Shutterstock, Inc.

Operator: Good day and thank you for standing by. Welcome to the Q3 2024 Shutterstock Incorporated Earnings Conference call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the call over to Rik Powell, SVP, Finance and Investor Relations. Please go ahead. Rik Powell: Thank you, Latonya. Good morning, everyone. And thank you for joining us for Shutterstock’s third quarter 2024 earnings call. Joining us today is Paul Hennessy, Shutterstock’s Chief Executive Officer; and Jarrod Yahes, Shutterstock’s Chief Financial Officer. Please note that some of the information you’ll hear during our discussion today will consist of forward-looking statements, including, without limitation, the long-term effects of investments in our business, the future success and financial impact of new and existing product offerings, our ability to consummate acquisitions and integrate the businesses we have acquired or may acquire into our existing operations, our future growth, margins and profitability, our long-term strategy and our performance targets, including 2024 guidance and long-range financial targets. Actual results or trends could differ materially from our forecast. For more information, please refer to today’s press release, which we have posted to our Investor Relations website. Please also refer to the reports we filed with the SEC from time-to-time, including the risk factors discussed in our most recently filed Form 10-K, for discussions of important risk factors that could cause actual results to differ materially from any forward-looking statements we may make on this call. We will be discussing certain non-GAAP financial measures today, including adjusted net income, adjusted net income per diluted share, adjusted EBITDA and adjusted EBITDA margin, revenue growth, including by Distribution channel on a constant currency basis, billings and free cash flow. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the financial tables included with today’s press release and in our 10-Q. I’d now like to turn the call over to Paul Hennessy, our Chief Executive Officer. Paul Hennessy: Thanks, Rik. Good morning, everyone, and thank you for joining us today. Following a strong first half, I’m pleased to report that Shutterstock reported both record third quarter revenues and record adjusted EBITDA. This is a tremendous accomplishment, and I’d like to thank our customers, our contributors and our entire Shutterstock team for their incredible efforts that helped generate these results. I will walk you through the component parts of our business in a moment, but suffice it to say, the quarter played out better than we expected. I would also like to extend a warm welcome to the global Envato team, including our new colleagues in Australia, New Zealand and Mexico, and we’re thrilled to have them be part of this journey with us. Q3 is the first quarter that Envato contributed to our consolidated results and we could not be more pleased. The strong product market fit of Envato Elements, the high-value, low-cost, unlimited multi-asset subscription is resounding in the market. Before we turn to this quarter’s results, I’d like to first share that after five years at Shutterstock, Jarrod Yahes will be leaving the company to pursue another opportunity. Jarrod’s deep understanding of the key drivers of our business has played a pivotal role in the expansion of our portfolio and growth during his tenure. As CFO, he has taken the business from $96 million in EBITDA in 2020 to $250 million this year, nearly doubled our EBITDA margins and led 11 acquisitions, which have all been constructive in driving overall revenue and EBITDA growth. I want to thank Jarrod for his incredible contributions to Shutterstock and wish him the very best in the future. I’d also like to announce that Rik Powell will become our Chief Financial Officer. Rik started in June as SVP, Finance and Investor Relations. Given Rik’s extensive experience, we are certain that under his leadership, Shutterstock will continue to drive profitable growth for our shareholders. Now let’s turn to our third quarter results. In the third quarter, Shutterstock delivered revenues of $251 million, representing growth of 7.4% year-over-year, adjusted EBITDA with $70 million, with a 28% margin. Content achieved revenues of $204 million in the third quarter, representing growth of 14% year-over-year. Envato contributed Content revenues of $38 million in the third quarter. Excluding the Envato contribution, Content revenues declined 7% year-over-year, compared to the 9% decline that we saw in the second quarter and in line with the rate of recovery that we predicted for this part of our business. We remain focused on improving performance in this area and are working extremely hard to drive the desired results. Changes we have made to simplify pricing, streamline the product offering and eliminate the use of the free trial promotion are slowly resulting in the improved performance that we are experiencing across our Content business. As I stated in my Q2 remarks, we believe that the Envato acquisition fills what was a material void in our product suite. The recent performance of Envato is underscoring that sentiment. Following a recent series of site improvements, product enhancements and the launch of an energetic and compelling rebrand, Envato has seen a sharp increase in paying subscribers. We are extremely encouraged by these trends. And while we believe there is a growing customer base that sees tremendous value in an unlimited multi-asset subscription, we also believe that our traditional pack and subscription products can continue to grow and succeed in the market. We are excited about the opportunity that the combination of Envato and our existing product offerings bring, not only to our customers, but also to our contributors and our business overall. Our offerings focus on medium and large size customers are experiencing solid, steady demand in line with recent trends. A contributing factor to our improved Content performance is being driven by AI-generated Content and we believe this could be a material opportunity for Shutterstock. AI-generated Content has been available to download and license directly on our site since the beginning of last year, with quality improving at a fast pace. We further embrace this technology by launching a Generative Plus in April of this year. Generative Plus is a low-cost, month-to-month subscription specific to the licensing of AI-generated Content. Subscribers to this product have grown each month since launch, with millions of AI images being generated and hundreds of thousands of these have been licensed. As we expected, our existing customers, who choose to subscribe and download the AI-generated Content, continue to license traditional stock content at a similar rate, and in many cases are increasing their traditional stock usage. Also in September just under half of subscribers to this product were new customers to Shutterstock with many going on to buy traditional stock in addition to Generative Plus. We see no material signs that traditional stock licensing is being displaced, in fact to the contrary we are seeing incrementality here across both new and existing customers. While we are happy with improving performance in our Content business. We continue to invest heavily behind the success we are seeing in Data, Distribution and Services, our product offering that are targeted as faster growth and more nascent TAMs than our traditional Content business. Data, Distribution and Services achieved revenues of $47 million in the third quarter. In Data, we continue to see a smaller number of large contract value deals. We are building out our sales force and footprint in order to address growing global demand as new customers globally recognize the value from licensed high quality Data for AI model training. These customers include large global technology companies, as well as high growth VC-backed generative AI companies that are revolutionizing the application landscape. In addition to new customers, we are also seeing multiple land-and-expand growth opportunities with existing customers. Existing customers are expanding in three primary ways. Firstly, they are asking us for more Data and incremental or refresh Data in specific Content categories. For example, since our last call we saw multiple expansions with existing customers and we have seen interest from customers in incremental Data and newer formats of Data brought to us through Envato. Secondly, they’re continuing diversify the type of Data they seek from us. For example, a customer initially purchased several asset types including inclusive of images video and 3D and subsequently returned to also purchase audio to augment their Data for AI model training. Lastly they are asking us to both source new Content to satisfy their training needs and further enhance the meta Data of existing Content. Recent examples of this include a customer that commissioned us to source a large set of bespoke video content for AI model fine-tuning. Another customer purchased additional existing metadata within our Data sets and yet a different customer purchased enhanced metadata services in order to create new detailed asset descriptions. Each of these is a massive opportunity for Shutterstock and we are being nimble in the way we serve our customers in order to be responsive to market needs and growth. In Distribution, our Giphy business is the world’s preeminent purveyor of GIFs and the new message-based advertising format that is something you share not something you skip. Audience engagement with GIFs continue to show impressive growth globally. Q3 views reached a staggering number of approximately 19 billion per day. This number is up over 10% versus the same quarter last year. Understandably we continue to be excited by the opportunity here and are investing aggressively. The third quarter gave us even more confidence that there is a strong path to monetization of this business. During the quarter we continue to fortify the Giphy team with strong sales hires. These new hires are already winning deals with the result being that our paying customer base increased by 46 clients when compared to the second quarter. Our deal pipeline is increasing on the back of this investment giving us confidence in our ability to scale as we look towards 2025 and beyond. We are seeing strength in both CPG and entertainment having closed multiple deals in these areas and recently closed our first deal in the gaming vertical. The foundation is being laid to build a scalable, sustainable, high growth business. In this regard you may have seen our press release from earlier today detailing our new and exciting partnership with TikTok. Earlier this month TikTok expanded its longstanding relationship with Giphy, selecting us as a valued partner to power a new specialized recommendation engine within direct messaging that delivers users the right GIF content at the right time on TikTok. This is an exciting opportunity for TikTok users to share GIF content in direct messaging. We continue to work with TikTok to explain ways to further enhance this offering across the TikTok experience. Finally, in Services, Shutterstock Studios, our award-winning end-to-end production business had a great quarter with revenues more than double that of third quarter last year. These results put this business well on its way to achieving record revenues for the year. This is a business whose product is truly differentiated and one in which we are extremely proud. Our focus in terms of the capital resources and attention directed across Data, Distribution and Services reflects the opportunity we believe exists for 20% plus growth in these emerging businesses. The results we are seeing are proving that this focus is resulting in even greater returns than we anticipated. In closing, we remain confident that our strategy is laid out at the start of the year remains sound and that our third quarter results lay a strong foundation to achieve our 2027 targets for Shutterstock to achieve $1.2 billion of revenue and $350 million of EBITDA. Now with more details on the financials, I’ll hand the call over to Jarrod. Jarrod Yahes: Thank you, Paul, and good morning, everyone. Shutterstock’s revenue for the third quarter was a record $250.6 million, up 7.4% year-over-year, with both business lines nicely outperforming our expectations. Content revenue was $204 million, an increase of 14% versus the prior year. Envato has meaningfully outperformed expectations since the acquisition. The total revenue contribution to Content from Envato in the quarter was $37.6 million. This reflects revenue after the July 22nd close of the acquisition. Envato’s outperforming because subscriber additions are exceeding expectations on the back of a strong brand refresh and site improvements. Excluding the Envato in quarter contribution, Content declined 7% year-over-year, which represents a 200-basis-point improvement as compared to the second quarter and the second consecutive quarter of improvement. This is another great Data point that we’re getting back to organic growth. Our most popular product categories and packs and subscriptions have experienced several months of net customer additions, making us optimistic about the resiliency here. In addition, the improvements we’ve made in pricing, packaging and promotion across our properties are showing positive results. Data, Distribution and Services revenue was $47 million in the quarter. In Data, we’ve seen new customer demand combined with expansions with existing customers through various land-and-expand opportunities, as Paul described. Growth in Giphy and Studios is accelerating in the back half of the year and we continue to hire aggressively to build out the sales team to support rapid growth in those businesses. The Data, Distribution and Services businesses have grown more than 40% year-to-date and we feel great about the momentum here. As I review the P&L, please note that these line items exclude the expenses to reconcile from net income to adjusted EBITDA. In the third quarter, sales and marketing was 20% of revenue, compared to 22.6% in the prior year. Based on the positive momentum in Content, we expect sales and marketing spend to increase in the fourth quarter as we invest behind the positive results we are seeing. Product development was 6.1% of revenue in the quarter, compared to 7.5% in the prior year, reflecting prudent cost management and ongoing integration of our acquisitions. Because some of our product development spend is capitalized we also expect capitalized R&D to decline in the coming quarters, improving free cash flow conversion. G&A expenses were 13% of revenue in the quarter, compared to 11% in the prior year. Note the third quarter G&A expenses include $3.2 million of Envato transaction costs associated with legal and M&A fees. These expenses total $8.2 million year-to-date and are not added back for purposes of calculating adjusted EBITDA. Adjusted EBITDA for the third quarter was a record $70 million with 27.9% EBITDA margins. Free cash flow was also extremely strong in the third quarter at $45.7 million. Consistent with the second quarter we repurchased $21 million of shares. Based on the relative attractiveness of our shares we expect to continue to buy back shares over the long-term and we will renew our repurchase authorization as necessary. After payment of the quarterly dividend and executing on our share repurchases in the third quarter we saw our cash balance increase to $131 million. Cash includes approximately $18 million of excess cash that came on the balance sheet of Envato, along with offsetting payments that we expect to make next quarter. Excluding any excess acquired cash, our cash balance still increased substantially from $75 million in Q2 to $113 million in the third quarter, even after share repurchases and dividends are taken into account. Our net debt balance at the third quarter was $149 million, representing a net debt to LTM EBITDA ratio of 0.6 times. Given the attractive rates that we have on our lines and the low cost of capital, we do not plan on paying down debt at this time. As discussed previously, we’ll aggressively redeploy cash flows to repurchase stock, pay dividends and acquire companies that add strategic value to Shutterstock. Now, turning to guidance. Given Shutterstock’s record third quarter performance and our expectations for continued business improvement through the remainder of the year, we’re raising our guidance for both revenue and adjusted EBITDA. Revenue is expected to be between $935 million to $940 million, representing growth of 7% to 7.5% year-over-year. We are seeing Content improve each quarter and expect that trend to continue in the fourth quarter. Envato is outperforming expectations and off to a strong start, and Data, Distribution and Services remain strong, as I previously outlined. Adjusted net income per diluted share guidance increases to $4.22 per share to $4.31 per share. And adjusted EBITDA guidance increases to $247 million to $250 million. This adjusted EBITDA guidance includes an expected $9 million of M&A costs for the full year. Please note that adjusted EBITDA is expected to be in the range of 24% to 25% in the fourth quarter. In summary, Shutterstock had a record quarter in terms of revenues and profits. We’re steadily returning to organic growth in Content, and our new Envato acquisition is outperforming. Our investments in Data, Distribution and Services are paying dividends, and we’re hiring and sales aggressively behind that success. With a solid balance sheet and strong free cash flow, we’re using our capital smartly to grow our business and return capital to shareholders. Lastly, we’re well set up to achieve our Shutterstock 2027 targets of $1.2 billion of revenues and $350 million of EBITDA. And we look forward to providing investors an update against those targets next quarter. Lastly, as I depart from Shutterstock, I wanted to take this opportunity to thank Paul Hennessy, Jon Oringer, and the entire Shutterstock Board of Directors for the amazing opportunity the company has afforded me and an extremely fulfilling five-year journey. I leave Shutterstock with a firm conviction in the company’s strong competitive position and growth prospects. The finance team is extremely capable and I have the utmost confidence that Rik and the team will continue to drive profitable growth for Shutterstock shareholders. And with that, Operator, we open the line for any questions. Operator: Certainly. [Operator Instructions] Our first question will be coming from Curt Nagle of Bank of America. Your line is open. Curt Nagle: Good morning. Thanks very much. Maybe just a couple on Giphy. I’m curious what the revenue contribution was in 3Q. And then just, thinking about the potential monetization from TikTok, what is that? I think previously, Paul, you had commented Giphy could be, I don’t know, kind of like a $50 million run rate business in a year or two. Was a deal like that contemplated in that figure? Jarrod Yahes: So, I’ll take the first part, Curtis, and then I’ll pass it over to Paul to talk about the Giphy opportunity and TikTok. Vis-à-vis Giphy, as we acquired the business, the run rate revenues of the business were about $20 million. We’ve consolidated that business into our Data, Distribution and Services segment. We’re seeing very nice growth in that segment. It’s growing 40% on a year-to-day basis. We’re continuing to see Giphy expand strength-on-strength. So, it’s growing sequentially each and every quarter over the course of this year and we expect that to continue. We’re not going to be breaking out the individual subcomponents of the DDS revenue segment, but really pleased with what we’re seeing in terms of ongoing sequential and year-over-year growth with Giphy as we grow and scale it. We’re obviously investing heavily behind it from a sales perspective. Paul Hennessy: And Curt, regarding the TikTok deal, clearly, I can’t talk about the specifics or nature of the deal, but I did reference the growth that we’re seeing across Giphy in GIF usage. And Giphy’s in now the monetization business. So certainly when we look at more users sending more GIFs with higher levels of engagement, we believe we’re going to monetize that. And so we continue to be very, very bullish on the revenue opportunity for Giphy in line with a lot of the comments that I’ve given in the past. We remain very, very enthusiastic about Giphy. Curt Nagle: Okay. Thanks very much. Operator: And one moment for our next question. Our next question will be coming from Youssef Squali of Truist Securities. Your line is open. Youssef Squali: Great. Thank you very much. Jarrod, best of luck for your new endeavor, and Rik, we look forward to working with you. So a couple of questions. Maybe starting on the Content side and excluding Envato, can you maybe feel that onion a little bit? You did show some sequential improvement. I think it went from negative 10 to negative 9 to negative 7. So red trajectory. How should we think about that trajectory going forward, i.e. the pace of the recovery? Do we get to positive growth sometime in 2025 from where you sit today? And then maybe on the Data side, what kind of visibility do you have into the pipeline there? Not only for Q4, but for 2025. I think you historically kind of quantified the money in the bank, if you will, from Data. How do you see that progressing for 2025? The type of visibility and the type of growth you expect in that line? Thank you very much. Paul Hennessy: Great. Thanks, Youssef. I’ll take Content. Jarrod can take Data. On the Content business, look, I don’t know what day we cross over, but we’re making really good progress. The changes that we’ve made, everything from coming off the free trial to reintroducing our smaller packs, as I mentioned, and our core subscription product is getting traction. We’re seeing growth in the business and you start to see the level of the decline is shrinking. You mentioned a minus 10 to minus 9, minus 7, and we’re predicting that Q4 is better than that. So we’re really like what we’re seeing. Then if you add in some of my commentary on the combination of AI in our Content business, we’re now seeing not only existing customers using the AI sub and maintaining their level of stock use, and in many instances, growing that. We’re also starting to see new customers come into the franchise for the AI product and start to use stock content. So we really like this ecosystem that’s starting to happen of growth in both stock and AI for customer sets. So again, I can’t tell you exactly when we cross over, but I really like the hand that we’ve got, and the core business, ex-Envato, is improving. Jarrod Yahes: And Youssef, just to add a note on Data, we came into this year with about $60 million for the visibility in our business and that’s what we communicated at the onset of the year. We’re going to finish the year with well over $100 million of revenue this year and meaningfully outperform our expectations. We’re effectively in a very similar situation looking forward. This is a business that’s lumpy. This is a business that’s characterized by limited visibility, and quite frankly, it makes it tough for us to forecast. We are extremely pleased with a lot of the land-and-expand opportunities that we’re seeing, because whenever you’re winning business from existing clients, it makes it much more visible and much more certain as compared to new customer bookings. And so we’re excited about what we’re seeing with new customer pipelines, but this idea that new customer -- that existing customers have a multitude of ways to expand with Shutterstock should over the long term make this a much more durable and visible business, and we’re really pleased with the way we’re building out those existing customer service lines. Youssef Squali: Thanks. And just one quick one on Envato. You seem to be more excited today about it than you were at acquisition. Can you maybe flesh out the growth you’ve seen there and kind of on a standalone basis, what kind of growth do you think this business can sustain? Paul Hennessy: Yeah. I’ll start. Jarrod can weigh in. Look, I mentioned some of the things that Envato has done of late, really post-acquisition, and we were appropriately conservative with a new acquisition on what that growth opportunity might be, but we’re seeing the work that they did on the customer experience, the work that they’ve done with the rebrand is driving new subs into the franchise. And so we’re more bullish today on the growth and the product market fit of Envato than we were when we acquired the company and so we’re obviously very excited and they’re delivering beyond our expectations. Youssef Squali: All right. Thank you. Paul Hennessy: Thank you. Operator: And one moment for our next question. And our next question will be coming from Bernie McTernan of Needham & Company. Your line is open. Bernie McTernan: Great. Thanks for taking the questions. Jarrod, sad to see you go. Appreciate all the help over the years. Rik, best of luck in the new role. Maybe the potential, trying to think about these standard opportunities from the Data deals. Are those going to be once talking about more meta Data? Are those going to be one-time or are those going to be more recurring revenue? I’m sorry for the background here. Paul Hennessy: Okay. Great. The background sounds very cute, both the dog as well as the daughter. They both sound adorable. And thanks so much for your question. Look, I think, what we’re seeing from our customers is recurring demand for incremental refresh Data, recurring demand for additional services to be layered on top of the first party Data that we have on offer. And that’s really exciting because we know that this R&D effort are only going to expand as investments are made in generative AI across its leading technology platforms. We are privileged to be a go-to trusted source for some of that first party Data, as well as the enhancement and optimization of that first party Data. And quite frankly, when you look at Data and the opportunity there around generative AI, and you look at Giphy, it becomes very clear that Shutterstock is a really durable business with some really exciting growth opportunities. Today, investors are not affording us a terminal multiple. We think that’s going to change as people realize that not only is our core business stabilizing very surely and gradually, but these growth opportunities are really, really exciting and we’re investing aggressively behind what we see. We think the rest of the market will see eventually as well. Bernie McTernan: That’s great. And then just two quick follow-ups. Paul, in the -- in your prepared remarks, you mentioned some new types of content that Envato brings to Computer Vision that wasn’t -- seemingly wasn’t in the Shutterstock library. Can you just dive into that a little bit more, whether it’s types of content or types of Data, whatever it may be? Jarrod Yahes: Yeah. Without getting into the specifics of the secret sauce, one of the things that Envato has been very strong in is templates and fonts, and being able to leverage those both for core traditional content use, but also Data services and Data training. It’s a multiple value in having that. So we’re excited to have them on board and with the access to that supplying content. Bernie McTernan: Great. And then just last one for me, just to follow up on the TikTok-Giphy deal, was TikTok contributing revenue prior to the deal announced this morning? Jarrod Yahes: I don’t want to give any specifics around any partner performance. We don’t even give the total revenue of Giphy broadly, but what I’ll say is they’ve been a good partner and a source of inventory for a long time and we believe that this new agreement will make it even more seamless for their customers and the Giphy experience. So I think it’s a plus to the business. Bernie McTernan: Understood. Should have had my son ask the tough one. Thanks again, guys, and thank you, Jarrod. Paul Hennessy: Bring them back. Bring them back. Thank you. Operator: And one moment for our next question. And our next question is coming from Matthew Cost of MS. Your line is open. Matthew Cost: Great. Good morning. Thanks for taking the questions. The first one is just around the interaction between Envato and the traditional Content products. I think you mentioned during the prepared remarks pretty decent confidence in your ability to keep growing those traditional products. I guess, how are you seeing the go-to-market for those products interact with Envato now that you’ve had them both under the same roof for three months? And then on the sales force side, there were also a few comments in there about just investing aggressively behind the sales force on the Data side. I guess, where are you in the ramp and any learning from ramping that sales force so far? Thank you. Paul Hennessy: Great. I’ll start with the Envato question. Right now, the two products exist in the marketplace, and by the way, they existed in the marketplace prior. And what we’re seeing is by having multiple irons in the fire, both for pack products and subscriptions on Shutterstock and the unlimited offering at Envato, it really provides an entire product suite to address all kind of customer needs. So we’re seeing it to be an incremental move rather than diluted to one or the other. And on the Data side, Jarrod, do you want to talk about the sales force investment and where we are on that? Jarrod Yahes: Yeah. We’ve been hiring steadily, slowly, but surely for our Data sales force. These are strategic sellers who really have a need to partner deeply with some of the world’s most sophisticated technology organizations. We’ve been expanding the diversity of that sales force globally. So we’ve recently made some hires into Europe and Asia. So I think that’s a great step for us and we’re also starting to think about additional Distribution partners. For example, we’re seeing venture capital firms actually recommend our first-party Data to their portfolio companies, which is very exciting for us, as well as traditional service providers start to recommend our first-party Data to some of their technology clients. So we’re really thrilled about the traditional sales force buildout, as well as the additional Distribution that can come from having partnerships with venture capital firms and service providers. Matthew Cost: Great. Thank you. Operator: Yeah. [Operator Instructions] And our next question will be coming from Andrew Boone of JMP Securities. Your line is open. Andrew Boone: Thanks so much for taking my questions. I wanted to ask two follow-ups in terms of AI. Just following up on Bernie’s question, as you guys are revisiting past customers for Data sales, there was a theory early on that, hey, they would continue to buy more Data from you guys. Are you guys seeing incremental purchases of existing forms of Data or can you just talk about the sustainability as you guys go back and resell past customers? And then part of the Distribution that you guys talked about in past quarters with smaller companies, I would just love an update on that in terms of, are deals going to what are hyperscalers and kind of people building next frontier models or are you guys making any progress in terms of smaller companies that are building more bespoke, maybe vertically specific models? Jarrod Yahes: Sure, Andrew. Thanks so much for the question. We are actually seeing existing Data customers continue to purchase refreshed Data from us in the way that we expected. So there is a need for sort of incremental and growth Data. But moreover, one of the things we’ve seen that’s surprising is we’ve actually started to see some of our first instances of re-licensure of the initial corpus of Data that we resold the first time around. So as companies come to the end of a three-year term for an initial corpus of Data that they’ve relicensed, the significant majority of our agreements are term agreements. They need to re-license that Data and we’ve seen them determine that they need that Data for R&D purposes and that there’s a value to that Data. We’ve seen those re-sign again, which is very exciting for us. As you think about the opportunity going forward, the opportunity clearly is around what you would describe as an industry vertical specific application layer or a generative AI application layer for developing applications around Data. There are big opportunities with some of the hyperscalers around LLMs and that’s where a lot of our existing customer demand is coming from. But a lot of the new companies that are coming up that are raising significant funding, those companies are building incredible point solutions, incredible industry vertical specific applications and they can potentially be some of the most exciting new customers for Shutterstock. And I would put Runway and Reka as examples of that customer cohort. Andrew Boone: Thanks. That’s helpful. And I wanted to touch on Content. Paul, you had some great comments earlier in terms of the uptake of generative AI within the core Content business. Can you just talk about that? Help us understand where you are in that process. What’s the potential for that to become a larger portion of the business and maybe just where you are today as we think about that transition into what potentially could be generative AI as a tailwind for the Content portion of the business? Thanks so much. Paul Hennessy: Sure, Andrew. I’ll just remind everyone, we’ve been at this game a long time. We were first out the door by having our AI generative tool available back in, I think, January of 2023, and we’ve been learning, watching and experimenting the entire time. We moved to a package launch earlier this year where customers can come and for a low-priced subscription engage in our product. And what’s fascinating and exciting for us is stock content customers are using the generative AI subscription and their stock content use continues. And in many cases, they’re using more stock content use as they use the generative AI product. In addition, new customers that are coming looking for generative AI are finding it at Shutterstock, engaging in the product, and then going on to buy stock content. So, we always said that this would be a one plus one and generative AI being a new ingredient so that creatives and advertisers can use these products together to create more and we’re actually seeing that come to life now. So, we’re seeing subscriptions grow in that product. It’s growing every single month. And over time, we’ll keep reporting out on how that’s doing and what the effect is having on our stock content business. But right now, it’s additive. And by the way, that’s just on the image side. If you let your mind wander on what we could do with generative video, our generative 3D product, there’s a lot more that we think can be a stock plus AI equaling a bigger aggregate business. Andrew Boone: Thank you. Paul Hennessy: Thank you. Operator: And I would now like to turn the conference back to Paul Hennessy, CEO, for closing remarks. Paul Hennessy: As always, I’d like to thank our team and contributors for their continued efforts and also our customers for continuing to trust Shutterstock as their provider of choice. As we’ve just outlined, this was a record quarter for Shutterstock. I could not be more proud of these results, and importantly, what drove them, being the team’s ability and desire to optimally execute against our strategy each and every day. Thank you. This ends the call for today. Operator: And this concludes today’s conference call. Thank you for participating. You may now disconnect.