Q3 2024 Getty Images Holdings Inc Earnings Call

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Thank you for watching!

Operator 2: Good afternoon, welcome to Getty Images' Q3 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'd like to turn the conference over to Steven Kanner, VP of Investor Relations and Treasury at Getty Images. Thank you. You may begin.

Speaker Change: Good afternoon and welcome to Getty Images 3rd Quarter 2024 Earnings Conference Call.

Today's call is being recorded.

Speaker Change: We have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Stephen Kanner, VP of Investor Relations and Treasury at Giddy Images. Thank you. You may begin.

Steven Kanner: Good afternoon, and welcome to the Getty Images Q3 2024 Earnings Call. Joining me on today's call are Craig Peters, Chief Executive Officer, and Jennifer Leyden, Chief Financial Officer. Before we begin, 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 1995. These statements are subject to various risks, uncertainties, and assumptions, which could cause our actual results to differ materially from these statements. 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.

Speaker Change: Good afternoon, and welcome to the Getty Images third quarter 2024 earnings call. Joining me on today's call are Craig Peters, Chief Executive Officer, and Jen Laden, Chief Financial Officer.

Speaker Change: Before we begin, 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 1995.

Speaker Change: These statements are subject to various risks, uncertainties, and assumptions, which could cause our actual results to differ materially from these statements.

Speaker Change: These risks, uncertainties, and assumptions are highlighted in the forward-looking statements section of today's press release and in our filings with the SEC.

Speaker Change: To ring 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. Reconciliations of GAAP to non-GAAP measures, as well as the 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. With that, I will hand the call over to our Chief Executive Officer, Craig Peters.

Speaker Change: We use non-GAAP measures in some of our financial discussions as we believe they represent our operational performance and underlying results of our business.

Speaker Change: Reconciliations of GAAP to non-GAAP measures as well as the description, limitations, and rationale for using each measure can be found in our filings for the SEC.

Speaker Change: After our prepared remarks, we'll open the call for your questions. With that, I will hand the call over to our Chief Executive Officer, Craig Peters.

Craig Peters: Thanks, Stephen. Thank you to everyone for joining us on today's call. I will touch on our performance and progress at a high level before Jen takes you through the more complete full Q3 financial results. I am pleased to report we delivered a strong performance in Q3 with revenue of $240.5 million, representing a year-on-year increase of 4.9% on a reported basis and 5.4% on a currency neutral basis. Adjusted EBITDA came in at $80.6 million for the quarter, up 0.4% on a reported basis and up 0.8% on a currency neutral basis with a healthy EBITDA margin of 33.5%. These positive results reflect growth across each of Getty Images, iStock, and Unsplash+. Our team continues to execute on the opportunity in front of us, and we were pleased to see improvements with our agency and production customers.

Craig Peters: Thanks, Stephen, and thank you to everyone for joining us on today's call.

Craig Peters: I will touch on our performance and progress at a high level before Jen takes you through the more complete full third quarter financial results.

Craig Peters: I am pleased to report we delivered a strong performance in the third quarter with a revenue of $240.5 million, representing a year-on-year increase of 4.9% on a reported basis and 5.4% on a currency-neutral basis.

Craig Peters: Adjusted EBITDA came in at $80.6 million for the quarter, up .4% on a reported basis, and up .8% on a currency-neutral basis, with a healthy EBITDA margin of 33.5%.

Craig Peters: These positive results reflect growth across each of Getty Images, iStock, and Unsplash Plus.

Craig Peters: Our team continues to execute on the opportunity in front of us, and we were pleased to see improvements with our agency and production customers.

Craig Peters: In line with these improvements, we drove growth across all customer categories, agency, media, and corporate within the quarter. Our subscription business saw outstanding performance, growing subscribers by nearly 50% versus the comparable LTM period, powered by our unique and differentiated iStock and Unsplash+ e-commerce offerings across a breadth of geographic markets. With subscriptions now accounting for more than 50% of our revenue, and many of these subscriptions including the full breadth of our offering across editorial and creative, we also saw higher download and therefore revenue allocations to editorial content during major events like the Paris Olympics and the run-up to the US election as customers consume more content from these events. While product level revenue attribution can be impacted by this shift in consumption, it really showcases the unique strength of our Premium Access subscription offering.

Craig Peters: In line with these improvements, we drove growth across all customer categories, agency, media, and corporate within the quarter.

Craig Peters: Our subscription business saw outstanding performance, growing subscribers by nearly 50% versus the comparable LTM period, powered by our unique and differentiated iStock and Unsplash Plus e-commerce offerings across a breadth of geographic markets.

Craig Peters: With subscriptions now accounting for more than 50% of our revenue, and many of these subscriptions including the full breadth of our offering across editorial and creative.

Craig Peters: We also saw higher download and therefore revenue allocations to editorial content during major events like the Paris Olympics and the run-up to the U.S. election as customers consume more content from these events.

Craig Peters: While product level revenue attribution can be impacted by this shift in consumption, it really showcases the unique strength of our premium access subscription offering.

Craig Peters: This product delivers real-time, broad-based, high-quality editorial coverage in combination with our highly differentiated, impactful Pre-Shot creative content. This is why we continue to see subscriptions as a core driver of our overall growth, backed on strong demand for these offerings, strong renewals, and the continued opportunity to upsell and cross-sell to these customers. One offering we continue to see success in cross-selling is our Custom Content offering. In the quarter, we saw brands such as Citi, Mitsubishi Motors, HSBC, Asahi, and 3M trust Getty Images to be the engine of their product and brand specific content needs via Custom Content. It was also great to see commercial activations by global brands leveraging our unique historical archive. Prime Video was just one of many examples of that within the quarter.

Craig Peters: This product delivers real-time, broad-based, high-quality editorial coverage in combination with our highly differentiated, impactful, pre-shot creative content.

Craig Peters: This is why we continue to see subscriptions as a core driver of our overall growth on back on strong demand for these offerings, strong renewals, and the continued opportunity to upsell and cross-sell to these customers.

Craig Peters: One offering we continue to see success in cross-selling is our custom content offering.

Craig Peters: In the quarter, we saw brands such as Citi, Mitsubishi Motors, HSBC, Asahi, and 3M trust Getty Images to be the engine of their product and brand-specific content needs via custom content.

Craig Peters: It was also great to see commercial activations by global brands leveraging our unique historical archive. Prime Video was just one of many examples of that within the quarter.

Craig Peters: On the AI front, we partnered with Sony Pictures on an activation in support of their latest release of the Venom series. We custom fine-tuned our commercially safe, high quality generative AI model built with privacy, responsible content use, and brand safety at its core to help launch Venomize My Pet, a promotional consumer activation that allows fans to interact with branded content in a fun, safe, and responsible way. Back to Pre-Shot, we continue to see strong demand for our creative offerings. This is not only demonstrated by the sustained growth of iStock and Unsplash+, but also through our API integrations. We were pleased to announce our Canva integration renewal in Q2. Continuing on that, we are pleased in Q3 to renew with brands like website builder Squarespace. As we look ahead to closing out the year and into 2025, I'm incredibly confident in our trajectory

Craig Peters: On the AI front, we partnered with Sony Pictures on an activation in support of their latest release of the Venom series.

Craig Peters: We custom fine-tuned our commercially safe, high-quality generative AI model built with privacy, responsible content use, and brand safety at its core to help launch Venomize My Pet.

Craig Peters: a promotional consumer activation that allows fans to interact with branded content in a fun, safe, and responsible way.

Craig Peters: Back to pre-shot, we continue to see strong demand for our creative offerings.

Craig Peters: This is not only demonstrated by the sustained growth of iStock and Unsplash+, but also through our API integrations.

Craig Peters: We were pleased to announce our Canva integration renewal in Q2, and continuing on that, we are pleased in Q3 to renew with brands like Website Builder, Squarespace, and many more. Thank you. Thank you.

Craig Peters: As we look ahead to closing out the year and into 2025, I'm incredibly confident in our trajectory.

Craig Peters: Our differentiation, execution, and commitment to providing durable value to our customers through all of our offerings will continue to drive our success. I'm excited to further capitalize on our strengths going forward. With that, I'll turn it over to Jen. We continue to build positive momentum, delivering strong revenue growth and an adjusted EBITDA margin north of 33%. As Craig mentioned, all three of our industry categories, corporate, media, and agency, are in growth. Getty Images, iStock, and Unsplash+ are in growth. Our annual subscription business comprises north of half of our total revenue, with Q3 adding to nine consecutive quarters of high double-digit growth on annual subscriber counts. Our e-commerce business is thriving. Now, it would be easy to misinterpret this quarter's results as being only about the post-Hollywood strike compares or about a robust editorial event calendar.

Craig Peters: Our differentiation, execution, and commitment to providing durable value to our customers through all of our offerings will continue to drive our success.

Speaker Change: I'm excited to further capitalize on our strengths going forward. And with that, I'll turn it over to Jen.

Jen Laden: We continue to build positive momentum, delivering strong revenue growth at an adjusted EBITDA margin north of 33%. As Craig mentioned, all three of our industry categories, corporate, media, and agency are in growth.

Jen Laden: Getty Images, iStock, and Unsplash Plus are in growth. Our annual subscription business comprises north of half of our total revenue, with Q3 adding to nine consecutive quarters of high double-digit growth on annual subscriber counts.

and our e-commerce business is thriving.

Jen Laden: Now, it would be easy to misinterpret this quarter's results as being only about the post-Hollywood strike compared or about a robust editorial event calendar, but the fact is we have momentum across the business.

Jennifer Leyden: The fact is, we have momentum across the business, and this quarter is a testament to the strength of both our creative and our editorial business, and to our ability to execute with our differentiated, high-quality, powerful content with our steadfast customer focus at the very core of our financial performance. Let's dive into those results. Revenue was $240.5 million, growth of 4.9% or 5.4% on a currency neutral basis. Across our major geographies, on a currency neutral basis, we saw year-on-year increases of 9.9% in the Americas, our largest region, 1.3% in APAC, and with EMEA down less than 1%. Underpinning this strong revenue growth is continued resiliency and health across many of our KPIs. Our annual subscription revenue was 52.4% of total revenue. We added 96,000 active annual subscribers to reach 298,000, an increase of approximately 48% over the comparable LTM period.

Jen Laden: And this quarter is a testament to the strength of both our creatives and our editorial business, and to our ability to execute with our differentiated, high-quality, powerful content, with our steadfast customer focus at the very core of our financial performance.

Let's dive into those results.

Jen Laden: Revenue is $240.5 million, growth of 4.9% or 5.4% on a currency-neutral basis.

Jen Laden: Across our major geographies, on a currency-neutral basis, we saw year-on-year increases of 9.9% in the Americas, our largest region, 1.3% in APEC, and with EMEA down less than 1%.

Underpinning this strong revenue growth is continued resiliency.

and health across many of our KPIs.

Jen Laden: Our annual subscription revenue was 52.4% of total revenue. We added 96,000 active annual subscribers to reach 298,000, an increase of approximately 48% over the comparable LTN period.

Jennifer Leyden: Subscriber growth was driven by our e-commerce business, iStock and Unsplash+. We continue to execute on our geographic growth plans with approximately 18,000 brand new customers from our targeted growth markets in EMEA, LATAM, and APAC. Our annual subscription revenue retention rate has begun to stabilize, coming in at 92.2% in LTM Q3 2024, down from 94.5% in the corresponding LTM period, but up from 89.4% in the LTM Q2 2024 period, and up from 90% in LTM Q1 2024. Relative to the LTM Q3 2023 period, the decline from 94.5% was primarily driven by growth in our lower retention, smaller e-commerce subscribers, who tend to start out with lower revenue retention rates. Paid downloads were essentially flat at 94 million, while our video attachment rate rose to 16.4% from 13.7% in the LTM Q3 2023 period.

Jen Laden: Subscriber growth was driven by our e-commerce business, iStock and Unsplash Plus, and we continue to execute on our geographic growth plans with approximately 18,000 brand new customers from our targeted growth markets in EMEA, LATAM, and APAC.

our annual subscription revenue retention rate has begun to stabilize.

Jen Laden: Coming in at 92.2% in LTM Q3-24, down from 94.5% in the corresponding LTM period, but up from 89.4% in the LTM Q2-24 period, and up from 90% in LTM Q1-24.

Jen Laden: Relative to the LTMQ323 period, the decline from 94.5% was primarily driven by growth in our lower retention, smaller e-commerce subscribers who tend to start out with lower revenue retention rates.

Jen Laden: Paid downloads were essentially flat at 94 million, while our video attachment rate rose to 16.4% from 13.7% in the LTN Q3 2023 period.

Jennifer Leyden: Editorial revenue was $92.8 million, an increase of 16.1% year-on-year and 16.3% on a currency neutral basis. This is our second straight quarter of a return to year-on-year growth for editorial after four consecutive quarters of decline, driven primarily by the Hollywood strike impact. At approximately one-third of our total revenue, editorial returning to growth is a core contributor to our momentum. We previously described the impact from major events during even years as adding approximately 1% of growth to total company revenue, equating to around a 3% lift to editorial revenue. That is consistent with what we are seeing this year.

Jen Laden: Editorial revenue was $92.8 million, an increase of 16.1% year-on-year and 16.3% on a currency-neutral basis.

Jen Laden: This is our second straight quarter of a return to year-on-year growth for editorials after four consecutive quarters of decline, driven primarily by the Hollywood strike impact.

Jen Laden: At approximately one-third of our total revenue, editorial returning to growth is a core contributor to our momentum.

Jen Laden: We've previously described the impact from major events during even years as adding approximately 1% of growth to total company revenue, equating to around a 3% lift to editorial revenue.

Jennifer Leyden: However, we are reporting a higher lift to editorial given strike compares, and as Craig mentioned, a large concentration of revenues with our Premium Access subscriptions due to a shift in consumption towards editorial content within those fixed value subscriptions as a result of our major editorial event coverage. This consumption shift contributed approximately 10 points of impact to editorial growth in the quarter, with the shift having an inverse impact on creative results, which I will touch on next. Creative revenue was $133.7 million, down 7.9% year-on-year and 7.4% on a currency neutral basis, with the decrease largely driven by that shift in Premium Access revenue allocation I just spoke to with an adverse impact of 5.4 points.

That is consistent with what we are seeing this year.

Jen Laden: However, we are reporting a higher lift to editorial given strike comparison.

And as Craig mentioned, a large concentration of revenues.

Jen Laden: with our premium access subscription due to a shift in consumption toward editorial content within those fixed value subscriptions as a result of our major editorial event coverage.

Speaker Change: This consumption shift contributed approximately 10 points of impact to editorial growth in the quarter, with the shift having an inverse impact on creative results, which I will touch on next.

Speaker Change: Rate of revenue was $133.7 million, down 7.9% year-on-year, and 7.4% on a currency-neutral basis.

Speaker Change: with a decrease largely driven by that shift in premium access revenue allocation I just spoke to with an adverse impact of 5.4 points.

Jennifer Leyden: When you account for this impact and some year-over-year revenue recognition differences, creative revenue is actually in growth with strong signals for sustained growth, which include our agency business, which has been in year-on-year decline for the past 12 consecutive quarters, return to growth with a 5% year-on-year increase and 5.9% on a currency neutral basis in Q3, driven by good performance across both the network and the independent agencies. Our customer acquisition efforts continue to deliver positive results, with iStock annual subscriptions growing approximately 17% on both a recorded and a currency neutral basis, and our Unsplash+ subscription growing triple digits. Our e-commerce business, which represents approximately 25% of total creative revenue, continues to grow and was up 4.5% on a recorded basis and 4.9% currency neutral.

Speaker Change: When you account for this impact and some year-over-year revenue recognition differences, creative revenue is actually in growth, with strong signals for sustained growth, which include

Speaker Change: Our agency business, which has been a year-on-year decline for the past 12 consecutive quarters, returned to growth with a 5% year-on-year increase and 5.9% on a currency neutral basis in Q3.

Speaker Change: Driven by good performance across both the network and the independent agencies.

Speaker Change: Our customer acquisition efforts continue to deliver positive results with iStock annual subscriptions growing approximately 17% on both a reported and a currency neutral basis. And our Unplush Plus subscription growing triple digits.

Speaker Change: Our e-commerce business, which represents approximately 25% of total creative revenue, continues to grow and was up 4.5% on a reported basis and 4.9% currency neutral.

Jennifer Leyden: Other revenue, which is historically a smaller revenue category for us, was $14.1 million, an increase of $9.9 million or about 240% from Q3 2023. This growth can be attributed to an expanded five-year creative content deal with an existing customer where we included some level of AI rights, which received accelerated revenue recognition in accordance with ASC 606 guidelines. Despite the heavy upfront revenue recognition, we will see cash flow evenly distributed over the five-year term, very much aligning to our positioning on the importance of longer-term recurring elements for these types of deals. While this is just one of many large commitments we see from our customers, the power of our creative content sits at the very heart of this deal. Revenue less our cost of revenue as a percentage of revenue remained consistently strong at 73.4% in Q3, unchanged from Q3 2023.

Bye.

Speaker Change: Other revenue, which is historically a smaller revenue category for us, is $14.1 million, an increase of $9.9 million, or about 240% from Q3'23.

Speaker Change: This growth can be attributed to an expanded five-year creative content deal with an existing customer where we included some level of AI rights which received accelerated revenue recognition in accordance with ASD 606 guidelines.

Speaker Change: Despite the heavy upfront revenue recognition, we will see cash flow evenly distributed over the five-year term, very much aligning to our positioning on the importance of longer-term recurring elements for these types of deals.

Speaker Change: While this is just one of many large commitments we see from our customers, the power of our creative content sits at the very heart of this deal.

Speaker Change: Revenue, lesser cost of revenue as a percentage of revenue, remained consistently strong at 73.4% in Q3, unchanged from Q3 2023.

Jennifer Leyden: We have seen this metric be north of 72% for 17 of the last 18 quarters. Indeed, one of the most resilient and compelling components of our business model. Total SG&A expense was $100.1 million in Q3, up from $97.3 million in the prior year. As a percentage of revenue, our expense rate was 41.6%, down from 42.4% last year. The lower expense rate was driven primarily by the increase in revenue and lower stock-based compensation in the quarter. Excluding stock-based compensation, SG&A rose to $95.8 million in the quarter, or 39.8% of revenue, up from $88.1 million or 38.4% of revenue in Q3 2023.

Speaker Change: We have seen this metric be north of 72% for 17 of the last 18 quarters. Indeed, one of the most resilient and compelling components of our business model.

Total SG&A expense was $100.1 million in Q3.

Speaker Change: up from $97.3 million in the prior year. As a percentage of revenue, our expense rate was 41.6%, down from 42.4% last year.

Speaker Change: The lower expense rate was driven primarily by the increase in revenue and lower stock-based compensation in the quarter.

Speaker Change: Excluding stock-based compensation, SG&A rose to $95.8 million in the quarter, or 39.8% of revenue, up from $88.1 million, or 38.4% of revenue in Q3 2023.

Jennifer Leyden: The increase in spend year-on-year reflects our planned reinvestment in the business as we entered 2024, primarily across staffing and marketing, following a pullback in spend as we navigated the Hollywood strike impact in 2023, as well as higher commissions tied to strong revenue performance this quarter and the inclusion of operating costs for the recently acquired Motorsport Images. Adjusted EBITDA was $80.6 million for the quarter, up 0.4% year-over-year and 0.8% on a currency neutral basis. Adjusted EBITDA margin was 33.5%, down from 35% in Q3 2023, but still incredibly strong. CapEx was $12.5 million in Q3, up $0.1 million year-over-year. CapEx as a percentage of revenue was 5.2%, down slightly from 5.4% in the prior year. Free cash flow showed a deficit of $1.8 million in Q3 compared to the $12.8 million generated in Q3 2023.

The increase in spend

Speaker Change: Year-on-year reflects our planned reinvestment in the business as we enter 2024.

Speaker Change: Primarily across staffing and marketing, following a pullback in spend as we navigated the Hollywood strike impact in 2023, as well as higher conditions tied to strong revenue performance this quarter, and the inclusion of operating costs to the recently acquired motorsport images.

Bye.

Speaker Change: Adjusted EBITDA was $80.6 million for the quarter, up 0.4% year-over-year and 0.8% on a currency-neutral basis.

Speaker Change: Adjusted even a margin was 33.5% down from 35% in Q3'23 but still incredibly strong.

Speaker Change: CapEx was $12.5 million in Q3, up $0.1 million year-over-year, CapEx as a percentage of revenue was 5.2% down slightly from 5.4% in the prior year.

Speaker Change: Free cash flow showed a deficit of $1.8 million in Q3 compared to the $12.8 million generated in Q3 2023.

Jennifer Leyden: The decrease in free cash flow reflects working capital changes related to the timing of receivables and payables, as well as higher cash interest expense and cash taxes paid. Free cash flow is stated net of cash interest expense of $40.8 million, an increase of $2.5 million over the prior year. Cash taxes for the quarter were $10.3 million, an increase of $2.7 million over Q3 2023. We finished the quarter with $109.9 million of balance sheet cash, down $11.8 million from Q2 2024 and down $3.6 million from Q3 2023. The lower cash balance is net of a voluntary $20 million debt repayment in the third quarter. Year to date, we have applied $55.2 million towards voluntary debt paydown, demonstrating our continued commitment to pay down debt and reduce our net leverage.

Speaker Change: The decrease in free cash flow reflects working capital changes related to the timing of receivables and payables, as well as higher cash interest expense and cash taxes paid.

Speaker Change: Free cash flow is stated net of cash interest expense of $40.8 million, an increase of $2.5 million over the prior year.

Speaker Change: Past taxes for the quarter were $10.3 million, an increase of $2.7 million over Q3 2023.

Speaker Change: The lower cash balance is net of a voluntary $20 million debt repayment in the third quarter. Year-to-date, we have applied $55.2 million towards voluntary debt paydowns.

Speaker Change: demonstrating our continued commitment to pay down debt and reduce our net leverage.

Jennifer Leyden: As of 30 September, we had total debt outstanding of $1.35 billion, which included $300 million of 9.75% senior notes, $581.8 million US term loans with an applicable rate of 8.85%, $467.6 million of euro term loans converted using exchange rates as of 30 September 2024 with an applicable rate of 8.4%. Our $150 million revolver remains undrawn. We ended the quarter with a net leverage of 4.2 times, unchanged from Q2. As I mentioned a moment ago, we remain committed to continuing to utilize our strong cash flow generation to further deleverage the balance sheet, and we will continue to explore opportunities to refinance our debt. Based on the foreign exchange rates and applicable interest rates on our debt balance as of 30 September, our 2024 cash interest expense is estimated to be approximately $129 million. Now turning to our outlook for the full year 2024.

Bye.

Speaker Change: As of September 30th, we had total debt outstanding of $1.35 billion.

Speaker Change: which included $300 million of 9.75% senior notes, $581.8 million USD term loan with an applicable rate of 8.85%,

Speaker Change: 467.6 million of Euro term loan converted using exchange rates as of September 30, 2024 with an applicable rate of 8.44 percent.

Our $150 million revolver remains unstrung.

Speaker Change: We ended the quarter with a net leverage of 4.2 times, unchanged from Q2.

Speaker Change: As I mentioned a moment ago, we remain committed to continuing to utilize our strong cash flow generation to further de-leverage the balance sheet, and we will continue to explore opportunities to refinance our debt.

Speaker Change: Based on the foreign exchange rates and applicable interest rates on our debt balance as of September 30th, our 2024 cash interest expense is estimated to be approximately $129 million.

Now, turning to our Outlook for the full year 2024.

Jennifer Leyden: Taking into consideration our financial performance year-to-date and the impact of current FX rates, we are increasing our reported revenue guidance range to $934 to $943 million, representing year-on-year growth of 1.9% to 2.9%, or 1.6% to 2.6% currency neutral. We are also increasing guidance on our adjusted EBITDA range to $292 to $294 million, which translates to a year-on-year decrease of 3.1% to 2.5%, or 3.4% to 2.8% currency neutral. Please note this includes an assumption that FX rates remain consistent with those as of 1 November 2024, with the EUR at 1.09 and the GBP at 1.31 for the remainder of the year. In summary, we are committed to strong execution, driving full-year top-line growth, and strategically investing in our business while maintaining fiscal discipline and paying down our debt.

Speaker Change: Taking into consideration our financial performance year-to-date and the impact of current FX rates, we are increasing our reported revenue five-inch range.

Speaker Change: to $934 million to $943 million, representing year-on-year growth of 1.9% to 2.9% or 1.6% to 2.6% currency neutral.

We are also increasing guidance on our adjusted EBITDA range.

Speaker Change: to $292 million to $294 million, which translates to a year-on-year decrease of 3.1% to 2.5% or 3.4% to 2.8% currency neutral.

Speaker Change: Please note this includes an assumption that FX rates remain consistent with those as of November 1st, 2024 with the Euro at 1.09 and the GBP at 1.31 for the remainder of the year.

Speaker Change: In summary, we are committed to strong execution, driving full-year top-line growth, and strategically investing in our business while maintaining fiscal discipline and paying down our debts.

Jennifer Leyden: As we look ahead, we are excited about our prospects for Q4 2024 and beyond. With that, operator, please open the call for questions.

Speaker Change: As we look ahead, we're excited about our prospects for the fourth quarter of 2024 and beyond.

With that, Operator, please open the call for questions.

Operator 2: Your first question comes from Alex Levine from The Benchmark Company. Please go ahead.

Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the 1 on your touchtone phone. You will hear a prompt that your hand has been raised.

Speaker Change: Should you wish to decline from the polling process, please press the star followed by the 2. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. And your first question comes from Alex Leving from The Benchmark Company. Please go ahead.

Alex Levine: Hey, guys. Thanks for taking the question. This is Alex from Benchmark. Two quick ones from me. Just curious if you could provide an update on the Gen AI front, whether or not clients broadly remain in the testing phase, and how you see that adoption curve perhaps scaling in 2025 alongside revenue. Separately, curious if you could provide an update just as you think about data licensing opportunities, whether or not the demand is there to take advantage of balanced against obvious competitive considerations as well. Just curious on those two. Thank you.

Speaker Change: Hey, guys, thanks for taking the question. This is Alex for Mark. 2 quick ones for me. Just curious if you could provide an update on the front, whether or not clients broadly remain the testing phase. And how you see that adoption curve, perhaps scaling in 25. Alongside revenue, and then separately curious to provide an update.

Speaker Change: Just as you think about data licensing opportunities, you know, whether or not the demand is there to take advantage of, balanced against, you know, obvious competitive considerations as well. So just curious on those two. Thank you.

Craig Peters: No, thanks, Alex. Appreciate the question. I'll take those. On the Gen AI front, we continue to integrate the services out into our websites. We've launched, obviously, the standalone generative model, but we've also launched the capabilities to utilize AI in order to modify our existing Pre-Shot creative. Most recently, we just launched the ability to insert product-based imagery into our Pre-Shot imagery using AI. The take-up of these services is incremental to the business. I would say it's still early in its overall take-up. We're in the single-digit percentages of customers that are adopting these capabilities. It is one that we expect to continue to be additive to the business over 2025, and we think we'll start to see that become a more material contributor.

Speaker Change: Thanks, Alex. I appreciate the question. I'll take those. On the Gen-AI front,

We continue to integrate the services out into our websites.

Speaker Change: We've launched, obviously, the standalone generative model, but we've also launched the capabilities to utilize AI in order to modify our existing pre-shot creative.

Speaker Change: The take-up of these services is incremental to the business. I would say it's still early in its overall take-up. We're in the single-digit percentages of customers that are adopting these capabilities.

Speaker Change: But it is one that we expect to continue to be additive to the business over 2025, and we think we'll start to see.

Craig Peters: It is interesting to note that where we're seeing adoption of the generative AI packages, we're seeing a good demand from that from new customers coming into the business that haven't been traditional customers of our brands or of our Pre-Shot offerings, which is nice. We're seeing that as an opportunity to actually cross-sell to them the Pre-Shot offerings based off the merits of those products standalone. I'd say it's still early days. Clearly, deals like the deal I mentioned on fine-tuning for the "Venom" movie promotion, those are interesting and more material into the business, they aren't as recurring in nature.

Speaker Change: that become a more material contributor. It is interesting to note that where we're seeing adoption of the generative AI packages, we're seeing a good demand from that from new customers.

coming into the business.

Speaker Change: that haven't been traditional customers of our brands or of our pre-shot offerings.

Speaker Change: Which is nice and we're seeing that as an opportunity to actually cross sell

Speaker Change: to them, the pre-shut offerings, based off the merits of that, those products stand alone. So I'd say still early days. Clearly, you know, deals like

Speaker Change: the deal I mentioned on fine-tuning for the Venom movie promotion. Those are interesting and more material into the business.

Speaker Change: But they aren't as recurring in nature, but I do believe there's going to be a lot of those activations out there and where our capabilities.

Craig Peters: I do believe there's going to be a lot of those activations out there, and where our capabilities, not just in terms of the tool that we've created and offered, but our capabilities as a business and our deep relationships with those companies are going to bring those to bear. I think we'll see more contribution from AI over 2025 as those types of activations get out and we continue to roll out more and more product features like the insert your product capability that we just rolled out last week. On the data licensing side of things, Jen touched on it. In Q2, we announced some small data licensing with an existing partner. We've done a little bit of data licensing in Q3, again, with an existing longstanding partner of ours.

Speaker Change: not just in terms of the tool that we've created and offered, but our capabilities as a business and our deep relationships with those companies.

Speaker Change: are going to bring those to bear. So I think we'll see more contribution from AI over 2025 as those types of activations get out and we continue to roll out more and more product features like the insert your product.

capability that we just rolled out last week.

Speaker Change: On the data licensing side of things, you know, Jen touched on it, we've done in Q2 we announced some small data licensing with an existing partner, we've done a little bit of data licensing in Q3, again, with an existing longstanding partner of ours.

Craig Peters: Those are deals where we have a belief that we will do deals that are aligned to the interest of the business and the interest of our creators over the long haul. That's not every deal that's out there. We have passed on a large number of deals that we don't think align to the long-term interest of this company and to our creators. In many cases, again, we've partnered with companies to develop services jointly and then bring them to market as an alternative. The world of AI is a big place, and it's not just all about simple generative models of imagery or video. There's a lot of applications to AI, and our quality content and metadata has relevance to that. I think you'll see us continue to expand on the data licensing.

Speaker Change: Those are deals where we have a belief that we will do deals that are aligned to the interests of the business and the interests of our creators over the long haul.

And that's not every deal that's out there.

Speaker Change: we have passed on a large number of deals that we don't think align to the long-term interest of this company and to our creators. In many cases, again, we've partnered with companies to develop services jointly and then bring them to market as an alternative. But the world of AI is a big place.

And it's not just all about.

Speaker Change: you know, simple generative models of imagery or video. You know, there's a lot of applications to AI, and our quality content and metadata has relevance.

Speaker Change: So, I think you'll see us continue to expand on the data licensing, but again, continuing to have a very long-term view on that.

Craig Peters: Again, continuing to have a very long-term view on that and one that we think ultimately is highly accretive to the business and aligns to the interest of our creators.

Speaker Change: And one that we think ultimately is highly accretive to the business and aligned to the interest of our creators.

Alex Levine: Got it. Thank you very much for the color.

Craig Peters: No, thanks, Alex.

Got it. Thank you very much for the caller.

No, thanks, Alex.

Operator 2: At this time, we have no other questions. Ladies and gentlemen, this concludes the conference. You may now disconnect your lines.

Speaker Change: At this time, we have no other questions. Ladies and gentlemen, this concludes the conference. You may now disconnect your lines.

Craig Peters: Thank you.

Thank you.