Good day, ladies and gentlemen, and welcome to the 2014 Q4 Shutterstock Conference Call. My name is Joyce, and I will be your operator for today. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Denise Garcia, Investor Relations. Please proceed.

Thank you. Good afternoon and welcome to Shutterstock's fourth quarter and full-year 2014 earnings call. Joining me today to discuss our results are Jon Oringer, Founder, CEO, and Chairman; and Tim Bixby, CFO. 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 addressable 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 with the Securities and Exchange Commission including the section entitled Risk Factors in the Company's Form 10-K filed with the U.S. Securities and Exchange Commission on February 28th, 2014. For a discussion of important risk factors that could cause actual results to differ materially from those discussed in forward-looking statements. We will 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 today’s earnings release which is posted within 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. And now, I will turn the call over to Jon Oringer, Shutterstock's Founder, CEO and Chairman.

Thank you all for joining us for our fourth quarter and full-year 2014 earnings call. Shutterstock delivered outstanding performance in 2014. As a leader in unit volume, revenue growth and innovation in our category, I'm very pleased with the continued strength we have seen across all of our key operator measures. In 2014, currency adjusted revenue grew 40%, adjusted EBITDA grew 32% and our image library grew 45%. While in the fourth quarter currency adjusted revenue grew 36%, adjusted EBITDA grew 46% and revenue per download hit a record high of $2.68. Shutterstock continues to deliver solid revenue growth and strong adjusted EBITDA and cash flow along with highly predictable revenue while supporting our global customer base. Here are the figures, in the fourth quarter revenue increased 34% year-over-year to $91 million, while adjusted EBITDA increased 46% as compared to the prior year to $22.4 million. Currency adjusted revenue growth was 36% in the period. Our fourth quarter currency adjusted revenue and adjusted EBITDA both exceeded the high end of our expected range. For the full year revenue grew 39% to $328 million, while adjusted EBITDA increased 32% to $70.7 million. A strong finish to a great year, the progress we have made in the fourth quarter and throughout 2014 continue to strengthen Shutterstock’s position as we continue to focus on three strategic areas for growth. Greater global penetration emerging content types and enterprise sales. I’d like to show the progress we have made in these three areas during the fourth quarter and 2014. I will start with global penetration. We significantly increased our global presence in 2014. During the year we expanded the number of languages in which we serve customers to a total of 20. And we launched our contributor platform in Portuguese and Korean, bringing the total…

Thanks, John. We finished 2014 with strong momentum, generating revenue in the fourth quarter of $91.2 million, an increase of 34% year-over-year or 36% on a currency adjusted basis. Revenue for the full-year grew 39% to $328 million. Constant currency revenue growth for the year was 40%. For the quarter, revenue per download increased 10% to a record $2.68 while paid downloads increased 20% to $33.5 million. We continue to see strong growth in both paid downloads and revenue per download, its worth noting however, that paid download metrics become less useful to fully capture the health and trajectory of the business as we continue to migrate customers from our core subscription offering to our enterprise products and as we continue to expand to higher price content types and creative tools like WebDAM. We plan to continue to provide these metrics, but we will focus somewhat less on their quarter-to-quarter fluctuations. Revenue growth across all regions was also strong. North America grew approximately 42%, while Europe grew 29% and the rest of the world grew at approximately 32% in the quarter. Our overall revenue breakdown by region today stands right inline with where it was last quarter about 37% North America, 35% Europe and 28% rest of world. We do benefit from both geographic and currency diversity in our customer base, while 70% of our revenue comes from customers outside the United States, approximately 30% of our global revenue is exposed to currency fluctuations, primarily the pound and the euro, as the remainder of our non U.S. business is denominated in U.S. dollars. And now on to other key financial results. Adjusted EBITDA in the fourth quarter grew 46% to $22.4 million or 25% of revenue as compared $15.4 million in the prior year. Our strong adjusted EBITDA growth reflects…

[Operator Instructions] The first question comes from the line of Rohit Kulkarni at RBC Capital Markets. Please proceed.

Great, thank you. Two questions, please. One just housing keeping what are your assumptions for revenue and EBITDA for 2015 for FX headwind as compared to what the guidance you gave in November and how much contribution are you assuming from the two acquisitions? And then I have follow-up.

Yes, so we don’t breakdown in our guidance for revenue by line item. We have included in the FX assumptions, the actual change in foreign exchange since our last guidance. So we are assuming that the current run rate foreign exchange rates of the most recent weeks continue forward. So we are not assuming any change, any improvement or deterioration beyond what we have seen over the last several weeks. We’ve factored that in as we noted about 30% of our revenue is exposed to currency 20% to the euro about 10% to the pound and then we've also increased our guidance for the acquisitions and enabled that overall total to increase.

Okay. And slightly different question on your API strategy you have had kind of partnerships with Facebook, [indiscernible]. I'm missing a few I'm sure cafe press constant contact.. So how do these partnerships affect your the way you recognize paid downloads? Is it also one of the caveats you would add to the enterprise the way that affects paid downloads and as for as the revenue recognition is also concerned?

Yes, for the most part paid downloads are included, they do run through our site and kind as with any other paid download. Overall we are highlighting the fact that there is quite a bit of activity in growth coming from areas that don’t trigger paid downloads at all in our enterprise group we have downloads that don't drive revenues and that's part of the business as we expand into WebDAM and potentially other workflow tools who have that aspect as well, but we do include them for the most parts with the API strategy.

Thanks, Tim.

The next question comes from the line of Youssef Squali at Cantor Fitzgerald. Please proceed.

Hi, this is Kip Paulson for Youssef, just a couple of quick ones. First, what did Rex and PremiumBeat do in 2014 on the top and bottom lines and then what is baked into your 2015 guidance for those acquisitions?

So we don’t break our revenue down by product lines or by companies, those acquisition were really giving us a foothold in those businesses and that was really the goal of them, they are both growth, they are both generating revenue, they are both profitable and cash flow positive, we expect them to be accretive, but we are not breaking down the specific revenue for each of those.

Okay, thanks. And how about addressable market, is there any color you can give us on what you think the addressable market with these two acquisitions in there?

For music we believe it’s about $0.5 billion, $500 million for music and for editorial it’s around $750 million.

Okay great, all right. Thank you.

The next question comes from the line of Blake Harper at Wunderlich Securities. Please proceed.

Yes, thanks guys. Wanted to ask about the paid download number and I know its affected by the enterprise sales and just trying to understand because in Q3 it was down a little bit due to some of the better enterprise sales but then this quarter came back pretty strong at over $2 million. And Tim I know you had mentioned that it becomes less relevant of a metric, but just wanted to understand some of the dynamics of why that would be up so much, would that imply that there was more subscription growth compared to enterprise or maybe just trying to help us understand how to think about the split between the enterprise growth and the subscription growth and how that affects that number going forward.

Yes I mean the sequential patterns are pretty consistent, you know Q4 is typically a stronger quarter for usage in growth it was a good result, it was an improvement over the sequential growth in the prior quarter, but I think the bigger picture here is that the subscription business and the core business used to be 100% of the business. Its now more like two-thirds as we’ve expanded video footage and enterprise sales and so just gradually over time this metric will become less and less helpful to capture the health of the total business, it is an interesting metric and that’s why we’ve continued to share it, but that was the major drivers to the seasonal impact. Revenue is really the key driver when you think of an average revenue per download of $2.68 yet we're licensing footage for $60 or $80 or offset images for $500, its clear that that metric is really very heavily weighted by something that’s not the core of the business.

Okay, all right then one more if I may Tim, just wanted to understand where some of the investments are going and with the revenue guidance that you gave is obviously very strong top line growth but the EBITDA it implies on a margin basis about flat with where you were in 2013 about 21% to 22% EBITDA margins, so not a lot of leverage there, but just wanted to understand is that mainly due to the acquisitions that you are making in some more of the headcounts that you are bringing on or is that some of the marketing investments that you talked about or just other investments. Just wanted to understand exactly which area those investments are going that’s doing that to the model.

Yes, the most significant impact that’s new is currency, so if you take the high currency rates from mid-year, last year or in the fall of last year and compare to where they are now and understand that 30% of our revenue is exposed to that change and then also understand that we have a gross margin – variable gross margin of above 60%, because we're paying out royalties on that revenue a significant amount of the impact is falling to the EBITDA line. If you correct for that, then I would say we're investing it similar pace and in the similar rate as we have historically - 4% or so of our revenue is being reinvested in new higher growth areas. Without that investment, EBITDA would be four points higher. So that trend continues and I think in Q4 you really saw what can happen when revenue grows nicely and higher pace slows a little bit. We saw a 25% EBITDA margin even with the currency impact. So there's clearly that leverage inhering in model that you can see.

Okay, that’s really helpful, thanks, Tim.

The next question comes from the line of Brian Fitzgerald at Jefferies. Please proceed.

Hey, guys, this is Sachin sitting in for Brian. So the question is does enterprise becomes a bigger portion of the business overall. How should we think about the kind of the ARPU for the enterprise accounts? How many kind of customers are there and what is the average sort of ticket revenue for the enterprise account and then a follow-up is how much potential do you think there is in your existing customer base in terms of converting them into enterprise accounts. Thank you.

A couple of thoughts on that. So enterprise is a broad range of activity. So you've got some customers and usage that’s at a - volume and a price point where they are paying $20 or $40 or $60 per image. You got other users who are using our premier license product at $200 and you’ve got to offset users at $500. It’s a very broad range we don’t give our customer count and revenue for customer because of that, because it’s really tough without whole lot of complex state is hardly get jobs around. The headline is significantly higher prices 10 to 100 overall with the acquisition of Editorial, we are seeing a similar kind of pricing impact 10 to 100 of dollars in licensing, same with video footage which is also very interesting to enterprise customers, a subset of our enterprise customers. So that’s one where we will continue to give a much detail as we can, but we don’t currently disclose customer account. And that second question I think there are very few enterprise accounts where we go in with the sales pitch where they aren’t already active users at Shutterstock in one way or another, whether the subscription z\are on demand. But there is a tremendous number, several thousand are not customers today. We have dozens and dozen of enterprise customer, but there is lot’s who are potential Shutterstock users that aren’t today

Okay, great. Thanks lot.

The next question comes from the line of Lloyd Walmsley of Deutsche Bank. Please proceed.

Thanks, I’m wondering I know you are not doesn’t sounds like you are going to give us any 2015 impact from acquisitions, but can you give us color on what these companies did last year in terms of revenue and EBITDA maybe. And then second question would just be - how do you think Adobe’s acquisitions of Fotolia might impact the competitive environment seeing Adobe has such a strong lock on the creative professionals who are both contributors and consumers of stock photography, is that something that you guys can kind of react to?

Sure, so we’ll deals first and then Adobe second. On the deals we are not going breakdown the revenue free to those, I think to help you get to a useful place, I think if you do the currency adjustment, our underlying guidance is unchanged from our prior guidance for the core business, we're factoring in the currency which is - you can kind of look and see what the change has been over the last 90-days that’s affecting 30% of our business, it’s a multi percentage point impact and so net of that the difference is really are from the deals, so directionally we want to give you as much color as we can without disclosing the specifics, so hopeful that that gets you there.

And with Adobe, Fotolia we’ve competed against big companies, multi billion dollar competitors with brand recognition - for many years and we will continue to do that. In this case, Adobe has acquired an asset that’s strong in a couple of countries in Europe and we don’t know exactly how they are going to be integrated into the Adobe tools, but it doesn’t seem to be such a clear cut kind of path. Licensing images is complicated, this is new to Adobe and they have tried several times before and we knew that they would try again at some point.

Okay. Thanks guys.

Thank you. End of Q&A