Q1 2023 Getty Images Holdings Inc Earnings Call
Speaker 1: Good afternoon and welcome to Get It Images 1st, or to 2022 Earnings Conference call. Today's call is being recorded.
Speaker 1: We have allocated one hour for prepared remarks and Q&A. At this time I would like to turn the conference over to Stephen Kanner, VP of Investor Relations and Treasury at Getty Images. Thank you. Thank you.
Speaker 1: updated one hour for Prepater Mox and Q&A. At this time, I would like to turn the conference over to Stephen Canner, VP of English Relations and Treasury FJT images. Thank you. He may begin. Good afternoon.
Speaker 2: And welcome to the Getty Images first quarter 2023 earnings call.
Speaker 2: Joining me on today's call are Craig Peters, Chief Executive Officer, and Jen Layden, Chief Financial Officer.
Speaker 2: Before we begin, we would like to remind you that this call will include forward-looking statements within the meaning of the Private Security Litigation Reform Act of 1995. These statements are subject to various risks, uncertainties, and assumptions, which could cause our actual results to differ materially from these statements.
Speaker 2: These risks, uncertainties, and assumptions are highlighted in the forward-looking statement section of today's press release.
Speaker 2: and in our filings with the FCC.
Speaker 2: Links to these filings and today's press release can be found on our investor relations website at investors.getiimages.com. During our call today, we will also reference certain non- GAAP financial information, including adjusted EBITDA, adjusted EBITDA margin,
Speaker 2: to these filings and today's press release can be found on our Investor Relations website at investors.gettyimages.com. During our call today, we will also reference certain non-GAAP financial information including adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA-less CAPEX,
Speaker 2: free cash flow and currency neutral growth rate. We use non- GAAP measures in some of our financial discussions as we believe they assist investors in understanding the core operating result that management uses to evaluate the business.
Speaker 2: Reconciliations of gap to non- GAAP measures , as well as the description, limitations, and rationale for using each measure, can be found in our filings with the FCC. After our prepared remarks, we will open the call for your questions. With that, I will hand the call over to our Chief Executive Officer, Craig Peters.
Speaker 2: Thanks, Stephen, and thanks to everyone for joining our Getty Images first quarter 2023 for our next call
Speaker 3: I'll start by addressing the quarter's business performance and progress at a high level before Jen takes you through the first quarter financial result.
Speaker 3: First quarter, 2023 reported revenue was $235.6 million.
Speaker 3: neutral growth of 5.5%.
Speaker 3: Our adjusted evita finished at just over 76 million for the quarter.
Speaker 3: This reflects a reported year-on-year decrease of 2%.
Speaker 3: and growth of 2.2% on a currency neutral basis.
Speaker 3: As accounted for in our guidance, we anticipated currency headwinds through the first half of 2023 to impact our bottom line. However, we anticipate this will significantly improve over the second half of the year.
Speaker 3: Top line results reflect continued softness in some parts of our business, notably in Europe and some agency customers, which we believe is due to customers approaching spend more cautiously in the challenging macro environment.
Speaker 3: Our Istock e-commerce performance continues to perform well and is that thriving engines behind our growth in total perks and customers and annual subscribers with the latter totaling 69,000 net additions in the quarter.
Speaker 3: Unsplash Plus, the paid subscription we launched in Q4 2022, continues to show positive signs with respect to customer acquisition, utilization, and renewals.
Speaker 3: Our total paid downloads increased by 6.6% year over year, with contributions to growth coming from each of our brands, from creative and editorial, and from stills and video. This speaks to the increasing value our customers are deriving from our offers. Of course, we believe increased commitment and consumption is underpinned by the uniqueness and quality of our content offering.
Speaker 3: During the quarter, we were pleased to announce our collaboration with NVIDIA to develop and distribute responsible generative text-to-image and text-to-video offerings. We are committed to building new, durable, recurring revenue streams with this technology, and this collaboration addresses many of the concerns with respect to current generative models and speaks to the uniqueness of Getty Images assets in the context of generative AI. Getty Images delivers a unique level of quality with respect to the content and metadata, a level of exclusivity and rights, and a level of quality in the context of generative AI.
Speaker 3: and a level of research, expertise, and ongoing flow of high quality contemporary content to maintain and improve these models over time.
Speaker 3: further leveraging responsible AI and building on the core strengths of our pre-shop model, which continues to maintain distinct advantages with respect to quality, time efficiency, resolution, and search cost. In partnership with Bria, we deployed one-click background removal functionality to all of our iStock subscribers. We're seeing strong initial adoption, and we'll be expanding these capabilities to object removal during the second quarter.
Speaker 3: These integrated capabilities allow our customers to get the exact image they need with increased time and budget efficiency.
Speaker 3: upsized and extended $150 million revolving credit facility.
Speaker 3: and rights and through the depth of our content expertise and archives.
Speaker 3: We are embracing new capabilities to increase the value we provide to our customers and to create new and recurring revenue streams.
Speaker 4: An expanded R subscription business, and overall, we delivered healthy, bottom line results and cash flow generation. So a very solid start to 2023. I'll begin by reviewing some of the key operating metrics or KPIs that underpin our financial performance. Note, today's press release contains information on all seven of our KPIs, but I'll touch on just a few here. All KPI metrics are out of the trailing 12 months for LPM period and at March 31, 2023, with comparisons to the LPM period and at March 31, 2022. As a reminder, beginning with our Q322 results.
Speaker 4: We made two go-forward changes to our customer data reporting. I'll highlight the impact of these changes on total active annual subscribers, which was more meaningfully impacted by those changes. Total purchasing customers rose to $829,000 from $825,000, an increase of $1,000 to $1,000 from $1,000 to $1,000.
Speaker 4: of 0.5% over the comparable 12-month period.
Speaker 4: A more moderate, yet still healthy, level of growth given the current macroeconomic environment.
Speaker 4: On a sequential basis, we did see a slight pullback in total purchasing customers.
Speaker 4: focused in the olive part part of our e-commerce business.
Speaker 4: partially offset by growth in our subscriber base, which drove a sequential pickup in annual revenue per purchasing customer from $1,109 to $1,123.
Speaker 4: We delivered impressive growth in active annual subscriber counts, adding 69,000 to reach 150,000. This is an increase of approximately 85% over the corresponding period in 2022.
Speaker 4: At the reporting changes I mentioned earlier, the increase would have still been a robust 66%. This growth is fueled by our e-commerce subscription offerings as well as our largest subscription premium access. Annual subscription revenue made up over 50% of total revenue for the second consecutive quarter. For those customers on annual subscription products, we retained revenue at a strong 99.8% compared to 104.6% in the LPM period and in March 31st.
Speaker 4: 2022, a period which benefited from a COVID-impacted year-on-year compare.
Speaker 4: We grew our paid download volume by approximately 6.6% to 95 million, driven by growth in downloads across both editorial and creative. And last, our video attachment rate.
Speaker 4: which measures our customers' engagement with video rose to 13.4% from 12% in Q1-22.
Speaker 4: We believe the investments we are making to improve video awareness through improved search and high-value differentiated video content and expansion of video in our subscription offerings will drive this metric higher over the coming years.
Speaker 4: Turning now to our financial performance. As we expected, our results this quarter were impacted by the headwinds in foreign exchange rates primarily with respect to the euro and the pound.
Speaker 4: driving a meaningful difference between our reported and our occurrence in neutral year-on-year performance.
Speaker 4: As reflected in our guidance, assuming these rates hold relatively steady to where we see them today, we expect foreign currency headwinds to ease as we move through the year, turning to a slight tailwind in the back half of 2023.
Speaker 4: Total revenue was $235.6 million, up 2% year-on-year on a reported basis and up 5.5% on a currency-neutral basis. We saw growth across all geographies, driven by a strong performance in our editorial business, continued demand from our corporate customers, and further expansion of our subscription business.
Speaker 4: Included in these results are certain impacts of the timing of revenue recognition, which contributed approximately 330 basis points to our year-and-year revenue growth in the first quarter.
Speaker 4: Our annual subscription revenue grew to 50.7% of our total revenue in Q1, up from 48.3% in Q1 2022 and 49% for the full year of 2022.
Speaker 4: The increase this quarter was led by growth in our Premium Access and iStock Premium Plus video subscriptions. This momentum points to the opportunity that remains for further expansion of our subscription business, which we can capture by offering the right solutions that provide our customers with access to an unmatched quality, depth, breadth, and unique mix of content across our image, video, and music library.
Speaker 4: Creative revenue was $146.5 million, down 1.3% year-on-year and up 1.9% on a currency-neutral basis. Within Creative, our annual subscription products were a positive driver, growing by 7.9% year-on-year and 10.8% on a currency-neutral basis.
Speaker 4: led by our Premium Access and iStock subscriptions.
Speaker 4: Within our overall e-commerce business, we saw the strongest themes in our iStock subscription, with customers shifting from monthly or a la carte products into our annual offerings, and with conversion of free trial customers to paying customers, which provides us with more stable, long-term revenue.
Speaker 4: early days of this product launch.
Speaker 4: a softer ad market impacted our performance.
Speaker 4: Editorial revenue was $84.6 million in Q1, up 7.5% year on year and 11.3% on a currency-neutral basis.
Speaker 4: This was another excellent performance for editorial business, led by strong double digit growth on both reported and currency neutral basis in entertainment. The archive and news verticals were also strong contributors, growing high single digits on a reported basis and double digits currency neutral. The archive and news verticals were also strong contributors, led by strong double digit growth on a reported basis and double digits currency neutral.
Speaker 4: This more than offset a challenging year on your compare in sports with the 2022 Beijing Winter Olympics in Q1 of last year.
Speaker 4: Our revenue grew across all major geographies on a currency-neutral basis, with year-on-year growth of 6.6% in the Americas, 3.2% in the MiA, and 6.2% in APAC.
Speaker 4: Revenue lists are cost of revenue as a percentage of revenues remained consistent and strong at 73.1% compared to 73.2% in Q1 2022.
Speaker 4: Total FJ&A expense was $102.4 million in the quarter, up 9.2 million year-on-year at 43.5% of our revenue, up from 40.3% last year. The higher year-on-year expense largely reflects higher staff costs.
Speaker 4: which included the initial vestiging of employee stock compensation incremental cost of being a public company and legal expenses partially offset by savings and occupancy. Adjusted eva. with 76.1 million for the quarter.
Speaker 4: down 2% or 1.6 million year on year. On a currency neutral basis, adjusted EBITDA was up 2.2%. Our adjusted EBITDA margin was 32.3% compared to 33.6% in Q1 2022, with the lower, though still very strong, margin rate.
Speaker 4: proven by the impact of FX and higher SGNAs.
Speaker 4: Capix was 15.5 million in Q1, a decrease of $700,000 a year over year.
Speaker 4: CapEx as a percentage of revenue was 6.6%, down from 7% in the prior year. The decreased spend reflects lower capitalized labor costs and the timing of equipment purchases, partially offset by content acquisition to fuel our Unslash Plus subscription.
Speaker 5: basis.
Speaker 4: Our adjusted EBITDA less CAPEX margin was 25.7%, down from 26.6%, and Q1 of 2022.
Speaker 4: Free cash flow was $16.4 million compared to $33.1 million in Q1-22.
Speaker 4: Lower free cash flow primarily reflects working capital adjustments related to timing, inclusive of cash interest expense of $37 million in Q1, an increase of $7.9 million over the prior year to enlarge parts of the timing of those payments. Under our term loans, we can elect different payment terms. For example, we can select
Speaker 4: Our ending cash balance on March 31st was 116.8 million, up 18.9 million from the end of 2022 and a decrease of 94 million from our ending balance in Q1 of 2022. That year over your decrease in our cash balance.
Speaker 4: reflects total debt pay down of $310.4 million on a USD term loan inclusive of a $2.6 million repayment in the first quarter of this year.
Speaker 4: from five times as of March 31, 2022.
Speaker 4: As of March 31st, we had total debt outstanding of 1.441 billion, including 300 million of 9.75 percent senior notes, 684.8 million USD term loans with an applicable interest rate of 9.5 percent.
Speaker 4: 456.5 million Euro term loan converted using exchange rates as of March 31, 2023, with an applicable interest rate of 8.06%.
Speaker 4: As Craig noted earlier, just last week we successfully amended, extended, and upsized our revolver, increasing our borrowing capacity to $150 million from $80 million and extending the maturity to May of 2028 from February 2024.
Speaker 4: This new expanded facility which continues to remain undrawn improves our access to liquidity and our ability to operate nimble.
Speaker 4: Our ability to nearly double the size of our revolver and the underlying support of our banking partners demonstrates the confidence in our business model, in our company's long history of delivering strong execution and financial performance, and in the opportunities that lie ahead.
Speaker 4: In addition, earlier this week we used $20 million of our balance sheet cash to repay a portion of our USD trim loan.
Speaker 4: The successful repayment demonstrates our commitment to further deliver the balance sheet with our strong cash flow generation. Based on the foreign exchange rates and applicable interest rates on our debt balance out of March 31st and taking into account 355 million interest rates swap agreement, the Andron fee on our amended revolver.
Speaker 4: and the $20 million debt repayment in May, our 2023 cash interest expense is expected to be approximately $121 million.
Speaker 4: Of course, our actual interest expense remains subject to changes in the interest rate environment, which we outline in more detail within our FCC filing.
Speaker 4: both an operational and capital structure standpoint.
Speaker 4: We have meaningful growth opportunities ahead and we will remain disciplined and focused on execution and on driving long-term shareholder value.
Speaker 4: Now turning to our guidance for 2023.
Speaker 4: We continue to expect revenue of $936 million to $963 million, representing growth of 1% to 4% year-on-year and currently neutral growth of 1.5% to 4.5%.
Speaker 4: Assuming current FX rates hold, we estimate an FX headwind on the top line of about 5 million net for the full year.
Speaker 4: This includes the 7.6 million negative impact from Q1 and an estimated headwind of approximately 3.5 million in the second quarter, implying a benefit of about 6 million in the second half of 2023.
Speaker 4: Given that we saw the bulk of the adverse impact of FX in the second half of 2022, we would expect the FX impact to shift to a tailwind in the second half of 2023, primarily benefiting the fourth quarter.
Speaker 4: We expect adjusted EBITDA of $305 million to $315 million, up 0.4% to up 3.6% year over year and up 0.7% to 4% currency neutral.
Speaker 4: Included in the adjusted EBITDA expectation is an approximate 1 million adverse impacts from FX in 2023, including the 3.2 million impact in Q1 and a headwind of about 1 million in the second quarter, again assuming a tailwind of approximately 3 million in the second half of 2023, largely in the fourth quarter.
Please note, built into this guidance are the anticipated impacts of macroeconomic pressures, as well as incremental costs related to ongoing litigation and costs tied to operating as a public company.
We believe that our proactive approach to cost management and execution against our growth opportunities will position the company to continue to deliver strong financial performance and ongoing operational agility.
highest and best use with continued emphasis on our balance sheet optimization.
With that, operator, please open the call for questions.
Thank you.
Ladies and gentlemen, we will now begin the question and answer session.
If you'd like to ask a question, please press star and then one on your telephone keypad. A confirmation turn will indicate your line of immigration in queue.
You may press star and then two if you would like to remove your question from the queue. For participants using speaker equipment it may be necessary to pick up your handset before pressing the star keys. Our first question is from Ron Josie of Citi.
Please go ahead. Great. Thanks for taking the question, Craig and Jen. I wanted to ask two, please. The first, and it's going to be on AI, Craig. So, the first one, just on the NVIDIA partnership and to customize the foundation models using licensed visual content. Help us better understand the partnership here, how it addresses the concerns that we've been talking about in the past and when do you...
would be helpful. Thank you. Great. No, thanks. Thanks for the question. I'm actually gonna, if it's okay, I'll certainly address the NVIDIA question in the go-live timing, but I thought it's just useful because I suspect as it has been across media generally, AI is going to be a topic for this call and I might as well just kind of address it holistically.
So I think first I want to kind of start with the core business and get images has been around for 28 years. And throughout those 28 years, the universe of available imagery has grown exponentially. It's driven by a move to digital cameras, then it was driven by a move online, then it was driven by the proliferation of the smartphone, and then ultimately social media.
And it's basically resulted in a universe of inventories. It's almost infinite. And generative AI is now an additive source to that.
We as a company, getting into this, never focused in competing with nor being a source of.
equity of imagery. Within editorial, approximately a third of our business, we provide a timely, reliable, trusted, and comprehensive level of coverage across news, sport, and entertainment events with unique access and rights, exclusive high quality content partners, and unmatched articles.
their end audiences across every geography, across every culture, and every community. We do that through deep research on what is required and what will be required, and we combine that with an experience and exclusive contributor base that produces a level of imagery that is distinct. Our solutions are incredibly time and budget efficient and substantially reduced.
Even with the resolution of those, we don't see generative models as a real threat to the core value proposition we provide in our services, nor a replacement for the types of content our customers consume from Getty Images.
In fact, I can actually see a world where our services and our content provide expanded value in the face of a proliferation of generative content.
I think starting there, that's kind of the base of how we look at AI when we look at it through the lens of our traditional kind of pre-shot core business.
We then pair that understanding with the view that there's also significant opportunity for Getty Images in generative AI.
And we see that across five dimensions. I'm gonna start with really the value contained in our pre-shot offering and building off of that, we see the opportunity to provide our customers with time and budget efficient services and allow them to easily transform our imagery to meet the specific needs and projects. As discussed in my prepared remarks, we've already introduced one touch background removal with launching object renew.
around much of the current models that exist out there and working hand in hand with our pre-shop offering. What are those risks? Well, a lot of these models, in fact, most of these models are trained off of intellectual property where they don't have rights to.
That brings real questions into play that are unsettled. We have brought a legal challenge against Ability AI to try to get clarity on that. But I think that's one of the primary risks of that. There are also risks though that go beyond intellectual property and they're into privacy.
and whether you have rights to the individuals that are portrayed within those images, et cetera. So we're trying to really bring a solution to the table that addresses those elements in partnership with the NVIDIA. And we expect to launch those services over the second half of this year.
So, that's the second piece in partnership with NVIDIA. And you can think about it as one where we expect to be a distributor of that technology and those services to our customers. And we also expect NVIDIA to be distributing those to some degree through their cloud, generative cloud services offer.
The third element that we see is leveraging compliant generative AI as a tool for our creative experts and contributors to efficiently bring new high quality content and visual concepts to our pre-shot offering. This is no different than the advent of software that allowed our visual artists to create really new interesting concepts.
or ways to depict concepts in a new way. And so we're excited about that, and we think it can actually add to our pre-shot offering. The fourth area is creating a new recurring data licensing stream based off our ongoing flow of exclusive high-quality content and metadata that can utilize to train and maintain gender-involved. And so those are conversations that we are having and continue to expect to happen.
generative AI solutions respect long established intellectual property laws and personal privacy and then work to address things like misinformation bias and other concerns that could be generated by the models. And I think actually today in the EU there was some announcements that came in some work that's progressing through the EU.
legislative side of things which we think is encouraging. So Ed is a more winded answer, but hopefully I addressed kind of how we think about AI in its totality, and then specifically how NVIDIA will come to bear, and then the timing on when we go live.
Jen, do you want to pick up on the sub growth that we're seeing at iStock and some of the greenhouse we're making to drive our booth?
I can. Thank you for the question Ron. I can't promise my answer will be as interesting as Craig's answer was just now. So yeah, a tremendous group in our annual subscriber count. To answer your question, the majority of that is going to be sitting in our corporate space. So that group is going to be driven by our iStock subscription.
As well as a lot of success we've had just over a year ago, we launched a free trial subscription program and we've really seen good results from that good conversion. That's part of our strategy to tap into some of our growth markets.
So that free trial and the subsequent conversion really driving some of that growth as well. So largely sitting in that corporate space, as I think you know, Ron, the agencies for the most part don't consume on a subscription basis. So we're seeing our corporate piece of our business approaching nearly 60% of our revenue and certainly some of the subscriber growth is helping that.
Thank you both. You're welcome. Thank you.
The next question is from Mark Zuskabicks of Benchmark Company. Please go ahead.
Thank you. Good evening. Craig, maybe just a follow up on the Gen AI in terms of, I guess, near term economics.
to the creators.
the generator community, if you will. And then if you think about over the next few years or longer term,
If you see sort of a dilutive impact of generative AI imaging to actual photocopy and sort of how you manage the net economics.
both to your cells and to the creative community. I know that last one is sort of a big question mark, but just your initial thoughts there would be.
I'm happy to, I mean, I think, look, I think we have a solution that we're working on building with NVIDIA that's going to benefit from the quality of our content and metadata. And we think we can bring that to the market in a way that is additive into the business. It is a standalone service that...
that are developing around that, but they're pretty nascent. But we think we can get probably some incremental value given the quality of the model and kind of some of the assurances that can go along with that model given our customer base. So I expect to start to see those economics come in over the second half as we launch these. Ultimately, I don't expect it to be material contributor revenue.
And that's because we are going to be putting compensation pools together for the contributors that created the content and the metadata that these images were trained on. And we're going to do that at a level that's very consistent to our current margin profile. Over the long term, as I kind of mentioned, in the long-winded response, I gave to Ron.
We know what our content, the types of content our customers consume from us. And we know the recency of that content. We know how much it needs to be contemporary, even leading in terms of what are the visual trends and where are the cultural trends, etc.
And we've always competed against what is, in essence, infinite imagery. And in many cases, infinite free imagery. And so, we just look at generative AI as a service that brings unique value, but I don't think it's a fundamental threat to the types of content that we offer.
And that's not, you know, we don't offer as Get Image, we don't offer the same content that everyone else does, maybe within our space. An asset is not an asset is not an asset.
You know, we really do do things differently. And that's why we've got that creative team. We're doing deep research. We're working with exclusive contributors. We've built a different model. And that model has always been one that is about what's to come. And AI, for all of its power and, you know, potential productivity that it can bring, it lacks that.
And so we'll continue to be in what I've always kind of considered the business that we're in, which is on the editorial side, it's what's happening now and how do we take you back into a real view of the past through our archive. And in the creative landscape, it's really, it's kind of almost a fast fashion business. How do we create things that are contemporary? How do we bring ideas and concepts to life in new ways? And that's the value that we realize.
cases we're hearing that the value of our services and the content on the pre shot side of things probably increases to them as they bear with some of the risks and challenges of kind of generative AI out there. Thanks that's a super helpful perspective Craig thank you. Jen maybe just I could ask a question in terms of
what's anticipated in your guidance. You mentioned on the a la carte size and weakness. I'm just curious in terms of just general agency weakness, is that, you know, what direction that's heading? Is that getting, you know, I guess worse, same, you know?
some context there and sort of what's contemplating your guidance. And then in terms of the retention, obviously you're coming off a big COVID benefit there, but the retention levels that you're showing now, do you anticipate that level to deteriorate a bit from there? Is that fair?
And then maybe one last one Jen, if I could just as a side, the percentage of net ads that came from Unsplash, if you are prepared to answer that yet. Thanks. Sure, so on the Unslash slide this will tell you what to do,
question, not disclosing that yet, primarily just because, you know, as we mentioned in the prepare remarks, it's really early days on that. But we like what we're seeing. We like seeing the unsplash customer base engage with the product. We're seeing a healthy volume of new subscriptions added every day. We're seeing a strong, cerebral mix to annuals versus monthly.
you know, to that 88-89%. So that was a low point certainly for this company all entirely due to COVID. So we did get that positive compare as you referenced in 2021. So, you know, us hovering around 100% sounds just fantastic to me. You know, if you look back at our history and you strip out
that one COVID impacted period, we tend to average around 100%. So we would certainly expect to see that stick somewhere around that level. In terms of guidance, I think we set out with our guidance really to try to factor in some level of macroeconomic pressure. Again, for this business, we tend to see that.
Q4 a slight improvement in agency performance relative to how we exited the year, but still feeling that side of the business being in decline.
Yeah, and I would just, you know, Mark, I would say that on the subs and the revenue retention side of things in some of the Olive Park. I think it's useful contact. I think Jen kind of hit on this in her initial kind of remarks, but what we are doing at one level is we are pushing for annual subscriptions more aggressively on the Istock.
platform. And that means that it has a slight impact in terms of purchasing customers. We're trading off a bit fewer purchasing customers in order to get higher LTV and ARPU from annual customers on iStock.
When we add those customers in, they do the cohorts for those customers in those product offerings. And these are subscriptions that are like 10 downloads a month, 25 downloads a month, typically within small businesses. Those cohorts do have lower overall revenue retention to the company. Now, again, it's at a highly advantageous kind of ARPU and LTV tradeoff to the business. So.
as we continue to push that. And I think you can see that in the numbers that we are pushing it and we are getting good outcomes and driving to that. We are gonna see that revenue retention slightly weaken over time, just as we push into a new customer base that historically has a higher turn relative to what I would say the enterprise kind of Getty Images.
customer base where we see very little to no customer turn at all. The other thing I'd note there, Craig, is historically this company does have a good track record of migrating customers up that subscription value chain. So as these customers, as Craig notes, are coming in on some of the smaller subscriptions, that creates opportunities for us to build revenue over time for that same subscriber base. Exactly. Got it.
But your editorial growth was very strong. I wonder, is that in some way related to the growth in the annual active subscribers, or is that more tied to some specific events that I think you called out in the release? And secondly, just if you could refresh the memory, your purchasing customers were down quarter to quarter as was your paid down load. Well, I'm kind of flatish. I wonder if that's just seasonality or if there's anything else in there. Thanks. No, I appreciate it. I'll take this in a gin and then feel free to add anything. On the editorial front, it's not driven by any major events. In fact, on a year of a year compared, last year, there was a winner Olympics and this year there wasn't. So we're just seeing really strong performance in the editorial business.
It's one that based off what we've seen from some of the kind of editorial services and what they've published in terms of their revenue growth within that. We feel really good about our performance and I think it just speaks to the value that we're delivering to our customers. And I think we also have to recognize that we're delivering that value and seeing that outcome in a time where our media customers are.
It was a really strong product that Getty Images puts out there that is unique within the space. On the purchasing customer side of things, again, I would highlight some of the comments I was just mentioning to Mark in that we are somewhat trading off lower purchasing customer quantum.
in order to get the higher commitment on the annual product. And that's most notable within the iStock part of the business. So we trade off some level of purchasing in order to get higher levels of subscriptions. Those subscriptions come at a much higher level of spend within the year and at much higher levels of LTV, lifetime value.
over kind of the last, we really started deploying this about 18 months ago and we've been ramping it up and as we get more confidence and we see more data we ramp it up a little bit more aggressively and you're starting to see that come through the numbers.
And if I could just chime in there on editorial. So you mentioned some of the events you mentioned in prepped remarks those are actually Q2 events. So as Craig noted no major events in Q1 but really we're seeing this growth anchored in entertainment. We saw our strongest quarter in terms of recorded revenue for entertainment since 2015.
in a very, very big way add to that double digit growth in news, in archives as well. So really, really solid performance across editorial, but an exclamation point on that entertainment result.
big way, add to that double digit growth in news, in archives as well. So really, really solid performance across editorial, but an exclamation point on that editorial result, excuse me, on that entertainment result. Thanks very much.
Thank you. The next question is from Brett Feldman of Goldman Sachs. Please go ahead. Yes, thanks for taking the question on a modeling follow-up and then a thought question to that. You reiterated the full year guidance ranges. That was good to see. It certainly looks like there were some areas of the business that performed certainly better than we would have expected. You were just referring to the
The other question is, it's good to see you're continuing to boost liquidity. Is that just to be cautious in an uncertain environment, or should we see that as a signal that maybe you're looking to be a bit more inquisitive in an environment where maybe valuations have come down a bit? Thanks.
And you want to take the first and I can take the second on coming in. Yeah, so maintaining guidance for the year, no change in a mix of revenue and a reminder on the editorial side of business, we are coming off of that even year in 2022.
with the bulk of that event revenue in the editorial business in 2022 in the balance of the year to come. So, you're right to call out some stronger performance in some areas, but not anything materially different in terms of composition of guidance that we would call out for modeling.
And then I think on the on the capital front, I think we will be we will have our eyes open and near to the ground as our opportunities present themselves around around M&A. But we've kind of stated before that ultimately our number one priority with respect to the balance sheet is to pay down debt.
And that continues to be the focus for us. It doesn't mean we'll ignore opportunities that, again, might present themselves in a more challenged economic environment or valuations kind of adjust to that environment. But right now, you know, we're kind of focused in on the debt pay down side of things and getting that leverage a little bit closer to two and a half to three times.
Thank you. Thank you very much. Our next question is from Cory Carpenter of JP Morgan, East Gate.
Thanks for the question. Greg, just on the fourth point you made in your opening AI remarks around new recurring data licensing stream, how do you think about the timeline to ramping that up, and also what margins can look like on that part of the business?
And then to me, if you're able to, I just would love to hear the latest on the legal front and sort of what the next steps are in some of those cases. Thanks. Okay, yeah, I obviously can't speak to anything on the legal front on this call. So, but I can tell you that ultimately, I think the conversation around, I think,
the need to compensate IP owners for their for the material is increasing. I think we're seeing that recognition by some of the key players in the open in terms of the the models that are being generated here and the leadership around those. I think we're seeing that in some of the regulatory and legislative kind of commentary.
So I think that's gonna increase importance. I think our legal pursuit is one that will play out over time and I don't expect resolution of that in the coming quarters, but ultimately we think that's gonna reaffirm that position and reinforce that position. So I think it's one that I don't expect these revenue streams to be.
you know, significant in the short term, but I do believe that AI is going to be a, you know, a large marketplace. And I believe our content and the model of bringing in new content, high quality to continually update these models is a material opportunity for this business.
But it's going to, you know, ultimately we got to get to the point where, you know, that AI starts getting monetized. And right now, AI is largely not being monetized. But it will be, and there will be, like I said, significant revenue streams. And I believe Getty Images will get its fair cut from those revenue streams.
over time based off the strength of its assets and ultimately long-standing intellectual property loss. So, and I think the margin profile, again, like I mentioned, will be very consistent with the current business based off the approach that we intend to put in place. We certainly expect to reward the contributors and our partners that create this content in a way that.
and with that we will conclude today's conference. You may disconnect your lines at this time and thank you for your participation. Thank you.
And.