Shutterstock Inc (SSTK) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the quarter-one 2015 Shutterstock Inc.

earnings call.

My name is Catherine and I will be your operator for today.

(Operator Instructions)

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

I would like to turn the call over to Mr. Craig Felenstein, Senior Vice President of Investor Relations.

Please proceed, sir.

Thank you, Catherine.

Good morning, everyone, and thank you for joining us for Shutterstock's first-quarter 2015 earnings call.

Joining me today is Jon Oringer, our Founder, Chief Executive Officer and Chairman; and Tim Bixby, our Chief Financial Officer.

During this call, Management may make forward-looking statements that are subject to risk and uncertainty, including predictions, expectations, estimates and other information.

These include statements relating to the expansion of our investable market; the success of new product offerings, including products we recently acquired; revenue growth; and the predictability of our revenue, adjusted EBITDA, equity-based compensation, taxes, and capital expenditures.

Our actual results may differ materially from the results predicted.

And reported results should not be considered as an indication of future performance.

Please refer to today's press release and the reports and documents filed by us from time to time with the US Securities and Exchange Commission, including the section entitled Risk Factors in the Company's Form 10-K filed on February 27, 2015 for a discussion of important risk factors that could cause actual results to differ materially from those discussed in forward-looking statements.

On this call we will refer to adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, and free cash flow, which are non-GAAP financial measures.

You can find a description of these items, along with the reconciliation of adjusted EBITDA, non-GAAP net income, and free cash flow to the most directly comparable GAAP financial measures in today's 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 financial measures should not be considered in isolation from, or as a substitute, for financial information prepared in accordance with GAAP.

With that, I'll turn the call over to Jon.

Thanks, Craig, and thank you all for joining us this morning.

Shutterstock is off to a great start in 2015, as the strong financial results and sustained operating momentum we generated throughout 2014 have continued unabated into this year.

Tim will cover our financial results in just a few moments, but before he does, let me take a few minutes to highlight the key drivers behind our strong and consistent financial performance, and why we expect to build upon this success moving forward.

Shutterstock's ability to cultivate a healthy and expanding marketplace for both customers and contributors remains a key competitive advantage and a crucial component of our sustained growth.

Our primary focus is ensuring we have the most robust platform for creative content worldwide, along with the most advanced search technology, and the most suitable purchasing options.

This way we can deliver a truly unique experience to each of our new and existing customers whenever they interact with us.

A growing and engaged customer base fuels the demand for content, delivering bigger payouts for our contributors and encouraging them to provide their best and freshest content to Shutterstock, further facilitating the network effect of our business.

This past quarter alone, our content library expanded by nearly 5 million images, and now includes more than 53 million photos, vectors and illustrations, and 2.5 million video clips.

And it's not just the scale of the content library which attracts customers, but equally important is the quality of the content we provide.

While we grow our library by over 10% this past quarter, we were selective.

An additional 3 million images failed to pass our content team's rigorous review process.

Our customers know that when they come to Shutterstock, they are not only getting the largest selection, but also the most suitable content that will fit their creative needs.

Equally important to having the right content is providing the proper tools for users so they can quickly find the images and videos they need.

We have spent considerable time and energy to develop technology and resources that make the search process more efficient and are constantly pioneering new tools to help our customers.

In the past year alone, we have introduced Shutterstock Palette, and Shutterstock Spectrum, which allow users to incorporate color into their search parameters.

It is these types of innovations, along with dozens of algorithmic improvements and interface changes which enhance our customer experience and why we frequently hear from our users that our search capabilities are a key differentiator.

A superior customer experience is attracting more and more total users to Shutterstock, with user accounts growing by 28% over the past year.

We now have nearly 1.3 million active users who have licensed content from Shutterstock in the past year.

This creative community downloads over four images per second on average from our content library.

Once users engage with our platform, they keep coming back for their stock-content needs year after year, as evidenced by our annual revenue retention rates exceeding 100%.

This customer loyalty and growing demand continues to attract more and more contributors to our platform.

We now have over 78,000 contributors, and we recently passed an impressive milestone, with over $300 million paid out in royalties since our inception.

Just as we are enhancing the customer side of our marketplace, we're also looking for ways to improve our contributor experience.

In the past year, we have further upgraded the way that we review content by introducing innovative data-driven auditing to monitor and manage reviewer performance.

Despite the diligent review procedures we have in place, and the immense number of content submissions, the efficiency of our review team enabled us to get the vast majority of images up on our site in less than 24 hours.

With both sides of our marketplace growing steadily, we continue to see strong and predictable growth from our traditional e-commerce platform.

There is still a significant opportunity for us to grow this business, and we will remain focused on nurturing both sides of the market.

At the same time, we've invested in additional revenue opportunities that are providing significant growth today, and which we expect to be even bigger pieces of our Company as Shutterstock evolves.

The first is enterprise sales, which is a natural extension of our traditional image and video business.

One of the strengths of our Company has been identifying the needs of our users and investing in resources to satisfy those needs.

And this is exactly what we're doing with our enterprise offering.

Not every customer is the same, and an ad agency or media company may have very different wants than a small business just starting out.

By providing dedicated sales reps, user management functionality, curated content and greater legal protection, we have better tailored our product offerings to the needs of large enterprises.

And as a result, we have significantly increased the value of these customer relationships.

Enterprise clients also tend to grow over time as additional users within the business are exposed to our content, as we further integrate ourselves by offering additional products and new services.

We are still in the early stages of building this offering, but our enterprise revenue now exceeds 20% of our overall revenue.

And as we indicated at our Investor Day, we believe that percentage can double in the future, given the low penetration of enterprise clients today.

Another revenue opportunity which we began investing in several years ago, which is delivering real growth today and which has considerable potential as media consumption continues to evolve, is our video business.

Four years ago, video was a small fraction of our overall revenue, but we recognized that customers were increasingly looking for quality footage to use in their diverse video projects.

We invested in the space and our video business has grown to nearly 10% of our overall revenue.

Looking forward, much like with stock photography a decade ago, as the cost of equipment to produce this content continues to come down and as it becomes increasingly important for companies to create and distribute video content, we fully expect the marketplace dynamics in this space to deliver significant growth to Shutterstock in the years ahead.

The third revenue opportunity driving growth today that I want to touch on is the increasing worldwide demand for stock imagery.

In 2014, we made significant inroads increasing our global presence by expanding the languages in which we serve customers, launching local contributor platforms and opening regional offices to support the market growth we're seeing in countries like Germany, Australia, and Japan.

We generate revenue from over 150 countries today, and our localization efforts have resulted in rapid global revenue expansion and diversification.

As global demand for stock imagery continues to grow, we are ideally situated to further capitalize on the worldwide opportunity.

The three areas I just detailed are natural evolutions of our existing e-commerce business and demonstrate Shutterstock's unique ability to deliver significant profitability and rapid growth, even as we invest in building new opportunities.

And while the majority of our resources and focus remains on further developing the core image business, we are continually evolving to meet and exceed the needs of our customers and our contributors.

We have recently invested in several under-served content categories that we believe will provide additional value to our existing customers and attract new clients who have yet to engage with Shutterstock.

Music and editorial content are both natural offshoots of our existing business.

And our clients have indicated for quite some time they're looking for alternatives in both areas.

Our recent acquisitions of PremiumBeat and Rex Features gives us a great kick start in addressing this demand.

And while it's very early days, we're already making real progress.

You may have noticed the new Rex Shutterstock credits that are now appearing in media outlets around the world every day.

Success in music and editorial can reinforce growth in all areas of our business, offering music allows us to serve more video customers.

And offering editorial content helps deepen our relationships with enterprise customers, and broadens exposure to the Shutterstock brand.

We have had great feedback from our customer base regarding these acquisitions, and we think these two categories can be significant levers of growth in the years to come.

Another area that we expect to provide meaningful growth over time is WebDAM, our cloud-based digital asset management service that enables marketing creative teams to efficiently manage and collaborate on their creative files.

This business further integrates us into the workflow of marketing and creative professionals/ And while still relatively small, WebDAM has seen bookings double year over year in Q1, with customer retention at nearly 100%.

Shutterstock is off to a great start in 2015, with strong financial results, and sustained operating momentum, as creative professionals and contributors continue to embrace the platform we have built.

We remain focused on cultivating our marketplace with additional investments that bolster our product offering, enhance our user experience, and expand our market opportunities, so we can continue our rapid growth and build sustained long-term shareholder value.

With that, I'll turn the call over to Tim.

Thanks, Jon.

We are off to a great start this year, with strong underlying growth as the marketplace continues to attract more and more customers and contributors.

First-quarter revenue increased 34% as compared to the prior year.

And excluding the impact of currency and the contributions from our PremiumBeat and Rex acquisitions, which closed in January, revenue growth was over 30%, as we continue to generate strong growth from our traditional e-commerce business, combined with significantly increased contributions from our expanding video and enterprise offerings.

We continue to see nice growth in both revenue per download, up 17%, as well as paid downloads, up 12% year on year.

As in recent quarters, the continuing shift of our product mix to higher-priced offerings makes the download metric on its own less indicative of the overall revenue growth of the Company than it was in prior years, as you can see in the reported revenue growth this quarter.

For example, when an existing subscription customer transitions to become an enterprise account, their price per image is significantly higher, but their paid download quantity may actually be lower.

And this is because comp images, or free images for internal use, are included in our enterprise agreements.

They can use these images internally, and they're not counted as paid downloads.

The result is an increase in the revenue per download metric, but the paid download number may be lower when compared to their previous license.

This is just one example of how the unit metric alone doesn't tell the full story of the health of Shutterstock.

The addition of Rex and PremiumBeat also add additional upward pressure on revenue per download.

They both carry effective prices in the range of $20 to $40 per download.

And while our traditional e-commerce business continues to make up the majority of our revenue and is growing considerably, by diversifying content types and product offerings, we're further meeting the needs of our existing customer base, and expanding our addressable market.

We continue attracting new users, as evidenced by our user base expanding to approximately 1.3 million, up 28% as compared to a year ago.

Our revenue diversity has also been consistent across geographies, with about 38% of our revenues in the first quarter coming from North America, 35% from Europe and 27% from the rest of the world.

This reflects only slight changes from prior periods.

Each of these regions is growing at a healthy pace, and we continue to see strong growth in most countries in all regions.

Overall growth is certainly benefiting from geographic diversity, with approximately 70% of our revenue generated from customers outside the United States.

Of that, approximately 30% of our global revenue is exposed to currency fluctuation, primarily the euro and the pound.

As a result, we continue, as others, to feel the impact of the strengthening US dollar.

Our focus remains on maintaining the organic underlying strength of our business.

But as we launch additional local language sites and further expand our revenues, currency fluctuation may continue to affect our reported results.

Now shifting to the cost side of the business.

Total operating expenses were up 35%, excluding stock-based compensation, with the primary driver being higher contributor royalties associated with growing revenue.

Contributor royalties represent approximately 28% of our revenue, relatively consistent over many quarters.

As this is the largest component of our cost of revenue, our gross margin, which was approximately 60% this past quarter, excluding stock compensation expenses, has also remained largely consistent.

Sales and marketing expense was approximately 24% of revenue in Q1, and this is slightly improved as a percent of revenue as compared to the prior year.

Our marketing spend, which primarily includes SEM and affiliate marketing, as well as other channels, continues to drive new customers to our platform while also helping to keep retention and repurchase rates high across both subscription and on-demand products.

And as Jon noted, our year-over-year revenue retention continues to run above 100%.

G&A expense was somewhat higher this quarter as compared to prior quarters, with approximately $1.5 million of incremental professional fee expenses and amortization expense, both of which were primarily related to the recently closed transactions.

We also continue to invest in new talent across the organization to further drive long-term growth, particularly in the areas of enterprise sales, customer support, R&D and product management.

And we ended the quarter with a total of 542 employees worldwide, up from 513 at year-end.

And this excludes acquisition-related head count, which totals approximately 70 additional employees.

Adjusted EBITDA in the first quarter grew 33%, to $18.7 million, resulting in an adjusted EBITDA margin of 19.2%, down slightly versus the first quarter a year ago on a reported basis, but actually up approximately 300 basis points if we were to exclude the impact of currency.

As we have for several quarters, we will continue to invest a portion of our incremental revenue back into the business, in areas including personnel, product development, technology, so we can further strengthen top-line growth and build additional long-term value.

This ratio continues to be in the range of 4% to 5% of revenue, invested into new revenue streams with long-term growth potential.

Given this investment level and adjusting for the revenue and cost impact of currency, it is important to note that our adjusted EBITDA growth versus the prior year would have been approximately 45%.

GAAP net income in the quarter was $3.2 million, or $0.09 per share, as compared to $4.9 million, or $0.14 per share, in the first quarter of 2014.

This decrease was driven primarily by an increase in stock-based compensation, currency revaluation expense due to currency volatility, as well as deal-related amortization related to the acquisitions in the first quarter.

Non-GAAP net income, which primarily excludes the after-tax impact of non-cash equity-based compensation expense, amortization of acquisition-related intangibles, increased 25% in the first quarter to $9 million, or $0.25 per share.

Now taking a look at our cash position, free cash flow in the quarter was $18.8 million, up $14 million versus the first quarter a year ago.

While capital expenditures in the first quarter were $3 million, primarily for tech hardware to support our growth.

Our cash balance decreased $43 million to $245 million at quarter-end, primarily reflecting the increase in cash from operations and offset by the approximately $65 million in total payments related to the acquisitions.

Turning now to the rest of the year, we remain very encouraged by the operating momentum across the entire business.

As a result, our full-year guidance remains unchanged despite some additional foreign currency headwinds.

For the full year of 2015, we expect revenue of $436 million to $444 million, adjusted EBITDA between $90 million and $94 million, non-cash equity-based comp expense of approximately $31 million, an effective tax rate of approximately 40% and capital expenditures of approximately $18 million.

All unchanged from the prior quarter.

Taking a look at the second quarter, giving our expectations for the first time and assuming no material change from the current US dollar exchange rates, we expect the following: revenue of between $104 million and $106 million, adjusted EBITDA between $19.5 million and $20.5 million, non-cash equity-based compensation expense of approximately $8 million, effective tax rate of approximately 40% and capital expenditures of approximately $5 million.

Thanks very much, and that concludes our prepared comments.

And now Jon and I would be happy to take any questions that you may have.

(Operator Instructions)

Youssef Squali, Cantor Fitzgerald.

Good morning, guys, and congrats on a very good quarter.

Two quick questions.

First, Tim, going back to the metrics, you're correct that over the last four or five quarters the paid download and the paid per download have been going in different directions.

The first question, is there a better way for us to track the business that would give us more insight into what's happening to the photos versus video versus enterprise, that we should be using, that the Street should be using to get a better gauge for the health of the different segments of the business?

Two, within the -- let me switch to another question about competition.

Have you seen any positive impact coming from Getty's recent financial woes?

And/or any feedback from customers for what Adobe is doing or planning on doing with Fotolia?

Thanks.

Sure, we'll take the metric first then switch to competition.

In terms of the metrics, I think the metrics in aggregate are good metrics.

The download metric captures one aspect of the business, the revenue per download captures another important aspect.

I think what you're seeing, it's important to look at them both in conjunction and look at the patterns we've seen.

I think now having many quarters, there are patterns that are quite visible.

What you're seeing is really the success of our diversification.

The download metric on its own really tracked our core subscription business nicely when that was the vast majority of the business.

As you know, Shutterstock started out as 100% subscription.

As we continued to grow significantly outside of subscription, footage, enterprise, now with acquisitions moving into music and editorial, all of which carry multiples of a higher price point per download, we'll continue to see these trends going forward.

I think in combination, they're good metrics.

We're always looking for other internal metrics that we look at that we think might help investors.

For now we think, in aggregate, they really capture the trajectory of the business.

As far as competitive environment goes, the competitive environment does change around us just like it has for the past 13 years.

There is a reason why we're still the leader, why we're still growing, why we've been profitable our entire time as a Company.

And as we do all this, we continue to invest in the future.

The reason for this is we continue to concentrate on what our customers need.

We continue to concentrate on having the best content, the best pricing plans that we can find out there.

The best algorithmic search we can develop in all 20 languages.

And generally it's the best product in the space.

Okay, thanks, Tim, thanks, Jon.

Ralph Schackart from William Blair.

Good morning.

Tim, I was wondering if you could quantify the FX, or the incremental FX drag on the outlook versus your prior expectations.

And then second question is, EBITDA was stronger than we had expected in the quarter.

Q2 is maybe a little bit lower than we were modeling.

Just curious if there was any push-out of any planned expenses in Q1 into Q2.

Thanks.

Sure.

On the EBITDA metric, I think Q1, no big surprises in terms of the currency going forward.

There's been minimal move since the end of the quarter.

Just slightly worse, but not dramatically as we saw in the first quarter.

So that factors within the guidance that we've given.

In terms of timing, I think we are continuing to aggressively hire, particularly in our sales organization early in the year.

And I think that's, as we've seen in prior years, continues to generate a lower EBITDA percentage in the first half of the year.

The historical pattern has a little bit been higher in the second half of the year as the revenue growth also follows a little bit of a seasonal uptick in the second half.

So that, I think, is a consistent pattern.

Great, one more if I could.

You've been fairly acquisitive over the last 6 to 12 months.

Taking a step back and looking at your portfolio today, is there any product gaps that you would recognize that might be interesting?

Or do you think you have a good base to operate from going forward?

We're always looking at different businesses out there that we can acquire.

But we believe that there's a lot more organic growth that we have in the business, so we continue to concentrate on that.

If there's something out there that can supplement what we have to grow faster, we seek to find those properties and acquire them.

But for now we have the asset types we believe set us up for a lot of growth.

The Rex business was very important for us to expand into editorial, our enterprise clients need this content.

We're already seeing a positive impact from doing this, from doing this acquisition.

Same with music.

Footage buyers need music, music buyers need footage.

Image buyers are continually pressured to move to motion content.

So the entire dynamic is supporting that acquisition as well.

And Ralph, this is Tim.

To flesh out, I think I jumped over one of your sub-questions.

In Q1, we saw about a 4.5% impact of currency on the business enter on the revenue line, and obviously that, a pretty significant portion of that, hits the EBITDA line.

Q2 we would expect -- well, we don't give specific guidance.

We would expect, given current currency rates, to have a similar impact, perhaps slightly greater, given the slight move that's happened since the end of the first quarter.

So similar to Q1, maybe a slight additional headwind.

Okay, that's helpful, thanks a lot.

Rohit Kulkarni, RBC.

Great, thank you for taking my questions.

A couple again on the paid downloads growth, is there a way that you could help us quantify just the downloads growth, given that you allow enterprise customers download images and comp them when they decide to pay a certain image?

Just to get a sense of the underlying engagement of your users and customers, is there a way for us to come up with just the downloads growth?

This would have been the downloads growth of whatever form of media.

Then you obviously gave the paid download growth.

And second question, you recently had introduced new pricing plans, a one-year pricing plan, unlimited download pricing plan.

So can you give some strategic rationale behind that?

As well as how should we think about the effect of those new pricing plans on these two metrics going forward?

Sure, so we'll take the download question first and then the pricing strategy second.

On the download growth, I think clearly the download growth tends to be a proxy for the subscription, because that's the vast majority of the downloads.

I think one data point that I think might be useful to flesh out the enterprise example, free comps is a pretty standard part of the enterprise business, where larger companies are able to use images for internal review use, but they're not paid licenses.

And one good forward indicator of the health of that business is the ratio between comps and actual licensing.

So that's something that we track carefully internally, and that's a good forward indicator.

We don't disclose a specific number, but that number has been growing as fast or faster than the enterprise business, more than doubling in recent periods.

And so that I think is another good indicator of the underlying health.

That doesn't show up in paid downloads, but it really gives you a feel for another metric that gives you a feel for the health of the enterprise business.

As far as pricing strategy goes, we've always experimented.

At any time we could be running several price tests at any time around the world.

And so we're always gathering data.

We're always iterating on this.

It's different for different types of customers.

It's different for different people, different traffic.

You may see us combine certain plans together, especially as footage and audio are complimentary products.

Enterprise and WebDAM have natural synergies.

There's a lot of different experiments that are going on at any time, and we're constantly innovating on pricing.

One phrase to put on it is customer-driven.

So when Shutterstock developed the subscription plan when there really wasn't such a thing in the market, that was in response, in part, a significant part, due to what customers wanted and needed.

There are now -- subscriptions have been able from Shutterstock for a long time.

We're still very customer-focused and customer-driven.

What do they need to support their work flow?

That is certainly one of the influences of what we test.

And then we've also got pretty strong views internally of what we think customers will be looking for now and in the coming quarters.

Okay, thank you.

Lloyd Walmsley, Deutsche Bank.

Hey, guys.

Tim, on the FX, I think you said 4.5% impact on FX isolated, which would imply about 8.5% impact on revenue from acquisitions, if I'm not mistaken.

On the EBITDA line, is the delta in the impact from FX and acquisitions greater in part because of a greater FX impact?

Or are these acquisitions a little bit of a drag?

Is that part of it?

Can you parse any of that out?

It is a combination of the two.

But I would categorize the deal impact on EBITDA as minimal.

The acquisitions are both profitable, EBITDA cash-flow positive.

A slight negative impact, but the most significant impact is the FX impact of the revenue line.

And then looking at the acquisitions, is there any approximate growth rate that we should be thinking about for those revenue streams this year?

We don't break out guidance by product or sub-unit.

Both of them are healthy businesses, and growing.

We've got pretty ambitious plans for both.

So our expectation is that both of those, over the coming couple of years, will continue to evolve into significant parts of the business.

I'll leave it at that.

Okay.

And then lastly, housekeeping, were there any one-time things that impacted your ability to recognize revenue from those?

Like any deferred revenue issues?

And then related to that, you all had called out in the script that some of the G&A deleverage was related to professional fees.

How much of that 2 points of deleverage is one-time fees that won't recur versus ongoing costs associated with the acquisitions?

On the first question, minimal impact in terms of ability to recognize revenue, fairly straightforward.

On the cost line, I noted $1.5 million that were -- I wouldn't refer to that as one-time because looking at and evaluating transactions is something we do from triumph to time.

But in the quarter, there was a significant amount in that $1.5 million that was tied to these acquisition, both professional fees as well as some goodwill accounting that hit in the first quarter.

Got it.

Okay, thanks, guys.

Brian Fitzgerald, Jefferies.

Thanks, guys.

A little more on the enterprise side.

How do you think about the operating leverage opportunity on enterprise?

How do those margins compare versus core e-commerce and video products?

And then the second one was around search.

Are you continuing to see strong SEM, ROI across Google?

Are those trends similar in the US versus overseas?

And maybe some color around search ROI across the different product lines.

Thanks.

Sure.

We'll take those in order, enterprise and then search.

On the enterprise side, the long-term potential margins, I think, are right in line with our core e-commerce business.

There is somewhat of a lag effect, which is pretty normal when you develop a direct sales force.

You add a new sales rep, it takes them sometime to ramp up and become productive.

And then once they do so, they tend to generate more revenue in year two than year one, and so on each year.

So it tends to scale nicely if you isolate a given rep or a given set of reps.

When you're growing the team as rapidly as we are, and that revenue line as a percent of our total revenue is continuing to grow at a quite healthy clip, you see a little bit of deleveraging, which is in the model.

And the margins are quite nice despite that.

So long-term, we're seeing nice progress, good scaling and operations, so we're very optimistic about the long-term margins from enterprise.

Even besides getting sales people more efficient, being a tech Company, we can get more efficient through other ways.

A lot of those customers that are in the enterprise system today came from our e-commerce system.

In our e-commerce world we do a lot of testing.

We can algorithmically improve search, for instance.

We can get better at targeting users.

We can curate collections.

We can get a lot better at marketing to certain users and figuring out certain patterns of image type usage and image amount usage, and we can gain that leverage over time as well.

As far as SEM and SEO, we continue to get more efficient, and learn more throughout all of our paid campaigns.

We're always concentrating on both organic growth in traffic and paid growth in traffic.

We're always concentrated on iterating all of our creatives, all of our pages, in every language around the world.

We're always testing.

And some of that you'll see in our pricing.

Some of them that you'll see in our messaging.

It's really different throughout the world.

Great, thanks, Jon, thanks, Tim.

Operator, we have time for one last question, please.

Blake Harper, Wunderlich Securities.

Yes, thanks.

I had a question, again, about the enterprise customers.

I believe that at your Investor Day you had said you had over 36,000, and obviously the potential to convert the subscription customers would be able to multiply that by several time.

Wanted to see if you could provide any update of where you are with that, and how many customers you do have.

Yes, we don't give exact customers counts, but directionally, that's correct.

And that's a mix of customers of all sizes, really, even enterprise customers.

So we have many of the world's largest creative agencies under master service agreements with sub-units all around the world, all the way down to smaller companies that might look even more like a Shutterstock, for example.

But that is still potentially an enterprise account.

So that number continues to grow in terms of proportion of revenue.

We're continuing to see consistent growth.

We're above 20%, crossed over that line last year.

And I think if we look out over the next coming quarters of the rest of this year, we'll continue to see that enterprise growth tracking nicely as a proportion of total sales.

On an account by account basis, there are very few enterprise accounts where we're even nearing total penetration.

Our penetration rate is quite low in nearly every enterprise account.

So a significant amount of the enterprise growth is coming from those existing accounts, in addition to continuing to add new ones.

Got you.

And then if you could, maybe have an update on the API strategy in the partnerships there.

Are any of them potentially accelerating or contributing any meaningful revenue or downloads yet?

Yes, the API is an important growth area for us.

We continue to look for new partners.

When it comes to the partnership we have with Facebook, we're constantly working on that with them.

We're constantly trying to find new partners.

We can expand the API in a lot of different ways, and it's really early right now.

I think the key thing on the API is customers have alternatives.

And we see a nice steady choice of Shutterstock.

So whether it's Facebook or WIX or Constant Contact or others that are not publicly announced, these customers have choices.

And they choose Shutterstock not just for the API, which works very nicely, but actually for the content and the search they're getting access to.

So it's a combination of that.

And we've also heard from clients that use -- the API customers that use the API, that they prefer our API over our competitors.

It's faster, it's more efficient.

It's a more streamlined functionality.

It has more functionality and it's faster.

All right, thanks, Jon and Tim.

Thanks, everyone, for joining us today.

If you have any follow-ups, please give us a call.

Thank you for joining today's conference.

This concludes the presentation.

You may now disconnect and have a very good day.