Q4 2022 Getty Images Holdings Inc Earnings Call
Speaker 1: The spe.
Speaker 2: Good afternoon and welcome to the Getty Images fourth quarter and full year 2022 earnings conference call.
Speaker 2: Today's call is being recorded. We have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Stephen Kanner, Vice President of Investor Relations and Treasury at Getty Images. Thank you. chronicle NASDAQ
Speaker 3: Good afternoon.
Speaker 3: And welcome to the Getty Images fourth quarter and full year 2022 earnings call.
Speaker 3: Executive Officer and Jen Lader, Chief Financial Officer.
Speaker 3: Before we begin, we would like to remind you that this call will include forward-looking statements within the meaning of the Private Security Qualification Reform Act of 1995.
Speaker 3: These statements are subject to various risks, uncertainties, and assumptions, which could cause our actual results to differ materially from these statements.
Speaker 3: These risks, uncertainties, and assumptions are highlighted in the forward-looking statements section of today's press release and in our filings with the SEC.
Speaker 3: Links to these filings in today's press release can be found on our Investor Relations website at investors.gettyimages.com.
Speaker 3: During our call today, we will also reference certain non-GAAP financial information, including adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA less CAPEX, and free cash flow.
Speaker 3: We use non-GAAP measures in some of our financial discussions as we believe they represent our operational performance and underlying results of our business.
Speaker 3: Reconciliations of gap to non- GAAP measures , as well as the description, limitation, and rationale for using each measure can be found in our filings for the SEC.
Speaker 3: After our prepared remarks, we'll open the call for your question.
Speaker 3: With that, I will hand the call over to our Chief Executive Officer, Craig Peters.
Speaker 3: Thanks, Stephen. And thanks to everyone for joining Getty Images' fourth quarter and full year 2022 earnings call.
Speaker 3: I will address the full year business performance and progress before Jen takes you through the full fourth quarter financial results and 2023 outlook.
Speaker 4: I want to start with context on the evolving macroeconomic environment and its impacts on Getty Images.
Speaker 4: 2022 was a challenging year, particularly as we move through the second half of the year.
Speaker 4: As I said last quarter, like other global businesses, the strengthening U.S. dollar relative to foreign currencies negatively impacted our results. We also experienced a slowdown in some parts of our business during the year as businesses exercised caution given the macroeconomic conditions.
Speaker 4: This being most pronounced in certain parts of Europe and with our agency customers.
Speaker 4: For the 2022 fiscal year, Getty Images exceeded $926 million in revenue, representing year-on-year growth of 0.8% and currency neutral growth of 5.7%.
Speaker 4: Our adjusted EBITDA finished just shy of $304 million for the full year.
Speaker 4: This reflects a reported year-on-year decline of 1.7% and currency neutral growth of 4.8% as our costs are heavily weighted towards the US dollar and we took on new costs as a public entity.
Speaker 4: While we experienced slowing over the year, Genya images generated year-on-year currency-neutral growth in each quarter of 2022. We grew our purchasing customers by over 5% year-on-year.
Speaker 4: We grew our annual subscription customers by more than 50,000 to 129,000.
Speaker 4: Our paid downloads grew more than 6% to $95 million.
Speaker 4: Our revenue retention rates for our annual subscribers continued in excess of 100%.
Speaker 4: We continue to grow our video attachment rate. That's the number of customers using our video offering within the period.
Speaker 4: These metrics speak to the strength of Getty Images' offering and how we continue to deliver more value to more customers with those customers increasingly committed.
Speaker 4: At the core of these customer metrics is our high quality exclusive and authentic content that is born from our unique expertise.
Speaker 4: creativity, and partnerships.
Speaker 4: It is incredibly difficult to articulate the uniqueness represented in our more than 500 million visual assets.
Speaker 4: But I believe it is clearly demonstrated by our unparalleled coverage of world events and comprehensive archives enabling context.
Speaker 4: events like the World Cup and Pele's passing.
Speaker 4: Events like the Queen's Platinum Jubilee in passing.
Speaker 4: Events like the U.S. midterm election, the Winter Olympics, and the war in Ukraine.
Speaker 4: It is clearly demonstrated by the organizations that choose to partner with Getty Images.
Speaker 4: Organizations like the BBC, Penske Media, Kyoto News, and Viacom.
Speaker 4: all signing or re-signing agreements with us over the past year to represent their amazing content.
Speaker 4: organizations like New York Fashion Week.
Speaker 4: The Grammy Awards, Sundance Film Festival.
Speaker 4: Grammy Awards, Sundance Film Festival, Toronto International Film Festival.
Speaker 4: the Met Gala, and the British Academy Film Awards, where we serve as the official photographer with unique access.
Speaker 4: organizations like the NBA, the NHL, Major League Baseball, FIFA, the IOC, Formula One, NASCAR, and PGA Tour, who entrust us to work so closely with their events, rights partners, and sponsors.
Speaker 4: It is clearly demonstrated by the honors bestowed on our team.
Speaker 4: Pulitzer Prize, and World Press Photo, just to name two awards of the more than 80 received in 2022.
Speaker 4: Today is Getty Images' 28th anniversary.
Speaker 4: And I believe the strength of our content franchise has never been stronger.
Speaker 4: In 2022, I was also very happy to expand our services to customers.
Speaker 4: We launched Visual GPS Insights, an interactive tool to help our customers choose the right imagery, backed by data and visual guidance.
Speaker 4: We launched Unsplash Plus, an unlimited subscription providing access to unique release content with expanded legal protections.
Speaker 4: and the first paid subscription offered by Unsplash.
Speaker 4: We invested in and partnered with Bria to bring state-of-the-art AI editing capabilities to optimize visuals for creative needs with speed and efficiency.
Speaker 4: reducing technical and budget barriers for customers.
Speaker 4: At the close of 2022, all iStock annual subscription customers could remove backgrounds from images with the touch of a button as part of their base subscription.
Speaker 4: We continue to broaden the reach of our custom content offering.
Speaker 4: leveraging Getty Images' global network of photographers and videographers to create customized, cost-effective, and exclusive...
Speaker 4: project-specific content to meet the specific needs of our customers.
Speaker 4: IHG and Mars are just a few of the global companies that took advantage of this offering, driving nearly 60% year-on-year currency neutral growth for our custom content business in 2022.
Speaker 4: In closing
Speaker 4: Like many companies, we are not immune to macro conditions, but our overall operating metrics remain positive, and we continue to see opportunity, as many of our offerings can be counter cyclical, allowing us to help our customers produce creative more efficiently and enhance their offerings.
Speaker 4: As a result, we continue to plan for moderate revenue growth in 2023.
Speaker 4: with the first half more challenged by FX.
Speaker 4: compares and the addition of public company costs. As a company, we are laser focused on expanding the monetization of Unsplash, growing our corporate business, driving further video consumption, and seizing geographic opportunities. Consistent with our track record,
Speaker 4: will be prudent in managing our cost base for efficient delivery across strategies. I am grateful for our teams.
Speaker 4: and all their work in these important areas, and the company is excited to enter its 29th year of leadership. With that, I'll hand the call over to Jen. We'll take you through the more detailed financials.
Speaker 4: Our operational performance in the fourth quarter and the full year 2022 is a testament to the resiliency we have built into our business and to the strength of the Getty Images offering.
Speaker 5: I'll start off today by reviewing some of the key operating metrics, or KPIs, that underpin that financial performance.
Speaker 5: Please note today's press release contains information on all of our KPIs, but I'll highlight just a few here to further expand on Peg's comments.
Speaker 5: All KPI metrics are out of the trailing 12 months or TTM period and with December 31, 2022 with comparison to the comparable TTM period ended December 31, 2021.
Speaker 5: As discussed in our Q3 earnings call, beginning with those Q3 results, we made two go-forward changes to our customer data and reporting.
Speaker 5: I will highlight the impact of these changes on total active annual subscribers and annual subscriber revenue retention rates, the two KPIs impacted by those changes. I will note that our Q4 KPI metrics point to a healthy, resilient business, even absent these two reporting changes.
Speaker 5: We continue to see growth in customer engagement, with our total purchasing customers rising to $835,000 from $794,000, an increase of 5.2% over 2021.
Speaker 5: This growth is fueled by our ability to consistently produce and deliver the highest quality authentic content that our customers need and demand to tell their visual stories and to amplify their visual presence.
Speaker 5: We meaningfully grew our active annual subscribers to 129,000.
Speaker 5: from 75,000, an increase of approximately 73% over 2021.
Speaker 5: Ascent that customer data reporting changes, this increase would have still been an impressive and critical increase in population high visualization and lossdon'at 56%.
Speaker 5: This metric counts the number of customers on one of our annual subscription products, which are products with a duration of 12 months or longer, and now also includes our UnslashPlus subscription.
Speaker 5: This growth in annual subscribers points to the growing mix of revenue from our annual subscription business, which in Q4 surpassed 50% for the first time in our company history.
Speaker 5: For our customers on those annual subscription products, we retained revenue at 100.1%.
Speaker 5: down from 104.5% in 2021, with 2021 benefiting from the year-on-year compare of a COVID-impacted 2020.
Speaker 5: Excluding the customer data reporting changes I mentioned earlier, our revenue retention rate would still be a very healthy 99.2%. We increased our paid download volume by approximately 6.1% to 95 million, with growth across both editorial and creative.
Speaker 5: Looking back at our history, at the COVID impacted period, we have seen our paid downloads grow consistently in every single year dating all the way back to 2013.
Speaker 5: And next, our video attachment rate.
Speaker 5: which measures the percentage of our downloaded customers who downloaded videos. This was also in growth, rising to 13.1% from 12.1% in Q4-22.
Speaker 5: As Craig mentioned, video is one of our key growth pillars, and we expect to see this metric continue to be on a growth trajectory as we move through 2023.
Speaker 5: Turning now to our financial performance, which of course is anchored by the strength of those KPIs.
Speaker 5: Foreign currency remains a significant headwind in the fourth quarter, with a stronger U.S. dollar relative to foreign currencies, in particular the euro and the pound, driving a meaningful difference between our reported and our currency neutral performance.
Speaker 5: Assuming rates hold relatively steady to where we see them today, we'd expect foreign currency to remain aheadwind in the first half of 2023, with comparisons improving as we move into the back half of the year as that FX impact on our business is most pronounced in the second half.
Speaker 5: I'll expand a bit more on this when we touch on our 2023 data. Total revenue in the fourth quarter was $231.5 million. 3.2% on a reported basis year on year.
Speaker 5: due in large part to 670 basis points of foreign currency headwinds. Excluding that FX impact, revenue increased 3.5% in the quarter, driven by a solid performance in our editorial business, growth across all of our major geographies, and growth in our subscription business. Included in these results...
Speaker 5: are certain impacts of the timing of revenue recognition, which reduced revenue growth by approximately 70 basis points in the fourth quarter and by 145 basis points for the whole year.
Speaker 5: Our annual subscription revenue as a percentage of our total revenue grew to 50.2% in Q4, up from 46.1% in Q4 of 2021.
Speaker 5: For the full year 2022, annual subscription revenue rose to 49%, up from our 2021 finish of 45.6%.
Speaker 5: With high revenue retention, surviving growth in recurring revenue, and better revenue predictability.
Speaker 5: As we look at 2023 and beyond, we still have plenty of runway to continue to grow that subscription business as we focus on growth in corporate, video, custom content, geographic expansion, and the recent launch of our new list subscription on Splash Plus.
Speaker 5: Creative revenue was $145.1 million.
Speaker 5: down to 6.8% and 0.4% on a currency neutral basis, respectively.
Speaker 5: Within Creative, our annual subscription product delivered a strong performance, rising 5.7% for 12.1% currency neutral, led by our premium access and iStock annual subscription.
Speaker 5: This strengthened our annual subscriptions, including those within our e-commerce business, was offset by softer results in our a la carte offerings. First, macro level impacts drew some revenue deceleration in our agency business, which fits largely within creative.
Speaker 5: Second, as our customers actively move into more committed, higher R2 subscription products, we'd expect to see some continued contraction in all our carts.
Speaker 5: While this can pressure revenue in the near term, we believe in the long term, it provides us with healthier, longer term revenue streams which will drive greater lifetime customer value.
Speaker 5: Our custom content solution, which Craig touched on earlier, continues to be an offering we are very excited about, generating revenue growth of 31.6% or 39.7% current to neutral. We are still in relatively early days with custom content, with room to continue to grow and drive top-line performance.
Speaker 5: as our customers increasingly see the benefits of this unique offering.
Speaker 5: Editorial, which benefited from a strong editorial calendar, or what we refer to as an even-year impact, grew revenue to $82.2 million in Q4.
Speaker 5: up 3.1% year on year on a reported basis, and up 10.3% on a currency neutral base.
Speaker 5: This result was driven by our sport and news verticals, which benefited from our extraordinary coverage of major editorial events such as the FIFA World Cup and the US midterm election.
Speaker 5: Revenue grew across all major geographies on a currency neutral basis in Q4.
Speaker 5: with year-on-year growth of 3.1% in the Americas, 2.9% in EMEA, and 10.5% in APAC.
Speaker 5: Revenue lesser cost of revenue as a percentage of revenue was 72.4% in Q4, down just slightly from 72.8% in Q4 21, due largely to product mix.
Our total SG&A expense of $96.4 million was up to $2.7 million this quarter, with our expense rate increasing to 41.7% of revenue from 39.2% last year. This is largely driven by incremental costs.
related to our return to the public market more than offsetting lower marketing and occupancy expense.
For the full year, SG&A increased by $9 million to 40.7% of revenues, up slightly from 40% last year, driven by incremental spend on our cloud IT and cloud-based costs, which are primarily tied to growth.
public company readiness expenses and marketing with some offsetting savings occupancy and lower compensation expense.
Adjusted EVADA was $74.5 million for the quarter, down 9.1%, or $7.4 million year over year. On a currency neutral basis, adjusted EVADA was essentially flat.
Our adjusted EBITDA margin was 32.2%, down from 34.3% in Q421, due primarily to the impact of FX on the top line with a more limited FX offset to expenses and higher SG&A expense.
For 2022, adjusted EBITDA was $303.9 million, or 32.8% of revenue, down 1.7% reported, and that's 4.8% absent the impact of FX.
Highlighting the stability and health of our business.
Even with the incremental expense that comes from operating as a public company, this is the fourth straight year with adjusted EBITDA margin north of 30%.
CAPEX was $13.3 million in Q4, up $700,000 year over year.
CapEx as a percentage of revenue was 5.7% compared to 5.3% in the prior year period.
For the full year, CAPEX is $59.3 million or 6.4% of revenue, up from $49.3 million or 5.4% of revenue in 2021. We continue to maintain CAPEX within our expected range of 5-7% of revenue.
Adjusted EBITDA less CAPEX was 61.2 million, down 8.1 million year over year, representing a decrease of 11.7% or 1.8% on a currency neutral basis.
Adjusted EVA-LS CapEx Margin was jumped 26.4% in Q4, down from 29% in Q4-21.
So the full year, adjusted EVA to less CAPEX was $244.6 million, a decrease of 5.9% recorded, and an increase of 0.9% currency neutral.
Free cash flow was $22.6 million in Q4 compared to $46.8 million in Q4 2021. The decline in class cash flows during Q4 was largely driven by lower EBITDA and working capital adjustments related to finals.
Free cash flow is dated net of cash at interest expense of $25.9 million and cash taxes paid of $7.6 million in the quarter.
For the full year, we've generated $103.8 million in free cash flow compared to $139.6 million in 2021.
And now, turning to our balance sheet.
We finished the forward quarter with $97 million of balance sheet cash, up $26 million from the third quarter, and a decrease of $88.4 million from Q4 of 20C1.
That year-over-year decrease in our cash balance reflects total debt paydowns of $310.4 million on our USD term loan in 2022, including a $2.6 million repayment in the fourth quarter.
That debt pay down earlier this year, of course, drove a significant improvement to our net debt to adjusted EBITDA leverage ratio, which was 4.4 times as of December 31, down from 5.1 at the end of 2021.
As of December 31st, we had total debt outstanding of $1.43 billion.
This included 300 million of 9.75% senior notes.
687.4 million of our USD term loan with an applicable interest rate of 8.9375%.
447 million euro term loan converted using exchange rates as of December 31st with an applicable rate of 7.25%.
And we also have an $80 million dollar revolver that continues to remain undrawn.
As of December 31, taking into consideration foreign exchange rates and applicable interest rates on our debt balance at that time, and the effects of $355 million of interest rate WAP agreements, our annualized estimated cash interest expense is $117 million.
we experience the slowdown in parts of our business due to macroeconomic impacts.
We ended the year in a solid financial position, rooted in strong operating metrics that continue to be in growth. We returned to the public market and we removed $1.1 billion of obligations from our balance sheet.
And we are positioned well as we head into 2023.
Switching gears to our 2023 data, we anticipate revenue of $936 million to $963 million, representing growth of 1% to 4% year over year and currency neutral growth of 1.9% to 1.9% year over year.
to 4.9%. Embedded within that guidance is an assumption of continued adverse impact of FX on our financial results.
Specifically, assuming that current FX rate polls would estimate an FX headwind on the top line of about 8 million net for the full year.
with approximately 13 million of headwinds in the first half of 2023, heavily weighted to the first quarter at approximately 8.5 million.
Given that we saw the bulk of the adverse impact of FX in the second half of 2022, we'd expect the FX impact to shift to a tailwind in the second half of 2023, primarily benefiting the fourth quarter.
We expect adjusted EBITDA of $305 million to $315 million.
up 0.4% to 3.6% year on year, and up 1.3% to 4.6% currency neutral. Included in our adjusted EBITDA expectation is a similar cadence for foreign currency.
with an approximate 3 million adverse impact in fiscal 2023, including a headwind of about 5 million in the first half of the year, of which approximately 3.5 million is expected in the first quarter.
Again, turning into a head tailwind in the back half of 2023, largely benefiting the fourth quarter.
Please note, embedded within this guidance are the anticipated impacts of macroeconomic pressures.
costs related to ongoing litigation, and incremental costs tied to operating as a public company.
While we feel confident in our ability to continue to drive growth, our leadership team will closely monitor business performance as we navigate through the broader economic impact.
We will remain physically responsible, prudent, and nimble.
deploying our capital wisely. We will continue to prioritize further balance sheet optimization and deleverage.
And with that, operator, we'd love to open up the call for questions. Thank you. We will now be conducting a question and answer session.
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One moment please while we pull for you
One moment please while we pull for questions.
Thank you.
Our first question is from Mark Skatovich with Benchmark Company. Please proceed with your question. Thank you and good evening. I have a micro one for Jen and then perhaps a bigger picture one for Craig. feedback is being received.
Jen, if we look at your creative revenue, which is down modestly in quarter year over year, I think...
up about 2.7%-ish organically in 2022. If we were to hold ala carte growth, that decline that you're seeing there as we transition subscription static, what would those organic growth numbers look like? We're just trying to get a sense of how much.
weight that has been putting on your your creative business growth which is obviously optical here as you move.
from all the cards to subscription.
Did you want to go with your second question or do you want me to just jump in there?
I'll save my second question here. It's maybe a little bit more involved, but good. I'm understanding your question correctly.
you're trying to quantify the impact of some of that all apart shifting.
on the creative performance. Am I understanding that correctly? Yeah, yeah. And I guess, you know, maybe more high level, just trying to get a sense of when there's an inflection, perhaps, in your growth where that weight of a volicard sort of leaving your business is lighter relative to the subscription growth.
Got it. Okay. Let me tackle that a few different ways and thank you for the question. So I think, you know, just to frame up creative, there's a couple of things happening there with that performance. That is where we are seeing some of that macro headwind certainly in the second half of the year. We would see that more pronounced in the creative side of the business.
That is going to be driven within the creative space by some softness, both in our agency business as well as some softness on the e-commerce side of things. Now within that, I think what you're pointing to is some RF a la carte to find also sitting within that creative space.
Where does that go? When does that transition end, if you will? You know, I think it's going to go on for a bit. We've quoted, we have not given a goal per se for where we think subscription revenue should be. We think we can get to a place where subscriptions make up roughly 60%.
The other piece is this business continues to drive massive amounts of new customers coming into this business. So as you can imagine, not every new customer starts on a bigger subscription. So there's always going to be a little bit of a push and pull with a la carte, whether that be new customers, pressure from the agency business.
Thanks, Jen, that's super helpful. And Craig, on the top of AI, obviously, something that has been increasingly in the news here, and you signed a partnership with Bria, and just wanted to cover that from both angles, sort of how you intend to use AI to your benefit. And then on the flip side, you're
I lost the pool, I had the AI questions first, you put them up and therefore I'm out a few dollars, so I'm gonna come after you for that. Look, I just thought I'd address the AI topic a bit more holistically. First, I think it's really important to note that while generative models have made quite the splash over the recent months, they have made a lot of progress.
This is something that Getty Images has been tracking closely, both the progress and the potential of these models for many, many years now. We think about generative models really in AI really across four dimensions. So for the first dimension, we believe Getty Images represents unique assets and data that is valuable to these generative and other computer vision models, applications, cloud-based services, et cetera.
We see that as a new revenue opportunity that extends far beyond the licensed imagery space. And our legal action with Stability AI expresses our strong belief that companies need to license those assets.
So that's the first dimension. The second dimension is the degree to which generative models threaten our existing creative business.
Models in current form have some very real limitations, and I'll speak to those a bit more in a second.
But we see general models continuing to improve and to where when developed and used responsibly, they will add yet another source of imagery to what is already an ever expanding sea of imagery. Since the emergence of digital Getty Images has always competed against what is essentially free, we're on track now.
an unlimited universe of imagery. There are literally trillions of images out there. And we've successfully done that. Today is our 25th, 28th anniversary, and we've done that successfully for 28 years. And we will continue to do this by focusing on providing content that creates a response. It's not just a picture. It's content at its core that is authentic, it is contemporary, and it's built on the understanding of core creative concepts.
This content has always been in short supply, and we believe there are still human driven outcomes that drive this content. And we believe that technology is an enabler, not a replacement.
So on the whole, we feel very good about our content library and how it stands up.
relative to these general models. The third dimension is the question of whether, when, and how we offer and integrate such models and content.
At Getty Images, we work to deliver the following points of value to our customers. You guys will probably hear this over multiple calls from me in the future because I talk about it all the time with our company. We try to elevate the quality of our customers.
We try to improve their time and budget efficiency. We try to reduce their risk. We continue to evaluate generative capabilities against these points of value. This is what the decision making is going on.
And from a current risk perspective, there are legal risks with respect to copyright, training data, and potential regulatory actions.
From a time and quality standpoint, it currently takes around 10 seconds to generate four random low-resolution images.
In many cases, these outputs carry significant anomalies such as distorted bases, six fingers on a hand, random text, etc.
As a result, use of this imagery can often require significant customer effort to upscale and correct anomalies, let alone the time that they're actually utilizing to actually search against these interfaces.
So for these reasons in current form it falls short of what we can typically a durable and trusted consumer customer solution delivering the types of imagery our customers request and consume.
So as a result, we've been focused on producing and providing the highest quality imagery that connects with the end audiences. And then offering the AI capabilities to our customers to seamlessly refine it to their exact needs. That's the Bria partnership. And this is capabilities like we talked about in the prepared remarks, such as background removal. As the models evolve and issues resolve, as the models evolve and issues resolve,
we may choose to offer our customers generative tools that enhance their creativity and efficiency. And we may choose to accept generative content consistent with other computer-enabled content on our platform.
So we will evolve as the landscape evolves. But it needs to subsequently meet the needs of our customers. It needs to elevate their creative outcomes. It needs to save them time, save them money, and mitigate their risk. So that's kind of how we think through that third dimension of that offering.
And then lastly, the fourth layer is respectable with our editorial business. You know, this technology can be used for nefarious purposes, and Getty Images needs to continue to stand as a source of truth with respect to our editorial imagery. And so to do that, we're really focused in on continuing to invest in the people, the partners.
the processes and the technology that make us a trusted source. So, it's a long-winded answer, but hopefully that gives you the kind of the four dimensions that we're really thinking through AI, how we think about it as an opportunity to grow our new revenue stream, how we think about it relative to our existing revenue streams, how we think about it from a product and service at a standpoint.
and how we think about it in terms of editorial integrity and deep fake technologies. Thank you, Craig. It was helpful. Appreciate it. Thank you.
think about it in terms of editorial integrity and deepfake technologies. Thank you, Craig. You got it.
Our next question is from Tim Nolan with McCrary. Please proceed with your questions.
I've got a couple questions about your KPIs, interrelated questions. Your customer count was up nicely year over year. It looks like it was down quarter over quarter. Can we assume there might have been some macro impact that affected that? And then also, you had some nice rise, very nice rise, especially in your active...
annual subscriber count, also your video attachment rate. Looks like maybe not fully layering into revenue growth yet, but maybe I'm not clear on that. If it looks like it's not factoring in yet, is it a matter of it just takes time to build the ARPU if that's the metric you use in terms of the revenue that you get on those customers or...
Is it maybe some Unsplash Plus customers that are just lower cost? Maybe if you could just help clarify how that works. Thanks.
Sure, I'll take this and then Jen, you can you can layer in anything over the top. So on the on the count side of things, we are seeing a slight macro impact as we mentioned the kind of in certain geographies and within certain ports of our business, but I would say the bigger thing that you're really seeing there Tim is we are pushing
to drive that annual subscription number more aggressively. And we do trade off some level of purchasing volume as a result of that, but it's a very net positive trade off to the business overall. With respect to video and subs, we do see attachment rate there. We're not.
is kind of minimal. It's not overly material at this point. We only launched that subscription in October of last year. So what you're really seeing there is we are seeing solid booking. And it takes a while for those bookings to flow through into recognized revenue. We have been introducing smaller subscriptions, smaller subscriptions that include video.
smaller subscriptions that include, you know, that transition customers on the e-commerce side of things to annual. So maybe the ARPU of some of these subscriptions isn't quite what it's historically been, but it's highly additive into the business. And again, we kind of book it up front and then we flow that through over the next 12 months. So, you know, that is some of the impact that we expect to see coming into this year.
Thank you. Our next question is from Ron Josie with Citi. Please proceed with your question. Great. Thanks for taking the question. I have two. And maybe Craig, starting off on the AI question or topic following some of your comments on the four dimensions, can you talk a little bit more about the new revenue opportunity you talked about.
that might go far beyond licensing as companies need to license the content. I'm assuming we're very early days here, but talk to us about what needs to happen for that to just start implementing or seeing that in the model. Then, Jen, you talked about softness in agency biz and e-commerce side of things. I wanted to hear a little bit more on the corporate side of the business.
So on the revenue side of things in terms of licensing, again, I think we have litigation with stability, you know, under the assertion that we believe fundamentally people should pay for the assets that we possess as they apply them into generative models or other AI systems. And we think our assets are quite unique.
We have been doing some licensing for those that have chosen to approach us and have that conversation. We have reached certain license agreements, but when we look at the space and we look at the potential for computer vision and generative AI, it's massive. It's much broader than what we have been doing.
than simply image licensing. I mean this has to do with the creation of any creative.
editing platforms across the board. This has to do with self-driving vehicles. The application of this technology and the need for these technologies to train themselves up on a significant corpus of imagery.
with highly relevant metadata and ongoing flows that kind of reflect the contemporary and where the world's moving, right? So think about how technology changes over time. Think about how fashion changes over time. Think about how simple things like landscapes and cityscapes change over time.
So, you know, what we are focused in is trying to establish, you know, clear parameters around that in terms of the need to license and then ultimately applying our data out into this field to create a new revenue stream for the business.
again, or at least a much larger revenue stream than it's historically been given recent kind of activities. Does that make sense, Ron?
or at least a much larger revenue stream than it's historically been given recent activities. Does that make sense, Ron? It does. Thank you, Craig. I appreciate it.
All right, Jen, you want to pick up the other? So on corporate Corporate actually was really strong for us in 2022. We had another year Of double-digit year-on-year growth in the corporate space that continues to be an opportunity for us So definitely one of our growth levers we think we can drive
even harder into the corporate space, but you know a strong finish relatively speaking with double-digit growth year on year. With respect to revenue retention, so we finished you know just over a hundred percent, a hundred point one percent to be exact. V, I think step down you're mentioning that that rate dipped to about 88% in 2020. That you know purely being driven by...
historically, we have seen this rate average 100% plus. That is where we finished 2022, and that is where we would expect to see this continue to be around that 100% plus range.
That's helpful, Jen. Thank you. And then on corporate, growing double digits, any insights on percentage of revenue or things along those lines? And thanks again for the answers here. You are welcome. So yeah, we are, corporate now makes up north of 50% of our revenue, with the agency making up well under 20% of our revenue.
Thank you. You're welcome. Thank you. Our next question is from Brett Feldman with Goldman Sachs. Please proceed with your question. Yes, thanks for taking the questions. The first one just has to do with getting a little more insight into your
guidance for the year. So I look at your revenue guidance range on a currency neutral basis, the 1.9 to 4.9 percent growth. How do we think about the swing factors between the high and the low end of that range? Or maybe another way of thinking about the question would be if the current operating conditions were to persist for the remainder of the year.
Where would that put you in the range and I'm curious the range you have for EBITDA Is that really driven exclusively by the low and the high end of revenue or is there something else? Further down the P&L that would create that variability and then I have one more follow-up question after we get to this one And you want to take that Yeah, so I think you know for revenue one to four percent
So that 4% is some continuation of macroeconomic impact, but the business is continuing to execute. As we roll through to EBITDA, what we have assumed in here is that we can maintain
Our revenue, that cost of revenue that maintains holds around 72%. That can waver slightly off of 72% plus or minus entirely based on product mix. But we assume 72% is a good starting point there. And then maintaining our EBITDA margins north of 30%.
that top line performance, right? We have a proven history when this business needs to pull back in how it's spending and what it's spending on. We will do that, right? We will deliver this EBITDA performance. We will monitor top line performance. We will moderate spend as needed, but we feel pretty comfortable with these ranges.
I appreciate the color. The other question I had is, can you just remind us what you're striving towards in terms of your net leverage profile and how you're thinking about prioritizing excess capital allocations here? Is it really just all towards de-levering? I've got to imagine there may be some assets that are available at pretty attractive prices. I just don't know how much of a priority that might be right now. Thank you.
So, yeah, I can pick that one since there's a bit of a quick dive in. We're targeting somewhere around three to two and a half times on leverage basis in terms of where we feel like that's a point where we reopen the question about what do we do with capital. We're targeting somewhere around three to two and a half times on leverage basis in
We will look to pay down debt going forward to get to that target. If there are opportunities to present themselves, I can't speak to any here.
We'll look at them. If they make good sense for the business, we will evaluate them and if there are opportunities to play offense in downside scenarios, we're open to it. But ultimately we are highly focused in on.
on paying down additional debt to create more operating flexibility in the business. But we're not going to ignore opportunities that might occur over the coming quarters and years.
additional debt to create more operating flexibility in the business, but we're not going to ignore opportunities that might occur over the coming quarters and years. Thank you for taking the question.
You got it. There are no further questions at this time. I would like to turn the floor back over to management for closing comments. Great. Thanks, Camilla. And so just thank you everybody for taking time out of your busy days to spend some time with us. We really appreciate it. And I just want to reiterate to all the employees that are listening in.
a happy 28th anniversary for Getty. If you got the champagne, pop it. We got more to do over this year and into the next 28 years. So get excited for it. Thanks, everybody.
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