Shutterstock Inc (SSTK) 2013 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Fourth-Quarter 2013 Shutterstock, Inc., Earnings conference call.

My name is Jackie, and I will be your operator today.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to Ms. Denise Garcia, Head of Investor Relations.

Please proceed.

Thank you.

Good afternoon.

Welcome to Shutterstock's Fourth-Quarter and Full Year 2013 Earnings call.

Joining me today to discuss our results are Jon Oringer, Founder, CEO, and Chairman; Thilo Semmelbauer, President and Chief Operating Officer; and Tim Bixby, CFO.

I would like to remind you that during this call, management may make forward-looking statements subject to risks and uncertainties including predictions, expectations, estimates, and other information.

Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance.

Listeners are referred to the reports and documents filed with us by the Securities and Exchange Commission, including the section entitled Risk Factors on the Company's Form 10-Q filed with the US Securities and Exchange Commission on November 8, 2013, for a discussion of important risk factors that could cause actual results to differ materially from those discussed in forward-looking statements.

We will also refer to adjusted EBITDA, non-GAAP net income, and free cash flow, which are non-GAAP financial measures.

You can find a reconciliation of these items to the most directly comparable GAAP financial measures in our Fourth-Quarter Earnings Release, which is posted on the Investor Relations section of our website.

We believe that the use of these measures provides additional insight for investors.

However, these non-GAAP measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

Now I'll turn the call over to Jon Oringer, Shutterstock's Founder, CEO, and Chairman.

Thanks, Denise.

And thank you all for joining us for our Fourth-Quarter and Full-Year 2013 Earnings call.

Shutterstock delivered another strong quarter and closed the quarter exceeding the high end of our revenue and adjusted EBITDA guidance range.

The powerful network effects of our business model continue to drive our momentum and to attract customers and contributors from all over the world.

On today's call, we will share key operating metrics and financial results; update you on our growth strategies, including our investments in new products and technologies; and share updated financial expectations.

Then we'll open the call to your questions.

In the fourth quarter, paid downloads grew 32% year over year, reaching a record 28 million downloads.

Revenue per download was $2.43, a 6% increase as compared to $2.30 in the same quarter of last year, due primarily to continuing strength in enterprise sales and video footage licensing, both of which carry a higher revenue per download than our overall average.

Along with growth on the demand side of our marketplace, we also saw continued momentum in the size and freshness of our image selection.

With more than 33 million images and 1.5 million video clips currently available, Shutterstock offers one of the largest libraries of its kind.

This volume of activity on both sides of our marketplace is reflected in our strong financial results, which exceeded the high end of our outlook.

For the fourth quarter, revenue grew 38% year over year to $68 million.

And adjusted EBITDA increased 37% compared to the prior year, to $15.4 million.

For the full year, revenue grew 39% to $235.5 million, while adjusted EBITDA increased 53% compared to the prior year, to $53.4 million.

We are very pleased with our fourth-quarter results and our accomplishments throughout 2013.

This performance came as a result of many years of strategic long-term investment, and we will continue to invest where we see opportunity to capture an increasing share of our large and growing market.

As many of you know, we strive to foster a culture of innovation at Shutterstock.

We encourage our employees to develop and explore new ideas to help grow the business, particularly across our three key growth strategies, which are: increasing penetration in all markets, foreign and domestic; investing in emerging content types, particularly video footage; and expanding our relationships with large enterprises, which we reach primarily through our enterprise sales team.

We consistently create new products and tools to inspire our users and expand our business opportunity across these areas.

Two recently developed products, Offset and Skillfeed, are examples of products launched in 2013 that have expanded our opportunities with both large enterprises and across the new content items.

Early last year, we launched Offset as a premium solution that offers highly-curated sophisticated imagery to enterprise clients.

We iterated on the product in beta for much of the year, as we listened to customers and contributors.

And now I am pleased to announce that Offset is officially out of beta and thriving.

Offset is helping to expand our relationships with large enterprises and serve a broader set of image needs.

We're excited about our potential in this area.

Skillfeed is another product that came out of beta in the second half of 2013.

At Shutterstock, we've been offering tutorials to customers and contributors on our blog for many years.

Our audience already views us as thought leaders on the latest digital and creative skills.

And so it felt natural for us to launch Skillfeed, which is an online marketplace for professional learning.

When the user signs up for Skillfeed, they get unlimited access to thousands of video courses on creative and technical skills, all as a part of one inexpensive monthly subscription.

Instructors from around the world can apply to have their courses on Skillfeed and earn money based on how much their courses are viewed

It's early days for Skillfeed, but we're starting to see similar network effects that we saw in the early days of Shutterstock.

While our expansion to new content types has historically centered around stock video, Skillfeed demonstrates how new content types can expand our addressable market even beyond commercial digital industry.

We are excited about our potential in this area.

And the early success of Skillfeed motivates us to increase our exploration of additional content types, whether through organic growth, partnership, or acquisition.

Our focus on technology and innovation has not only led to new businesses like Offset and Skillfeed, but also enabled us to grow our business through strategic partnerships.

During the second half of the year, we announced the collaboration with Facebook, through which over 1 million active Facebook advertisers would have access to Shutterstock images directly within Facebook's ad creation workflow.

Through this exciting integration, image licensing is now accessible to a substantial new audience and businesses who might not otherwise have used commercial imagery.

These are just a few examples of how our culture of innovation has helped build our business and expand our market opportunity.

While we are intensely focused on the core growth strategies in front of us, I believe we have significant opportunities in new product and technology areas that we have yet to explore and will only discover through our focus on innovation.

With this philosophy in mind, we continue to invest in attracting talented designers, engineers, and product leaders who can inspire new ideas and bring them to life.

For example, we recently added a technology office in Denver to bring on a development team that has worked together for many years, including working with Shutterstock.

We welcome them to the Company and look forward to their contributions.

You should expect us to continue to invest aggressively in innovation in 2014, with a view towards capturing an even larger piece of our multibillion dollar market and addressing complementary customer needs that expand our market opportunities.

Our willingness to invest in the long term and in innovation is core to who we are and is an important factor in why we have been able to consistently achieve strong results.

We will continue to invest in our business, our products, our technology, and in hiring the best people to reach our full potential.

With that, I'll turn the call over to Thilo Semmelbauer, Shutterstock's President and Chief Operating Officer, who will share the progress we made across our growth strategies in Q4 and in 2013.

Thanks, Jon.

We continue to be focused on growing both sides of our marketplace as we execute across our primary growth strategies.

As we've discussed on prior calls, our first growth strategy is to increase penetration in markets around the world.

We have a few key levers to increase penetration, bringing in more content that customers are looking for, making it easier for customers to search and discover that content, and expanding our marketing efforts to increase awareness of Shutterstock and reach new customers.

I'll touch on each one of these.

Looking at our content, in Q4 we had another record quarter.

We added 2.5 million new images, more than in any prior quarter.

And our library now contains more than 33 million images including photography, vector art, and illustrations.

Our contributor base has also seen strong growth.

Our active contributor base has increased to 55,000.

And we're especially pleased with the diverse geographies, subject matter, and the high talent level of new contributors we're attracting.

We are also proud to have reached an important milestone for contributors.

We have paid out more than $200 million to artists around the world since the inception of the Company.

We also continue to improve the way customers search for and discover new content in Q4.

One of the very visible examples is that we created an option that allows users to view search results as a beautiful mosaic of images.

This view maximizes the amount of image information that's on a page, which creates a better user experience and increases paid downloads.

To improve the experience of our mobile customers, we launched our Android app and also improved the way site works on mobile browsers.

We have a full portfolio of tools for mobile covering iOS, Android, as well as mobile web which allows our customers to interact with Shutterstock on any device.

These improvements are thanks to the talented product development teams we've put in place, and we continue to invest more in this area.

Regarding our marketing efforts, we were pleased with our results in Q4, which helped drive overall revenue growth of 38% year over year.

In Q4, we spent $16.5 million in sales and marketing, an increase of $1.6 million over the prior quarter, while our cost per required customer remained in line with prior quarters and with our targets.

We continue to build out our regional marketing efforts and increase spend in proven channels, and we've reduced spend in less productive channels.

One final point on increasing penetration.

The geographic composition of our employee base is shifting to reflect the global nature of our business.

Just three years ago, almost 100% of our staff was based in New York City.

Now more than 20% of our employees work outside of our New York headquarters.

If you include employees, contractors, and agency resources, we now have teams in 21 countries around the world.

We expect this trend to continue as we look to serve more customers and contributors with a more local perspective and hire talented people across the globe.

Our second growth strategy is emerging content types, particularly video footage.

During the fourth quarter, we added nearly 200,000 new video clips; and we now have more than 1.5 million clips in our collection.

Our footage business more than doubled from 2012 to 2013, and we are very pleased with our Q4 growth.

We're also innovating in this area.

In the fourth quarter, we started offering Ultra HD clips, also known as 4K.

Ultra HD represents the latest digital video format which has four times as many pixels per frame as standard HD video.

As you can imagine, the storage and bandwidth requirements for Ultra HD are higher.

So we're investing strategically in our infrastructure in this area so that we can lead the market.

Our third growth strategy is expanding our relationships with large enterprises.

We closed a tremendous year, with enterprise sales more than doubling versus 2012.

As we continue to expand relationships with agencies, publishers, media companies and large corporations worldwide, the enterprise business has grown significantly and currently represents more than 15% of overall Company revenue.

Given the positive response we've seen, we're continuing to expand our team, adding sales, sales support, and operational talent around the world.

Over the course of 2013, we expanded the size of our team in enterprise area by more than 50%.

Overall, we're very pleased with our performance in Q4 and the year, and we look forward to continuing to invest to fuel of the network effects of our business.

I'd now like to hand it over to Tim Bixby, our CFO, who will share financial highlights.

Great.

Thank you, Thilo.

I'll give a bit more color around our results and our expectations, and then we'll turn to questions.

We will also be sharing our financial expectations for the first quarter, as well as an updated view for the full year.

To review a bit, the number of paid downloads we delivered in the quarter was 28 million.

This was up 31% from 21.4 million in the fourth quarter a year ago.

Revenue was $68 million, an increase of 38% compared to the same quarter in the prior year.

And revenue for the full year was up 39% to $235.5 million.

Revenue per download increased 6%, to $2.43, as compared to the prior year.

And the increase in revenue per download in the quarter was driven primarily by the growing proportion of our revenue deriving from enterprise licensing and video footage downloads.

This is a trend we've seen for several quarters.

Adjusted EBITDA grew 37% to $15.4 million for the quarter, as compared to $11.3 million in the fourth quarter of 2012, primarily as a result of the significant revenue growth offset by increased investment in sales and marketing, and increased G&A expense.

Adjusted EBITDA for the full year grew 53%, to $53.4 million, up from $34.9 million in the prior year.

GAAP net income was $7.9 million, or $0.22 per share, in Q4 as compared to $29 million in the fourth quarter of 2012.

GAAP net income in Q4 2012 and in the full year of 2012 included a nonrecurring tax benefit related to our conversion to a Delaware Corporation in that quarter which equaled approximately $28.8 million.

Non-GAAP net income in the fourth quarter was $9.1 million, or $0.26 per share, as compared to $6.6 million, or $0.20 per share, in the fourth quarter in the prior year.

Non-GAAP net income for the full year was $31 million, as compared to $28 million in the prior year.

As a reminder, non-GAAP net income excludes the after-tax impact of non-cash stock-based compensation expense, as well as one-time tax impacts.

Our effective tax rate in the fourth quarter was approximately 37%, and in the prior year was only 2% as we were not yet subject to federal and state income tax prior to our reorganization from an LLC to a C-corporation, which occurred in October of 2012.

Our effective tax rate for the full year of 2013 was 39%.

Shifting now to operating expenses for the fourth quarter, gross margin was 61.6%, in line with the prior quarter.

Contributor royalties, which make up approximately 28% of revenue, have remained fairly consistent over the past several quarters.

Sales and marketing expense was $16.5 million, or roughly 24% of revenue.

And this was in line as a percent of revenue as compared to the prior year.

We expect sales and marketing expense to increase as a percent of revenue in the first quarter of 2014 to approximately 26%, as we continue to find cost-effective ways to increase our marketing spend while maintaining our customer acquisition economics.

It is also important to note that our recurring revenue metrics also held constant in 2013.

We continue to expect approximately 100% of the revenue generated from existing customers in 2013 to recur in 2014.

This is a trend and a metric that has tracked right around that level, that 100% level, for several years.

Product development expense was $6.5 million in the quarter, roughly 9.5% of revenue.

This was down from 11.5% of revenue in the prior year, primarily due to stock compensation expense timing.

We expect product development expense as a percent of revenue in Q1 2014 to be approximately 11% as we continue to invest and grow this area.

G&A expense in the fourth quarter was $6.5 million, or about 9.5% of revenue; and we expect G&A to be approximately 11% of revenue in Q1 2014 as we continue to expand our operations.

We will also incur approximately $1 million in a one-time expense related to the completion of the relocation of our headquarters office in New York City.

This amount will not recur after the first quarter.

All of these margin rates noted include the impact of stock-based compensation expense.

Overall, with a positive outlook we have for revenue and marketing returns, we expect our increased investment to result in a somewhat lower EBITDA margin for the first quarter, as compared to what we expect for the remainder of the year and for the full year of 2014.

This is the pattern we have seen in prior years, with a lower EBITDA margin in Q1 than in the overall full year.

We are, it is important to note, maintaining our full-year EBITDA guidance in line with our prior earnings call.

Turning now to headcount, we ended the quarter and the year with a total of 345 employees worldwide.

This is an increase of about 47% from a year ago, and up 6% from the end of the third quarter.

Our cash balance strengthened significantly, and at December 31 was approximately $210 million of cash, cash equivalents, and short-term investments.

We generated approximately $24 million of cash from operations during the quarter and approximately $56 million of cash from operations during the full year.

Capital expenditures during Q4 were $9.3 million, and the full year were $14.1 million.

As noted previously, we had planned to spend approximately $10 million in total related to our office relocation in New York City.

Approximately $2 million of that will extend past the year end of 2013 into the first quarter of 2014.

Overall, the office relocation has now concluded right on budget.

I'd now like to detail our updated and increased financial expectations for the full year, as well as our initial guidance for the first quarter.

For the first quarter, we expect revenue of between $69 million and $70 million, and this implies an approximately 37% year-on-year growth rate.

We expect adjusted EBITDA to be between $12 million and $13 million.

We expect stock-based compensation expense of approximate $5 million.

And we expect capital expenditures in the first quarter of approximately $7 million; and this includes the $2 million of carryover real estate-related expense originally planned for 2013.

For the full year of 2014, we expect revenue to be between $305 million and $310 million.

This implies at the high end of the range a year-on-year growth rate of approximately 32%.

And this is up from the prior guidance we gave from about 30% growth rate.

We also expect adjusted EBITDA between $68 million and $70 million, which gives us an implied margin at the high end of the range of about 23% EBITDA.

This EBITDA level of between $68 million and $70 million remains unchanged from our prior expectations that we shared on our last quarterly earnings call.

We expect capital expenditures for the full year of approximately $14 million, again including the $2 million of carryover expense.

Finally, we expect stock-based compensation expense for the full year of approximately $18 million.

One thing to note, we have added to our Investor Relations section of our website an interesting summary video of some of the highlights of 2013.

And we would encourage those of you on the call to go follow that link and enjoy that video.

Overall, we're very pleased with our performance in the year.

Financial and operating metrics are on track and exceeded our expectations.

Key performance measures like recurring revenue ratios and marketing acquisition ROI have remained stable.

And new product introductions have moved nicely from concept to beta to real revenue, setting us up nicely for a solid 2014.

Now we'd like to turn the call back over to the operator, who can please rejoin the call with Q&A instructions.

And we'd be happy to take your questions.

(Operator Instructions)

Youssef Squali, Cantor Fitzgerald

Hello, good afternoon.

Thanks.

A couple of questions, and congrats on obviously a really nice quarter again.

Tim, I wanted to follow up on the margin comments you had.

Understandably, your Q1 margins will decline.

For the year though, as we look at the midpoint, or even at the higher end of the guidance, it seems flat margin year-on-year.

I want to go back to just trying to understand the leverage in the model.

How long do you feel this heavier investment cycle is going to last before we start seeing a greater leverage in the model?

Then two, Jon, maybe can you touch a little bit about the competitive landscape you're seeing right now?

One of your peers had increased their sales and marketing quite a bit in the third quarter.

I was wondering if you could maybe provide some color on their impacts, or the lack thereof, in the fourth quarter, and what's baked into your guidance in terms of just competitive pressures in 2014?

Thanks.

Sure.

We'll take the margin and leverage question first, and turn to Jon.

On the model in terms of the quarterly flow, you're correct.

The intent there on the first quarter is to make it clear that the pattern we've seen in the prior couple of years will continue which is tighter margins in Q1.

That's really driven by increased marketing spend relative to revenue in the first quarter.

We've seen that in the past.

That's really a sign of strength and our confidence in the marketing metrics.

We also tend to hire new hires to help grow the existing business and push new products and innovations forward at a little more aggressive pace in the first half as compared to the second half.

That will continue this year.

We've also got the one-time G&A expense which is a real estate related transition that will hit in Q1.

The net of those -- tighter margins in Q1, but we expect overall over the course of the year, greater level of EBITDA in the out quarters.

In terms of the leverage in the model, you're not seeing the leverage externally that we can see internally and that's really when we pull apart the business a little bit and say, what are we spending to drive and support the core, as opposed to what are we spending to drive new products and innovations that aren't driving significant revenue?

You can see a really anywhere from 3 to 5 percentage points of spend going into new areas that aren't yet driving a lot of revenue.

We're comfortable in this EBITDA range of between 20% and 25%, and that's really where we've been over 5 or 6 quarters.

As long as our marketing metrics hold and our opportunities are what they are now, and over the past several quarters, you should expect us to be in that range.

Long term, certainly we believe 30%-plus EBITDA margins are doable, larger established players obviously at slower growth rates, at much higher margins, and our gross margin will certainly support that long term.

As far as competitive changes and marketing changes from our competitors, we haven't seen that much change.

Over the past few years, our competitors have tried different types of marketing channels.

They've tried different types of creatives, and we've iterated ourselves also.

But the great thing about the model we have, the high-volume subscription model, is that we have a lot more data to use to continue to iterate and to get better and better with our marketing efforts.

We haven't seen much change in our cost for acquisition or retention metrics.

Okay, thank you.

Brian Fitzgerald, Jefferies.

Thanks.

When you guys think of the rev share agreements with contributors, there are competitors out there that have more generous revenue shares.

Would that tend to impact or take share from you guys over the course of time?

Can you talk about how that dynamic is panning out?

Then, it seems like you guys have been driving down pricing among your major competitors.

They're now trying to price match.

Have you seen any real impact from that thus far?

Thanks.

Yes, as far as our contributors go, we pay about 30% to them, and we've seen competitors come in and try to play with that number.

What happens is if they pay out more to contributors, they leave less room for marketing spend, and that causes less sales in the long run and less payouts to their contributors.

We really found the sweet spot over the past 10 years with the subscription plan, with the 30% payout, and competitors have come and gone and tried different things.

But we haven't seen much change.

Yes, this is Thilo.

Maybe I'll touch on the pricing topic a little bit.

Obviously, there's always lots of experimentation going on in the space.

We ourselves are doing experimentation all the time.

The last 12 months, we've launched and tested multiple different pricing plans.

When you look at our offering, we really average, as you know, about $2 per image, but for high-volume users, it can be $1 or less.

For lower volume users it could be significantly more, including with our enterprise customers, who are paying in the range of $20 and up, sometimes hundreds per image depending on the licensing rights and so forth, as we've talked about before.

At this point, we're not seeing anything that is really changing the landscape from what it has been which is quite active in experimentation.

As Jon mentioned, our acquisition costs are stable, even as we increase our marketing spend, which is a great sign.

Our retention continues to be very strong.

We haven't seen any degradation and you will continue to see positive movement there, so not much impact.

Great.

Thanks, guys.

(Operator Instructions)

Blake Harper, Wunderlich.

Thanks.

I wanted to ask about the Skillfeed contribution.

Jon, you'd talked about that, and I just wanted to understand what the contribution is to the business, both now and in the future, do you see this as something that would be material?

Or is it more just something that you see strategically that can drive your core business?

It's super early.

We're starting to see the same sorts of network effects that happened with Shutterstock where the subscribers come in, and they can view as much as they want.

They pay the low monthly fee.

They come in, and they provide us with a lot of data about exactly what they're looking for.

We then use that data to go out and try to find more contributors that create that type of content.

That speeds the network effect up just a little bit more.

We do this every single day, every single week, every single month to try to get those network effects going.

The types of things that we're seeing now are the types of things that we saw 10 years ago when Shutterstock started, and so it will take a little bit of time to actually make a contribution.

Okay, thanks.

I'm sorry, go ahead?

I was just to say, in terms of the guidance we've factored in something greater than zero, but certainly a modest amount given the newness of the product and the early stage that we're at.

Okay.

Thanks for that, Tim.

Then if I could just have a quick follow-up, how do you think about the revenue per download and the emerging content, Ultra HD stuff?

Obviously, there's a big difference there with that and the enterprise.

How do you think about that moving forward?

Is it increased gradually?

Is there some type of a point where you see that things could accelerate more with either of those two things, and how that would affect the revenue per download?

I think the best place to look is at what happened with the transition to HD.

There was a time when high resolution was the standard.

HD came along, and there was a slow transition and then a little bit of a tipping point.

The nice thing about HD is that it boasts a higher revenue per download, a higher price point.

In aggregate, if you just look at video overall per Shutterstock, our average revenue per download per clip is around $60, so 30 times what the overall number is for the Company.

It's a little bit too early to say where 4K or Ultra HD will play out.

What we are comfortable, what we do know is that it'll be at a significantly higher price point, but I think it will take some time to know where that will settle out.

We would expect a similar dynamic where the cost structure's a little bit higher, but the value it provides and the quality that is there will support a much higher price point.

I would expect to have either a flattish or potentially positive impact over time on revenue per download.

Great.

Thanks for taking my questions.

(Operator instructions)

Lloyd Walmsley, Deutsche Bank.

Thanks, guys.

I'm wondering if you could talk about the spending profile of customers in enterprise and video.

Do see the same kind of retention rates as you have historically in those products?

Or might it even be higher?

Maybe, if you could give us an update on where those are each as a percent of revenue, and growth rates in the fourth quarter?

That would be helpful.

Sure.

This is Thilo.

On the spending profile of enterprise customers, that's a great question.

It's obviously early days for us, and customers here are work groups, divisions of companies, agencies, et cetera.

What we're doing is methodically upselling from year to year those groups and teams, and that's part of what's driving our strong growth in that area, if you disaggregated a piece, obviously coming from a lot of new accounts.

But a very significant piece is also coming from taking an account from $20,000 to $50,000 to $100,000 to $200,000, et cetera.

Without getting into details, we are nowhere near seeing the end of the increases there.

In a sense, we've talked about the business as a whole having 100% revenue retention year-over-year.

In the enterprise area, it's north of that.

That's a smaller part of our business, but that gives us a lot of confidence going forward.

In the video area, which is doubling year-over-year, it's still early days to see what kind of retention characteristics we'll see.

We're also seeing more strong retention behavior there, so I would say it's similar to enterprise at smaller dollar levels.

In terms of the proportion of revenues, the enterprise has been growing nicely, greater than 100%, and now represents more than just above 15% of revenue.

It continues to be, and expand, as a meaningful part of the revenue stream.

Video is growing at similar rates, right around 100%, doubled last year, but on a smaller base.

It's still single digits as a percent of revenue, so call it 5% or 6% of revenue approximately.

Okay.

As a follow-up if I may, you've talked about how enterprise customers are often paying higher price points.

What tips an enterprise?

I know it's, to some extent, the indemnifications you give them.

But what characteristics really tip something into those deals?

You've talked to agencies that don't pay any higher -- large ad agencies, that still don't pay any higher download rates.

I'm curious what is it that would trigger that in a customer?

As you said, it's a combination of the license and rights they get, the indemnification, the service, as well as the functionality that we provide.

As an example, agencies use a platform where they can download what's called the comps for free.

Comps are the full resolution files without watermarks that they can use in their discussions with clients, in their workflow, and until their clients decide, yes, we want to use this image, they're actually not paying for that.

Now, when they do license that image, it's going to be in the hundreds of dollars per image.

That's a very different type of workflow.

That's very suited to the agency market.

I won't go through all of the other categories, but it's an example of how we've customized our offering for publishers, large corporations, agencies, and the price point per image varies based on those suites of things.

Okay.

Thanks a lot.

Nice quarter, guys.

Ralph Schackart, William Blair.

Good afternoon.

Nice strong quarter.

Just curious, on the enterprise business one more question if I could, you mentioned it doubled year-over-year, and now represents about 15% of revenue.

Do you think you could see it potentially double again in 2014?

Or could we continue to see the sustained growth?

I'm just trying to gauge how far along Shutterstock is in what appears to be a pretty big opportunity.

We expect it to continue at the high end of the growth rates that we have overall as a Company.

Doubling again year-over-year would be quite extraordinary.

So we don't expect that to happen, and we've not built that into the guidance.

It's certainly possible over the longer term that they will continue to grow and represent something well above 20% -- 20% to 25% of revenue someday, but I think it's a little premature at this point of the year to assume that that doubling growth rate will continue.

Okay.

One more if I could, we get a lot of questions on Facebook.

I can appreciate how it's probably hard to give a lot of details on it, but if I could ask just maybe one question, is it fair to assume that that relationship is rolling through the financial model at this point?

Yes, we're generating revenue on a GAAP basis.

It's up and running and part of the revenue flow.

We have included something greater than zero in the guidance.

It's part of the expectations for the year.

All right.

Maybe one more follow-up, are you seeing any incremental customers that are coming in through Facebook as a new channel for you?

Absolutely, it's a new channel for us.

Actually, we think of it as the kind of deal that expands the market for stock imagery because we think a lot of the types of advertisers on Facebook might not buy stock.

But now that we've put it into the workflow and through Facebook because Facebook is paying for the image, it's essentially free to the advertiser.

It's a way that we've really expanded the market and reached customers that we wouldn't otherwise have.

But it's still very early days.

Okay, thank you.

Ladies and gentlemen, that concludes our question-and-answer session.

With that, I would like to thank you for your participation on today's conference.

This concludes the presentation.

You may now disconnect and have a great day.