Q1 2024 Getty Images Holdings Inc Earnings Call
Operator: Good afternoon, and welcome to Getty Images' first quarter 2024 earnings conference call. Today's call is being recorded. We have allocated one hour for prepared remarks and Q&A. At this time, I would like to turn the conference over to Steven Kanner, VP of Investor Relations and Treasury at Getty Images. Thank you. You may begin.
Good afternoon, and welcome to Getty images first quarter 'twenty 'twenty four earnings conference call.
Steven Kanner: Today's call is being recorded and we have allocated one hour for prepared remarks and Q&A at this time I would like to turn the conference over to Steven Cantor VP of Investor Relations and Treasury at Getty images. Thank you you may begin good.
Steven Kanner: Good afternoon, and welcome to the Getty Images first quarter 2024 earnings call. Joining me on today's call are Craig Peters, Chief Executive Officer, and Jen Leyden, Chief Financial Officer.
Steven Kanner: Good afternoon.
Steven Kanner: Welcome to the Getty images first quarter 2024 earnings call.
Steven Kanner: Joining me on today's call are correct Peters, Chief Executive Officer, and Jen Leighton Chief Financial Officer.
Steven Kanner: 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 expectations. 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. Links 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, and Free Cash Flow.
Steven Kanner: Before we begin we.
Steven Kanner: We would like to remind you that this call will include forward looking statements within the meaning of the private Securities Litigation Reform Act of 995.
Steven Kanner: These statements are subject to various risks uncertainties and assumptions, which could cause our actual results to differ materially from these statements.
Steven Kanner: These risks uncertainties and assumptions are highlighted in the forward looking statements section of today's press release.
Steven Kanner: Now we have filings with the SEC.
Steven Kanner: Links to these filings and today's press release can be found on our Investor Relations website at investors that Getty images dot com.
Steven Kanner: 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.
Steven Kanner: 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.
Steven Kanner: Reconciliations of GAAP to non-GAAP measures as well as a description limitations and rationale for using each measure can be found in our filings with the SEC.
Steven Kanner: Yeah.
Steven Kanner: After our prepared remarks, we'll open the call for your questions with that I will hand, the call over to towers, Chief Executive Officer, Greg Peters.
Steven Kanner: 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. Reconciliations of gap to non-gap measures, as well as a description, limitations, and rationale for using each measure can be found in our filings with the SEC. After our prepared remarks, we'll open the call for your questions, and with that, I will hand the call over to our Chief Executive Officer, Craig Peters.
Craig Peters: Thanks Steven.
Craig Peters: And thank you to everyone for joining Getty Images' first quarter earnings call. I will touch on our performance and progress at a high level before Jen takes you through the full first quarter financial results. As expected, our financial performance in the first quarter was soft due to macroeconomic challenges we outlined in our last call, residual impacts from the Hollywood strikes, and a pressured agency business. Within editorial, we also face a tougher year-on-year comparison, with Q1 of 2023 being the only quarter of year-over-year editorial growth before the strike impacts impacted the balance of the year.
Craig Peters: Thank you to everyone for joining Getty images first quarter earnings call.
Craig Peters: For the first quarter of 2024, revenue was $222.3 million, representing a year-on-year decrease of 5.7% on a reported and currency-neutral basis. Adjusted EBITDA came in just over $70.2 million for the quarter, down 7.9% reported, or 7.7% currency neutral, and representing 31.6% of revenue.
Jen: I will touch on our performance and progress at a high level before John takes you through the full first quarter financial results.
Craig Peters: As expected financial performance in the first quarter was soft due to macroeconomic challenges we outlined in our last call.
Craig Peters: Residual impacts from the Hollywood strikes in a pressured agency business.
Craig Peters: Within the editorial we also faced a tougher year on year compare with Q1 of 2023 being the only quarter of year over year editorial growth before the strike impacts impacted the balance of the year.
Craig Peters: For the first quarter 2024 revenue was $222 3 million.
Craig Peters: Presenting a year on year decrease of five 7% on a reported and currency neutral basis.
Craig Peters: Adjusted EBITDA came in just over $70 2 million for the quarter down seven 9% reported or seven 7% currency neutral and representing 31, 6% of revenue.
Craig Peters: On April 1st, we closed on and funded the acquisition of Motorsport Images, which represents a truly iconic archive of automotive imagery and video that augments Getty Images' existing offerings. Motorsport Images also brings deep relationships across racing series such as Formula E, teams such as McLaren Racing, races, and sponsors. In combination with Getty Images, it established a position as the official photographic partner of Formula One. We are excited about what this edition can offer the growing number of motorsports stakeholders. Continuing on the content front, we were pleased to announce renewals with Bloomberg and the English Football Association. Earlier this week, we exclusively covered the Met Gala for a sixth consecutive time.
Craig Peters: On April 1st.
Craig Peters: We closed on and funded the acquisition of Motorsport images.
Craig Peters: Motor Sports images represents a truly iconic archive of automotive imagery and video.
Craig Peters: Vince Getty images existing offerings.
Craig Peters: Motorsport images also brings deep relationships across racing series, such as Formula E teams, such as Mclaren racing races and sponsors.
Craig Peters: In combination with Getty images established position as the official photographic partner Formula line. We are excited for what this addition can offer the growing number motorsports stakeholders.
Craig Peters: Continuing on the content front, we were pleased to announce renewals with Bloomberg and the English Football Association.
Craig Peters: Earlier this week, we exclusively covered the met gala for a sixth consecutive time.
Craig Peters: We also added new content partnerships with the Saudi Pro League, Visual Capitalists, Filmpac, Specti, and Niche Sport Media. The Motorsport acquisition and these partners stand as a testament to our continued commitment to deliver the very best visual content to our customers. Looking forward, the Olympic torch is now lit and on its way to Paris, where we are once again the official photographic agency of the International Olympic Committee. But before Paris, we have the upcoming UEFA Euro 2024 tournament, where we are the official photographer supplier for UEFA, add in the global election cycle, and our teams are busy doing what they do best.
Craig Peters: We also added new content partnerships with the Saudi poorly visual capitalist film pack expect the niche sports media.
Craig Peters: The Motorsport acquisition and these partners stand as a testament to our continued commitment to deliver the very best visual content to our customers.
Craig Peters: Looking forward the Olympic Torch is an outlet and on its way to Paris, where were once again the official photographic agency of the International Olympic Committee.
Craig Peters: So before Paris.
Craig Peters: Coming UEFA Euro 2024 tournament, where we are the official photographer supplier for UEFA.
Craig Peters: Add in the global election cycle and our teams are busy doing what they do best.
Craig Peters: On the topic of doing it best, our team was recognized by industry peers across a range of categories and award ceremonies during the quarter. This year, our team was honored with over 40 awards of excellence in categories including news, sport, and politics at ceremonies such as the White House News Photographers Association Awards, the SJA British Sports Journalism Awards, and the NPPA's Best Photojournalism Awards. We were excited to add Southern University, an A&M college in Louisiana, Lincoln University in Pennsylvania, and Delaware State University as partners in our Historically Black Colleges and Universities (HBCUs) program that provides funding towards the digitization of HBCU photographic libraries.
Craig Peters: On the topic of doing our best.
Craig Peters: Our team was recognized by industry peers across a range of categories and award ceremonies during the quarter.
Craig Peters: This year our team was honored with over 40 awards of excellence in categories, including news sport and politics and ceremony such as the White House News Photographers Association Awards.
Craig Peters: S J, a British sports Journalism awards, and the N P as best Photojournalism Awards.
Craig Peters: We were excited to add southern University in A&M College in Louisiana, Lincoln University in Pennsylvania, and Delaware State University as partners and our historically black colleges and universities HBC use program that provides funding towards the digitization of HBC use photographic libraries.
Craig Peters: This program continues to preserve and surface rarely seen archival photography as well as contemporary news, sport, and entertainment coverage that is additive to our customers. On the generative AI front, we continue to expand our commercially safe generative AI offerings in partnership with NVIDIA, adding the tool to iStock, launching new capabilities such as in-painting and out-painting, and we started rolling out generative AI capabilities across our FreeShot Creative Library, a powerful combination that allows customers to quickly secure the exact imagery to meet their needs while benefiting from the quality, depth, breadth and creativity embedded in our creative library.
Craig Peters: This program continues to preserve and surface rarely seen archival photography as well as contemporary news sports and entertainment coverage that is additive to our customers.
Craig Peters: On the generative AI front, we continued to expand our commercially save generative AI offerings in partnership with Nvidia, adding the tool to ISR.
Craig Peters: <unk> new capabilities, such as in painting in our painting.
Craig Peters: And we started rolling out generative AI capabilities across our free shot greater library, a powerful combination that allows customers to quickly secure the exact imagery to meet their needs while benefiting from the quality depth.
Craig Peters: Brett and creativity embedded our creative library.
Craig Peters: It is still early days, but we're seeing positive engagement, hearing positive feedback, and seeing early signs of how this adds to our business, with about half of those purchasing AR plans not having previous spend with the business. At NVIDIA's ETC conference in March, we announced our upcoming custom fine-tuning capability. Starting this month, we will offer enterprise services to custom fine-tune the NVIDIA Edify Foundation model to a company's brand and visual style.
Craig Peters: It is still early days, but we're seeing positive engagement hearing positive feedback and seeing early signs of how this adds to our business and about half of those purchasing airplanes not having previous spend with the business.
Craig Peters: And as Invidious GTC conference in March we announced our upcoming custom fine tuning capabilities.
Craig Peters: This month, we will offer enterprise services to custom fine tune, the Nvidia Edify Foundation model to a company's brand individuals' style.
Craig Peters: As a part of custom fine-tuning, we will also release a collection of APIs that provide finer control over image output, one of the biggest challenges in generative AI. Our gender API tools are already being used by leading creatives and advertisers at Dentsu, McCann, and WPP. We're excited for the balance of the year, and now I'll turn the call over to Jen to take you through the more detailed financials
Craig Peters: As a part of custom fine tuning, we will also release a collection of Apis that provide finer control over image output.
Jen: One of the biggest challenges in general in AI.
Jen: Our agenda or API tools are already being used by leading creative and advertisers dentsu Mccann and W. P. P.
Jen: We're excited for the balance of the year and now I will turn the call over to John to take you through the more detailed financials.
Jennifer Leyden: Our Q1 results broadly reflect the slow start to the year that we anticipated and described on our Q4 earnings call. We expected some of our known challenges to be most acute in the first quarter, with continued headwinds from the residual effects of last year's Hollywood strike, ongoing pressures in our agency business, and the broader macroeconomic environment.
Jen: Our Q1 results broadly reflects the slow start to the year that we anticipated and described on our Q4 earnings call.
Jennifer Leyden: We expected some of our known challenges to be most acute in the first quarter with continued headwinds from the residual effects of last year's Hollywood strikes.
Jennifer Leyden: Going pressures in our agency business and the broader macro economic environment.
Jennifer Leyden: We also had a challenging year-on-year comp and editorial in Q1, with Q1 of last year being the only quarter of growth for our editorial business, as the remainder of 2023 was adversely impacted by the strike. All of that said, looking ahead, we remain steadfastly confident in our ability to return to growth in 2024 as our headwinds turn into tailwinds, and we flip the calendar to a robust editorial season in the second half of the year. I'll start by highlighting some of our KPIs which are reported on a rolling 12-month basis or the LTN period ended March 31st, 2024, with comparisons to the LTN period ended March 31st, 2023.
Jennifer Leyden: We also had a challenging year on year comp in editorial in Q1 with Q1 of last year being the only quarter of credits for editorial death as the remainder of 2023 was adversely impacted by the strikes.
Jennifer Leyden: All of that said looking ahead, we remain steadfastly confident in our ability to return to growth in 2024 after headwind turn into tailwind and we flip the calendar children robust editorial season in the second half Walter here.
Jennifer Leyden: Okay.
Jennifer Leyden: Total purchasing customers were 769,000, down from 829,000 in the comparable LTM period. This decrease can be attributed to lower a la carte transaction volume primarily due to both the ongoing shift of our customers into more committed annual subscription products and a still pressured agency business, which consumes nearly entirely on an a la carte basis. Importantly, the shift into more committed solutions continues to have a positive impact on annual revenue per purchasing customer, which grew by 4.5% to $1,174 from $1,123 in the comparable LPN period.
Jennifer Leyden: I'll start by highlighting some of our Kpis, which are reported on the trailing 12 month basis. Our LTM period ended March 31, 2024 with comparisons to the LTM period ended March 31 2023.
Jennifer Leyden: Total purchasing customers were 769000.
Jennifer Leyden: Down from 829000 in the comparable LTM period.
Jennifer Leyden: This decrease can be attributed to lower Ala Carte transaction volume, primarily due to both the ongoing shift of our customers into more committed annual subscription products.
Jennifer Leyden: Still pressured agency business, which consumes nearly entirely on an Ala carte basis.
Jennifer Leyden: Importantly, this shift into more committed solution continues to have a positive impact.
Jennifer Leyden: Annual revenue per purchasing customer, which grew by four 5% to 1174 from 1123 in the comparable LTM period.
Jennifer Leyden: We again saw tremendous growth in our active annual subscribers, up 79% to 262,000 from 147,000 in the 2023 LTM period. This is now the sixth consecutive quarter with growth well in excess of 50%. This performance continues to largely be driven by growth in our e-commerce subscriptions, including our iStock Annual and Unsplash Plus subscriptions. In addition, growth continues to be fueled by customers who are brand new to Getty Images. Out of the 262,000 annual subscribers, over 60% were new customers, with nearly half of those in our growth markets across LATAM, APAC, and EMEA. In a world of ever-increasing visual content supply and demand, we continue to reach new customers and tap into new markets with the power of our content.
Jennifer Leyden: We again saw a tremendous growth in our active annual subscribers up 79% to 262000 from 147000 in the 2023 LTM period.
Jennifer Leyden: This is now the sixth consecutive quarter with growth well in excess of 50%.
Jennifer Leyden: This performance continues to largely be driven by growth of our e-commerce subscription, including our ISR annual and I'll Splash plus subscription.
Jennifer Leyden: In addition, the growth continued to be fueled by customers brand new to Getty images.
Jennifer Leyden: Of the 262000 annual subscribers over 60% were new customers with nearly half of those in our growth markets.
Jennifer Leyden: Cross flat, an APAC and EMEA.
Jennifer Leyden: In a world of ever increasing visual content supply and demand.
Jennifer Leyden: Continue to reach new customers and tap into new markets with the power of our content.
Jennifer Leyden: Our annual subscriber revenue retention rate was 90% compared to 99.8% in the 2023 LTM period. The decline was due primarily to both an expected lower revenue retention rate on some of our smaller e-commerce subscribers and also a reduction in incremental a la carte subscriber revenue due to residual Hollywood strike impacts across some of our media, broadcast, and production customers, as well as a decline related to one-time project spend in the prior period from certain corporate customers.
Jennifer Leyden: Our annual subscriber revenue retention rate was 90% compared to 99, 8% in the 2023 LTM period.
Jennifer Leyden: The decline was due primarily to both and expected lower revenue retention rate than some of our smaller e-commerce subscribers and also a reduction in incremental Ala carte subscriber revenue.
Jennifer Leyden: The residual Hollywood strike impact across some of our media broadcast and production customers as well as a decline related to one time project spend in the prior period from certain corporate customers.
Jennifer Leyden: Broadly speaking, we believe our subscription business is very healthy, with revenue renewal rates generally averaging over 90% and with our enterprise customer subscriptions generally averaging north of 100%. Paid download volume with plot at $95 million, an ever compelling proof point that our content remains relevant and in demand. Our video attachment rate rose to 14% from 13.4% in LTM Q1 2023, another quarter of steady year over year growth. We continue to see plenty of opportunity to drive more meaningful growth across our video business.
Jennifer Leyden: Broadly speaking, we believe our subscription business is very healthy with revenue renewal rate generally averaging over 90% and with our enterprise customer subscription generally averaging north of 100%.
Jennifer Leyden: Yeah.
Jennifer Leyden: Download volume was flat at $95 million and ever compelling proof point that our content remains relevant and in demand.
Jennifer Leyden: Our video attachment rate rose to 14% from 13, 4% in LTM Q1 2023.
Jennifer Leyden: Another quarter of steady year over year aircrafts.
Jennifer Leyden: We continue to see plenty of opportunity to drive more meaningful growth across our video business.
Jennifer Leyden: Turning to our financial performance, total revenue was $222.3 million, down 5.7% on both a reported and a currency-neutral basis. Included in these results are certain impacts of the timing of revenue recognition, which reduced year-on-year growth by approximately 360 basis points. Annual subscription revenue was 55.4% of total revenue, up from both 50.7% in Q1 2023 and 53.2% for the full year of 2023. In total, subscription revenue increased 3.1% on a reported basis and 3% currency neutral, driven by growth across e-commerce subscription solutions.
Jennifer Leyden: Turning to our financial performance.
Jennifer Leyden: Total revenue was $222 3 million down five 7% on both the recorded and a currency neutral basis.
Jennifer Leyden: Included in these results are certain impacts of the timing of revenue recognition with reduced year on year growth by approximately 360 basis points.
Jennifer Leyden: Okay.
Jennifer Leyden: Annual subscription revenue was 55, 4% of total revenue up from 57% in Q1, 2023, and 53, 2% for the full year of 2023.
Jennifer Leyden: In total subscription revenue increased three 1% on a reported basis and 3% currency neutral driven.
Jennifer Leyden: Driven by growth across e-commerce subscription solution.
Jennifer Leyden: Okay.
Jennifer Leyden: Creative revenue was $138.9 million, down 5.2% on both a reported and a currency-neutral basis. Agency, which is accounted for entirely within Creative and is largely an a la carte business model, was down double digits, largely due to declines in smaller, independent agency customers. Encouragingly, we saw improvements across our larger holding company or network agency customers, which stabilized to flat year-on-year. However, creative a la carte was also pressured by lingering impacts from the Hollywood strike.
Jennifer Leyden: Revenue was $138 9 million down five 2% on both reported and currency neutral basis.
Jennifer Leyden: Okay.
Jennifer Leyden: Agency, which is accounted for entirely within creative and is largely an Ala carte business model was down double digits largely due to declines from smaller independent agency customers.
Jennifer Leyden: Encouragingly, we saw improvements across our larger holding company or network agency customers, which stabilized to flat year on year.
Jennifer Leyden: Creative Ala Carte was also pressured by lingering impact from the Hollywood strikes.
Jennifer Leyden: Annual subscription revenue within Creative was up 7.7% on both a reported and a currency-neutral basis. iStock annual subscriptions maintained strong momentum, growing over 27% on both a reported and a currency-neutral basis, making this the 11th consecutive quarter of double-digit growth. In addition, our Unflashed Plus subscription, the first paid subscription for Unflashed, delivered another quarter with strong double-digit growth, and Custom Content, which leverages Getty Images' global network of contributors to create cost-effective, customized, and exclusive content to meet specific customer needs, increased 11.2% year-on-year or 11.6% currency neutral.
Jennifer Leyden: Annual subscription revenue within creative was up seven 7% on both reported and a currency neutral basis.
Jennifer Leyden: Our ISR annual subscriptions maintained strong momentum.
Jennifer Leyden: Over 27% on both a reported and a currency neutral basis, making this the 11th consecutive quarter of double digit growth.
Jennifer Leyden: In addition, our <unk> plus subscription the first paid subscription and slashed delivered another quarter with strong double digit growth.
Jennifer Leyden: And custom content, which leverages Getty images global network of contributors to create cost effective customize and exclusive content to meet specific customer needs.
Jennifer Leyden: 11, 2% year on year or 11, 6% currency neutral.
Jennifer Leyden: Yeah.
Jennifer Leyden: So overall, absent the impacts of agency, we believe our creative business is healthy, and our e-commerce business is growing. Editorial revenue was $79.4 million, a decrease of 6.2% year-on-year and 6.4% on a currency-neutral basis. The decline was driven by results across our news, archive, and entertainment verticals, which are up against challenging compares with double-digit growth in Q1 of 2023, with some offset from a strong Q1 2024 for sports. Again, Q1 of 2023 was the only quarter of growth for editorial in 2023, at over 11% currency neutral growth, with the balance of 2023 being editorial in decline every quarter due to the Hollywood strike impact. Across our major geographies, on a currency-neutral basis, we saw a year-on-year decrease of 9.4% in the Americas, 0.2% in EMEA, and 2% in APAC.
Jennifer Leyden: So overall absent the impacts of agency, we believe our creative business is healthy and our E Commerce business is growing.
Jennifer Leyden: Editorial revenue was $79 4 million a decrease of six 2% year on year and six 4% on a currency neutral basis.
Jennifer Leyden: The decline was driven by results across our news archive and entertainment vertical.
Jennifer Leyden: Again challenging compares with double digit growth in Q1 of 2023 with some offset from a strong Q1 2024 for sport.
Jennifer Leyden: Again Q1 of 2023 was the only quarter of growth for editorial in 2023 and over 11% currency neutral growth with the balance from 2023 edits.
Jennifer Leyden: Editorial in decline every quarter due to Hollywood strike impact.
Jennifer Leyden: Across our major geographies on a currency neutral basis, we saw a year on year, a decrease of nine 4% in the Americas, 2% in EMEA and 2% in APAC.
Jennifer Leyden: Revenue less or cost of revenue as a percentage of revenue remained consistently strong at 72.9% in Q1 compared with 73.1% in Q1 of 2023. Total SG&A expense was $100.9 million in Q1, down from $102.2 million in the prior year. As a percentage of revenue, our expense rate was 45.4%, up from 43.4% last year. The higher expense rate was driven primarily by lower revenue in the quarter. SG&A decreased year on year 4.5% to $91.8 million in the quarter. The decrease reflects our disciplined approach to cost management, with lower spend driven primarily by marketing savings.
Jennifer Leyden: Revenue lesser cost of revenue as a percentage of revenue remained consistently strong at 72, 9% in Q1 compared with 73, 1% in Q1 of 2023.
Jennifer Leyden: Okay.
Jennifer Leyden: Total SG&A expense was $109 million in Q1 down from $102 2 million in the prior year.
Jennifer Leyden: As a percentage of revenue our expense rate was 45, 4% up from 43, 4% last year.
Jennifer Leyden: Higher expense rate was driven primarily by lower revenue in the quarter.
Jennifer Leyden: Excluding stock based compensation SG&A decreased year on year, four 5% to $91 8 million in the quarter.
Jennifer Leyden: The decrease reflects our disciplined approach to cost management as lower spend driven primarily by marketing savings.
Jennifer Leyden: As a percentage of revenue, SG&A excluding stock-based comp was 41.3% compared to 40.8% in the prior year period, with the increased rate due primarily to the decrease in revenue. Adjusted EBITDA was $70.2 million for the quarter, down 7.9% year-over-year and 7.7% on a currency-neutral basis. Our adjusted EBITDA margin was 31.6%, down from 32.4% in Q1 of 2023. CapEx was $14.5 million in Q1, down $1.1 million year-over-year. CapEx as a percentage of revenue was 6.5%, compared to 6.6% in the prior year period, and well within our expected range of 5 to 7% of revenue.
Jennifer Leyden: As a percentage of revenue SG&A, excluding stock based comp was 41, 3% compared to 48% in the prior year period with the increased rate due primarily to the decrease in revenue.
Jennifer Leyden: Adjusted EBITDA was $72 million for the quarter down seven 9% year over year, and seven 7% on a currency neutral basis.
Jennifer Leyden: Our adjusted EBITDA margin was 31, 6% down from 32, 4% in Q1 of 2023.
Jennifer Leyden: Capex was $14 5 million in Q1 down $1 $1 million year over year Capex.
Jennifer Leyden: Capex as a percentage of revenue was six 5% compared to six 6% in the prior year period, and well within our expected range of 5% to 7% of revenue.
Jennifer Leyden: Free cash flow was $7 million in Q1 compared to $16.4 million in Q1 2023. The decline in free cash flow during Q1 was driven by an adjusted EBITDA decline and working capital changes related to the timing of receivables and payables, including our semi-annual interest payment on our senior notes, which is due every March and September. Free cash flow is stated net of cash entrance expenses of $39.3 million and cash taxes paid of $5 million in the first quarter.
Jennifer Leyden: Free cash flow was $7 million in Q1 compared to $16 4 million in Q1 2023.
Jennifer Leyden: The decline in free cash flow during Q1 was driven by our adjusted EBITDA decline and working capital changes related to the timing of receivables and payables, including our semi annual interest payment on our senior notes, which is due every March and September.
Jennifer Leyden: Free cash flow is stated net of cash interest expense of $39 3 million in cash.
Jennifer Leyden: Cash taxes paid of $5 million in the first quarter.
Jennifer Leyden: We finished the quarter with $134.2 million of balance sheet cash, up $17.4 million from our ending balance in Q1 of 2023 and down $2.4 million from the end of 2023. This includes a $2.6 million voluntary debt repayment in the first quarter of 2024. As of March 31, we had total debt outstanding of $1.386 billion, which included $300 million of 9.75% senior notes, $634.4 million USD term loan, with an applicable interest rate of 9.909%, and 451.9 million euro term loan converted using exchange rates as of March 31, 2024, with an applicable rate of 8.875%. We also have a $150 million revolver that remains undrawn.
Jennifer Leyden: We finished the quarter with $134 2 million of balance sheet cash up $17 4 million from our ending balance in Q1 of 2020, great and down $2 4 million from the end of 2023.
Jennifer Leyden: This includes a $2.6 million voluntary debt repayment in the first quarter of 2024.
Jennifer Leyden: As of March 31, we had total debt outstanding of 1.386 billion, which included $300 million of 975% senior notes $634 4 million USD term loan within the applicable interest rate of 999%.
Jennifer Leyden: 451, 9 million Euro term loan converted using exchange rates as of March 31, 2024, with an applicable rate of 875%.
Jennifer Leyden: We also have a $150 million revolver that remains undrawn.
Jennifer Leyden: Our net leverage was 4.2 times at the end of Q1, unchanged from year-end 2023. In early May, we used $30 million of our balance sheet cash to repay a portion of our USD term loan. This voluntary repayment demonstrates our ongoing commitment to utilize our cash flow to further de-leverage the balance sheet. We also continue to look for the optimal opportunity and market conditions to refinance our debt. Based on the foreign exchange rates and applicable interest rates on our debt balance as of March 31, and taking into account the $30 million debt repayment we just made in May, our 2023 cash interest expense is expected to be approximately $131 million.
Jennifer Leyden: Our net leverage was four two times at the end of Q1 unchanged from year end 2023.
Jennifer Leyden: In early May we used $30 million of our balance sheet cash to repay a portion of our U S. D term loan.
Jennifer Leyden: This voluntary repayment demonstrates our ongoing commitment to utilize our cash flow to further deleverage the balance sheet.
Jennifer Leyden: We also continue to look for the optimal opportunity and market conditions to refinance our debt.
Jennifer Leyden: Based on the foreign exchange rates and applicable interest rates on our debt balance as of March 31.
Jennifer Leyden: And taking into account the $30 million debt repayments. We've just made in may of 2023 cash interest expense is expected to be approximately $131 million.
Jennifer Leyden: Of course, our actual annual interest expense remains subject to changes in the interest rate environment, which we outline in more detail within our SEC filings. In summary, we have navigated through what we expect to be the most challenging quarter of our financial year.
Jennifer Leyden: Of course, our actual annual interest expense remains subject to changes in the interest rate environment, which will outline in more detail within our SEC filings.
Jennifer Leyden: In summary, we have navigated through what we expect to be the most challenging quarter of our financial year.
Jennifer Leyden: We remain fiscally disciplined, we continue to be laser-focused on execution, and we are well-positioned to see a return to top-line growth as we navigate through the remainder of 2024. Turning now to our outlook for the full year 2024. We continue to expect revenue of $928 million to $947 million, representing growth of 1.3% to 3.3% year-on-year and currency-neutral growth of 1% to 3%. This is unchanged from prior guidance. We also continue to expect adjusted EBITDA of $298 million, down 1.2% year-over-year and down 1.5% current to neutral.
Jennifer Leyden: Remain fiscally disciplined we continue to be laser focused on execution and we are well positioned to see a return to topline growth as we navigate through the remainder of 2024.
Jennifer Leyden: Turning now to our outlook for the full year of 2024.
Jennifer Leyden: We continue to expect revenue of 928 million to $947 million.
Jennifer Leyden: And in growth of one 3% to three 3% year on year and currency neutral growth of 1% to 3%. This is unchanged from prior guidance.
Jennifer Leyden: We also continue to expect adjusted EBITDA of 298 million down one 2% year over year and down.
Jennifer Leyden: One 5% currency neutral. This is also unchanged from our prior guidance.
Jennifer Leyden: Please note we have not updated estimated FX impacts at this time given the recent volatility in the currency market.
Jennifer Leyden: Our guidance continues to assume the euro at 1.9, and the GBP at one key Stephane.
Jennifer Leyden: We'll keep a close eye on FX rate and if appropriate we will provide an update on our next earnings call with that operator, Please open the call for questions.
Jennifer Leyden: This is also unchanged from our prior guidance. Please note we have not updated estimated FX impacts at this time given the recent volatility in the currency market. Our guidance continues to assume the Euro at 1.09 and the GBP at 1.27. We will keep a close eye on FX rates, and if appropriate, we'll provide an update on our next earnings call. With that, Operator, please open the call for questions.
Operator: At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any point by pressing star 2. Once again, that is a star and 1 if you would like to ask a question. We will pause for just a moment to allow questions to queue. And we'll take our first question from Ron Gosley with Citi. Your line is now open.
Jennifer Leyden: At this time, if you would like to ask a question. Please press the star and one on your telephone keypad, you may remove yourself from the queue at any point by pressing star two.
Ronald Victor Josey: Once again that is star one if you would like to ask a question, we'll pause for just a moment to allow questions to queue.
Speaker Change: And we will take our first question from Brian <unk>.
Ronald Victor Josey: <unk> with Citi.
Ronald Victor Josey: Your line is now open.
Ronald Victor Josey: Thanks for taking the question. Craig, I wanted to start out with you.
Ronald Victor Josey: Thanks for taking the question Craig I wanted to start out with you I think you talked about some macro challenges in <unk> and this is a few things, but Hollywood strike because it was also in there as those are now finished and winding down I guess just can you talk to us about the progress here. When do you think things sort of normalize to a certain extent going forward is that going to be <unk> or maybe.
Ronald Victor Josey: I think you talked about some macro challenges in 1Q and listed a few things, but Hollywood Strikes was also in there as those are now finished and winding down, I guess. Just can you talk to us about the progress here? When do you think things will sort of normalize to a certain extent going forward? Is that going to be 2Q or maybe in the back half?
Ronald Victor Josey: And then, Jen, I wanted to follow up. You had some interesting comments on the subscriber retention rate. I think you talked about smaller e-commerce subs, lower a la carte, and one-time spending changes, but maybe if you could unpack those a little bit more to better understand this retention rate, and do you think this can level off at this 90% level, or should we expect continued declines?
Ronald Victor Josey: In the back half and then Jim I wanted to follow up you had some interesting comments on the subscriber retention rate. Thank you talked about smaller e-commerce subs lower Ala carte onetime spending.
Ronald Victor Josey: But maybe if you could unpack there was little bit more to better understand this retention rate in <unk> and do you think the eastern Lake level off at this 90% level or should we expect continued declines. Thank you.
Ronald Victor Josey: Thank you. Great. Thanks.
Craig Peters: Great. Thanks, Ron.
Jen: Great. Thanks, Ron.
Jen: So I'll take first and then defer to John on the sub retention side of things so macro I'd say within the within the production side of things, we continue to see a bit of slowness throughout Q1.
Craig Peters: So, I'll take first and then defer to Jen on the subretention side of things. So, macro, I'd say within the production side of things, we continue to see a bit of slowness throughout Q1 as those schedules and, you know, try to reline up after the strike. I would say, you know, we probably expect maybe a little bit more of that into Q2, and then we probably expect it to be kind of back at, what I'd say, normal levels within the second half of the year.
Jen: As those schedules and trying to re lineup after after the strike.
Craig Peters: I would say, we probably expect maybe a little bit more of that into Q2, and then we probably expect it to be kind of backing it.
Jen: I wanted to say normal levels within the second half of the year.
Craig Peters: I don't think we fully expect, given some of the streaming items and such, to necessarily come back to where it was fully pre-strikes, but in terms of what we expected within our guidance and our budgeting this year, I think we're largely tracking to the kind of expectations from the timing.
Craig Peters: I don't think we fully expect.
Craig Peters: Given some of the streaming items and such to necessarily come back.
Craig Peters: To where it was fully pre.
Craig Peters: Pretty strikes.
Craig Peters: But in terms of what we expected within our our.
Craig Peters: Our guidance and our budgeting this year.
Craig Peters: We're largely tracking to kind of expectation from a timing standpoint.
Jennifer Leyden: Hi Ron. So on the revenue retention rate, yeah, there's a few things to unpack there. I'll start with, I think, the end of your question, which is, where do we see this? kind of trending to or normalizing back to. And I think the answer there is that we'll start to see this, you know, over time start to tick back up into that mid 90% range. And the reason for that is, you know, as we're talking about this really phenomenal subscriber growth, where we're seeing that growth, as we commented on, is really in those smaller e-commerce subscriptions, with a lot of that coming from brand new customers and markets in the world that we're just starting to tap into.
Speaker Change: Hi, Ron.
Craig Peters: Revenue retention rate.
Jennifer Leyden: Thanks to unpack in there.
Jennifer Leyden: I'll start with I think the end of your question, which is where do we see this kind of turned into our normalizing back to.
Jennifer Leyden: And I think the answer there is that we'll start to see that.
Jennifer Leyden: Over time start to tick back up into that mid 90% range.
Jennifer Leyden: And the reason for that is you know as we're talking about that's really it's nominal subscriber growth, where we're seeing that growth.
Jennifer Leyden: As we commented on is really in those smaller e-commerce subscription.
Jennifer Leyden: A lot of that coming from brand new customers.
Jennifer Leyden: Markets in the World that we're just starting to tap into so with that comes.
Jennifer Leyden: So with that comes, you know, those are lower commitment, lower price point subscription products, newer customers, and as you can imagine, those do come at the start with lower revenue retention rates. Now, each and every one of those provides an opportunity for us to upsell and grow with the customer over time as their content needs expand, as their budgets expand. So, you know, they start off low, but that is, you know, a really nice opportunity for us to grow those customers over time.
Jennifer Leyden: Those are lower commitment lower price point subscription.
Jennifer Leyden: Subscription products newer customers as you can imagine those do come at the start with lower revenue retention rates now each and every one of those provides an opportunity for us to upsell.
Jennifer Leyden: And grow with the customer over time, I'll say, our content is expand as their budgets expand so.
Jennifer Leyden: They start off slow, but that is a really nice opportunity for us to grow those customers over time, but that mix to what we're seeing to 90% now.
Jennifer Leyden: But that mix, you know, to what we're seeing to 90% now, a good chunk of that driver is that mix of growth in those smaller e-commerce, you know, predominantly new customers. The other thing I commented on there about this metric, as you know, it counts not just the subscription revenue but revenue that these subscribers are spending outside of their subscription. So what we're seeing here is a bit of a contraction in, you know, essentially all the money a cart spends outside of the subscription during this period.
Jennifer Leyden: Good chunk of that driver is that mix of growth in those smaller e-commerce.
Jennifer Leyden: Predominantly in new customers. The other thing I commented on there.
Jennifer Leyden: This metric is email accounts not just in subscription revenue, but revenue that these subscribers are spending outside of their subscription. So what we're seeing here is a bit of a contraction.
Jennifer Leyden: <unk>.
Jennifer Leyden: Essentially all la carte spend outside of the subscription.
Jennifer Leyden: And we think, you know, that's largely due to some of that residual impact from Hollywood Strikes, some macro impacts, and just a contraction of budgets related to some of those dynamics. So, you know, a little bit less spend outside of subscription, which again, as Craig just commented, as we start to see those conditions improve, we'd expect to see that improve as well.
Jennifer Leyden: In this period and we think that's largely due to some of that residual impact from Hollywood strikes some.
Jennifer Leyden: Macro impacts just a contraction.
Jennifer Leyden: Of budgets related to some of those dynamics. So you know a little bit less spend outside of subscription which again.
Jennifer Leyden: Greg just comment as we start to see those conditions improve we would expect to see that improve as well.
Jennifer Leyden: Great. Thank you, Jen. Thank you, Craig.
Speaker Change: Great. Thank you John and thank you Craig.
Jennifer Leyden: No.
Operator: And once again, that is Starkey. We'll take our next question from Mark Zgutowicz with The Benchmark Company. Your line is open.
Speaker Change: And once again that is star one if he would like.
Mark John Zgutowicz: To ask a question.
Mark John Zgutowicz: We will take our next question from Mark Zuckerberg with the benchmark Company. Your line is open.
Operator: Okay.
Mark John Zgutowicz: Thank you. Good evening.
Mark John Zgutowicz: Thank you good evening.
Speaker Change: Jim maybe just a quick follow up.
Mark John Zgutowicz: When you talk about.
Mark John Zgutowicz: Jim, maybe just a quick follow-up when you talk about the subscription NRR reverting back to the mid-90s. Is that something we should expect that's sort of baked into your guidance, or is that more into the 25 timeframe? And then, just could you confirm that enterprise remained at roughly 100% NRR in 1Q.
Mark John Zgutowicz: Subscription and our <unk>.
Mark John Zgutowicz: Turning back up to the mid Ninety's does that.
Mark John Zgutowicz: Something we should expect that sort of baked into your guidance or is that more of it into the 25 timeframe and then just.
Speaker Change: If you could.
Mark John Zgutowicz: Confirm that enterprise remained at roughly 100%.
Speaker Change: Thank you.
Jennifer Leyden: Yeah, so I think that's something that we'd expect to see more of as an exit rate as we start to come out of 2024 and really start to unwind some of these bigger strike and macro impacts. So I don't think we'd expect to see that really jump right back up in Q2 per se, but something that we'd start to see start ticking up as we exit the year. And then on enterprise, yeah, as we noted, we see the revenue renewal rates for enterprise subscribers still averaging north of 100%. Okay, good.
Mark John Zgutowicz: Yeah. So I think that's something that we would expect to see more of it as an exit rate at.
Jennifer Leyden: As we start to come out of 2024, and really start to unwind some of these bigger strike.
Jennifer Leyden: Macro impacts I don't I don't think we would expect to see that really jump right back up in Q2 per se, but something that would start to see start ticking up as we exit the year.
Jennifer Leyden: And then on the enterprise, Yes, we noted we see the revenue renewal rates for enterprise subscribers still averaging north of 100%.
Jennifer Leyden: Okay, great. And then maybe just a couple quick follow-ups. Looking at corporate and agency separately in terms of how they trended in the quarter, corporate re-accelerated in 4Q. I was just curious whether that moderated a bit this quarter. And then agency, which was down mid-signal digits year-over-year, exiting the year, sort of flattish in the quarter. Just curious, given that's a nice upsell opportunity for you guys, what we should be thinking about that trend line over the next, call it two years or so.
Super: Okay Super and then maybe just a couple quick.
Speaker Change: Quick follow ups.
Jennifer Leyden: Looking at corporate and agency separately in terms of the how they trended in the quarter corporate re accelerated in <unk>.
Jennifer Leyden: <unk> I was just curious whether that moderated a bit this quarter, and then agency, which was down mid single digits.
Jennifer Leyden: Year over year exiting the year did that.
Jennifer Leyden: Stabilized in <unk>.
Speaker Change: Then one just last one if I could on video attach rate.
Jennifer Leyden: That was.
Jennifer Leyden: Sort of flattish in the quarter.
Jennifer Leyden: Just curious given that's a nice upsell opportunity for you guys. How we should be thinking about that trend line over the next.
Jennifer Leyden: Call it two years or so thanks.
Jennifer Leyden: Yeah, sure. So, on the corporate level, good memory, Mark. We exited 2023 with Q4, and corporate was back in growth. I'm happy to say that Q1 corporate remained in growth. So, you know, continuing to see those trend lines. For agency, Q1 was back down, you know, low double-digit declines again. So, more or less in line, you know, with what we were seeing as we exited the year. We saw that improve a bit, you know, higher single-digit declines in Q4. But, you know, that 11% decline is, broadly speaking, what we saw. Just remind me again what your other question was. Yeah,
Jennifer Leyden: Yeah.
Speaker Change: Yeah sure so on corporate good know Mary Mark.
Jennifer Leyden: In 2023 with Q4 corporate was back in growth.
Jennifer Leyden: To say that Q1 corporate remain de growth so continuing to see those trend lines for agency <unk>.
Jennifer Leyden: Q1 was back down you know low double digit declines again, so more or less in line.
Jennifer Leyden: You know what what we're seeing here as we exited the year, we saw that improve a bit higher single digit declines in Q4.
Jennifer Leyden: But that 11% decline is broadly speaking.
Jennifer Leyden: Yes.
Jennifer Leyden: Lisa just remind me again, what your other question was.
Mark John Zgutowicz: Yeah, sorry. It's on the video.
Speaker Change: Yes, sorry.
Speaker Change: Just on the video attach rate.
Mark John Zgutowicz: Mhm.
Mark John Zgutowicz: Yeah, so, yeah. What are the drivers of that, you know, climbing up, and over what period of time should we be thinking about maybe milestones of that growth?
Mark John Zgutowicz: Yes.
Mark John Zgutowicz: Yes.
Mark John Zgutowicz: Sort of what are the drivers of that.
Mark John Zgutowicz: Okay climbing up and over what period of time should we be thinking about maybe milestones of that growing yes, yes. So that's one where we have seen pretty much every quarter. We've seen that tick up this quarter, you know kind of flattening out a bit. So there's a few things here when we think about what the opportunities are.
Jennifer Leyden: Yes. Yeah. So, that's one where, you know, we have seen pretty much every quarter that tick up. This quarter, you know, kind of flattening out a bit.
Jennifer Leyden: So, there are a few things there. When we think about what the opportunities are, I mean, that's really an upsell opportunity, right? So, it's an upsell opportunity, as you just noted, for us to make sure our customers know we have video, make sure we're merchandising video well, make sure all of our subscription customers know that video is an option, and talk about video. When you come to the site, do you see video, do you see imagery, you know, all of those things that just come with sort of packaging up, marketing, upselling, and customer conversations
Jennifer Leyden: I mean, thats really an upsell opportunity with an upsell opportunity there as you just noted for us to make sure. Our customers now we have video mixture of our merchandising video while mix for all of our subscription customers know that video is an option.
Jennifer Leyden: Talking about video when you come to the site you see video do you see inventory all of those things that just come with sort of pathway to have marketing upselling customer conversation.
Jennifer Leyden: So, that continues to be a focus for us. I think, you know, when we think about the math that goes into this equation, you have to correlate this back to some of that annual subscriber growth where we commented, you know, a big amount of that growth is new customers, and a big amount of that growth is sitting in e-commerce subscriptions. Broadly speaking, those smaller e-commerce subs don't have video turned on yet, right? So, there's a bit of a math equation here as you bring in some of those new customers who are just not in video yet within the Getty ecosystem, that plays into the math of that attachment. And again, you know, that's an opportunity for us over time to migrate those customers as they grow in both budget and content needs.
Jennifer Leyden: So that continues to be a focus for us.
Jennifer Leyden: I think when we think about the math that goes into this equation you have to correlate that back to some of that annual subscriber growth, where we commented you know big amount of that growth is new customers big amount of that growth is sitting in E. Commerce subscriptions broadly speaking those smaller E.
Jennifer Leyden: Commerce subs don't have video turned on yet right. So there's a bit of.
Jennifer Leyden: A math equation here as you bring in some of those new customers, who are just not in video yet.
Jennifer Leyden: With them, they're getting ecosystem.
Jennifer Leyden: That plays into the math of that attach rate and again, that's opportunity for us over time.
Jennifer Leyden: Great for our customers.
Jennifer Leyden: As they grow in both budget and content needs.
Jennifer Leyden: Got it. It makes sense. Thanks, Jen.
Speaker Change: Got it makes sense thanks John.
Craig Peters: I would just add to that that the Unsplash subscription doesn't have video as an option today on the site, so as to Jen's point, as we continue to grow those subs, you know we basically don't have the current opportunity for attachment, although we did launch illustrations this week as part of that subscription, and that initial take-up is going well, and you can certainly expect video downstream at some point. But those are all opportunities. It's good to know. Thanks, Craig.
Jen: Youre welcome.
Speaker Change: I would just add to that that the on spy subscription doesn't have video.
Craig Peters: <unk> has an option today on the site so to John's point is we continue to grow those subs.
Craig Peters: Yes.
Craig Peters: Basically we don't have current opportunity for attachment, although we did launch illustrations this week.
Craig Peters: As part of that subscription in that initial take up is going well and you can certainly expect video downstream at some point.
Craig Peters: But that those are all opportunities.
Craig Peters: Good enough thanks, Greg.
Operator: We have no further questions in the queue at this time. I would like to thank everyone for your participation. You may disconnect at any time. This does conclude today's program.
Speaker Change: We have no further questions.
Speaker Change: The queue at this time I would like to thank everyone for your participation you may disconnect at any time. This does conclude today's program.
Speaker Change: Thank you all.
Speaker Change: Thank you.
Operator: Thanks for watching!
Operator: Okay.
Speaker Change: Uh-huh Uh-huh.
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Operator: Okay.