription offerings in our business as you would expect subscription offerings tend to come with lower unit prices. They are the way the customers like to consume today in our economy, and we do want to be well position.
[noise] to be able to roll out those subscription offerings have them be cost effective solutions for our customers and be able to bring them to market and we believe that the structure. We have in place today enables fat.
That structure kicked in in June So we would get the full three months of it and the third in the fourth quarter, but we don't expect forcibly that structure ended up itself to result in any.
Significant increases in gross margin they just keep in mind or pricing to the end market is the other end of that equation and it's important that we're able to basically flex to maintain stability in our gross margins over time. So I think that's the way, we're really thinking about our business, which is stable gross margins.
Leverage N G N a cost that we've talked about over the course of the last several quarters and we do believe that over time. In addition to just being treated with respect to our sales and marketing expense because it would be increasing subscription nature of our business. There is less of a need to bring in <unk> new.
<unk> customers from the subscribe a perspective and the challenge really becomes around retention in order to drive subscriber revenue growth.
So you know that's that's the thing where we are today when I think we feel quite good about the position that we're in for today as well as how the industry is going to continue evolved towards the subscription model and the years to come.
Thanks yard.
And then your point on enterprise is a great one in terms of new customers in new logos that we bring into our.
Into our platform and that's definitely a key K P. I that we look at internally.
As well as you know kind of the equation of of growth for enterprise is to expand.
And penetrates existing account with new services, so that when we look at night retention.
It is greater than prior year.
And then new logos are definitely critical and is you know pipeline perspective, something that we look at pretty much on on a daily and weekly basis N as a key part of.
The growth strategy, and we're seeing a lot of great traction back.
Okay, and if I can add one more just going back to some of the drivers of the subscription subscription number of growth versus the revenue growth how much of how much of the <unk>.
A number of subscribers is driven by I think you've had a new video product this quarter, but just new products versus maybe.
Yeah, I guess, new format products versus new lower priced pier products.
And what what were some of the new I guess, the new dollar price tears this corner.
Sure So Lloyd while we don't care about.
Revenue byproduct or we're not gonna give out kind of the subscriber growth byproduct you know the reason fundamentally wide number of subscribers is increasing significantly faster than subscribe of revenue growth is because of the success and the tendency for some of this new pro Schumer segment to consume.
<unk> some of the small subscription products that we have so we do talk about kind of our existing Tam within the stock market industry and we talk about some of the expansion that we believe that it's gonna come from some of the the casual creative that are really starting to drive our business and they're always casual creative tend.
Have a preference for smaller subscription products. They don't need are 750 product.
They are more content to consume save for example.
10 assets per month at $30 per month, which is a subscription product that you can see on the the homepage of our website and so we're we've seen growth as we've seen growth in some of the smaller subscription products than what I. Just mentioned, there's an image product we put out a press release last quarter about our new footage product.
And the wall, that's not as low cost of a product it seemed meaningful traction and we've seen a number of clients take up that food subscription product, who were erstwhile by activity or a basket buyers and shudder stocks products and we also have a new music product.
Premium because that's a lower cost product that we've gone to market with that we're gonna be supporting with increased sales and marketing. So I think you know those lower cost subs driven by the pro Sumer segment are really what is forcibly driving this trend a subscriber growth in excess awesome subscriber reading the growth.
Alright, Thank you guys.
Thanks, Thanks, so much like.
Thank you we have a question where I'm Alex G. M O with Jeffries. Please go ahead Sir.
Okay. Thanks for taking the question guys sounds a bit of a follow up to a couple of previous questions. But you had mentioned the goal is to get back to overall revenue growth as a company and just looking at the addressable market analysis in inside that you guys put out it looks like you know you're you're looking at about seven.
<unk> stock imagery grow with this if I'm reading that correctly from an industry standpoint, so should we consider that maybe you know the the north star where future revenue growth can can get to for the company and you know what needs to happen too.
A lemonade maybe some of the competitors that are that are taking chair and you know have shutterstock participate more than that outside and then lastly, an <unk>. You know you were able to dramatically expand large as well I'll also seen revenue decline just 1%. So does that give me more confidence in the sustainability of of your <unk>.
Revenue levels, maybe as a baseline again, just give me. The fact that that you random spending N N topline was still relatively study thanks guys.
Yep, a great question, Alex and.
What I would say is the 7% category growth expectation.
Similar to some of the expectations that were.
That were had going into this year around advertising around retail, etc. A lot of those expectations are no longer true.
As a result of the pandemic so.
You're you're right that you know the seven per cent growth that was expected for this category would be absolutely what we would expect to grow.
As a as I keep sort of player in the space.
<unk>, we believe that there are several adjacent categories that we that we are looking at.
That could also help us.
You know in the long term accelerate growth and so we're pretty actively looking at those categories again.
These days growth projections, our our not very accurate and hard to hard to get our hands around but we definitely believe that we can get more you know additional growth being deeper and workflow and really integral.
Writing deeper with our customers and so will continue to look at investing in that as far as our margin profile and leverage in the business you know going forward. We we stated you know at the beginning of the year. We stated are goal.
That we were going to start to focus on increasing the margins with a business. We had talked about 50 basis point.
<unk>.
And we're definitely confident that we can you know meet and exceed that going forward, but it's definitely you know something that we think.
We have room.
Two two exceed that expectation going forward.
Great. Thanks, then.
Thank you.
For any additional questions place suppress store one at this time.
We have a follow up question from Yousef squealing with Suntrust's.
Alright. Thank you just a follow up to the D. M N a reference and you're prepared remarks can you just again help us kind of frame.
Type of of either.
Products technology, just whatever it is that you think could help you either solidify the business you're as it exists today or two stands earlier comments amount maybe going into some adjacencies to help accelerate the business. So any any kind of.
Incremental color there would be very helpful. Thanks, guys.
Sure use of I'll I'll give some comments and then let's diet tag on I think from our perspective, there's there's two types of.
Potential opportunities. We're looking at there are a number of consolidation opportunities in the stock space. We we regularly look at them where disciplines in our approach. We believe that these are businesses that are often additive from a content tight perspective, and may give us a leg off with a specific type of Khan.
Give us access to a new contributor community and we typically look at those acquisitions to be accretive either immediately or within a short period of time based on the multiple and based on our opportunity to get cost out of those businesses.
We're also looking very actively at strategic opportunities. You know these are companies that would typically be on a revenue multiple basis from a transaction perspective, the margin profiles or not yet mature, but we think that was 2 million customers in over 200 people.
In terms of our front desk sales apparatus, there's a great channel that we can leverage in order to accelerate the growth of these businesses.
And pick up the margins, there's a few areas that we're looking at and we've been looking at.
Marketing technology, specifically in terms of creative content workflow as an area that we look at very actively.
Tools and utilities with which are creative uses to manipulate content either image video music or other as an area that we look at and we also quite frankly look at AI and machine learning with respect to identification of content looking at the performance of selected content.
And looking at how to create dynamism in terms of the optimization of content for a deployment in marketing use cases as well as an website use cases. So those are kind of three or four of the strategic areas. We look at in addition to the consolidation plays that we regularly looked at.
It sounds good thanks.
Thank you.
I'm sorry. It appears there are no further questions on the cute.
Great well. Thank you everybody I want to take one last opportunity to thank our employees our customers in our contributors for their support an engagement I couldn't be more proud of the organization I'm. So excited about our future and believe that we're very well positioned to take advantage of the opportunity.
He's ahead, so please stay safe and that ends our call for the day.
Thank you then I'll conclude call everyone him and I'll disconnect.