Jarrod Yahes: Bernie, Paul mentioned some of this in his remarks and response to the previous question, but there is definitely a broadening out of the desire for companies to own the intellectual property associated with generative AI, so if you read some of the headlines around Bloomberg looking at chat capabilities, if you read some of the headlines that have come out from NVIDIA about companies that are working closely with them to train their own proprietary models, you quickly come to the conclusion, and we’re increasingly of the conviction that companies are going to want to own this IP and they’re not going to be solely reliant on a small cadre of global technology leaders to provide it to them, and that really plays to our strength and plays to the depth that this TAM could have on a go-forward basis.
It is all still work in progress, so no one is quite sure how this is going to play itself out, but it really does seem like each company wants to own the IP and control their own destiny with respect to generative AI in a way that I don’t think people quite understood even several months ago.
Bernie McTernan: Understood, and then just last from me, big beat on EBITDA in 1Q and the flow-through for the full year guide was less. Do we maybe just have the seasonality wrong, or anything we should be thinking about on the cost side of the business? I know you called out some shifts in marketing expense, but anything we should be thinking about the cost side in the remainder of the year?
Jarrod Yahes: The only thing I’d call out, Bernie, is number one, you’re aware of how at the gross margin level, our gross margin adjusts annually based on the structure of our contributor royalty payouts, and so that typically creates a slightly better gross margin at the beginning of the year that slightly declines as the year moves on, so that’s one thing to keep in mind. The other piece is sales and marketing. We’re keeping sales and marketing, the vast majority of that spend is really around performance media and ecommerce, and so as our ecommerce business is weak, we are adjusting performance marketing consequently. We’re not going to spend increasing percentages of sales and marketing spend in a business that is slightly lower, and so we haven’t done anything with sales and marketing to improve the margin but we’re also keeping it consistent.
We feel great about the margin profile of the business. Obviously to be able to raise your margin guidance in the first quarter means that you believe you strongly have the ability to operate the business in a highly profitable manner, so we feel great about that and our ability to continue to drive margin expansion, which we’ve done for the past several years now.
Bernie McTernan: Great. Thanks Jarrod, thanks Paul.
Paul Hennessy: Thank you.
Operator: Thank you. One moment please. Our next question comes from the line of Youssef Squali of Truist. Your line is open.
Youssef Squali: Great, thank you. Good morning guys. Jarrod, can you maybe quantify the organic growth ex Pond5, so versus that 10% FX neutral number that you gave in the release, what was the organic number, since I think Pond5 was acquired in May of last year? Then I know you’re not quantifying the revenue contribution from all these partnerships, but if you strip out the revenue from the partnerships and if you strip out maybe the contributions from Studios, what was the–was there any weakness in the enterprise segment from just the macro headwinds that we all know about?
Jarrod Yahes: Sure Youssef. You know, look – rather than sort of stripping apart the business in that way, let me just give you some baseline figures that may help. I think number one, with respect to Pond5, we talked about that business contributing roughly $11 million, $12 million a quarter when we acquired the business, and so there has been some growth in the business but that’s the approximate quarterly contribution of the business. You know the acquisition date, so you can think about what the contribution of that is on a more specific basis. In enterprise, and I think we really tried to reinforce this, the business regardless of whether you think about the Studios piece in or out, regardless of whether you think about the data partnerships being a strong contributor, the business is quite healthy.
I don’t think there’s any other way to sort of cut it. When you talk about overall bookings growth of 20% and subscription bookings growth in excess of that, it just–it feels really good, and it is a continuation of the strategy that we embarked on a couples years ago which is leading to our success, which is cross-selling into multiple content types, so expanding image relationships into video and music. It is also enhancing that service offering and solidifying that service offering with services, and so whether it be our Studios offering, whether it be asset assurance, whether it be providing data partnerships, there is a culture of cross-sell, up-sell and value delivery to customers that is resounding in the market and working for us, and so we feel quite good about our core enterprise channel, and look, clearly as a result, it’s becoming a larger and larger part of our business.
You could see a day where this is the majority of our business if this trajectory continues in a relatively short period of time.
Youssef Squali: Super helpful. Thanks, Jarrod, for that. I guess one last question for me on ecommerce. Europe is not doing that well, rest of world is slowing down. What’s the game plan? Is it a product issue or is it really just a market environment kind of issue, and how are you guys planning on addressing it or how are you addressing it?
Paul Hennessy: Yes, you know, we’re on the case. We’ve been watching this for the better part of a year on the decline, and we believe the vast majority of that decline is related to the macro environment. We think we’ve got the right products, we think we’ve got the right pricing, but we’re committed to, I’d say, experimentation at scale so that we understand in this new market what our customers need, what their buying behaviors are, how they want to engage and the amount that they want to consume, even the way that they engage and download. All of those things are on the table for us to evaluate, as well as any of the implications of generative AI and what it will do for the ecommerce channel. We’re watching this very closely, we’re putting a lot of experiments in front of customers to understand exactly what their needs are, but we believe the fundamental cause is much more macro than an omission of products or something that Shutterstock doesn’t have quite right.
Youssef Squali: Great, thanks Paul. Congrats.
Paul Hennessy: Thank you.
