Q1 2025 Getty Images Holdings Inc Earnings Call
Operator 2: To all sites on hold, we do appreciate your patience and ask that you continue to stand by.
To all sites on hold we do appreciate your patience and ask that you continue to standby.
Yeah.
Steven Kanner: Before we begin, we would like to note that due to the ongoing regulatory review process, we will not be able to comment on the status of the merger with Shutterstock or the Q1 2025 Shutterstock operating results. We appreciate your understanding and will share updates as soon as we are able. 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.
Before we begin we would like to note that due to the ongoing regulatory review process, we will not be able to comment on the status of the merger with charter stock for the first quarter 2025 with Shutterstock operating results.
We appreciate your understanding and we'll share updates as soon as we're able.
This call will include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.
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 in today's press release can be found on our Investor Relations website at investors Dot Getty images dot com.
Okay.
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. 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 a description, limitations, and rationale for using each measure, can be found in our filings with the SEC. After our prepared remarks, we will open the call for your questions. With that, I will hand the call over to our Chief Executive Officer, Craig Peters.
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.
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.
Speaker Change: With that I will hand, the call over to our Chief Executive Officer, Greg Peters.
Craig Peters: Thanks, Steven, thanks to everyone for taking the time to join us today. I'll begin with a high-level view of the quarter, after which Jen will add more detail on our performance. Q1 revenue for 2025 was $224.1 million, representing growth of 0.8% or 2.6% on a currency neutral basis. Adjusted EBITDA was $70.1 million for the quarter, down 0.1% or up 2.2% on a currency neutral basis. We continue to see growth in our annual subscription business driven by our corporate sector, which remains in steady growth with gains across Premium Access and Unsplash+, and with strong demand for video, news, and sport. As expected, our revenue was impacted by early FX pressures, which have since reversed, tariff-driven uncertainty impacting customers' investment, and continued softness in our agency, production, and entertainment sectors, the latter due to impacts from the LA fires.
Greg Peters: Thanks, Steven and thanks to everyone for taking the time to join us today I.
Greg Peters: I'll begin with a high level view of the quarter after which Jen will add more detail on our performance.
Jen: First quarter revenue for 2025 was $224 1 million representing growth of 8% or two 6% on a currency neutral basis adjusted.
Jen: Adjusted EBITDA was $70 1 million for the quarter down, 1% or up two 2% on a currency neutral basis.
Jen: We continue to see growth in our annual subscription business driven by our corporate sector, which remains in steady growth with gains across premium access announced last plus and with strong demand for video news and sport.
Jen: As expected our revenue was impacted by early FX pressures, which have since reversed.
Jen: Tariff driven uncertainty impacting customers' investment and continued softness in our agency production and entertainment sectors. The latter due to impacts from the la fires.
Craig Peters: We delivered a strong start to the year in our sport business, where we are a trusted strategic partner across the full spectrum of the sports ecosystem. WWE, Major League Soccer, and the National Women's Soccer League all signed as new exclusive partners while we renewed our longstanding partnership with UEFA. Additionally, the Formula One series launched its 75th anniversary season, where we hold an official designation for the series itself, along with the commercial relationships with teams including McLaren, Red Bull, and Aston Martin. Our industry-leading sports operation and commercial teams, photographic talent, and global distribution platform make Getty Images the partner of choice and therefore the premier destination for photographic coverage around this landmark year.
Jen: We delivered a strong start to the year in our sport business, where we are a trusted strategic partner across the full spectrum of the sports ecosystem.
Jen: WWE E Major League soccer and the National Women's Soccer League, all signed as new exclusive partners, while we renewed our long standing partnership with UEFA.
Jen: Additionally, the Formula One series launched at 75th anniversary season, where we hold an official designation for the series itself along with the commercial relationships with teams, including Mclaren Red Bull and Aston Martin.
Jen: Our industry, leading sports operation and commercial teams photographic talent and global distribution platform make Getty images the partner of choice and therefore, the premier destination for photographic coverage around this landmark year.
Craig Peters: In entertainment, our expert production team partnered with the Academy of Motion Picture Arts and Sciences, the Elton John AIDS Foundation Oscar Party, the Vanity Fair Oscar Party, Grammys, and BAFTA, to name a few. In the quarter, we also renewed content partnerships with The Boston Globe, MTV, and welcomed new video partner, Bader Media. Our custom content solution continued to be popular with customers across different sectors who value the hands-on experience of this team and data-backed visual insights which produce visuals targeted for the customer's specific needs. This level of targeted content production is unique to Getty Images and one of the reasons companies like 3M and Fujitsu are repeat customers of this product. Finally, I'm proud to see our expert photographers recognized by industry peers across a range of categories and award ceremonies during the quarter.
Jen: And entertainment are expert production team partnered with the Academy of Motion Picture Arts and Sciences, The Aten, John AIDS Foundation Oscar Party, the Vanity Fair Oscar Party.
Grammys and BAFTA to name a few.
Jen: In the quarter, we also renewed content partnerships with Boston Globe, MTV and welcome New video partner Beta media.
Jen: Our custom content solution continues to be popular with customers across different sectors, who value the hands on experience of this team and data back visual insights, which produce visuals targeted for the customer's specific needs.
Jen: This level of targeted content production is unique to Getty images and one of the reasons companies like three am and Fujitsu are repeat customers of this product.
Jen: Finally, I'm proud to see our expert photographers recognized by industry peers across a range of categories and award ceremonies during the quarter.
Craig Peters: The team was honored with 115 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, NPPA's Best of Photojournalism Awards, and World Press Photo. Award-winning talent, prestigious partnerships, unique access, deep expertise embedded across our staff and our exclusive contributors, comprehensive coverage and archive, long-standing customer relationships, and a high-quality e-commerce offering are all at the core of our durable business and what sets Getty Images apart. In terms of the proposed merger with Shutterstock, we received a request for additional information from the DOJ in the US and the CMA in the UK. Neither of these was unexpected given the nature of these regulatory processes.
Jen: The team was honored with a 115 awards of excellence in categories, including news sport and politics at ceremonies, such as the White House News photographer Association Awards.
Speaker Change: S J, a British sports journalism boards.
Speaker Change: And Ppas Best photo Journalism Awards and World Press photo.
Speaker Change: Award winning talent prestigious partnerships unique access deep expertise embedded across our staff and our exclusive contributors comprehensive coverage and archive.
Speaker Change: Longstanding customer relationships and a high quality e-commerce offering are at the core of our durable business and what sets Getty images apart.
Speaker Change: In terms of the proposed merger with Shutterstock.
Speaker Change: Date request for additional information from the Doj in the U S and the CMA in the UK.
Speaker Change: Neither of these was unexpected given the nature of these regulatory processes.
Craig Peters: In the months ahead, we'll continue to work with the regulators to obtain all necessary approvals. We continue to expect the transaction to close in H2 2025. Looking forward, our experience has shown that we can navigate challenging environments. By remaining flexible and financially disciplined, with an annual subscription business that represents more than half of our revenue, we're positioning the business to adapt to the potential macro uncertainty ahead. Our Q1 results are largely in line with our expectations. We feel good about the start to the year, even with some of the challenges in Q1. As we look out to the remainder of the year, we remain on track to deliver our 2025 outlook.
Speaker Change: In the months ahead, we will continue to work with the regulators to obtain all necessary approvals and we continue to expect the transaction to close in the second half of 2025.
Speaker Change: Looking forward our experience has shown that we can navigate challenging environments by remaining flexible and financially disciplined and with an annual subscription business that represents more than half of our revenue.
Speaker Change: We're positioning the business to adapt to the potential macro uncertainty ahead.
Speaker Change: Our first quarter results are largely in line with our expectations and we feel good about the start to the year, even with some of the challenges in the first quarter.
Speaker Change: As we look out to the remainder of the year, we remain on track to deliver our 2025 outlook through at all including the ongoing macroeconomic uncertainty we're committed to investing in the core assets of their company and continuing to evolve our offering in ways that deepen our relevance for our customers with that I will turn the call over.
Craig Peters: Through it all, including the ongoing macroeconomic uncertainty, we're committed to investing in the core assets of our company and continuing to evolve our offering in ways that deepen our relevance for our customers. With that, I'll turn the call over to Jen to take you through the more detailed financials.
Speaker Change: Agenda take you through the more detailed financials.
Craig Peters: Our Q1 results reflect a solid yet challenging start to the year. As anticipated and discussed on our Q4 earnings call, the Los Angeles fires, early FX pressures, and the broader macro uncertainty impacted our Q1 results. That said, we focused on executing through these challenges and delivered low single-digit top-line growth, combined with a healthy adjusted EBITDA margin. Q1 revenue was $224.1 million, with year-on-year growth of 0.8%, or 2.6% on a currency neutral basis. Included in these results are certain impacts of the timing of revenue recognition, which contributed approximately 320 basis points to Q1 growth. Annual subscription revenue was 57.2% of total revenue in Q1, up from 54.7% in Q1 of last year, and also up from 53.8% in 2024. In total, subscription revenue grew by 5.4%, or 7.2% on a currency neutral basis, driven primarily by growth in our Premium Access offering.
Speaker Change: Our Q1 results reflect the solid yet challenging start to the year.
Speaker Change: As anticipated and discussed on our Q4 earnings call the Los Angeles fire early FX pressures and the broader macro uncertainty impacted our first quarter result.
Speaker Change: That said, we are focused on executing granted these challenges and delivered low single digit top line growth combined with a healthy adjusted EBITDA margin.
Q1 revenue was $224 1 million with ear on aircrafts.
Speaker Change: 8% or two 6% unexciting themed hotel basis.
Speaker Change: And these results are certain impacts of the timing of revenue recognition, which contributed approximately 320 basis points Q1 growth.
Speaker Change: Annual subscription revenue was 57, 2% of total revenue in the first quarter up from 54, 7% in Q1 of last year and also up from 53, 8% in 2024.
Speaker Change: In total subscription revenue grew by five 4% or seven 2% on a currency neutral basis, driven primarily by growth in our premium access offering.
Speaker Change: We added 56000 active annual subscribers to reach 318000 in the Q1 LTM period, an increase of approximately 21% over the comparable LTM period in 2024.
Craig Peters: We added 56,000 active annual subscribers to reach 318,000 in the Q1 LTM period, an increase of approximately 21% over the comparable LTM period in 2024, driven by our e-commerce businesses, iStock and Unsplash+. Of the 318,000 annual subscribers in the LTM period, 53% were brand new customers and 28% were customers in our growth markets across LATAM, APAC, and EMEA. Our annual subscription revenue retention rate was 92.7% in the Q1 LTM period, up from 90% in the corresponding 2024 period. Paid downloads were down slightly at 93 million, while our video attachment rate remains in steady growth, rising to 16.7% from 14% in the Q1 2024 LTM period. Editorial revenue was $82.6 million, an increase of 4% year-on-year and 5.6% on a currency neutral basis. Key growth drivers in this quarter included our coverage of global news events and sports.
Speaker Change: Driven by our e-commerce businesses, I stopped and unplanned plus.
Speaker Change: Of the 318000 annual subscribers in the LTM period, 53% were brand, new customers, and 28% where customers and aircraft market.
Speaker Change: Cross flat, an APAC and EMEA.
Speaker Change: Our annual subscription revenue retention rate was 92, 7% in the Q1 LTM period up from 90% in the corresponding 2024 hour period.
Speaker Change: Paid downloads were down slightly at 93 million, while our video attachment rate remains and steady growth rising to 16, 7% from 14% in the Q1 2024 LTM period.
Speaker Change: Editorial revenue was $82 6 million, an increase of 4% year on year and five 6% on a currency neutral basis.
Speaker Change: Key growth drivers in the quarter included our coverage of global news events and sport.
Craig Peters: Our entertainment business was down due to the impact of the LA fires, while the archive was flat. Creative revenue was USD 132.2 million, down 4.8% year-on-year and 3% on a currency neutral basis. Within creative, we saw strength across our Premium Access subscriptions, demand for video, and continued growth in Unsplash+. While our corporate business continues to perform well, our agency business, which is accounted for entirely within creative, was down high single digits, due primarily to declines at the large network agencies. Being an almost entirely a la carte business, agency is where we usually see a slowdown in spending and investment as agency customers navigate periods of potential macroeconomic uncertainty. Our media business saw a mid-single-digit decline, primarily due to the impact of the LA fires on our broadcast and production customers.
Speaker Change: Our entertainment business was down due to the impact of the L. A fire while the archives was flat.
Speaker Change: Creative revenue was $132 2 million down four 8% year on year and 3% on a currency neutral basis.
Speaker Change: Within creative we saw strength across our premium access subscriptions demand for video and continued growth in on Splash plus.
Speaker Change: While our corporate business continues to perform well our agency business, which is accounted for entirely within creative was down high single digits due primarily to the client that the large network agencies.
Speaker Change: Being an almost entirely Ala Carte business agency is where we usually see a slowdown in spending and investment as agency customers navigate periods of potential macro economic uncertainty.
Speaker Change: Our media business saw a mid single digit decline, primarily due to the impact of the L. A fires on our broadcast and production customers.
Craig Peters: This pullback, which was reflected across both creative and editorial, had the largest impact in the first two months of the quarter, with the media segment returning to growth as we exited the quarter. Other revenue was $9.3 million, an increase of $5.3 million from Q1 2024, driven primarily by two new multi-year creative content deals that included some level of AI rights with heavier upfront revenue recognition. Across our major geographies, we saw currency neutral revenue growth of 6.4% in the Americas, which is our largest region with respect to revenue. EMEA was down 3% and APAC was down less than 1%. Revenue less our cost of revenue as a percentage of revenue was consistent and strong at 73.1% in Q1, compared with 72.9% in Q1 2024.
Speaker Change: This pullback, which is reflected across both creative and editorial had the largest impact in the first two months of the quarter with the media segment returning to growth as we exited the quarter.
Other revenue was $9 3 million, an increase of $5 3 million from Q1 24.
Speaker Change: Driven primarily by two new multi year creative content deals that included some level of AI rights with heavier upfront revenue recognition.
Speaker Change: Across our major geographies, we saw currency neutral revenue growth of six 4% in the Americas, which is our largest region with respect to revenue, while EMEA was down 3% and APAC was down less than 1%.
Speaker Change: Revenue less cost of revenue as a percentage of revenue was consistent and strong at 73, 1% in Q1 compared with 72, 9% in Q1 2024.
Speaker Change: SG&A expense was $98 3 million down $2 7 million year on year with our expense rate decreasing to 43, 9% of revenue from 45, 4% last year.
Craig Peters: SG&A expense was $98.3 million, down $2.7 million year on year, with our expense rate decreasing to 43.9% of revenue from 45.4% last year. The lower expense rate was due primarily to a $4.6 million decrease in stock-based compensation. Excluding stock-based compensation, SG&A increased to $93.7 million in the quarter or 41.8% of revenue, up from $91.8 million or 41.3% of revenue in Q1 2024. The increase in spend primarily relates to professional fees incurred for our ongoing litigation with Stability AI. However, that spend was in line with our expectations for the quarter. Adjusted EBITDA was $70.1 million for the quarter, down 0.1%, or up 2.2% on a currency-neutral basis. Adjusted EBITDA margin was 31.3% compared to 31.6% in Q1 2024. CapEx was $15.7 million, up $1.3 million year over year. CapEx as a percentage of revenue was 7% compared to 6.5% in the prior year period.
Speaker Change: The lower expense rate was due primarily to a $4 6 million decrease in stock based compensation.
Speaker Change: Excluding stock based compensation SG&A increased to $93 7 million in the quarter or 41, 8% of revenue up from 91 8 million or 41, 3% of revenue in Q1 2024.
Speaker Change: Yeah.
Speaker Change: The increase in spend primarily relates to professional fees incurred for ongoing litigation, but stability a lot. However that spend was in line with our expectations for the quarter.
Speaker Change: Adjusted EBITDA was $70 1 million for the quarter down, 1% or up two 2% on a currency neutral basis.
Speaker Change: Adjusted EBITDA margin was 31, 3% compared to 31, 6% in Q1 2024.
Speaker Change: Capex was $15 7 million up $1 3 million year over year.
Speaker Change: Capex as a percentage of revenue was 7% compared to six 5% in the prior year period. This increase was driven by the timing of the payment of 2024 performance compensation a portion of which is capitalized.
Craig Peters: This increase was driven by the timing of the payment of 2024 performance compensation, a portion of which is capitalized. Q1 CapEx remained within our expected range of 5% to 7% of revenue. Adjusted EBITDA less CapEx was $54.4 million, down $1.3 million year over year, representing a decrease of 2.4%, or an increase of 0.5% on a currency-neutral basis. Adjusted EBITDA less CapEx margin was 24.3% in Q1 compared to 25.1% in Q1 2024. Free cash flow was -$300,000, down from $7.1 million in Q1 2024, primarily due to the impact of cash outflows tied to merger-related expenses. Free cash flow is stated net of cash interest expense of $38.2 million and cash taxes paid of $4.6 million in the first quarter.
Speaker Change: Q1, Capex remained within our expected range of five 7% of revenue.
Speaker Change: Adjusted EBITDA less Capex was $54 4 million down $1 3 million year over year.
Speaker Change: Presenting a decrease of two 4% or an increase of 5% on a currency neutral basis.
Speaker Change: Adjusted EBITDA less Capex margin was 24, 3% in Q1 compared to 25, 1% in Q1 2024.
Speaker Change: Free cash flow was negative 300000 down from $7 1 million in Q1, 2024, primarily due to the impact of cash outflows tied to merger related expenses.
Speaker Change: Free cash flow is stated net of pass interest expense of $38 2 million and cash taxes paid of $4 6 million in the first quarter.
Speaker Change: We finished the quarter with $114 6 million of balance sheet pass down $19 6 million from the ending balance in Q1, 2024 and down $6 6 million from Q4 of 2024.
Craig Peters: We finished the quarter with $114.6 million of balance sheet cash, down $19.6 million from the ending balance in Q1 2024 and down $6.6 million from Q4 2024. The lower cash balance relative to Q1 2024 is due to $55.2 million of voluntary debt paydowns executed over the past 12 months and $12.5 million of financing outflows related to the refinancing of our term loans. As just mentioned, during the quarter, we completed the refinancing of the existing term loan structure, replacing our old term loans, which were set to mature in February 2026, with new loans now maturing in February 2030.
Speaker Change: The lower pass balance relative to Q1, 'twenty 'twenty four is due to $55 2 million of voluntary debt paydown executed over the past 12 months and $12 5 million of financing outflows related to the refinancing of our term loan.
Speaker Change: As Jeff mentioned during the quarter, we completed the refinancing of the existing term loan structure, replacing our old term loans, which were set to mature in February of 2026 with me alone now maturing in February 2030.
Speaker Change: As of March 31, we had total debt outstanding of 136 billion.
Craig Peters: As of 31 March, we had total debt outstanding of $1.36 billion, including $300 million of 9.75% senior notes, $580 million of USD term loans at 11.25% fixed rate, $476.1 million of euro term loans converted using exchange rates as of 31 March 2025, with an applicable rate of 8.375%. We also have a $150 million revolver that remains undrawn. We ended the quarter with a net leverage of 4.1 times compared to 4 times at the end of 2024. That slight uptick in net leverage primarily reflects the impact of the February refinancing and the impact of the weaker dollar on the value of our euro term debt. We continue to assess market conditions with respect to any potential refinancing or redemption of the $300 million of bonds.
Speaker Change: Including $300 million of 975% senior notes.
Speaker Change: $580 million of USD term loan at 11, two 5% fixed rate.
Speaker Change: $476 1 million of Euro term loan converted using exchange rates as of March 31, 2025, with an applicable rate of 8.3 dollars 75 per cent.
Speaker Change: We also have a $150 million revolver that remains undrawn.
Speaker Change: We ended the quarter with a net leverage of four one times compared to four times at the end of 2020 for that slight uptick in net leverage primarily reflects the impact of the February refinancing and the impact of the weaker dollar on the value of our euro term debt.
Speaker Change: We continue to assess market conditions with respect to any potential refinancing our redemption of the 300 million of bonds.
Craig Peters: Considering the foreign exchange rates and applicable interest rates on our debt balance as of 31 March and factoring in the new mandatory amortization on the euro term loan, our estimated cash interest expense for 2025 is $133 million. In summary, we ended the Q1 with positive operating metrics and a healthy and growing annual subscription business, which helps to mitigate some of the potential impacts from macroeconomic volatility. We continue to see opportunities to build positive momentum, expanding our customer base, our annual subscription business, and our geographic footprint, and driving greater video consumption. Turning to our outlook for the full year 2025. Taking into consideration the impact of the weaker dollar and assuming full year 2025 FX rates with the euro at 1.10 and the GBP at 1.30, we are updating our guidance for FX impacts as follows.
Speaker Change: Considering the foreign exchange rates and applicable interest rate on our debt balance as of March 31st.
Speaker Change: When factoring in the new mandatory amortization on the Euro term loan our estimated cash interest expense for 2025, it's $133 million.
Speaker Change: In summary, we ended the first quarter with positive operating metrics and a healthy and growing annual subscription business, which helps to mitigate some of the potential impact from macro economic volatility.
Speaker Change: We continue to see opportunities to build positive momentum.
Speaker Change: Expanding our customer base, our annual subscription business.
Speaker Change: And our geographic footprint and driving greater video consumption.
Speaker Change: Now turning to our outlook for the full year 2025.
Speaker Change: Taking into consideration the impact of the weaker dollar and assuming full year 2025, FX rates with the euro at 1.10 and the G. D. P. At 1.30, we are updating our guidance for FX.
Speaker Change: What impacts as follows.
Craig Peters: We anticipate revenue of $931 to 968 million, down 0.9% to up 3.1% year over year. On a currency-neutral basis, this represents a decrease of 1% to an increase of 3%. This remains unchanged from prior guidance. As you think through the cadence for the year, we would expect to see growth trends from Q1 continue into Q2, with tougher comparisons flattening growth in the back half of 2025. The update to our guidance reflects a $1 million impact from FX, inclusive of the $3.8 million headwind in the first quarter, which will be offset by a benefit for the rest of 2025, including an estimated $1.4 million in the second quarter. We expect adjusted EBITDA of $277 to 297 million, down 7.6% to 1.2% year over year, or down 7.9% to 1.4% currency neutral.
Speaker Change: We anticipate revenue of 931 million to 968 million.
Speaker Change: Down <unk>, 9% to up three 1% year over year.
Speaker Change: On a currency neutral basis. This represents a decrease of 1% to an increase of 3%. This remains unchanged from prior guidance.
Speaker Change: As you think through the cadence for the year, we would expect to see growth trends from Q1 continue into Q2 with.
Speaker Change: With tougher comparisons flattening growth in the back half of 2025.
Speaker Change: The update to our guidance reflects a 1 million impact from FX inclusive of the $3 8 million headwind in the first quarter, which will be offset by a benefit for the rest of 2025.
Speaker Change: Including an estimated $1 4 million in the second quarter.
Speaker Change: We expect adjusted EBITDA of $277 million to 297 million down seven 6% to one 2% year over year or down seven 9% to 1.4% currency neutral.
Speaker Change: Included in the adjusted EBITDA expectations is a similar cadence for the estimated FX impact with an approximate <unk> 5 million tailwind in 2025 inclusive of the one 6 million headwind from the first quarter offset by a tailwind across the remainder of the.
Craig Peters: Included in the adjusted EBITDA expectations is a similar cadence for the estimated FX impact, with an approximate $0.5 million tailwind in 2025, inclusive of the $1.6 million headwind from Q1, offset by a tailwind across the remainder of the year, which includes an estimated $0.5 million in Q2. Please note this guidance includes the anticipated impact of the odd year versus even year editorial event calendar comparison, as well as the impact from disruptions in production activity due to the LA fires and some continued lag in a return to pre-Hollywood strike production levels. The H2 of 2025 faces tougher year-on-year comparisons, given the year-on-year lift in performance post-strike during H2 of 2024. On the cost side, our guidance continues to include approximately $8 million in one-off increases in SG&A, which were disclosed during our Q4 earnings call.
Speaker Change: Year, which includes an estimated <unk> 5 million in the second quarter.
Speaker Change: Please note. This guidance includes the anticipated impact of the odd year versus even year editorial event calendar comparison as.
Speaker Change: As well as the impact from disruptions in production activity due to the L. A fire and some continued lab and a return to pre Hollywood strike production levels.
Speaker Change: Additionally, in the second half of 2025 faces tougher year on year comparisons given the year on year lift in performance post strike during the second half of 2024.
Speaker Change: On the cost side. Our guidance continues to include approximately 8 million in one off increases in SG&A, which was disclosed during our Q4 earnings call, which will be largely concentrated in the key to this Q4 periods as we accelerate our sox compliant efforts in 2025.
Craig Peters: This will be largely concentrated in the Q2 to Q4 periods as we accelerate our SOX compliance efforts in 2025. Please note all other merger-related costs are not included in this guidance, as they are considered one-time in nature and therefore excluded from adjusted EBITDA. Any potential broader impacts, which may result from the trade wars and other global macroeconomic conditions, remain unknown and may not be fully reflected in this guidance. With that, operator, please open up the call for questions.
Speaker Change: Hi.
Speaker Change: Please note all other merger related costs are not included in this guidance as they are considered one time in nature and therefore excluded from adjusted EBITDA.
Speaker Change: Finally, any potential broader impact, which may result from the trade wars and other global macroeconomic conditions remain unknown and may not be fully reflected in this guidance.
Speaker Change: With that operator, please open up the call for questions.
Speaker Change: Thank you at this time, if you would like to ask a question. Please press star one on your telephone keypad, you may remove yourself from the queue at any time by pressing star to once again it is star one to ask a question.
Operator 2: Thank you. We'll go first to Ron Josey with Citi.
Ron Josey: We'll go first to Ron Josey with Citigroup.
Ron Josey: Great. Thanks for taking the question. I have one for Craig and one for Jen. Craig, on the subscription side, you talked about the strength and the mix shift to corporate. Talk to us more about that mix shift to corporate, what you're seeing from a demand perspective. As we look at the numbers of overall ending or active annual subscribers, it looked like growth maybe ticked down a little bit. Wondering if there's maybe a change in the size and scale of your subscriber base. That's question 1. Jen, I think I heard you say for Q1, there was some timing of revenue in the quarter, about 220 basis points impact, but also some impact from FX and tariff uncertainty and agency headwinds and fires.
Speaker Change: Great. Thanks for taking the question I have one for Craig and one for Jim Craig on the subscription side, you talked about the strength in the mixed shift to corporate talk to us more about that mix shift to corporate what youre seeing from a demand perspective, and as we look at the numbers of of.
Speaker Change: Of overall, ending or active annual subscribers. It looked like gross maybe ticked down a little bit. So I'm wondering if there was maybe a change in the size and scale of your subscriber base. That's question one and then John I think I heard you say for <unk> there was some.
Speaker Change: Timing of revenue in the quarter about 10, or 20 basis points impact, but also some impact from FX and tariff uncertainty and agency headwinds and fires and just I think you said just I just wanted to confirm are we are we beyond most of those notwithstanding any changes to the macro thank.
Ron Josey: Just I think you said this, but I just want to confirm, are we beyond most of those, notwithstanding maybe changes to the macro? Thank you.
Speaker Change: Thank you.
Craig Peters: Great. Thanks, Ron. On the subscription side of things, we're seeing really a continued trend that has been a trend for almost more than a decade now, which is the continued build-out of internal corporate marketing groups, creative groups, in support of their owned and operated marketing, their website, their social media, et cetera, their sales and marketing collateral. That's been a long driver about increasing not only our corporate segment, but the subscription business from the corporate segment. That's one driver that continues. The other one is really at the iStock level. Our small and medium-sized businesses that buy there largely are, we classify within the corporate segment. We've been increasing the volume of subscriptions and the prominence of subscriptions on that website and service. Those are the real drivers.
Speaker Change: Great. Thanks, Ron.
Speaker Change: On the subscription side of things.
Speaker Change: We're seeing really continued trend there has been a trend for almost more than a decade now which is the continued build out of internal corporate marketing groups creative groups in support of their owned and operated marketing to their website.
Speaker Change: Social media et cetera, their sales and marketing collateral.
Speaker Change: And that's been a long driver about increasing not only our corporate segment, but the subscription business from the corporate segment.
Speaker Change: And so that's one driver that continues.
Speaker Change: And the other one is really at the high stock level, our small and medium size businesses that buy theyre largely are reclassify within the corporate segment.
Speaker Change: And we've been increasing the volume of subscriptions and the prominence of subscriptions on that website and service.
Speaker Change: This is a real drivers we have been testing out of that a bit on the <unk> side as we optimize to get the right blend between subscription customers in an olive garden.
Craig Peters: We have been testing out of that a bit on the iStock side as we optimize to get the right blend between subscription customers and à la carte. That is going to slow. I think we've mentioned that over time, our subscription growth will slow. We continue to be encouraged by the take-up that we're seeing at iStock and continue to be very encouraged by the revenue retention and renewal rates on the subscription side of things overall, most emphasis on that within the corporate space. Jen?
Speaker Change: So that that is going to slow and I think we've mentioned that over time, our subscription growth will slow.
Speaker Change: But we continue to be encouraged by the take up that we're seeing high stock and continued to be very encouraged by the revenue retention and renewal rates on the subscription side of things overall.
Speaker Change: Most emphasis on that within the corporate space.
Speaker Change: Ken.
Ken: Yeah, Hi, Ryan and so their revenue recognition item, that's actually a quarterly.
Jen: Hi, Ron Josey. The revenue recognition item, that's actually a quarterly accounting entry, so that's the ASC 606 entry. I think for the most part, we do try to quantify that on every call, that's a standard item. I wish I could say that one is going away, but we'll continue to have that every quarter. Again, that's just intended to smooth out revenue to align with when you've met your obligations to your customers. Over time, the intent is that that nets out to zero, but it can have a little bit of impact, positive or negative, on a quarterly basis. The other items, I think that you mentioned and I mentioned, that impacted Q1, LA fires, FX pressures, broader macro. LA fire impact specifically on the production side of things. We expect that that's going to be a little bit of a continued impact for us.
Ken: Accounting entries. So that's the ASC 606 entry I think for the most part we do try to quantify that on every call. So thats a standard items.
Ken: I can say that one is going away, but we will continue to have that every quarter again, that's just intended to smooth that revenue to align with when you've met your obligations to your customers over time, the intent is that that nets out to zero.
Ken: But it can have a little bit of impact positive or negative on a quarterly basis.
Ken: The other items I think that you mentioned and I mentioned that impacted Q1.
Ken: La <unk> FX pressures broader macro.
Ken: Fire impact specifically on the production side of things, we expect that that's going to be a little bit of a continued impact for us.
Jen: Again, that's embedded in the guidance. FX pressures, again, as you know, we see FX volatility move around. We did take the step this quarter to go ahead and update our guidance for that because we did see a decent size movement from the last time we shared out guidance. We'll continue to monitor that, update guidance as is appropriate. Broader macro, again, to the best of our ability, at this point, that is baked into our guidance. We caveat towards the end, don't know anything specific at this point that we're seeing in the business related to tariffs or trade wars or how that evolves. Again, to the best of our ability, all of that baked into guidance. As we see something more material, we'd of course take that into consideration.
Ken: And that's embedded in the guidance FX pressures again, you know as you know we see FX volatility.
Ken: We're around we did take the step this quarter to go ahead and update our guidance for that because we didn't see it.
Ken: A decent size to me is that from the last time, we shared out guidance. So we'll continue to monitor that.
Ken: Update guidance as appropriate broader macro again to the best of our ability at this point that is baked into our guidance.
Ken: We caveat towards the end don't know anything specific at this point that we're seeing in the business related to tariffs or trade wars or how that evolves.
Ken: So again to the best of our ability all of that baked into guidance as we see something more material, we would of course take that into consideration.
Ron Josey: Great. Thanks, Craig. Thanks, Jen.
Speaker Change: Great. Thanks, Greg Thanks, Sharon.
Jen: Sure.
Ron Josey: Sure. Thanks Ryan.
Jen: Thanks, Ron Josey.
Operator 2: We'll go next to Mark Zgutowicz with Benchmark.
Ron Josey: We'll go next to Mark <unk> with benchmark.
Mark Zgutowicz: Thank you. Hi, Jen and Craig. Jen, question for you. Your annual guidance implies a constant currency acceleration, at least a modest one, for the rest of the year. I was just hoping you could maybe share where you expect that acceleration to come from and or what your present guidance assumes in terms of data licensing revenue versus the prior guide. Craig, broader question, can you just remind us again on the specifics of the ruling you're hoping to get from existing litigation protecting your copyrighted content against Gen AI training, maybe specifically with Stability AI and others. In parallel, can you also clarify what your copyright protections are in place covering your exclusive content likeness agreements, similar to what you have with partners like the NBA and Major League Baseball?
Jenny Craig: Thank you Hi, Jenny Craig.
Speaker Change: A question for you or your annual guidance implies constant currency acceleration at least a modest one.
Jenny Craig: For the rest of the year I was just hoping you could maybe share where do you expect that acceleration to come from.
Speaker Change: And for.
Speaker Change: Or what your present guidance assumes in terms of data licensing revenue versus the prior guide.
Craig: And then Craig.
Craig: Broader question could you just remind us again on the specifics.
Craig: Of the ruling Youre, hoping to get from existing litigation protecting your copyrighted content against Jenny I training.
Craig: Maybe specifically with stability AI and <unk>.
Craig: Others and then in parallel can you also clarify what your copyright protections are in place covering your exclusive contact content wise likeness agreements.
Craig: Similar to what you have with partners like the NBA and major League baseball.
Mark Zgutowicz: We're obviously seeing increasing AI models within social media that are enabling the capturing and doctoring of images in these sports partners and the like. Just trying to get a sense roughly sort of what boundaries are in place that protect you on the content likeness side of things. Thanks.
We're obviously seeing increasing.
Craig: AI models within social media that are enabling the capturing and doctoring of images in these sports partners.
Speaker Change: And the likes so I'm just trying to get a sense you.
Speaker Change: Roughly sort of what the boundaries are in place that protect you on the right content and likeness side of things.
Jan: Jan feel free to start.
Craig Peters: Jen, feel free to start.
Jen: With respect to currency-neutral guidance, on the question of data licensing and what's embedded, no real change there to what was in our previous guidance, and that puts that bucket of revenue, call it somewhere in the 2% to 3%, give or take, range of total revenue. Nothing really has moved there versus prior guidance. As we move through the year, some of the items that I just mentioned and spoke to in prepared remarks, things like some of the impacts from LA fires on the production media side of the business. We think we'll start to see some improvement coming out of that relative to Q1. Still some lingering impact from Hollywood strikes, that side of things. Still not 100% back to pre-Hollywood strike levels, but again, feel like as we move through the year, we'll start to see improvement there.
Speaker Change: Yeah. So.
Speaker Change: With respect to our currency neutral guidance. So on the question of of data licensing and what's embedded no real change there.
Speaker Change: What was in our previous guidance and you know that puts that bucket of revenue call. It somewhere in the 2% to 3% give or take range of total revenue, but nothing really has moved their prior versus prior guidance and then as we move through the year some of the items.
Speaker Change: And that I, just mentioned and spoke to in the prepared remarks things like some of the impacts from <unk> on the production media side of the business. We think we'll start to see some improvement coming out of that relative to Q1 still some lingering impact from Hollywood strikes you know that that side of things.
Speaker Change: Still not 100% back to pre Hollywood strike levels, but again feel like as we move through the year, we'll start to see improvement there and then more broadly you know the.
Jen: More broadly, the areas where we think we have growth remain the same, and that's frankly continuing to drive that subscription business. We noted in the remarks there, we're seeing a lot of that growth come from new customers, and we're seeing a lot of that growth come from geographic markets where we're tapping into new customer segments. A lot of opportunity there for the business as we grow that subscriber base. Again, many of whom are coming in new to the business. Areas across video, continuing to see traction on the video side of things, continuing to monetize our Unsplash business, specifically the Unsplash+ paid subscription, which continues to do quite well. A lot of the same growth levers that we've been tracking along on, and then some improvement in some of the macro elements that impacted Q1.
Speaker Change: Areas, where we think we have growth remain the same and that's frankly continuing to drive that subscription business. You know we noted in the remarks, there we're seeing a lot of that growth coming from new customers and we're seeing a lot of that growth come from geographic markets, where you know, we're tapping into to new customer segments.
Speaker Change: So a lot of opportunity there for the business as we grow that subscriber base again, many of whom are coming in new to the business and then areas across video continuing to see traction on the video side of things continuing to monetize our on slash business, specifically on splash plus.
Speaker Change: Paid subscription, which continues to do quite well so a lot of the same growth levers that we have been we've been tracking along on and then some improvement in some of the macro elements.
Speaker Change: About that impacted Q1.
Craig Peters: Thanks, Jen. Mark, I'll do my best to navigate the world of AI and copyright in a relatively short amount of time. Let me be clear. Right now, the world of AI models and AI providers has largely operated in a mode of training on scraped content across the Internet. Doing that under the belief that it would qualify as, quote-unquote, fair use or similar concepts around the globe. That means that they are scraping content from Getty Images, they're scraping content from the likes of the NBA and Major League Baseball, and that content will include the name and likeness of those individuals. It can contain personal privacy items and can contain other third-party intellectual property.
John: Thanks, John and Mark I'll I'll do my best to navigate the world of.
John: AI and copyright in a relatively short amount of time.
John: So.
John: Let me be clear right now.
John: World of AI models Nai provide largely.
John: Largely operated in a mode of.
John: Training on scraped content across the Internet.
John: And doing that under the belief that it would qualify as clinical fair use or similar concepts around the globe.
John: And that means that they are scraping content from Getty images are scraping content.
John: From the likes of the NBA and major League baseball and that content will include.
John: The name and likeness of those individuals it can contain personal privacy.
John: Items and could contain other third party intellectual property.
Craig Peters: What we advanced with Stability AI in the UK and in the US is litigation on that point to hopefully get clarity from the courts of whether training on copyrighted material was permissioned. Now, we believe that not all training and use of copyrighted content requires permission. There is research and development. There are non-commercial applications that can be put out there. We want to get clarity on that, because we fundamentally don't believe that the likes of companies like Stability AI should be able to train on copyrighted material and then provide these tools out into the marketplace, in some cases targeting the very same market. That trial is going to happen in June of this year in the UK. We still don't have clarity of when that will happen in the US.
John: We advanced with stability AI in the UK and in the U S.
John: Is litigation on that point to hopefully get clarity from the courts of weather training on copyrighted material was with permission now we believe.
John: The novel.
John: Training.
John: And use of copyrighted content is requires permission there is research and development.
John: There are non commercial applications.
John: Applications that can be put out there.
John: But we want to get clarity on that because we fundamentally don't believe that.
John: Did the likes of companies like stability I should be able to train on.
John: Copyrighted material and then.
John: Provide these tools out into the marketplace in some cases targeting the very same market.
John: So that trial is going to happen in June of this year in the U K, we still don't have clarity on when that will happen.
John: In the U S. There is some.
Craig Peters: There's some venue questions, which is why we have 2 pieces of litigation in there. Within the past couple of days, just within the last 72 hours, we've seen the US Copyright Office issue a report that aligns to our view with respect to AI training. We've also seen the House of Lords just today adopt amendments, which we fully support, to their proposed UK AI Act, again, which align to us. Both are welcome steps to get clarity within the landscape, but they're not definitive. We continue, alongside our litigation, continue to work with our partners and other industries, like the music industry, like the motion picture industry, in order to advance our perspective, so that ultimately we can have a world where we both have AI capabilities, and we have a world that respects creators, intellectual property, and personal privacy rights.
John: Venue questions, which is why we have to to put pieces of litigation in there.
John: Within the past couple of days just within the last seven or 872 hours, we've seen in the U S. Copyright office issued a report that aligns to our view with respect to AI training.
John: And we've also seen the UK house of Lords, just today adopt amendments.
John: Which we fully support to their proposed UK AI Act again, which align to us. So both are welcome steps to get clarity.
Within the landscape, but theyre not definitive.
John: And we continue alongside our litigation continue to work with our partners.
John: In other industries like the music industry Mike.
John: Mike the motion picture industry in order to to advance our perspective.
John: So that ultimately we.
John: We can have a world, where we both have AI capabilities, and we have a world that respects creators and intellectual property and personal privacy rights. So that's what we're working through again, we hope we start to get some clarity on that in the coming.
Craig Peters: That's what we're working through. Again, we hope we start to get some clarity on that in the coming months, and that's how it kind of works out. I do want to just state one thing that we do not do. You referenced our data licensing, where we do limited amount of data licensing for AI purposes and machine learning purposes, and Jen kind of gave you a view to that over the balance of the year. In no case does Getty Images license its editorial content. We are not licensing news, sport, entertainment, or archival content into those deals. Again, those would be covered by personal privacy rights and intellectual property rights that we are not comfortable conveying as an editorial outlet. There's your AI copyright 101, Mark. Hopefully, that answers the question. If not, happy to go deeper offline.
John: Thanks.
John: And.
Speaker Change: And that's how it kind of works out I do want to just state one thing that we do not we do not do you know you referenced our data licensing where we do limited amount of data licensing.
Speaker Change: For AI purposes in machine learning purposes.
Speaker Change: And then kind of gave you a view that over the balance of the year in no case does Getty images license. Its editorial content. So we are not licensing news sports entertainment or archival content into those.
Into those deals again, those would be covered by personal privacy rights.
Speaker Change: And intellectual property rights that we are not comfortable conveying isn't editorial.
Speaker Change: So there is your AI.
Mark: Copyright 101, Mark hopefully that answers the question.
Speaker Change: Not happy to go deeper on line.
Mark Zgutowicz: Thanks, Craig. Appreciate it. Jen as well.
Speaker Change: Thanks, Greg appreciate it John as well.
Speaker Change: Yeah.
Operator 2: We'll go next to Daniel Pfeiffer with JPMorgan.
Speaker Change: We will go next to Danny Piper with J P. Morgan.
Daniel Pfeiffer: Hey, thanks for the questions. Craig, for the first one, can you provide an update on your own gen AI offering, what the client adoption looks like, and how you're seeing that adoption curve scaling over the next year along with revenue? Then Jen, on the client spend being held back due to tariff uncertainty in Q1, can you just provide any color on how that trend has changed since liberation day starting in April? Thanks.
Danny Piper: Hey, thanks for the questions.
Danny Piper: So the first one can you provide an update on your own journey I offering what the client adoption looks like and how youre seeing that adoption curve scaling over the next year, along with revenue and then Jen on the client spend being held back due to tariff uncertainty in the first quarter could you just provide any color on how that trend has changed since liberation day starting in April. Thanks.
Craig Peters: Sure, Danny. On the AI front, we continue to see growing adoption. It's not accelerating adoption, it's consistent adoption. It's still in the low single digits in terms of customer adoption. From a revenue standpoint, it's still, and when I say low single digits, I mean percentage points. When I say revenue, it's still in the single-digit millions in terms of revenue addition into the business. It is growing as we see our customers adopt. I think what we've now been doing is increasingly bundling AI into our subscriptions. What we found was less so text-to-image generation, we actually found that our customers wanted to use the model and the capabilities in order to modify existing pre-shot content. By bundling that together, we make that easier for the customer.
Danny Piper: Sure Danny.
Danny Piper: So on the AI front, we continue to see growing adoption, it's not accelerating adoption, but its consistent.
Danny Piper: Adoption.
Danny Piper: It's still in the low single digits in terms of.
Danny Piper: Customer adoption and from a revenue standpoint, it's still in.
Danny Piper: The and when I say low single Jeremy percentage points.
Danny Piper: When I say revenue, it's still in the single digit millions in terms of revenue addition.
Danny Piper: Into the business, but it is growing as we see our customers adopt and I think what we've now been doing is increasingly bundling AI into our subscriptions.
Danny Piper: Because what we found was less so text image generation, we actually found that our customers wanted to use the model and the capabilities in order to modify existing pre shop content and so by bundling that together, we make that easier for the customer and so I expect we will see more.
Craig Peters: I expect we'll see more adoption in the future as we roll those out. We're just early stages in terms of rolling out those bundles across iStock and across Getty Images. We think that's a good thing for customers because we hear positive feedback. We see them doing things that would have historically taken them a lot of time in software products to increase the copy space or to insert their product or things along those lines that they can now do relatively easily with AI. Still early days in terms of ultimately business adoption of this into their end projects, which is where our content goes, but we are seeing it increase at a kind of pretty steady clip. Jen?
Danny Piper: Adoption in the future as we roll those out and we're just early stages in terms of rolling out those bundles across our stock and the crosscutting.
Danny Piper: Yeah.
Danny Piper: But we think thats a good thing for customers because we see.
Danny Piper: The positive feedback, we see them doing things that they would have historically taken them a lot of time in software products to increase the coffee space or to.
Danny Piper: Insert their product or things along those lines that they can now do relatively easily with AI. So still early days in terms of ultimately business adoption of this into their end.
Danny Piper: And into their end projects, which is where our content goes but we are seeing an increase.
Danny Piper: Kind of a pretty steady clip.
Danny Piper: Jan.
Jen: Thanks for the question, Danny. Just to clarify, I think my comment there was a little bit more of a broader comment, and that is that historically, for this business, when there are periods of macro uncertainty, where we tend to see it first is in the agency side of our business. That is intuitively as agency customers start to slow their spend with the agency, agencies slow their need for content from us. That wasn't necessarily a cause and effect there with tariffs or trade war per se. It's just an anecdotal comment for us. Obviously in Q1, we did see our agency business in decline about 9%, roughly 9% year on year. We have seen steeper declines for sure in the agency business over the past couple of years, but a decline nonetheless.
Danny Piper: Yeah. Thanks for the question David So just to clarify I think my comment there was a little bit more of a broader comment and that is that historically for this business.
Danny Piper: You know when there are periods of macro uncertainty, where we tend to see it first is in the agency side of our business and that as you know intuitively as agency customers to slow their spend.
Danny Piper: With the agency agencies slow their need for content from us so.
Danny Piper: That wasn't necessarily a cause and effect there.
Danny Piper: Tariffs or trade raw trade war per Se. It's just you know an anecdotal comment for us So obviously in Q1.
Danny Piper: We did see our agency business in decline at about 9% roughly 9% year on year.
Danny Piper: We have seen Super steeper declines for sure in the agency business over the past couple of years, but the decline Nonetheless.
Jen: It's an assumption for us that there is a bit of a slowdown macro impact on the agency customer side of things, and that's what we're seeing play out there. No direct cause and effect that we would be able to definitively quantify there.
Danny Piper: You know, it's an assumption for us that that there is a bit of a slowdown macro impact on the agency customer side of things and that's what we're seeing play out there.
Danny Piper: <unk> got no direct cause and effect that we would be able to definitively quantify there.
Craig Peters: Yeah. The only thing I would add is we listen to their earnings calls just like you do, and there have been some mention there. Over Q4 and into Q1 for those that have reported. We're taking some of that information into Jen's comments as well.
Danny Piper: Yes.
Danny Piper: That is.
Speaker Change: We listen to their to their earnings calls just like you do in <unk>.
Danny Piper: There have been some mentioned there so.
Danny Piper: Over Q4 and into Q1 for those that have reported.
Danny Piper: So we're taking some of that information into Johns comments as well.
Daniel Pfeiffer: Gotcha. Thank you.
Danny Piper: Got you. Thank you.
Danny Piper: Once again, if you had a question with Star one star one for any questions at this time.
Operator 2: Once again, if you had a question, it was star one. Star one for any questions at this time. It appears that we have no further questions at this time. That will conclude the Getty Images Q1 2025 Earnings Conference Call. We thank you for your participation. You may disconnect at any time.
Danny Piper: And it appears that we have no further questions. At this time that will conclude the Getty images first quarter 2025 earnings conference call. We thank you for your participation you may disconnect at anytime.
Danny Piper: Hmm.
Daniel Pfeiffer: Thank you.
Uh huh.
Danny Piper: Hmm.
Danny Piper: [music].