Getty Images Holdings, Inc. (NYSE:GETY) Q4 2024 Earnings Call Transcript

Getty Images Holdings, Inc. (NYSE:GETY) Q4 2024 Earnings Call Transcript March 17, 2025

Getty Images Holdings, Inc. misses on earnings expectations. Reported EPS is $-0.01 EPS, expectations were $0.04.

Operator: Good afternoon, and welcome to Getty Images Fourth Quarter and Full Year 2024 Earnings Conference Call. Today’s call is being recorded. We have allocated one hour for prepared remarks and Q&A. At this time, I’d like to turn the conference over to Steven Kanner, VP of Investor Relations and Treasury at Getty Images. Thank you. You may begin.

Steven Kanner: Good afternoon, and welcome to the Getty Images fourth quarter and full year 2024 earnings call. Joining me on today’s call are Craig Peters, Chief Executive Officer; and Jenn Leyden, Chief Financial Officer. Before we begin, we would like to note that due to the ongoing regulatory review process, we will not be able to comment on the status of the merger with Shutterstock for the fourth quarter Shutterstock operating results. We appreciate your understanding and we’ll share updates as soon as variable. This call will include forward-looking statements with the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks, uncertainties and assumptions, which could cause our actual results to differ materially from these statements.

These risks, uncertainties and assumptions are highlighted in the forward-looking statements section of today’s press release and in our filings with the SEC. Links to these filings in today’s press release can be found on our Investor Relations website at investors.gettyimages.com. During our call today, we will also reference certain non-GAAP financial information, including adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA less CapEx and free cash flow. We use non-GAAP measures in some of our financial discussions as we believe they represent our operational performance and underlying results of our business. Reconciliations of GAAP to non-GAAP measures as well as the description, limitations and rationale for using each measure can be found in our filings with the SEC.

After our prepared remarks, we’ll open the call for your questions. With that, I will hand the call over to our Chief Executive Officer, Craig Peters.

Craig Peters: Thanks, Steven and thanks to everyone for taking the time to join us today. I will touch on Q4 and full year 2024 business performance and progress before Jenn takes you through the full results in more detail and the 2025 outlook. I’d like to start by briefly touching on the merger with Shutterstock. As announced earlier this year, Getty Images and Shutterstock entered into a definitive merger agreement that will result in a company with a strong financial foundation and opportunities for superior value creation for customers, creators and our combined shareholder base. This is an exciting and transformational opportunity for our companies at a time when Getty Images is building positive organic performance momentum as evidenced in the results we will take you through today.

I was also pleased to complete a refinancing on our term loans in this quarter, which extended maturities on $1 billion of debt to 2030, Jenn will share more details on this transaction. Moving to results. In the fourth quarter, we grew revenue to $247.3 million, representing growth of 9.5% or 8.5% on a currency neutral basis. The top line performance was coupled with strong profitability with adjusted EBITDA rising to $80.6 million, up 11.7% or 10.4% on a currency-neutral basis. For the full year 2024, revenue was $939.3 million, an increase of 2.5% on both the reported and currency-neutral basis. Our adjusted EBITDA finished at $300 million for the full year with a healthy margin at 32% of revenue. With these results we delivered on the full year return to top-line growth, exceeding the midpoint of our guidance and finished the year with a strong Q4.

Just this last week Getty Images celebrated its 30th year in business. Over those 30 years we built a respected brand. We produced and preserved iconic imagery. We cultivated deep customer and partner relationships delivering real value in each instance and we embraced a spirit of continuous evolution in the face of an extremely dynamic market. Over our 30 years we’ve experienced and navigated immense change, the introduction and universal embrace of digital photography, the growth of the Internet and e-commerce, the introduction of the smartphone and explosion of mobile photography, access to broadband and the shift from print to digital media, now artificial intelligence. Throughout 2024, we continue to invest in core assets of our company and evolve.

We renewed and added to our roster of long-standing world-class partnerships. We produced award-winning comprehensive photo and video coverage across the world of news, sport and entertainment. We added Motorsport images talent, relationships and archive. We conducted deep and broad-based research across cultures, demographic, industries and creative trends. We work closely with our exclusive network of talented contributors to develop content that reflects this research. We launched natural language search across our websites. We expanded our integrations across the broader creative and editorial ecosystems. We rolled out new commercially safe AI capabilities to our customers. We continue to grow our annual base of annual subscribers. Our delivery in 2024 serves as a foundation for 2025 and the decades to come.

2025 has already delivered its own challenges with the horrific fires in Los Angeles impacting so many individuals and businesses just to name one. But I’m confident in the future of Getty Images given our unique position and assets and our unwavering focus on delivering sustainable customer value by helping our customers to create and engage end audiences saving them time and money and reducing their risk. I look forward to our announced merger with Shutterstock as a means to further delever our balance sheet increase our margins and cash flow and accelerate investment where we see opportunity. And I’m extremely energized to take Getty Images into its fourth decade. With that I’ll turn the call over to Jenn to take you through more financial details.

Jenn Leyden: We continue to build momentum as we move through 2024 culminating in a strong finish to the year with a strong Q4 financial performance. We delivered high single-digit top-line growth while maintaining north of 30% adjusted EBITDA margins. We surpassed both the midpoint of the updated guidance we shared on our last call and the guidance we started the year with. Q4 revenue was $247.3 million with year-on-year growth of 9.5% or 8.5% on a currency-neutral basis. Full year revenue was $939.3 million, up 2.5% on both a reported and a currency-neutral basis. Geographically, the Americas region our largest region with respect to revenue was up 15.9% in Q4 on a currency-neutral basis, with APAC also up 0.4%, and EMEA down just under 1%.

Annual subscription revenue was 54.9% of total revenue in the fourth quarter. Subscription revenue grew approximately 11% on both a reported and a currency-neutral basis. This growth was driven by our premium access and our e-commerce subscription offerings. We added 78,000 active annual subscribers to reach 314,000 in the Q4 LTM period, an increase of approximately 33% over the comparable LTM period. This was driven by our e-commerce businesses iStock and Unsplash+. Of the 314,000 annual subscribers in the LTM period 54% were brand-new customers and 32% were customers in our key growth markets across LatAm, APAC and EMEA. Our annual subscription revenue retention rate continues to strengthen at 92.9% in the 2024 LTM period, up from 92.4% in the corresponding 2023 period, and also up from 92.2% in LTM Q3 2024.

Paid downloads were down slightly at $93 million, while our video attachment rate remains in growth rising to 16.5% from 14.1% in the Q4 2023 LTM period. Q4 editorial was $90.1 million, an increase of 19% year-on-year, and 17.7% on a currency-neutral basis. This performance was a continuation of the trends we discussed last quarter, with elevated demand for our editorial content, fueled by major even year events, which drove a shift in downloads towards editorial amongst our premium access subscribers. Key drivers this quarter, included our coverage of the US elections, global sporting events, as well as good compares for our entertainment and archive verticals, which were materially impacted in 2023 by the Hollywood strikes. Creative revenue was $142.4 million, down 2.4% year-on-year and 3.1% on a currency-neutral basis.

This decrease was primarily due to that shift in download consumption from creative to editorial given the robust editorial event calendar, which I just mentioned. This is an impact we discussed last quarter as well. In the fourth quarter, this represented approximately 3.2 points of downward pressure on creative results. Adjusting for that impact on a pro forma basis, Creative revenue was in growth. Digging in a bit further to some of the revenue performance trends we saw in Q4. Within our Creative business, we continue to see positive momentum in our iStock annual subscriptions, which grew by 10.7% on a reported basis and 9.9% currency neutral, while our Unsplash+ subscription grew once again by double-digits as this newer subscription offering continues to thrive.

Corporate remains healthy and in growth for the quarter. Within Media, we saw double-digit growth across our broadcast and motion picture production customers, which reflects, the ongoing recovery from the 2023, Hollywood strikes impact. Agency, which saw some strengthening in Q3, was a high-single-digit decline in Q4, impacting our creative à la carte revenue. While we did see a decline in Q4, this still represents improvement from the double-digit declines we have seen in Agency over the past several years. Other revenue was $14.8 million, an increase of $10.4 million from Q4 2023, primarily due to two new multiyear creative content deals that included some level of AI rights. The growth was also driven by ongoing revenue recognition in the quarter from deals signed in previous quarters.

Revenue less our cost of revenue, as a percentage of revenue, remained strong at 73.5% in Q4 compared with 72.3% in Q4 2023 and for the full year 73.1%, up from 72.7% in 2023. Q4 SG&A expense was $105.5 million, up $3.9 million year-on-year with our expense rate decreasing to 42.7% of revenue from 45% last year. The lower expense rate was due primarily to a $6 million decrease in stock-based compensation. For the full year SG&A increased by $5.3 million to 43.4% of revenue, down from 43.9% last year with that decrease in rate also driven by the decrease in stock-based compensation. Excluding stock-based compensation, SG&A increased to $101.1 million in the quarter or 40.9% of revenue, up from $91.1 million or 40.3% of revenue in Q4 2023. The higher year-on-year spend reflects an increase in incentive-based staff compensation and commissions tied to our strong financial performance.

For the full year adjusted SG&A increased to $385.9 million or 41.1% of revenue compared to 39.8% of revenue in the prior year. Adjusted EBITDA was $80.6 million for the quarter, up 11.7% year-over-year and 10.4% on a currency-neutral basis. Adjusted EBITDA margin was 32.6%, up from 31.9% in Q4 2023. For 2024, adjusted EBITDA was $300.3 million, down 0.4% reported and 0.3% on a currency-neutral basis. Adjusted EBITDA margin was 32% compared to 32.9% in 2023. CapEx was $15.1 million in Q4, essentially flat to the prior year. CapEx as a percentage of revenue was 6.1%, down from 6.7% in the prior year period. For the full year, CapEx was $57.4 million or 6.1% of revenue, again, fairly flat to prior year and well within our range of 5% to 7% of revenue.

Adjusted EBITDA less CapEx was $65.5 million, up $8.4 million year-over-year, representing an increase of 14.8% or 12.2% on a currency-neutral basis. Adjusted EBITDA less CapEx margin was 26.5% in Q4, an increase from 25.2% in Q4 of 2023. For the full year, adjusted EBITDA less CapEx was $242.8 million, a decrease of 0.7% on both a reported and a currency-neutral basis. Free cash flow was $24.6 million in Q4, compared to $18.6 million in Q4 2023. The increase in free cash flow during Q4 was largely driven by the increase in EBITDA. Free cash flow is stated net of cash interest expense of $22.7 million and cash taxes paid of $13.3 million in the fourth quarter. For the full year, we generated $60.9 million in free cash flow compared to $75.7 million in 2023, with that full year decrease, primarily driven by an increase in cash paid for interest and taxes.

We finished the year with $121.2 million of balance sheet cash, up $11.3 million from the end of the third quarter and down $15.4 million from Q4 2023. The lower cash balance relative to 2023 is due to $57.8 million of voluntary debt paydowns executed during the year. This includes $2.6 million in the fourth quarter. As of December 31, we had total debt outstanding of $1.3 billion, which included $300 million of 9.75% senior notes, $579.2 million of USD term loan with an applicable interest rate of 8.85% and $435.2 million of euro term loans converted using exchange rates as of December 31, 2024, with an applicable rate of 7.88%. We also have a $150 million revolver that remains undrawn. We ended the quarter with a net leverage of 3.97 times.

This is down from 4.2 times at year-end 2023. This marked the first time in over a decade that our net leverage has fallen below four times. While we remain focused on continuing to bring down our leverage, we are extremely proud of crossing below that four times net leverage mark, given that this company has in its 30 years seen its leverage be as high as 10 times. As Craig mentioned in February, we completed the refinancing of our existing term loan structure. We replaced our old term loans which were set to mature in February 2026 with new loans now maturing in February 2030. We maintain roughly $1 billion of term loans outstanding. Our new facilities include US$580 million of term loan with an 11.25% fixed rate and $440 million of euro term loan with an applicable interest rate of 600 basis points plus EURIBOR equivalent to 8.63% as of February 21, 2025.

We will continue to assess market conditions with respect to any future potential refinancing or redemption of our $300 million of bonds. In addition, as we advance on the regulatory front and gain clearer insight into the merger’s time line, we will decide on any additional financing actions required to close the Shutterstock transaction. Considering the foreign exchange rates and applicable interest rates on our debt balance as of December 31, and also factoring in the impact of the debt refinancing including, mandatory amortization on the euro term loan, our estimated cash interest expense for 2025 is projected to be $133 million. To recap, we finished 2024 by delivering on the guidance, we shared at the beginning of the year. We returned our business to top line growth while maintaining strong profitability margins.

We drove meaningful subscriber growth and we ended the year, with a net leverage below 4 times. As we approach the end of the first quarter of 2025, we are excited to continue to build on the momentum with which we closed 2024. With that, let’s move into our 2025 guidance. We anticipate revenue of $918 million to $955 million, down 2.3% to up 1.6% year-over-year and down 1% to up 3% on a currency-neutral basis. Embedded in this guidance, is an assumption for FX rates, with the euro at 1.05 and the GBP at 1.26, which implies a headwind on revenue of $12.5 million of which approximately $3 million was expected in the first quarter. However, in recent days, we have seen increased volatility in FX rates, following the ECB rate decision with the dollar weakening relative to both the euro and the GBP.

This change may lessen the impact of FX on our financial results in the Q2 through Q4 periods. We expect adjusted EBITDA of $272 million to $290 million, down 9.5% to 3.3% year-over-year or down 8% to 1.7% currency neutral. Included in the adjusted EBITDA expectations, is a similar cadence for estimated FX impact, with an approximate $5 million headwind in 2025 of which approximately $1.5 million is expected in the first quarter. Please note, this guidance includes the anticipated impacts of the odd year versus even year, event calendar comparisons, as well as impact from disruptions in production activity due to the Los Angeles fires and some continued lag in a return to pre-Hollywood strike production levels. On the cost side, our guidance includes approximately $8 million in one-off increases in SG&A as we accelerate our SOX compliance efforts in 2025.

This acceleration is to prepare for what we anticipate being a necessary shift in resources and focus on merger and integration-related activities, upon the close of the transaction. Please note, all other merger-related costs are not included in this guidance, as they are considered onetime in nature and therefore are excluded from adjusted EBITDA. With that, operator, please open the call for questions.

Operator: [Operator Instructions]. We’ll take our first question from Cory Carpenter with JPMorgan. Your line is open.

Q&A Session

Cory Carpenter: Good afternoon. Thank you. I think, Craig one for you, and one for you Jenn. So, Craig just generative AI hoping for an update on the consumer uptake that you’re seeing and your latest thoughts on how you expect monetization to ramp? And Jenn on the financials, just could you expand a bit on what drove the outperformance in 4Q relative to the guide you gave last quarter on revenue, but especially on EBITDA? Thank you.

Craig Peters: Great. Thanks, Cory. I will take the first and leave the second to Jenn. On the AI take-up, we continue to see take-up of the AI service both on Getty Images and on iStock. I would say, it continues to grow but at a relatively modest pace, which from all accounts seems to match kind of corporate adoption of generative generally in terms of end deployment within the business versus internal deployment within the business. And where we’re seeing that take-up is largely with existing customers using the capability not to generate from a text prompt, but to utilize the technology to modify the imagery. And that’s been something that has kind of exceeded our expectations in terms of how customers are adopting it and using it.

In the fall, we launched the ability to insert products into the imagery. And that’s been really received well across the customer base. And it’s addressing something that they haven’t historically been able to do with our imagery on the creative side of things. And at least do that without significant effort. And so this is something that really simplifies that down. But it continues to be there, but the core value that we continue to deliver is on pre-shop. And we see those two really being complementary with the customer base. And so we’re pleased to kind of continue to roll out those capabilities leveraging the technology that really help our customers save time and money.

Jenn Leyden: And Cory, I’ll take the question on Q4. So, I mean, the good part about the Q4 performance is really it was driven by a strong top line. So you mentioned a bit of improvement on EBITDA. That’s really mostly about a drop-through of strong top line performance a bit of favorability on the gross margin side, which is almost always for us a product mix story. And that can vary a bit quarter-to-quarter. But as you know, we’re always within roughly that 72% to 73% range. So, some favorability there on margin. And then that top line was a few different things. Obviously, as we move through the year, we continued, as we indicated to see that production side of things start to come back still not quite fully back to pre-strike levels.

But for sure, we saw that come back in Q3, Q4 some nice year-on-year comps there, as we comp to the 2023 — second half of 2023 that was really adversely impacted by the strikes. Event year calendar continued to see some strong momentum from that in Q4 as well as Q3. And we mentioned some of the — a couple of content deals that included an AI licensing element that also impacted Q4. As we’ve spoken about before those tend to come with heavy upfront revenue recognition. So a few different things driving revenue, but ultimately that profitability story is a drop-through of strong top line.

Cory Carpenter: Great. Thank you very much.

Jenn Leyden: Yeah.

Operator: We’ll take our next question from Mark Zgutowicz with The Benchmark Company. Your line is open.

Mark Zgutowicz: Thank you. Good evening, Craig and Jenn. Maybe a three-parter if I could, on the outlook for 2025, just looking for revenue growth by segment, Jenn, I don’t know if you can provide a little color there. Also curious, how much data licensing revenue is expected next 12 months? And then, just in terms of your visibility this year, for Agency, Corporate and Media client spend, just if you can compare that to this time last year that would be helpful. Thanks.

Craig Peters: Jenn, do you want to take the first two and I can maybe provide some commentary on the Agency, front?

Jenn Leyden: Yeah. Hey Mark, so we don’t guide at that segment or product level. Broadly speaking, I think Agency for us we’ve spoken before we don’t anticipate Agency suddenly flipping into a growth part of our business. We’d hope to see, sort of a continued stabilization on that side of things. Media I mentioned we’re still not back to pre-Hollywood strike levels. That’s more broadly the industry not just us. So probably still a little bit of improvement to go there as we navigate through that, but we do have unfortunately the new impact from the L.A. fires on that segment. So we’ll see what that does, but definitely seeing a bit of slowdown delays on the production side of things as it relates to the impact of those fires.

And of course Corporate for us, always our biggest opportunity for growth, so we’d expect to continue to see that into growth. On the Data Licensing side, again, there we don’t guide to a specific number there. Nothing heroic assumed in our guidance there, a bit of a continuation of the levels that we saw in 2024, which by all accounts is fairly modest but the guidance is not dependent on that becoming a very large piece of our business.

Craig Peters: Thanks, Jenn, yeah, low-single digits there. And then, I would say just one of the things that we’re watching is we are watching the creative agencies, Mark. Wpp put out their performance for Q4 and for the full year. Their full year Creative Agency part of their business was down about 4%, but their Q4 was down around 6.5%. And so it looked like it got a little softer in Q4. And it seems like that, that we’re still kind of processing across the full Agency space, but that seems indicative. So — which aligns to kind of some of the commentary that Jenn had about our Q4, where we continue to see that portion of our business down. And so we’re kind of watching a little bit. Obviously, right now, there is a lot of uncertainty in the macro sense.

And so that tends to show up first in the agency side of things. So — but as Jenn highlighted, we’ve kind of factored those into our guidance. to our best of ability at this point. But that is typically the area where we see impacts more earlier and more acute where the rest of our business is much more heavily weighted into subscriptions and much more stable in terms of the usage and everything there.

Mark Zgutowicz: That’s helpful. And on the subscription side, it was nice to see that net retention number continue to improve. So I appreciate all the color. Thanks.

Craig Peters: Yeah. And that should continue. Again, we’re getting — as we kind of mentioned within our e-commerce business, we were pushing a lot into first year cohorts and that those cohorts just aren’t as — we don’t retain at the same level as later-stage cohorts. And we’re seeing that already within the cohorts as we move into kind of year two and such, the cohorts look identical to more seasoned cohorts, older cohorts in the business. So yeah, we should continue to see that.

Mark Zgutowicz: Great. Thank you.

Operator: [Operator Instructions] And it does appear that there are no further questions at this time. This does conclude today’s program. Thank you for joining. You may disconnect at any time.

Craig Peters: Thank you.