Good morning, ladies and gentlemen, and welcome to the Q2 2017 Shutterstock, Inc. earnings conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Rawson Daniel, Vice President of Corporate Development.

Thank you, operator. Good morning, everyone, and thank you for joining us for Shutterstock's second quarter 2017 earnings call. Joining me today is Jon Oringer, our Founder, Chief Executive Officer and Chairman, and Steven Berns, our Chief Operating and 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 addressable market, the growth of our customer base, and success of new and existing product offerings, revenue growth and the predictability of our revenue, adjusted EBITDA, equity-based compensation, foreign currency rates, 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 we file from time to time with the US Securities and Exchange Commission, including the section entitled Risk Factors in the company's annual report on Form 10-K for the year ended December 31, 2016 for discussions of important risk factors that could cause actual results to differ materially from those discussed in any forward-looking statements we may make on this call. On this call, we will refer to adjusted EBITDA, adjusted EBITDA growth, adjusted EBITDA margin, adjusted net income; each of these metrics on a constant currency basis, revenue growth on a constant currency basis, and free cash flow, all of which are non-GAAP financial measures. You can find a description of these items, along with the reconciliation to the most directly comparable GAAP financial measures in today's earnings release and in our Form 10-K, which are posted on the Investor Relations section of our website. We believe that the use of these matters in conjunction with GAAP financial measures provides important additional insights for investors about the performance of the company's overall business and operating performance and enhances the comparability for investors in assessing our financial reporting. However, these non-GAAP financial measures should not be considered as a substitute for, or superior to, financial information prepared in accordance with GAAP. And with that, I’ll turn the call over to Jon.

Thanks, Rawson. And thanks everyone for joining us today for Shutterstock's second quarter 2017 earnings call. We're pleased with the progress we're making in our business. While our quarterly results do not reflect the long-term proposition of our business, we're beginning to see the benefits of our new technology platform and operating structure and we believe we are making significant progress against our objective of moving from a content marketplace to a creative platform. In the second quarter of 2017, on a constant currency and year-over-year basis, revenue grew 9% and adjusted EBITDA decreased 10%. Our revenue grew slower than expected in the second quarter, which negatively impacted adjusted EBITDA. In addition, in the second quarter of 2017 and on a year-to-date basis, adjusted EBITDA was negatively impacted by one-time costs related to M&A and our continuing move to a cloud-based hosting environment. On a year-over-year basis during the quarter, our customer base grew by 11% to more than 1.7 million customers. Paid downloads decreased by 2% to 42.7 million. We grew revenue per download by 10% on a constant currency basis. We've expanded our image library by 57% to 144.7 million images and our video library increased by 55% to 7.6 million clips. The story that the quarterly metrics don't fully tell is the exciting evolution that’s taking place at Shutterstock. We are taking deliberate actions to transition from a stock image marketplace to a broader platform that provides individuals and enterprises with the various content types and tools needed to collaboratively design, build and distribute creative projects. We've built a better technology, reorganized our talent and have acquired our launch assets that we believe will define the future of our business. On the product and engineering side, we're now able to get to market faster than we did…

Thanks, Jon, and thank you, everyone, for joining us today. Before I discuss our performance, I want to let you know that we posted a brief presentation deck on our website that contains supporting materials for today's call, as well as other items discussed on today's call. As Jon has highlighted, Shutterstock continues to execute against our vision throughout the second quarter, translating into revenue growth on a reported basis of 8% and an adjusted EBITDA margin of 14%. On a constant currency basis, revenue growth was 9% and adjusted EBITDA margin was 15%. This past quarter, our customer base expanded 11% to over 1.7 million customers. As compared to the prior-year second quarter, we saw revenue per download increase 9% on a reported basis or 10% on a constant currency basis, driven by the continued growth in our enterprise and motion businesses, as well as a shift within our e-commerce business toward our smaller subscription plans, which are sold at higher price per image rates in our traditional larger subscriptions. We also saw a 2% decrease in paid downloads, driven by lower downloads from our e-commerce subscription customer base. In the second quarter of 2017, revenue from our e-commerce business was $85.9 million or 3% higher than the second quarter of 2016. Revenue growth in the e-commerce channel decelerated slightly compared to the first quarter of 2017, driven by the changes in mix of our subscription business, as Jon detailed earlier. Enterprise revenue grew 16% year-over-year to $42.9 million and now makes up approximately 32% of our total revenues. International expansion and localization continues to be a core part of our long-term growth strategy. In the first quarter of 2017, of the approximately 65% of our revenues from customers outside the United States, approximately half of that amount is…

[Operator Instructions]. Your first question comes from the line of Ralph Schackart from William Blair. Your line is open.

Good morning. Two questions, if you could please. Jon, maybe if you could just give us an update on sort of where you are with the other platform transition and if you're on beta with any customers right now and the feedback you're getting and any timelines around when that might roll out broader? And then second, just on the sort of reinvestment phase right now with the business, can you give us a sense right now if the current sort of reinvestment spend is the right level? Would you need to take that up potentially in the future? And then, how much longer are you anticipating this current reinvestment phase to last? Thank you.

I'll start with the platform transition. There's nothing in beta right now. And the entire platform is available to our e-commerce customers today. We're running multiple tests. At any moment, testing different plans, pricing, features, functionality. You see that on our search results page. There are several new features that we launch. And those are all on our new platform changes. Some of our businesses are moving over the next quarter. So…

As it relates to investment spending, what we see is that the opportunities for us are significant. We will continue to invest at appropriate levels. Having said that, we do expect our growth rates in the future will increase on the revenue line. And certainly, we expect margins to improve. Our investment in our infrastructure will over time come down as we evolve from what has been a physical server environment into a cloud-based environment, and so we will not have, if you would, the level of costs of basically that transition where sometimes you incur for some period of time a duplication of costs of both physical as well as cloud.

Okay, thank you.

Your next question comes from the line of Lloyd Walmsley from Deutsche Bank. Your line is open.

Thanks. Two, if I can. First, when you look at the broader stock market, not a lot of great third-party data out there. Wondering if you guys have a view as to how fast the market as a whole was growing and kind of whether you guys are gaining share in that market? And then second one would just be, as you see customer shift to different plans and you look at lifetime value, have you had customers on long enough to really get a firm view of the lower-priced plans, like how it is changing lifetime value or is it more just a function of having the lower-priced plans does retain customers that otherwise might leave? Wondering how you guys look at that.

Thanks, Lloyd. I'll start with the first question. As far as the market, hard to pin down the exact size. We know that there is more and more demand for images. But let me just kind of take a step back and talk about all of our different lines of business because there's a lot of opportunity in each one and I can go into a little bit of detail for each one. So, we can start with e-commerce images. Our site today, on the new platform, there's a ton of opportunity as we start to get even more local, more international, improve our search results, and improve the user experience of that site. Now that we're fully on that new platform, we're seeing that we're able to do that faster and better than ever. So, there should be a lot of stuff we can do there. Our second line of business, e-commerce motion. That includes footage and that includes audio. As it gets easier and easier to use footage, which will have become more and more democratized, we feel like there's a lot of opportunity on the stock video side. And we plan to take advantage of that. On the audio side, with our acquisition of PremiumBeat, as we learn more and more about how people are using footage and music together, the opportunity becomes bigger and bigger for us. And as that footage platform starts to get further on to our core platform, there's even more opportunity for us. On the enterprise side, we have begun a pretty big effort to make our tools easier to use for our reps to get more predictive models going here, so that we can better figure out exactly who we should target from our e-commerce customer and bring into enterprise and…

As it relates to your other questions on the early days for the smaller subs, we have about half a year of data and what we know is the following. We've seen extremely view on retention. And the most important outcome that I can give you at this point in time is we have more customers buying more subs than before and we have more total customers overall than we had before for those products. So, it's true that it's somewhat early days, the indications are strong on a comparable basis.

Thank you.

Sure.

[Operator Instructions]. Your next question comes from the line at Kip Paulson from Capital. Your line is open.

Hi. This is Kip Paulson from Cantor Fitzgerald. Thanks for taking my question. Just a couple from me. Enterprise growth decelerated, this 15% year-on-year year from 25% in the first quarter. Were there any one-time impacts here and how should we think about growth going forward? And then second, do you expect paid download decline to get worse before they get better? How does the mix shift toward subscription play out on downloads in the back half of the year within the context of your guidance? Thanks.

Yeah. As it relates to the second part of your question with regard to paid downloads, at this point in time, it's really premature for us to tell you – we're not able to say kind of the quantity of downloads that will happen. As Jon indicated in his prepared remarks and just now in response to a question, the number of features and functionality that we're launching is such that we certainly got to be at a greater level of activity. So, while absolute downloads, we would expect, would once again recover and increase, I can't tell you specifically whether that’s going to be in the second half of the year or beyond relative to the experience in the second quarter. As it relates to enterprise, it is definitely slower than expected. Certainly, the numbers have gotten larger. We are certainly focused on certain parts of the world where we've had historically not had the level of sales resources that we do today. That's true in Asia-Pacific and Europe. Also, having the editorial business opens up doors for us on the media side, agencies and corporates that we previously were not necessarily participants in. And so, we are continuing to see significant opportunities there to work with every type of large or even medium-size, like I say, media agencies and corporates. And our return on investment of enterprises, as I mentioned in my comments with regard to the reps we hire, is still within 12 months. Last thing I would say that, as we plug in more products, as we bring in, as Jon just mentioned, custom, as we bring in editorial, as we launch our tools and asset management products, all of these create an ecosystem and a platform which is more attractive to enterprise customers on a global basis. And so, we believe the opportunities are certainly significant and don't look at the second quarter as representative of future growth.

Okay, great. And then just one more, if I could squeeze one in. It seems that the US slowed more than the regions outside the US. Anything other than the mix shift toward subscription or the pricing plan changes impacting this?

No, the biggest thing was really the mix as we talked about on the e-commerce side. There wasn't anything beyond that that would be noteworthy.

Okay, great. Thank you.

There are no further questions at this time. I would now like to turn the conference back to Steve Berns.

Kim, thank you. And thank you, participants. We appreciate your time today and we'll talk to you soon. Bye-bye.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may now disconnect.