10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 __________________________________________________________________________________________________ 

FORM 10-Q

 ___________________________________________________________________________________________________ 

(Mark One)

☒   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the quarterly period ended June 30, 2021

or

☐         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to         

Commission File Number: 001-35669

 _____________________________________________________________________

SHUTTERSTOCK, INC.

(Exact name of registrant as specified in its charter)

 ________________________________________________________

Delaware	80-0812659
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

350 Fifth Avenue, 21st Floor

New York, NY 10118

(Address of principal executive offices, including zip code)

(646) 710-3417

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

 ______________________________________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	SSTK	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   ☒ Yes   ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   ☒ Yes   ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.						☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).			☐	Yes	☒	No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of July 23, 2021, 36,622,833 shares of the registrant’s common stock, $0.01 par value per share, were outstanding.

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Shutterstock, Inc.

FORM 10-Q

Table of Contents 

For the Quarterly Period Ended June 30, 2021

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	4
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations	5
	Consolidated Statements of Comprehensive Income	6
	Consolidated Statements of Stockholders’ Equity	7
	Consolidated Statements of Cash Flows	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	37
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 6.	Exhibits	38
Signatures		40

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, particularly in the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All statements other than statements of historical fact, are forward-looking. Examples of forward-looking statements include, but are not limited to, statements regarding guidance, industry prospects, future business, future results of operations or financial condition, future dividends, our ability to consummate acquisitions and integrate the businesses we have acquired or may acquire into our existing operations, new or planned features, products or services, management strategies, our competitive position and the COVID-19 pandemic. You can identify many forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “aim,” “anticipate,” “believe,” “estimate,” “intend,” “plan,” “predict,” “project,” “seek,” “potential,” “opportunities” and other similar expressions and the negatives of such expressions. However, not all forward-looking statements contain these words. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed or implied by the forward-looking statements contained herein. Such risks and uncertainties include, among others, those discussed under the caption “Risk Factors” in our most recently filed Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (the “SEC”) on February 11, 2021 (our “2020 Form 10-K”), and in our consolidated financial statements, related notes, and the other information appearing elsewhere in the 2020 Form 10-K. such Annual Report, this Quarterly Report on Form 10-Q and our other filings with the SEC. Given these risks and uncertainties, you should not place undue reliance on any forward-looking statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made only as of the date hereof, and we do not intend, and, except as required by law, we undertake no obligation to update any forward-looking statements contained herein after the date of this report to reflect actual results or future events or circumstances.

Unless the context otherwise indicates, references in this Quarterly Report on Form 10-Q to the terms “Shutterstock,” “the Company,” “we,” “our” and “us” refer to Shutterstock, Inc. and its subsidiaries. “Shutterstock,” “Shutterstock Editorial,” “Asset Assurance,” “Offset,” “Bigstock,” “Rex Features,” “PremiumBeat,” “TurboSquid” and “Shutterstock Editor” and their logos are registered trademarks and are the property of Shutterstock, Inc. or one of our subsidiaries. All other trademarks, service marks and trade names appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

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PART I.     FINANCIAL INFORMATION

Item 1.        Financial Statements.

Shutterstock, Inc.

Consolidated Balance Sheets

(In thousands, except par value amount)

(unaudited)

	June 30,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	411,046	$	428,574
Accounts receivable, net of allowance of $2,425 and $4,942	49,756		43,846
Prepaid expenses and other current assets	23,615		16,650
Total current assets	484,417		489,070
Property and equipment, net	49,990		50,906
Right-of-use assets	36,336		39,552
Intangible assets, net	46,409		25,765
Goodwill	149,069		89,413
Deferred tax assets, net	7,867		13,566
Other assets	21,764		21,372
Total assets	$	795,852	$	729,644
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,402	$	2,442
Accrued expenses	73,889		67,909
Contributor royalties payable	30,317		26,336
Deferred revenue	161,935		149,843
Other current liabilities	10,993		10,399
Total current liabilities	282,536		256,929
Lease liabilities	38,678		41,620
Other non-current liabilities	9,304		9,170
Total liabilities	330,518		307,719
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.01 par value; 200,000 shares authorized; 39,173 and 38,803 shares issued and 36,615 and 36,245 shares outstanding as of June 30, 2021 and December 31, 2020, respectively	392		389
Treasury stock, at cost; 2,558 shares as of June 30, 2021 and December 31, 2020	(100,027)		(100,027)
Additional paid-in capital	360,404		360,939
Accumulated comprehensive loss	(7,391)		(7,681)
Retained earnings	211,956		168,305
Total stockholders’ equity	465,334		421,925
Total liabilities and stockholders’ equity	$	795,852	$	729,644

See Notes to Unaudited Consolidated Financial Statements.

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Shutterstock, Inc.

Consolidated Statements of Operations

(In thousands, except for per share data)

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue	$	189,912	$	159,230	$	373,193	$	320,515
Operating expenses:
Cost of revenue	67,757		63,811		129,589		132,934
Sales and marketing	45,896		35,557		87,817		78,217
Product development	11,993		12,485		22,724		25,554
General and administrative	31,041		24,832		61,720		55,484
Total operating expenses	156,687		136,685		301,850		292,189
Income from operations	33,225		22,545		71,343		28,326
Other income / (expense), net	1,323		149		(1,139)		662
Income before income taxes	34,548		22,694		70,204		28,988
Provision for income taxes	5,094		3,707		11,236		5,683
Net income	$	29,454	$	18,987	$	58,968	$	23,305
Earnings per share:
Basic	$	0.81	$	0.53	$	1.62	$	0.65
Diluted	$	0.79	$	0.53	$	1.58	$	0.65
Weighted average shares outstanding:
Basic	36,570		35,652		36,453		35,587
Diluted	37,189		35,906		37,218		35,894

See Notes to Unaudited Consolidated Financial Statements.

5

Shutterstock, Inc.

Consolidated Statements of Comprehensive Income

(In thousands)

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	29,454	$	18,987	$	58,968	$	23,305
Foreign currency translation gain / (loss)	64		254		290		(2,194)
Other comprehensive gain / (loss)	64		254		290		(2,194)
Comprehensive income	$	29,518	$	19,241	$	59,258	$	21,111

See Notes to Unaudited Consolidated Financial Statements.

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Shutterstock, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(unaudited)

							Additional Paid-in Capital		Accumulated Other Comprehensive Income / (Loss)		Retained Earnings
	Common Stock			Treasury Stock
Three Months Ended June 30, 2021	Shares	Amount		Shares	Amount								Total
Balance at March 31, 2021	39,010	$	391	2,558	$	(100,027)	$	357,422	$	(7,455)	$	190,173	$	440,504
Equity-based compensation	—	—		—	—		9,686		—		—		9,686
Issuance of common stock in connection with employee stock option exercises and RSU vesting	244	2		—	—		490		—		—		492
Common shares withheld for settlement of taxes in connection with equity-based compensation	(81)	(1)		—	—		(7,194)		—		—		(7,195)
Cash dividends paid	—	—		—	—		—		—		(7,671)		(7,671)
Other comprehensive income	—	—		—	—		—		64		—		64
Net income	—	—		—	—		—		—		29,454		29,454
Balance at June 30, 2021	39,173	$	392	2,558	$	(100,027)	$	360,404	$	(7,391)	$	211,956	$	465,334
Three Months Ended June 30, 2020
Balance at March 31, 2020	38,119	$	381	2,558	$	(100,027)	$	316,823	$	(8,668)	$	119,218	$	327,727
Equity-based compensation	—	—		—	—		3,636		—		—		3,636
Issuance of common stock in connection with employee stock option exercises and RSU vesting	180	2		—	—		627		—		—		629
Common shares withheld for settlement of taxes in connection with equity-based compensation	(54)	(1)		—	—		(1,674)		—		—		(1,675)
Cash dividends paid	—	—		—	—		—		—		(6,058)		(6,058)
Other comprehensive loss	—	—		—	—		—		254		—		254
Net income	—	—		—	—		—		—		18,987		18,987
Balance at June 30, 2020	38,245	$	382	2,558	$	(100,027)	$	319,412	$	(8,414)	$	132,147	$	343,500
Six Months Ended June 30, 2021
Balance at December 31, 2020	38,803	$	389	2,558	$	(100,027)	$	360,939	$	(7,681)	$	168,305	$	421,925
Equity-based compensation	—	—		—	—		17,896		—		—		17,896
Issuance of common stock in connection with employee stock option exercises and RSU vesting	601	6		—	—		1,795		—		—		1,801
Common shares withheld for settlement of taxes in connection with equity-based compensation	(231)	(3)		—	—		(20,226)		—		—		(20,229)
Cash dividends paid	—	—		—	—		—		—		(15,317)		(15,317)
Other comprehensive loss	—	—		—	—		—		290		—		290
Net income	—	—		—	—		—		—		58,968		58,968
Balance at June 30, 2021	39,173	$	392	2,558	$	(100,027)	$	360,404	$	(7,391)	$	211,956	$	465,334
Six Months Ended June 30, 2020
Balance at December 31, 2019	38,055	$	381	2,558	$	(100,027)	$	312,824	$	(6,220)	$	121,187	$	328,145
Cumulative effect of accounting change (Note 1)	—	—		—	—		—		—		(247)		(247)
Balance at January 1, 2020	38,055	$	381	2,558	$	(100,027)	$	312,824	$	(6,220)	$	120,940	$	327,898
Equity-based compensation	—	—		—	—		9,396		—		—		9,396
Issuance of common stock in connection with employee stock option exercises and RSU vesting	289	3		—	—		626		—		—		629
Common shares withheld for settlement of taxes in connection with equity-based compensation	(99)	(2)		—	—		(3,434)		—		—		(3,436)
Cash dividends paid	—	—		—	—		—		—		(12,098)		(12,098)
Other comprehensive loss	—	—		—	—		—		(2,194)		—		(2,194)
Net income	—	—		—	—		—		—		23,305		23,305
Balance at June 30, 2020	38,245	$	382	2,558	$	(100,027)	$	319,412	$	(8,414)	$	132,147	$	343,500

See Notes to Unaudited Consolidated Financial Statements.

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Shutterstock, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

	Six Months Ended June 30,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	58,968	$	23,305
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	20,243		21,370
Deferred taxes	1,782		693
Non-cash equity-based compensation	17,896		9,396
Bad debt expense	213		1,086
Changes in operating assets and liabilities:
Accounts receivable	(6,056)		(3,279)
Prepaid expenses and other current and non-current assets	(5,892)		49
Accounts payable and other current and non-current liabilities	6,359		(4,045)
Long-term incentives related to acquisitions	—		(7,759)
Contributor royalties payable	1,750		(840)
Deferred revenue	11,953		(3,633)
Net cash provided by operating activities	$	107,216	$	36,343
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(15,337)		(13,966)
Business combination, net of cash acquired	(72,165)		—
Acquisition of content	(3,396)		(1,577)
Security deposit (payment) / release	(65)		105
Net cash used in investing activities	$	(90,963)	$	(15,438)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options	1,801		629
Cash paid related to settlement of employee taxes related to RSU vesting	(20,229)		(3,436)
Payment of cash dividend	(15,317)		(12,098)
Net cash used in financing activities	$	(33,745)	$	(14,905)
Effect of foreign exchange rate changes on cash	(36)		(717)
Net (decrease) / increase in cash, cash equivalents and restricted cash	(17,528)		5,283
Cash, cash equivalents and restricted cash, beginning of period	428,574		305,874
Cash, cash equivalents and restricted cash, end of period	$	411,046	$	311,157
Supplemental Disclosure of Cash Information:
Cash paid for income taxes	$	9,495	$	927

See Notes to Unaudited Consolidated Financial Statements.

8

Shutterstock, Inc.

Notes to Consolidated Financial Statements 

(unaudited)

(1) Summary of Operations and Significant Accounting Policies

Summary of Operations

Shutterstock, Inc. (the “Company” or “Shutterstock”) is a leading global creative platform offering full-service solutions, high-quality content, and tools for brands, businesses and media companies. The Company’s platform brings together users and contributors of content by providing readily-searchable content that our customers pay to license and by compensating contributors as their content is licensed.

The content licensed by the Company’s customers includes:

•Images - consisting of photographs, vectors and illustrations. Images are typically used in visual communications, such as websites, digital and print marketing materials, corporate communications, books, publications and other similar uses.

•Footage - consisting of video clips, premium footage filmed by industry experts and cinema grade video effects, available in HD and 4K formats. Footage is often integrated into websites, social media, marketing campaigns and cinematic productions.

•Music - consisting of high-quality music tracks and sound effects, which are often used to complement images and footage.

•3D Models - following the Company’s acquisition of TurboSquid, Inc. on February 1, 2021, Shutterstock now offers 3D models, used in industries such as advertising, media & video production, gaming, retail, education, design and architecture. See Note 3 Acquisition.

The Company licenses content to its customers. Contributors upload their content to the Company’s web properties in exchange for royalty payments based on customer download activity.

Basis of Presentation

The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all information and footnotes required by GAAP for complete financial statements.

The interim Consolidated Balance Sheet as of June 30, 2021, and the Consolidated Statements of Operations, Comprehensive Income and Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020, and the Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020, are unaudited. The Consolidated Balance Sheet as of December 31, 2020, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures required by GAAP. These unaudited interim financial statements have been prepared on a basis consistent with the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, which include all normal recurring adjustments necessary to fairly state the Company’s financial position as of June 30, 2021, and its consolidated results of operations, comprehensive income and stockholders’ equity for the three and six months ended June 30, 2021 and 2020, and its cash flows for the six months ended June 30, 2021 and 2020. The financial data and the other financial information disclosed in the notes to the financial statements related to these periods are also unaudited. The results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2021 or for any other future annual or interim period.

These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on February 11, 2021. The unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain immaterial changes in presentation have been made to conform the prior period presentation to current period reporting.

9

Shutterstock, Inc.

Notes to Consolidated Financial Statements 

(unaudited)

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements. Actual results could differ from those estimates. Such estimates include, but are not limited to, the determination of the allowance for doubtful accounts, the volume of expected unused licenses for our subscription-based products, the assessment of recoverability of property and equipment, the fair value of acquired goodwill and intangible assets, the amount of non-cash equity-based compensation, the assessment of recoverability of deferred tax assets, the measurement of income tax and contingent non-income tax liabilities and the determination of the incremental borrowing rate used to calculate the lease liability.

Cash and Cash Equivalents

The Company’s cash and cash equivalents consist primarily of cash on hand, bank deposits, money market funds and commercial paper.

Allowance for Doubtful Accounts

The Company’s accounts receivable consists of customer obligations due under normal trade terms, carried at their face value less an allowance for doubtful accounts, if required. The Company determines its allowance for doubtful accounts based on an evaluation of (i) the aging of its accounts receivable considering historical receivables loss rates, (ii) on a customer-by-customer basis, where appropriate, and (iii) the economic environments in which the Company operates.

During the six months ended June 30, 2021, the Company recorded bad debt expense of $0.2 million. As of June 30, 2021 and December 31, 2020, the Company’s allowance for doubtful accounts was approximately $2.4 million and $4.9 million, respectively. The allowance for doubtful accounts is included as a reduction of accounts receivable on the Consolidated Balance Sheets.

The Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU 2016-13”) on January 1, 2020, using the modified retrospective method and recorded a cumulative-effect adjustment of $0.2 million, net of tax, in retained earnings as of January 1, 2020.

Chargeback and Sales Refund Allowance

The Company establishes a chargeback allowance and sales refund reserve allowance based on factors surrounding historical credit card chargeback trends, historical sales refund trends and other information. As of June 30, 2021 and December 31, 2020, the Company’s combined allowance for chargebacks and sales refunds was $0.5 million, which was included as a component of other current liabilities on the Consolidated Balance Sheets.

Revenue Recognition

The majority of the Company’s revenue is earned from the license of content. Content licenses are generally purchased on a monthly or annual basis, whereby a customer pays for a predetermined quantity of content that may be downloaded over a specific period of time, or, on a transactional basis, whereby a customer pays for individual content licenses at the time of download. 

The Company recognizes revenue upon the satisfaction of performance obligations, which generally occurs when content is downloaded by a customer. The Company recognizes revenue on both its subscription-based and transaction-based products when content is downloaded, at which time the license is provided. In addition, management estimates expected unused licenses for subscription-based products and recognizes the estimated revenue associated with the unused licenses as digital content is downloaded and licenses are obtained for such content by the customer during the subscription period. The estimate of unused licenses is based on historical download activity, and future changes in the estimate could impact the timing of revenue recognition of the Company’s subscription products. The Company expenses contract acquisition costs as incurred, to the extent that the amortization period would otherwise be one year or less.

Collectability is reasonably assured at the time the electronic order or contract is entered. The majority of the Company’s customers purchase products by making an electronic payment with a credit card at the time of a transaction. Customer payments received in advance of revenue recognition are contract liabilities and are recorded as deferred revenue. Customers that do not pay in advance are invoiced and are required to make payments under standard credit terms. Collectability for customers who pay on credit terms allowing for payment beyond the date at which service commences is based on a credit evaluation for certain new customers and transaction history with existing customers. 

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Shutterstock, Inc.

Notes to Consolidated Financial Statements 

(unaudited)

The Company recognizes revenue gross of contributor royalties because the Company is the principal in the transaction, as it is the party responsible for the performance obligation and it controls the product or service before transferring it to the customer. The Company also licenses content to customers through third-party resellers. Third-party resellers sell the Company’s products directly to customers as the principal in those transactions. Accordingly, the Company recognizes revenue net of costs paid to resellers.

Recently Adopted Accounting Standard Updates

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes (“ASU-2019-12”). ASU 2019-12 eliminates certain exceptions to the guidance in Topic 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes, enacted changes in tax laws or rates and clarifies the accounting transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. The Company adopted ASU 2019-12, effective January 1, 2021. The impact of adoption of this standard on the consolidated financial statements, including accounting policies, processes and systems, was not material.

(2) Fair Value Measurements and Long-term Investments

Fair Value Measurements

The Company had no assets or liabilities requiring fair value hierarchy disclosures as of June 30, 2021 or December 31, 2020, except as noted below.

Cash Equivalents

Cash equivalents includes money market accounts and are classified as a level 1 measurement based on quoted prices in active markets for identical assets that the reporting entity can access at the measurement date. As of June 30, 2021 and December 31, 2020, the Company had cash equivalent balances of $280.1 million and $250.0 million, respectively.

Other Fair Value Measurements

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments. The Company’s non-financial assets, which include property and equipment, intangible assets and goodwill, are not required to be measured at fair value on a recurring basis. However, if the Company is required to evaluate a non-financial asset for impairment, whether due to certain triggering events or because annual impairment testing is required, a resulting asset impairment would require that the non-financial asset be recorded at fair value.

Long-term Investments

As of June 30, 2021 and December 31, 2020, the Company’s long-term investments were in equity securities with no readily determinable fair value, totaled $20.0 million, and were reported within other assets on the Consolidated Balance Sheets. The Company uses the measurement alternative for these equity investments and their carrying value is reported at cost, adjusted for impairments or any observable price changes in ordinary transactions with identical or similar investments.

On a quarterly basis, the Company evaluates the carrying value of its long-term investments for impairment, which includes an assessment of revenue growth, earnings performance, working capital and general market conditions. As of June 30, 2021, no adjustments to the carrying values of the Company’s long-term investments were identified as a result of this assessment. Changes in performance negatively impacting operating results and cash flows of these investments could result in the Company recording an impairment charge in future periods.

11

Shutterstock, Inc.

Notes to Consolidated Financial Statements 

(unaudited)

(3) Acquisition

TurboSquid, Inc.

On February 1, 2021, the Company completed its acquisition of all of the outstanding shares of TurboSquid, Inc. (“TurboSquid”), for approximately $77.3 million. The total purchase price was paid with existing cash on hand in the three months ended March 31, 2021. The transaction was accounted for using the acquisition method and, accordingly, the results of the acquired business have been included in the Company’s results of operations from the acquisition date. In connection with the acquisition, the Company incurred approximately $1.6 million of transaction costs.

TurboSquid is a Louisiana-based company that operates a marketplace offering more than one million 3D models, a marketplace for 2D images derived from 3D objects and a digital asset management solution. The Company believes this acquisition establishes Shutterstock as the premium destination for 3D models as well as 3D models in an easy-to-use 2D format.

The fair value of consideration transferred in this business combination was allocated to the intangible and tangible assets acquired and liabilities assumed at the acquisition date, with the remaining unallocated amount recorded as goodwill.

The aggregate purchase price was allocated to the assets acquired and liabilities assumed as follows (in thousands):

Assets acquired and liabilities assumed:	Fair Value at Acquisition Date
Cash and cash equivalents	$	5,165
Other assets	1,553
Property and equipment	472
Intangible assets	21,500
Goodwill	59,491
Total assets acquired	$	88,181
Accounts payable, accrued expenses and other liabilities	(4,685)
Contributor royalties payable	(2,243)
Deferred tax liability	(3,923)
Total liabilities assumed	(10,851)
Net assets acquired	$	77,330

The identifiable intangible assets, which include customer relationships, developed technology, trade names and contributor content, have a weighted average life of approximately 8.2 years and are being amortized on a straight-line basis. The fair value of the customer relationships was determined using a variation of the income approach known as the multiple-period excess earnings method. The fair value of the trade names and developed technology were determined using the relief-from-royalty method and the fair value of the contributor content was determined using the cost-to-recreate method.

The goodwill arising from the transaction is primarily attributable to expected operational synergies and is not deductible for income tax purposes.

12

Shutterstock, Inc.

Notes to Consolidated Financial Statements 

(unaudited)

The following unaudited pro forma consolidated financial information (in thousands) reflects the results of operations of the Company for the three and six months ended June 30, 2021 and 2020, as if the TurboSquid acquisition had been completed on January 1, 2020, after giving effect to certain purchase accounting adjustments, primarily related to intangible assets. These pro forma results have been prepared for comparative purposes only and are not necessarily indicative of what the Company’s operating results would have been, had the acquisitions actually taken place at the beginning of the previous annual period:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue
As Reported	$	189,912	$	159,230	$	373,193	$	320,515
Pro Forma	189,912		164,762		375,256		331,485
Income before income taxes
As Reported	$	34,548	$	22,694	$	70,204	$	28,988
Pro Forma	34,548		22,728		71,505		27,569

(4) Property and Equipment

Property and equipment is summarized as follows (in thousands):

	As of June 30, 2021		As of December 31, 2020
Computer equipment and software	$	208,018	$	193,141
Furniture and fixtures	10,246		10,235
Leasehold improvements	19,380		19,382
Property and equipment	237,644		222,758
Less accumulated depreciation	(187,654)		(171,852)
Property and equipment, net	$	49,990	$	50,906

Depreciation expense related to property and equipment was $7.9 million and $9.6 million for the three months ended June 30, 2021 and 2020, respectively, and $15.9 million and $18.9 million for the six months ended June 30, 2021 and 2020, respectively. Cost of revenues included depreciation expense of $7.1 million and $8.6 million for the three months ended June 30, 2021 and 2020, respectively, and $14.2 million and $16.8 million for the six months ended June 30, 2021 and 2020, respectively. General and administrative expense included depreciation expense of $0.8 million and $1.0 million for the three months ended June 30, 2021 and 2020, respectively, and $1.7 million and $2.1 million for the six months ended June 30, 2021 and 2020, respectively.

Capitalized Internal-Use Software

The Company capitalized costs related to the development of internal-use software of $7.2 million and $6.5 million for the three months ended June 30, 2021 and 2020, respectively, and $14.2 million and $13.1 million for the six months ended June 30, 2021 and 2020, respectively. Capitalized amounts are included as a component of property and equipment under computer equipment and software on the Consolidated Balance Sheets.

The portion of total depreciation expense related to capitalized internal-use software was $6.6 million and $7.8 million for the three months ended June 30, 2021 and 2020, respectively, and $13.3 million and $14.9 million for the six months ended June 30, 2021 and 2020, respectively. Depreciation expense related to capitalized internal-use software is included in cost of revenue in the Consolidated Statements of Operations.

As of June 30, 2021 and December 31, 2020, the Company had capitalized internal-use software of $38.9 million and $38.0 million, respectively, net of accumulated depreciation, which was included in property and equipment, net.

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Shutterstock, Inc.

Notes to Consolidated Financial Statements 

(unaudited)

(5) Goodwill and Intangible Assets

Goodwill

The Company’s goodwill balance is attributable to its Content reporting unit and is tested for impairment annually on October 1 or upon a triggering event. No triggering events were identified during the six months ended June 30, 2021.

The following table summarizes the changes in the Company’s goodwill balance during the six months ended June 30, 2021 (in thousands):

	Goodwill
Balance as of December 31, 2020	$	89,413
Goodwill related to acquisitions	$	59,491
Foreign currency translation adjustment	165
Balance as of June 30, 2021	$	149,069

Intangible Assets

Intangible assets consisted of the following as of June 30, 2021 and December 31, 2020 (in thousands):

	As of June 30, 2021							As of December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Life (Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing intangible assets:
Customer relationships	$	27,282	$	(12,181)	$	15,101	10	$	18,132	$	(11,032)	$	7,100
Trade name	8,926		(6,592)		2,334		8	6,669		(6,328)		341
Developed technology	14,763		(6,131)		8,632		4	6,930		(5,039)		1,891
Contributor content	32,623		(12,416)		20,207		8	26,669		(10,378)		16,291
Patents	259		(124)		135		18	259		(117)		142
Total	$	83,853	$	(37,444)	$	46,409		$	58,659	$	(32,894)	$	25,765

Amortization expense was $2.3 million and $1.2 million for the three months ended June 30, 2021 and 2020, respectively, and $4.4 million and $2.5 million for the six months ended June 30, 2021 and 2020, respectively. Cost of revenue included amortization expense of $1.2 million and $0.7 million for the three months ended June 30, 2021 and 2020, respectively, and $2.3 million and $1.3 million for the six months ended June 30, 2021 and 2020, respectively. General and administrative expense included amortization expense of $1.1 million and $0.5 million for the three months ended June 30, 2021 and 2020, respectively, and $2.0 million and $1.2 million for the six months ended June 30, 2021 and 2020, respectively.

The Company determined that there was no indication of impairment of the intangible assets for any period presented. Estimated amortization expense is: $4.6 million for the remaining six months of 2021, $8.9 million in 2022, $8.6 million in 2023, $7.6 million in 2024, $4.3 million in 2025, $3.2 million in 2026 and $9.2 million thereafter.

(6) Accrued Expenses 

Accrued expenses consisted of the following (in thousands):

	As of June 30, 2021		As of December 31, 2020
Compensation	$	27,016	$	31,499
Non-income taxes	20,937		17,164
Website hosting and marketing fees	12,831		9,991
Other expenses	13,105		9,255
Total accrued expenses	$	73,889	$	67,909

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Shutterstock, Inc.

Notes to Consolidated Financial Statements 

(unaudited)

(7) Stockholders’ Equity and Equity-Based Compensation

Stockholders’ Equity

Common Stock

The Company issued approximately 163,000 and 126,000 shares of common stock during the three months ended June 30, 2021 and 2020, respectively, and 370,000 and 190,000 for the six months ended June 30, 2021 and 2020, respectively, related to the exercise of stock options and the vesting of Restricted Stock Units.

Treasury Stock

In October 2015, the Company’s Board of Directors approved a share repurchase program, authorizing the Company to purchase up to $100 million of its common stock. In February 2017, the Company’s Board of Directors approved an increase to the share repurchase program, authorizing the Company to repurchase up to an additional $100 million of its outstanding common stock. During the six months ended June 30, 2021 and 2020, the Company did not repurchase any shares of its common stock under the share repurchase program. As of June 30, 2021, the Company had $100 million of remaining authorization for purchases under the share repurchase program.

The Company expects to fund future repurchases, if any, through a combination of cash on hand, cash generated by operations and future financing transactions, if appropriate. Accordingly, the share repurchase program is subject to the Company having available cash to fund repurchases. Under the share repurchase program, management is authorized to purchase shares of the Company’s common stock from time to time through open market purchases or privately negotiated transactions at prevailing prices as permitted by securities laws and other legal requirements, and subject to market conditions and other factors.

Dividends

The Company declared and paid cash dividends of $0.21 and $0.42 per share of common stock, or $7.7 million and $15.3 million, during the three and six months ended June 30, 2021, respectively, and $0.17 and $0.34 per share of common stock, or $6.1 million and $12.1 million, during the three and six months ended June 30, 2020, respectively.

On July 19, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.21 per share of outstanding common stock payable on September 16, 2021 to stockholders of record at the close of business on September 2, 2021. Future declarations of dividends are subject to the final determination of the Board of Directors, and will depend on, among other things, the Company’s future financial condition, results of operations, capital requirements, capital expenditure requirements, contractual restrictions, anticipated cash needs, business prospects, provisions of applicable law and other factors the Board of Directors may deem relevant.

Equity-Based Compensation

The Company recognizes stock-based compensation expense for all equity-based payment awards, including employee Restricted Stock Units and Performance-based Restricted Stock Units (“PRSUs” and, collectively with Restricted Stock Units, “RSUs”) and stock options granted under the Company’s Amended and Restated 2012 Omnibus Equity Incentive Plan (the “2012 Plan”), based on the fair value of each award on the grant date.

15

Shutterstock, Inc.

Notes to Consolidated Financial Statements 

(unaudited)

The following table summarizes non-cash equity-based compensation expense, net of forfeitures, by financial statement line item included in the accompanying Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (in thousands): 

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Cost of revenue	$	194	$	99	$	358	$	150
Sales and marketing	926		374		1,393		834
Product development	1,799		1,068		3,028		2,193
General and administrative	6,767		2,095		13,117		6,219
Total	$	9,686	$	3,636	$	17,896	$	9,396

The following table summarizes non-cash equity-based compensation expense, net of forfeitures, by award type included in the accompanying Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Stock options	$	177	$	414	$	352	$	1,730
RSUs	9,509		3,222		17,544		7,666
Total	$	9,686	$	3,636	$	17,896	$	9,396

Stock Option Awards

During the six months ended June 30, 2021, no options to purchase shares of its common stock were granted. As of June 30, 2021, there were approximately 300,000 options vested and exercisable with a weighted average exercise price of $34.43. As of June 30, 2021, the total unrecognized compensation charge related to non-vested options was approximately $1.3 million, which is expected to be recognized through 2023.

Restricted Stock Unit Awards

During the six months ended June 30, 2021, the Company had RSU grants, net of forfeitures, of approximately 382,000. As of June 30, 2021, there are approximately 1,242,000 non-vested RSUs outstanding with a weighted average grant-date fair value of $56.89. As of June 30, 2021, the total unrecognized non-cash equity-based compensation charge related to the non-vested RSUs was approximately $56.7 million, which is expected to be recognized through 2024.

During the six months ended June 30, 2021 and 2020, shares of common stock with an aggregate value of $20.2 million and $3.4 million were withheld upon vesting of RSUs and paid in connection with related remittance of employee withholding taxes to taxing authorities.

(8) Revenue

The Company distributes its content offerings through two primary channels:

E-commerce: The majority of the Company’s customers license content directly through the Company’s self-service web properties. E-commerce customers have the flexibility to purchase a subscription plan that is paid on a monthly or annual basis or to license content on a transactional basis. These customers generally license content under the Company’s standard or enhanced licenses, with additional licensing options available to meet customers’ individual needs. E-commerce customers typically pay the full amount of the purchase price in advance or at the time of license, generally with a credit card.

Enterprise: The Company also has a base of customers with unique content, licensing and workflow needs. These customers benefit from communication with dedicated sales professionals, service and research teams which provide a number of tailored enhancements to their creative workflows including non-standard licensing rights, multi-seat access, ability to pay on credit terms, multi-brand licensing packages, increased indemnification protection and content licensed for use-cases outside of those available on the E-commerce platform.

16

Shutterstock, Inc.

Notes to Consolidated Financial Statements 

(unaudited)

The Company’s revenues by distribution channel for the three and six months ended June 30, 2021 and 2020 are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
E-commerce	$	120,715	$	98,164	$	239,115	$	197,900
Enterprise	69,197		61,066		134,078		122,615
Total Revenues	$	189,912	$	159,230	$	373,193	$	320,515

The June 30, 2021 deferred revenue balance will be earned as content is downloaded or upon the expiration of subscription-based products, and nearly all is expected to be earned within the next twelve months. $99.2 million of total revenue recognized for the six months ended June 30, 2021 was reflected in deferred revenue as of December 31, 2020.

(9) Other Income / (Loss), net

The following table presents a summary of the Company’s other income and expense activity included in the accompanying Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Foreign currency gain / (loss)	$	1,277	$	132	$	(1,233)	$	(466)
Interest income, net	46		17		94		1,128
Total other income / (loss)	$	1,323	$	149	$	(1,139)	$	662

(10) Income Taxes

The Company’s effective tax rates yielded a net expense of 14.7% and 16.3% for the three months ended June 30, 2021 and 2020, respectively, and a net expense of 16.0% and 19.6% for the six months ended June 30, 2021 and 2020, respectively.

During the three months ended June 30, 2021, the net effect of discrete items decreased the effective tax rate by 5.3%. For the six months ended June 30, 2021, the net effect of discrete items decreased the effective tax rate by 4.0%. The discrete items for the three and six months ended June 30, 2021, primarily relate to windfall tax benefits associated with equity-based compensation. Excluding discrete items, the Company’s effective tax rate would have been 20.0% for the three and six months ended June 30, 2021.

During the three months ended June 30, 2020, the net effect of discrete items decreased the effective tax rate by 0.3%. For the six months ended June 30, 2020, the effective tax rate increased by 1.6% as a result of a loss jurisdiction with no tax benefit. Discrete items further increased the effective tax rate by 1.4%. Excluding the discrete items, the Company’s effective tax rate would have been 16.6% for the three and six months ended June 30, 2020.

The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding a loss jurisdiction with no tax benefit and the application of discrete items, if any, in the applicable period.

During the three and six months ended June 30, 2021 and 2020, uncertain tax positions recorded by the Company were not significant. To the extent the remaining uncertain tax positions are ultimately recognized, the Company’s effective tax rate may be impacted in future periods.

The Company recognizes interest expense and tax penalties related to unrecognized tax benefits in income tax expense in the Consolidated Statements of Operations. The Company’s accrual for interest and penalties related to unrecognized tax benefits was not significant for the three and six months ended June 30, 2021 and 2020.

During the six months ended June 30, 2021 and 2020, the Company paid net cash taxes of $9.5 million and $0.9 million, respectively.

17

Shutterstock, Inc.

Notes to Consolidated Financial Statements 

(unaudited)

(11) Net Income Per Share

Basic net income per share is computed using the weighted average number of shares of common stock outstanding for the period, excluding unvested RSUs and stock options. Diluted net income per share is based upon the weighted average shares of common stock outstanding for the period plus dilutive potential shares of common stock, including unvested RSUs and stock options using the treasury stock method.

The following table sets forth the computation of basic and diluted net income per share for the three and six months ended June 30, 2021 and 2020 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	29,454	$	18,987	$	58,968	$	23,305
Shares used to compute basic net income per share	36,570		35,652		36,453		35,587
Dilutive potential common shares
Stock options	242		39		233		53
Unvested restricted stock awards	377		215		532		254
Shares used to compute diluted net income per share	37,189		35,906		37,218		35,894
Basic net income per share	$	0.81	$	0.53	$	1.62	$	0.65
Diluted net income per share	$	0.79	$	0.53	$	1.58	$	0.65
Dilutive shares included in the calculation	1,221		1,304		1,328		1,080
Anti-dilutive shares excluded from the calculation	2		1,152		10		1,148

(12) Geographic Information

The following table presents the Company’s revenue based on customer location (in thousands): 

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
North America	$	68,954	$	56,211	$	133,263	$	113,229
Europe	64,778		52,207		127,055		106,003
Rest of the world	56,180		50,812		112,875		101,283
Total revenue	$	189,912	$	159,230	$	373,193	$	320,515

 The United States, included in North America in the above table, accounted for 31% and 32% of consolidated revenue for the six months ended June 30, 2021 and 2020, respectively. No other country accounts for more than 10% of the Company’s revenue in any period presented.

The Company’s long-lived tangible assets were located as follows (in thousands):

	As of June 30,		As of December 31,
	2021		2020
North America	$	42,324	$	43,451
Europe	7,470		7,192
Rest of the world	196		263
Total long-lived tangible assets	$	49,990	$	50,906

The United States, included in North America in the above table, accounted for 75% of total long-lived tangible assets as of June 30, 2021 and December 31, 2020. No other country accounts for more than 10% of the Company’s long-lived tangible assets in any period presented.

18

Shutterstock, Inc.

Notes to Consolidated Financial Statements 

(unaudited)

(13) Commitments and Contingencies

As of June 30, 2021, the Company had total non-lease obligations in the amount of approximately $45.4 million, which consisted primarily of minimum royalty guarantees and unconditional purchase obligations related to contracts for infrastructure and other business services. As of June 30, 2021, the Company’s non-lease obligations for the remainder of 2021 and for the years ending December 31, 2022, 2023, 2024 and 2025 were approximately $14.2 million, $14.2 million, $9.9 million, $4.7 million and $2.1 million, respectively.

Legal Matters

From time to time, the Company may become party to litigation in the ordinary course of business, including direct claims brought by or against the Company with respect to intellectual property, contracts, employment and other matters, as well as claims brought against the Company’s customers for whom the Company has a contractual indemnification obligation. The Company assesses the likelihood of any adverse judgments or outcomes with respect to these matters and determines loss contingency assessments on a gross basis after assessing the probability of incurrence of a loss and whether a loss is reasonably estimable. In addition, the Company considers other relevant factors that could impact its ability to reasonably estimate a loss. A determination of the amount of reserves required, if any, for these contingencies is made after analyzing each matter. The Company reviews reserves, if any, at least quarterly and may change the amount of any such reserve in the future due to new developments or changes in strategy in handling these matters. Although the results of litigation and threats of litigation, investigations and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these matters will not have a material adverse effect on its business, consolidated financial position, results of operations, or cash flows. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. The Company currently has no material active litigation matters and, accordingly, no material reserves related to litigation.

Indemnification and Employment Agreements

In the ordinary course of business, the Company enters into contractual arrangements under which it agrees to provide indemnification of varying scope and terms to customers with respect to certain matters, including, but not limited to, losses arising out of the breach of the Company’s intellectual property warranties for damages to the customer directly attributable to the Company’s breach. The Company is not responsible for any damages, costs, or losses to the extent such damages, costs or losses arise as a result of any modifications made by the customer, or the context in which content is used. The standard maximum aggregate obligation and liability to any one customer for any single claim is generally limited to ten thousand dollars but can range to $250,000, with certain exceptions for which our indemnification obligation are uncapped. As of June 30, 2021, the Company had recorded no material liabilities related to indemnification obligations for loss contingencies. Additionally, the Company believes that it has the appropriate insurance coverage in place to adequately cover such indemnification obligations, if necessary.

Pursuant to the Company’s charter documents and separate written indemnification agreements, the Company has certain indemnification obligations to its executive officers, certain employees and directors, as well as certain former officers and directors.

The Company has also entered into employment agreements with its executive officers and certain employees. These agreements specify various employment-related matters, including annual compensation, performance incentive bonuses, and severance benefits in the event of termination in the event of a change in control or otherwise, with or without cause.

(14) Subsequent Events

In July 2021, the Company acquired Pattern89 Inc., Datasine Limited and assets from Shotzr, Inc. The aggregate cash consideration was approximately $35 million, and is subject to customary working capital and other adjustments, paid from existing cash on hand. These three entities provide data driven insights through their artificial intelligence platforms. The Company is currently evaluating the accounting model for these transactions.

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Item 2.         Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read together with our interim consolidated unaudited financial statements and related notes contained elsewhere in this Quarterly Report on Form 10-Q and with information contained in our other filings, including the audited consolidated financial statements included in our 2020 Form 10-K.

In addition to historical consolidated financial information, this discussion contains forward-looking statements including statements about our plans, estimates and beliefs. These statements involve risks and uncertainties and our actual results could differ materially from those expressed or implied in forward-looking statements. See “Forward Looking Statements” above. See also the “Risk Factors” disclosures contained in our 2020 Form 10-K for additional discussion of the risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements.

For a discussion as to how COVID-19 has affected our business, see “COVID-19 Update” below.

Overview and Recent Developments

Shutterstock is a leading global creative platform offering full-service solutions, high-quality content, and tools for brands, businesses and media companies. Our platform brings together users and contributors of content by providing readily-searchable content that our customers pay to license and by compensating contributors as their content is licensed.

The content licensed by our customers includes:

•Images - consisting of photographs, vectors and illustrations. Images are typically used in visual communications, such as websites, digital and print marketing materials, corporate communications, books, publications and other similar uses.

•Footage - consisting of video clips, premium footage filmed by industry experts and cinema grade video effects, available in HD and 4K formats. Footage is often integrated into websites, social media, marketing campaigns and cinematic productions.

•Music - consisting of high-quality music tracks and sound effects, which are often used to complement images and footage.

•3D Models - following our acquisition of TurboSquid, Inc. (“TurboSquid”) on February 1, 2021, we now offer 3D models, used in industries such as advertising, media & video production, gaming, retail, education, design and architecture.

For customers seeking specialized solutions, we also create custom, on-brand content by matching our global contributor network to the unique needs of our customers. This solution allows us to offer customers a fast and scalable way to produce cost-effective content that is in line with the visual footprint of their brand. We typically offer a royalty-free, non-exclusive license, and the processes we maintain to properly license content and the indemnification protections we provide allow individuals and businesses of all sizes, including media agencies, publishers, production companies and creative service providers, to confidently utilize such content for their unique commercial or editorial needs.

Over 2.0 million active, paying customers contributed to our revenue for the twelve-month period ended June 30, 2021. As of June 30, 2021, more than 1.8 million approved contributors made their images, footage and music tracks available in our collection, which has grown to more than 380 million images and more than 22 million footage clips as of June 30, 2021. This makes our collection of content one of the largest of its kind, and we delivered 90.7 million paid downloads to our customers across all of our brands during the six months ended June 30, 2021.

Through our platform, we generate revenue by licensing content to our customers. During the six months ended June 30, 2021, 64% of our revenue and the majority of our content licenses came from our E-commerce sales channel. The majority of our customers license content directly through our self-service web properties, including our Shutterstock.com, bigstock.com, premiumbeat.com and turbosquid.com websites. E-commerce customers have the ability to purchase plans that are paid on either a monthly or annual basis or to license content on a transactional basis. E-commerce customers generally license content under our standard or enhanced licenses, with additional licensing options available to meet customers’ individual needs.

Customers in our Enterprise sales channel generally have unique content, licensing and workflow needs. These customers benefit from communication with our dedicated sales, service and research teams which provide a number of personalized enhancements to their creative workflows including non-standard licensing rights, multi-seat access, ability to pay on credit terms, multi-brand licensing packages, increased indemnification protection and content licensed for use-cases outside of those

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available on our E-commerce platform. Customers in our enterprise sales channel may also benefit from our API platform as well as access to Shutterstock Editorial, which includes our library of editorial images and videos and Shutterstock Studios, our offering that provides custom, high-quality content matched with production tools and services. Our Enterprise sales channel provided approximately 36% of our revenue for the six months ended June 30, 2021.

As the use cases for our creative solutions expand, we believe our customers are seeking alternative means to consume our offerings. As a result, we have seen strong growth in customers purchasing monthly subscription products. Our monthly subscriptions provide for a fixed number of content licenses that may be downloaded during the period. Our subscription-based pricing model makes the creative process easier because customers can download content in our collection for use in their creative process without incremental costs, which provides greater creative freedom and helps improve work product. In addition, customers may also purchase licenses through other contractual plans where the customer commits to buy a predetermined quantity of content licenses that may be downloaded over a period of time, generally between one month to one year. For users who need less content, individual content licenses may also be purchased on a transactional basis, paid for at the time of download.

Contributors of content typically earn a royalty each time their work is licensed. Contributors earn royalties based on our published earnings schedule that is based on annual licensing volume, which determines the contributor’s earnings tier and the purchase option under which the content was licensed. Royalties represent the largest component of our operating expenses, are reported within cost of revenue, tend to fluctuate proportionately with revenue and paid downloads and may be impacted by the mix of products sold.

In July of 2021, through its newly formed entity Shutterstock.AI, Inc. (“Shutterstock.AI”), the Company acquired Pattern89, Inc., DataSine Limited, and assets from Shotzr, Inc., three artificial intelligence entities that provide data driven insights through their artificial intelligence platforms. The aggregate purchase price was approximately $35 million.

Shutterstock.AI will commercialize data assets within Shutterstock’s content library and enable companies to grow their capabilities in computer vision and content insights. In addition, with artificial intelligence tools obtained from the acquisitions, the Company will develop predictive performance capabilities to help customers make more data-informed content decisions.

COVID-19 Update

In December 2019, a novel coronavirus disease (“COVID-19”) was initially reported and on March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. Our operations have been impacted by office closures globally and restrictions on employee travel and in-person meetings, however, we have generally been able to deliver our services remotely. We believe the economic uncertainty caused by COVID-19 has had an impact on our customers and their ability to spend marketing budgets on our products, in varying degrees during 2020 and into 2021. See Item 1A. Risk Factors in our 2020 Form 10-K for further discussion of the possible impact of the COVID-19 pandemic on our business.

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Key Operating Metrics

We regularly review a number of key operating metrics to evaluate our business, determine the allocation of resources and make decisions regarding business strategies. We believe that these metrics can be useful for understanding the underlying trends in our business. The following table summarizes our key operating metrics, which are unaudited, for the three and six months ended June 30, 2021 and 2020:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Subscribers (end of period)	321,000		223,000		321,000		223,000
Subscriber revenue (in millions)	$	78.1	$	62.7	$	154.6	$	126.6
Average revenue per customer (last twelve months)	$	356	$	326	$	356	$	326
Paid downloads (in millions)	44.9		44.0		90.7		90.8
Revenue per download	$	4.17	$	3.61	$	4.07	$	3.51
Content in our collection (end of period, in millions):
Images	380		340		380		340
Footage clips	22		19		22		19

Subscribers

We define subscribers as those customers who purchase one or more of our monthly recurring products for a continuous period of at least three months, measured as of the end of the reporting period. We believe the number of subscribers is an important metric that provides insight into our monthly recurring business and its growth. We believe that an increase in our number of subscribers is an indicator of engagement in our platform and potential for future growth.

Subscriber Revenue

We define subscriber revenue as the revenue generated from subscribers during the period. We believe subscriber revenue, together with our number of subscribers, provide insight into the portion of our business and growth driven by our monthly recurring products.

Average Revenue Per Customer

Average revenue per customer is calculated by dividing total revenue for the last twelve month period by customers. We define customers as total active, paying customers that contributed to total revenue over the last twelve month period. Changes in our average revenue per customer will be driven by changes in the mix of our subscription-based products and the pricing in our transactional business.

Paid Downloads

We define paid downloads as the number of downloads that our customers make in a given period of our content. Paid downloads exclude custom content and downloads of content that are offered to customers for no charge, including our free image of the week. Measuring the number of paid downloads that our customers make in a given period is important because they are the primary method of delivering licensed content, which drives a significant portion of the Company’s revenue and contributor royalties.

Revenue per Download

We define revenue per download as the amount of revenue recognized in a given period divided by the number of paid downloads in that period excluding revenue from custom content and revenue that is not derived from or associated with content licenses. This metric captures any changes in our pricing, including changes resulting from the impact of competitive pressures, as well as the mix of licensing options that our customers choose, some of which generate more revenue per download than others, and the impact that changes in foreign currency rates have on our pricing. Changes in revenue per download are primarily driven by the introduction of new product offerings, changes in product mix and customer utilization of our products.

22

Content in our Collection

We define content in our collection as the total number of approved images (photographs, vectors and illustrations) and footage (in number of clips) in our library on shutterstock.com at the end of the period. We exclude content from this collection metric that is not uploaded directly to our site but is available for license by our customers through an application program interface, custom content and certain content that may be licensed for editorial use only. We believe that our large selection of high-quality content enables us to attract and retain customers and drives our network effect.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires our management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure or inclusion of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the period. We evaluate our significant estimates on an ongoing basis, including, but not limited to, estimates related to allowance for doubtful accounts, the volume of expected unused licenses used in revenue recognition for our subscription-based products, the fair value of acquired goodwill and intangible assets and income tax provisions. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

We believe that the policies, assumptions and estimates associated with our revenue recognition, allowance for doubtful accounts, goodwill and intangible assets and accounting for income taxes have the greatest potential impact on our financial statements. Therefore, we consider these to be our critical accounting policies and estimates.

A description of our critical accounting policies that involve significant management judgments appears in our 2020 Form 10-K, under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates.”

See Note 1 to our Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a full description of the impact of the adoption of new accounting standards on our financial statements. There have been no material changes to our critical accounting policies and estimates as compared to our critical accounting policies and estimates included in our 2020 Form 10-K.

23

Key Components of Our Results of Operations

Revenue

We distribute our content offerings through two primary channels:

E-commerce: The majority of our customers license content directly through our self-service web properties. E-commerce customers have the flexibility to purchase a subscription-based plan that is paid on a monthly or annual basis or to license content on a transactional basis. These customers generally license content under our standard or enhanced licenses, with additional licensing options available to meet customers’ individual needs. E-commerce customers typically pay the full amount of the purchase price in advance or at the time of license, generally with a credit card.

Enterprise: We also have a base of customers with unique content, licensing and workflow needs. These customers benefit from communication with our dedicated sales professionals, service and research teams which provide a number of tailored enhancements to their creative workflows including non-standard licensing rights, multi-seat access, ability to pay on credit terms, multi-brand licensing packages, increased indemnification protection and content licensed for use-cases outside of those available on the e-commerce platform.

The Company’s revenues by distribution channel for the three and six months ended June 30, 2021 and 2020 are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
E-commerce	$	120,715	$	98,164	$	239,115	$	197,900
Enterprise	69,197		61,066		134,078		122,615
Total Revenues	$	189,912	$	159,230	$	373,193	$	320,515

Costs and Expenses

Cost of Revenue. Cost of revenue consists of royalties paid to contributors, credit card processing fees, content review costs, customer service expenses, infrastructure and hosting costs related to maintaining our creative platform and cloud-based software platform, depreciation and amortization of capitalized internal-use software, content and technology intangible assets, allocated facility costs and other supporting overhead costs. Cost of revenue also includes employee compensation, including non-cash equity-based compensation, bonuses and benefits associated with the maintenance of our creative platform and cloud-based software platform.

Sales and Marketing. Sales and marketing expenses include third-party marketing, advertising, branding, public relations and sales expenses. Sales and marketing expenses also include associated employee compensation, including non-cash equity-based compensation, bonuses and benefits, and commissions as well as allocated facility and other supporting overhead costs.

Product Development. Product development expenses consist of employee compensation, including non-cash equity-based compensation, bonuses and benefits, and expenses related to vendors engaged in product management, design, development and testing of our websites and products. Product development costs also includes software and other IT equipment costs, allocated facility expenses and other supporting overhead costs.

General and Administrative. General and administrative expenses include employee compensation, including non-cash equity-based compensation, bonuses and benefits for executive, finance, accounting, legal, human resources, internal information technology, internet security, business intelligence and other administrative personnel. In addition, general and administrative expenses include outside legal, tax and accounting services, bad debt expense, insurance, facilities costs, other supporting overhead costs and depreciation and amortization expense.

Other Income / (Expense), Net. Other income / (expense), net consists of non-operating costs such as foreign currency transaction gains and losses in addition to interest income.

Income Taxes. We compute income taxes using the asset and liability method, under which deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted statutory income tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce net deferred tax assets to the amount expected to be realized.

24

Results of Operations

The following table presents our results of operations for the periods indicated. The period-to-period comparisons of results are not necessarily indicative of results for future periods.

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(in thousands)
Consolidated Statements of Operations:
Revenue	$	189,912	$	159,230	$	373,193	$	320,515
Operating expenses:
Cost of revenue	67,757		63,811		129,589		132,934
Sales and marketing	45,896		35,557		87,817		78,217
Product development	11,993		12,485		22,724		25,554
General and administrative	31,041		24,832		61,720		55,484
Total operating expenses	156,687		136,685		301,850		292,189
Income from operations	33,225		22,545		71,343		28,326
Other income / (expense), net	1,323		149		(1,139)		662
Income before income taxes	34,548		22,694		70,204		28,988
Provision for income taxes	5,094		3,707		11,236		5,683
Net income	$	29,454	$	18,987	$	58,968	$	23,305

The following table presents the components of our results of operations for the periods indicated as a percentage of revenue:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Consolidated Statements of Operations:
Revenue	100	%	100	%	100	%	100	%
Operating expenses:
Cost of revenue	36	%	40	%	35	%	41	%
Sales and marketing	24	%	22	%	24	%	24	%
Product development	6	%	8	%	6	%	8	%
General and administrative	16	%	16	%	17	%	17	%
Total operating expenses	83	%	86	%	81	%	91	%
Income from operations	17	%	14	%	19	%	9	%
Other income / (expense), net	1	%	—	%	—	%	—	%
Income before income taxes	18	%	14	%	19	%	9	%
Provision for income taxes	3	%	2	%	3	%	2	%
Net income	16	%	12	%	16	%	7	%

__________________________________

Note: Due to rounding, percentages may not sum to totals.

25

Comparison of the Three Months Ended June 30, 2021 and 2020

The following table presents our results of operations for the periods indicated:

	Three Months Ended June 30,
	2021		2020		$ Change		% Change
	(in thousands)
Consolidated Statements of Operations:
Revenue	$	189,912	$	159,230	$	30,682	19	%
Operating expenses:
Cost of revenue	67,757		63,811		3,946		6
Sales and marketing	45,896		35,557		10,339		29
Product development	11,993		12,485		(492)		(4)
General and administrative	31,041		24,832		6,209		25
Total operating expenses	156,687		136,685		20,002		15
Income from operations	33,225		22,545		10,680		47
Other income / (expense), net	1,323		149		1,174		*
Income before income taxes	34,548		22,694		11,854		52
Provision for income taxes	5,094		3,707		1,387		37
Net income	$	29,454	$	18,987	$	10,467	55	%

__________________________________

*    Percentage change is not meaningful

Revenue

Revenue increased by $30.7 million, or 19%, to $189.9 million in the three months ended June 30, 2021 compared to the same period in 2020. On a constant currency basis, revenue increased approximately 16% in the three months ended June 30, 2021, compared to the same period in 2020.

The Company’s E-commerce revenues increased by 23%, to $120.7 million in the three months ended June 30, 2021, compared to the same period in 2020. On a constant currency basis, the Company’s E-commerce revenues increased by 20% in the three months ended June 30, 2021, compared to the same period in 2020. During the three months ended June 30, 2021, growth in our E-commerce sales channel was primarily driven by increased subscriber revenue. E-commerce revenues also benefited from our acquisition of TurboSquid on February 1, 2021.

The Company’s Enterprise revenues increased by 13%, to $69.2 million in the three months ended June 30, 2021, compared to the same period in 2020. On a constant currency basis, the Company’s Enterprise revenues increased by 9% in the three months ended June 30, 2021, compared to the same period in 2020. The Company has continued to execute on its strategy to respond to market trends including making updates to product offerings and continuously improving our platform. We believe these enhancements impacted our Enterprise sales operations during the period and is one of the drivers of the increased deferred revenue balance as of June 30, 2021.

In the three months ended June 30, 2021 and 2020, we delivered 44.9 million and 44.0 million paid downloads, respectively, and our revenue per download was $4.17 and $3.61 for the three months ended June 30, 2021 and 2020, respectively. During the three months ended June 30, 2021, the increase in revenue per download was primarily due to changes in product mix.

Changes in our revenue by region were as follows: revenue from North America increased by $12.7 million, or 23%, to $69.0 million, revenue from Europe increased by $12.6 million, or 24%, to $64.8 million and revenue from outside Europe and North America increased by $5.4 million, or 11%, to $56.2 million, in the three months ended June 30, 2021 compared to the same period in 2020.

26

Costs and Expenses

Cost of Revenue. Cost of revenue increased by $3.9 million, or 6% to $67.8 million in the three months ended June 30, 2021 compared to the same period in 2020, due to higher royalty expense and credit card fees, which is in line with the increase in revenue and paid downloads. These amounts are partially offset by lower content procurement costs and depreciation and amortization expense. We expect that our cost of revenue will continue to fluctuate in line with changes in revenue and paid downloads.

Sales and Marketing. Sales and marketing expenses increased by $10.3 million, or 29%, to $45.9 million in the three months ended June 30, 2021 compared to the same period in 2020. As a percent of revenue, sales and marketing expenses increased to 24% for the three months ended June 30, 2021, from 22% for the same period in 2020. This was primarily driven by a (i) $5.7 million increase in marketing spend, and (ii) $3.9 million in higher employee-related costs, primarily related to commissions associated with increased enterprise billings. For the three months ended June 30, 2020, sales and marketing expenses included severance charges of $1.5 million. We expect sales and marketing expenses to continue to fluctuate as we optimize our sales channels and invest in new customer acquisition, products and geographies.

Product Development. Product development expenses decreased by $0.5 million, or 4%, to $12.0 million in the three months ended June 30, 2021 compared to the same period in 2020. This decrease was driven by (i) lower employee and third-party contractor related costs, net of capitalized labor, and (ii) a reduction in software and other IT-related costs, for the three months ended June 30, 2021, as compared to the same period in the prior year. These declines were partially offset by higher non-cash compensation expense, attributable to certain performance-based awards. We expect product development expenses, of which a portion will be capitalized, to continue in the foreseeable future, as we pursue opportunities to invest in developing new products and internal tools and enhance the functionality of our existing products and technologies.

General and Administrative. General and administrative expenses increased by $6.2 million, or 25%, to $31.0 million in the three months ended June 30, 2021 compared to the same period in 2020. During the three months ended June 30, 2021, general and administrative expenses included higher non-cash compensation expense of $4.7 million, attributable to certain performance-based awards, and $1.6 million in higher employee-related costs. In addition, during the three months ended June 30, 2021, increases in professional fees, and depreciation and amortization expense were offset by reductions in bad debt expense. For the three months ended June 30, 2020, general and administrative expenses included severance charges of $0.7 million.

Other Income / (Expense), Net. In the three months ended June 30, 2021, other income / (expense), net substantially consisted of $1.3 million of favorable foreign currency fluctuations.

During the three months ended June 30, 2020, other income / (expense), net substantially consisted of $0.1 million of favorable foreign currency fluctuations. As we increase the volume of business transacted in foreign currencies resulting from international expansion and as currency rates fluctuate, we expect foreign currency gains and losses to continue to fluctuate.

Income Taxes. Income tax expense increased by $1.4 million for the three months ended June 30, 2021 as compared to the same period in 2020. Our effective tax rates yielded a net expense of 14.7% and 16.3% for the three months ended June 30, 2021 and 2020, respectively.

For the three months ended June 30, 2021, the effective tax rate decreased by 5.3% related primarily to windfall tax benefits associated with equity-based compensation. Excluding discrete items, our effective tax rate would have been 20.0% for the three months ended June 30, 2021.

For the three months ended June 30, 2020, the net effect of discrete items decreased the effective tax rate by 0.3%. Excluding these items, our effective tax rate would have been 16.6% for the three months ended June 30, 2020.

As we continue to expand our operations outside of the United States, we have been and may continue to become subject to taxation in additional non-U.S. jurisdictions and our effective tax rate could fluctuate accordingly.

27

Comparison of the Six Months Ended June 30, 2021 and 2020

The following table presents our results of operations for the periods indicated:

	Six Months Ended June 30,
	2021		2020		$ Change		% Change
	(in thousands)
Consolidated Statements of Operations Data:
Revenue	$	373,193	$	320,515	$	52,678	16	%
Operating expenses:
Cost of revenue	129,589		132,934		(3,345)		(3)	%
Sales and marketing	87,817		78,217		9,600		12	%
Product development	22,724		25,554		(2,830)		(11)	%
General and administrative	61,720		55,484		6,236		11	%
Total operating expenses	301,850		292,189		9,661		3	%
Income from operations	71,343		28,326		43,017		152	%
Other (expense) / income, net	(1,139)		662		(1,801)		*
Income before income taxes	70,204		28,988		41,216		142	%
Provision for income taxes	11,236		5,683		5,553		98	%
Net income	$	58,968	$	23,305	$	35,663	153	%

______________________________________

*    Not meaningful

Revenue

Revenue increased by $52.7 million, or 16%, to $373.2 million in the six months ended June 30, 2021 compared to the same period in 2020. On a constant currency basis, revenue increased approximately 13% in the six months ended June 30, 2021, compared to the same period in 2020.

The Company’s E-commerce revenues increased by 21%, to $239.1 million in the six months ended June 30, 2021, compared to the same period in 2020. On a constant currency basis, the Company’s E-commerce revenues increased by 18% in the six months ended June 30, 2021, compared to the same period in 2020. During the six months ended June 30, 2021, growth in our E-commerce sales channel was primarily driven by increased subscriber revenue. E-commerce revenues also benefited from our acquisition of TurboSquid on February 1, 2021.

The Company’s Enterprise revenues increased by 9%, to $134.1 million in the six months ended June 30, 2021, compared to the same period in 2020. On a constant currency basis, the Company’s Enterprise revenues increased by 6% in the six months ended June 30, 2021, compared to the same period in 2020. The Company has continued to execute on its strategy to respond to market trends including making updates to product offerings and continuously improving our platform. We believe these enhancements impacted our Enterprise sales operations during the period and were one of the drivers of the increased deferred revenue balance as of June 30, 2021.

In the six months ended June 30, 2021 and 2020, we delivered 90.7 million and 90.8 million paid downloads, respectively, and our revenue per download was $4.07 and $3.51 for the six months ended June 30, 2021 and 2020, respectively. During the six months ended June 30, 2021, the increase in revenue per download was primarily due to changes in product mix.

Changes in our revenue by region were as follows: revenue from North America increased by $20.0 million, or 18%, to $133.3 million, revenue from Europe increased by $21.1 million, or 20%, to $127.1 million and revenue from outside Europe and North America increased by $11.6 million, or 11%, to $112.9 million, in the six months ended June 30, 2021 compared to the same period in 2020.

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Costs and Expenses

Cost of Revenue.   Cost of revenue decreased by $3.3 million, or 3%, to $129.6 million in the six months ended June 30, 2021 compared to the same period in 2020, due to lower royalty expense, content procurement costs and depreciation and amortization expense, partially offset by increased credit card fees. In addition, for the six months ended June 30, 2020, cost of revenue includes severance charges of $1.2 million. The reduction in royalty expense was driven by a change in product mix as well as a modification in the way we compensate contributors. We expect that our cost of revenue will continue to fluctuate in line with changes in revenue and paid downloads.

Sales and Marketing.   Sales and marketing expenses increased by $9.6 million, or 12%, to $87.8 million in the six months ended June 30, 2021 compared to the same period in 2020. As a percent of revenue, sales and marketing expenses remained flat at 24% for the six months ended June 30, 2021, compared to the same period in 2020. The increase in sales and marketing expenses was primarily driven by (i) $5.3 million in higher employee-related costs, primarily related to commissions associated with increased enterprise billings, and (ii) $4.0 million in higher marketing spend. In addition, for the six months ended June 30, 2020, sales and marketing includes severance charges of $1.6 million. We expect sales and marketing expenses to continue to fluctuate as we optimize our sales channels and invest in new customer acquisition, products and geographies.

Product Development.   Product development expenses decreased by $2.8 million, or 11%, to $22.7 million in the six months ended June 30, 2021 as compared to $25.6 million for the same period in 2020. This decrease was primarily driven by (i) lower employee and third-party contractor related costs, net of capitalized labor, and (ii) a reduction in software and other IT-related costs, for the six months ended June 30, 2021, as compared to the same period in the prior year. These declines were partially offset by higher non-cash compensation expense, attributable to certain performance-based awards. We expect product development expenses, of which a portion will be capitalized, to continue in the foreseeable future, as we pursue opportunities to invest in developing new products and internal tools and enhance the functionality of our existing products and technologies.

General and Administrative.   General and administrative expenses increased by $6.2 million, or 11%, to $61.7 million in the six months ended June 30, 2021 compared to the same period in 2020. This increase was primarily driven by: (i) $6.8 million in higher non-cash compensation expense, attributable to certain performance-based awards, and (ii) $1.7 million in higher professional fees, primarily associated with transaction costs associated with our acquisition of TurboSquid. These increases were partially offset by a $0.9 million decline in bad debt expense, and other reductions associated with ongoing vendor management initiatives.

Other Income / (Expense), Net. During the six months ended June 30, 2021, other income / (expense), net substantially consisted of $1.2 million of unfavorable foreign currency fluctuations.

During the six months ended June 30, 2020, approximately $1.1 million of other income / (expense), net consisted of interest income which was partially offset by $0.5 million of unfavorable foreign currency fluctuations. As we increase the volume of business transacted in foreign currencies resulting from international expansion and as currency rates fluctuate, we expect foreign currency gains and losses to continue to fluctuate.

Income Taxes.   Income tax expense increased by $5.6 million for the six months ended June 30, 2021 as compared to the same period in 2020. Our effective tax rates for the six months ended June 30, 2021 and 2020 were 16.0% and 19.6%, respectively. 

For the six months ended June 30, 2021, the effective tax rate decreased by 4.0% related primarily to windfall tax benefits associated with equity-based compensation. Excluding discrete items, our effective tax rate would have been 20.0% for the six months ended June 30, 2021.

For the six months ended June 30, 2020, the effective tax rate increased by 1.6% as a result of a loss jurisdiction with no tax benefit. Discrete item further increased the effective tax rate by 1.4%. Excluding these items, our effective tax rate would have been 16.6% for the six months ended June 30, 2020.

As we continue to expand our operations outside of the United States, we have been and may continue to become subject to taxation in additional non-U.S. jurisdictions, and our effective tax rate could fluctuate accordingly.

29

Quarterly Trends

Our operating results may fluctuate from quarter to quarter as a result of a variety of factors, including the effects of some seasonal trends in customer behavior. For example, we expect that certain customers’ usage may decrease at times during the third quarter of each calendar year due to the summer vacation season and may increase at times during the fourth quarter of each calendar year as demand is generally higher to support marketing campaigns in advance of the fourth quarter holiday season. While we believe seasonal trends have affected and will continue to affect our quarterly results, our growth trajectory may have overshadowed these effects to date. Additionally, because a significant portion of our revenue is derived from repeat customers who have purchased subscription plans, our revenues have historically been less volatile than if we had no subscription-based customers.

In addition, expenditures on content by customers tend to be discretionary in nature, reflecting overall economic conditions, the economic prospects of specific industries, budgeting constraints, buying patterns and a variety of other factors, many of which are outside our control, including any impacts from COVID-19. As a result of these and other factors, the results of any prior quarterly or annual periods should not be relied upon as indicators of our future operating performance.

See “Risks Related to the Coronavirus (COVID-19) Pandemic, The effect of the COVID-19 pandemic on our operations, and the operations of our customers, partners and suppliers, could have a material adverse effect on our business, financial condition, cash flows and results of operations” in Part I, Item 1A, “Risk Factors” in our 2020 Form 10-K for further discussion of the possible impact of the COVID-19 pandemic on our business.

Liquidity and Capital Resources

As of June 30, 2021, we had cash and cash equivalents totaling $411.0 million which primarily consisted of bank balances and money market funds. Since inception, we have financed our operations primarily through cash flows generated from operations.

Historically, our principal uses of cash have included funding our operations, capital expenditures, content acquisitions, business combinations that enhance our strategic position, cash dividend payments and share purchases under our share repurchase program. We plan to finance our operations and capital expenses largely through cash generated by our operations. Since our results of operations are sensitive to the level of competition we face, increased competition could adversely affect our liquidity and capital resources.

Dividends

We declared and paid cash dividends of $0.42 per share of common stock, or $15.3 million during the six months ended June 30, 2021.

On July 19, 2021, our Board of Directors declared a quarterly cash dividend of $0.21 per share of outstanding common stock payable on September 16, 2021 to stockholders of record at the close of business on September 2, 2021. Future declarations of dividends are subject to the final determination of our Board of Directors, and will depend on, among other things, our future financial condition, results of operations, capital requirements, capital expenditure requirements, contractual restrictions, anticipated cash needs, business prospects, provisions of applicable law and other factors our Board of Directors may deem relevant.

Share Repurchase Program

In October 2015, our Board of Directors approved a share repurchase program, authorizing us to repurchase up to $100 million of our common stock, and in February 2017, our Board of Directors approved an increase to the share repurchase program, authorizing us to repurchase up to an additional $100 million of our outstanding common stock. We expect to fund future repurchases, if any, through a combination of cash on hand, cash generated by operations and future financing transactions, if appropriate. Accordingly, our share repurchase program is subject to us having available cash to fund repurchases. Under the share repurchase program, management is authorized to purchase shares of our common stock from time to time through open market purchases or privately negotiated transactions at prevailing prices as permitted by securities laws and other legal requirements, and subject to market conditions and other factors.

As of June 30, 2021, we have repurchased approximately 2,558,000 shares of our common stock under the share repurchase program at an average per-share cost of $39.09. During the six months ended June 30, 2021, we did not repurchase any shares of our common stock under the share repurchase program. As of June 30, 2021, we had $100 million of repurchase capacity remaining under the share repurchase program.

30

Equity-Based Compensation

Upon the vesting of restricted stock units (“RSUs”), the Company has a practice of net share settlement, to cover any required withholding taxes by retaining the number of shares with a value equal to the amount of the tax and remitting an equal amount of cash to the appropriate taxing authorities, rather than requiring employees to sell a portion of the shares that they receive upon vesting to fund the required withholding taxes (“sell-to-cover”). The net share settlement approach has increased our cash outflows compared to the cash outflows under the sell-to-cover approach. In addition, as compared to the sell-to-cover approach, net share settlement has resulted in fewer shares being issued into the market as employees’ RSUs vest, thereby reducing the dilutive impact of our equity-based compensation programs on stockholders.

During the six months ended June 30, 2021, shares with an aggregate value of $20.2 million were withheld upon vesting of RSUs and paid in connection with related remittance to taxing authorities.

Acquisition of Three Artificial Intelligence Platforms

In July 2021, the Company acquired Pattern89 Inc., Datasine Limited and assets from Shotzr, Inc. The aggregate cash consideration was approximately $35 million, and is subject to customary working capital and other adjustments, paid from existing cash on hand. These three entities provide data driven insights through their artificial intelligence platforms.

Sources and Uses of Funds

We believe, based on our current operating plan, that our cash and cash equivalents, and cash from operations, will be sufficient to meet our anticipated cash needs for at least the next 12 months. Future capital expenditures could relate to building enhancements to the functionality of our current platform, the acquisition of additional storage, servers, network connectivity hardware, security apparatus and software, leasehold improvements and furniture and fixtures related to office expansion and relocation, content and general corporate infrastructure. See Note 13 to our Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding our existing capital commitments as of June 30, 2021.

Cash Flows 

The following table summarizes our cash flow data for the six months ended June 30, 2021 and 2020 (in thousands).

	Six Months Ended June 30,
	2021		2020
Net cash provided by operating activities	$	107,216	$	36,343
Net cash used in investing activities	$	(90,963)	$	(15,438)
Net cash used in financing activities	$	(33,745)	$	(14,905)

Operating Activities

Our primary source of cash from operating activities is cash collections from our customers. The majority of our revenue is generated from credit card transactions and is typically settled within one to five business days. Our primary uses of cash for operating activities are for the payment of royalties to content contributors, employee-related expenditures and the payment of other operating expenses incurred in the ordinary course of business.

Net cash provided by operating activities was $107.2 million for the six months ended June 30, 2021, compared to $36.3 million for the six months ended June 30, 2020. In the six months ended June 30, 2021, operating cash flows were favorably impacted from our increased operating income and changes in the timing of payments pertaining to operating expenses, which can cause operating cash flow to fluctuate from period to period. In addition, the six months ended June 30, 2020 were impacted by $7.8 million in one-time payments associated with long-term incentives related to our 2017 acquisition of Flashstock.

Investing Activities

Cash used in investing activities for the six months ended June 30, 2021 was $91.0 million, consisting primarily of cash used in the acquisition of TurboSquid of $72.2 million, net of cash acquired, capital expenditures of $15.3 million for internal-use software and website development costs and purchases of software and equipment and $3.4 million paid to acquire the rights to distribute certain digital content into perpetuity.

Cash used in investing activities in the six months ended June 30, 2020 was $15.4 million, consisting primarily of capital expenditures of $14.0 million for internal-use software and website development costs and purchases of software and equipment, and $1.6 million paid to acquire the rights to distribute certain digital content into perpetuity.

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Financing Activities

Cash used in financing activities in the six months ended June 30, 2021 was $33.7 million, consisting primarily of $20.2 million, paid in settlement of tax withholding obligations related to employee stock-based compensation awards and $15.3 million, related to the payment of the quarterly cash dividend. These amounts were partially offset by approximately $1.8 million received from the issuance of common stock in connection with the exercise of stock options.

Cash used in financing activities in the six months ended June 30, 2020 was $14.9 million, consisting primarily of $12.1 million related to the payment of the quarterly cash dividend and $3.4 million, which was paid in settlement of tax withholding obligations related to employee stock-based compensation awards.

Contractual Obligations and Commitments

We lease real estate under operating lease agreements that expire on various dates during the period from 2021 through 2029. We do not have any material finance lease obligations and our property, equipment and software have been purchased primarily with cash. We do not anticipate any difficulties in renewing those leases and co-location agreements that expire within the next several years and that we currently plan to renew, or in leasing other space or hosting facilities, if required. 

On March 21, 2013, we entered into an operating lease agreement to lease our headquarters in New York City, which was amended in 2016. The aggregate undiscounted future minimum lease payments under the lease, as amended, are approximately $53.3 million. We are also party to a letter of credit as a security deposit for this leased facility in the amount of $1.7 million. As of March 31, 2020, the Company is no longer required to provide cash collateral for its letter of credit, and, accordingly, these funds are no longer restricted.

Additionally, as of June 30, 2021, aggregate undiscounted future minimum lease payments under other operating leases are approximately $6.2 million.

We enter into unconditional purchase obligations related to contracts for cloud-based services, infrastructure and other business services as well as minimum royalty guarantees in connection with certain content licenses. As of June 30, 2021, our guaranteed royalty payments and unconditional purchase obligations for the remainder of 2021 and for the fiscal years ending December 31, 2022, 2023, 2024, 2025 and 2026 were approximately $14.2 million, $14.2 million, $9.9 million, $4.7 million, $2.1 million and $0.3 million, respectively.

Non-GAAP Financial Measures

To supplement our consolidated financial statements presented in accordance with the accounting principles generally accepted in the United States, or GAAP, our management considers certain financial measures that are not prepared in accordance with GAAP, collectively referred to as non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income per diluted common share, revenue growth (including by distribution channel) on a constant currency basis (expressed as a percentage), and free cash flow. These non-GAAP financial measures are included solely to provide investors with additional information regarding our financial results and are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly-titled measures presented by other companies.

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Non-GAAP Financial Measures:	(in thousands)
Adjusted EBITDA	$	53,063		$	37,032		$	109,482		$	59,092
Adjusted net income	37,935			22,162			74,571			31,321
Free cash flow	$	61,692		$	22,383		$	88,483		$	28,559
Revenue growth on a constant currency basis	16		%	(1)		%	13		%	(1)		%

These non-GAAP financial measures have not been calculated in accordance with GAAP, should be considered only in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP measures. In addition, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income per diluted common share, revenue growth (including by distribution channel) on a constant currency basis (expressed as a percentage) and free cash flow should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions; accordingly, its

32

use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies.

Our management uses these non-GAAP financial measures, in conjunction with GAAP financial measures, as an integral part of managing the business and to, among other things: (i) monitor and evaluate the performance of our business operations, financial performance and overall liquidity; (ii) facilitate management’s internal comparisons of the historical operating performance of its business operations; (iii) facilitate management’s external comparisons of the results of its overall business to the historical operating performance of other companies that may have different capital structures and debt levels; (iv) review and assess the operating performance of our management team and, together with other operational objectives, as a measure in evaluating employee compensation and bonuses; (v) analyze and evaluate financial and strategic planning decisions regarding future operating investments; and (vi) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments. 

Management believes that adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income per diluted common share, revenue growth (including by distribution channel) on a constant currency basis (expressed as a percentage) and free cash flow are useful to investors because these measures enable investors to analyze our operating results on the same basis as that used by management. Additionally, management believes that adjusted EBITDA, adjusted EBITDA margin, adjusted net income and adjusted net income per diluted common share provide useful information to investors about the performance of the Company’s overall business because such measures eliminate the effects of unusual or other infrequent charges that are not directly attributable to our underlying operating performance, and that revenue growth (including by distribution channel) on a constant currency basis, provides useful information to investors by eliminating the effect of foreign currency fluctuations that are not directly attributable to our operating performance. Management also believes that providing these non-GAAP financial measures enhances the comparability for investors in assessing our financial reporting. Management believes that free cash flow is useful for investors because it provides them with an important perspective on the cash available for strategic measures, after making necessary capital investments in property and equipment to support the Company’s ongoing business operations and after excluding the impact of nonrecurring payments associated with long-term incentives related to our 2017 acquisition of Flashstock, and provides them with the same measures that management uses as the basis for making resource allocation decisions.

Our use of non-GAAP financial measures has limitations as an analytical tool, and these measures should not be considered in isolation or as a substitute for an analysis of our results as reported under GAAP, as the excluded items may have significant effects on our operating results and financial condition. Additionally, our methods for measuring non-GAAP financial measures may differ from other companies’ similarly titled measures. When evaluating our performance, these non-GAAP financial measures should be considered in addition to other financial performance measures, including various cash flow metrics, net income and our other GAAP results.

Our method for calculating adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income per diluted common share, revenue growth (including by distribution channel) on a constant currency basis and free cash flow, as well as a reconciliation of the differences between adjusted EBITDA, adjusted net income, revenue growth (including by distribution channel) on a constant currency basis and free cash flow, and the most comparable financial measures calculated and presented in accordance with GAAP, are presented below.

33

Adjusted EBITDA and Adjusted EBITDA Margin

We define adjusted EBITDA as net income adjusted for depreciation and amortization, non-cash equity-based compensation, foreign currency transaction gains and losses, interest income and expense and income taxes. We define adjusted EBITDA margin as the ratio of adjusted EBITDA to revenue.

The following is a reconciliation of net income to adjusted EBITDA for each of the periods indicated:

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
	(in thousands)
Net income	$	29,454		$	18,987		$	58,968		$	23,305
Add / (less) Non-GAAP adjustments:
Depreciation and amortization	10,152			10,851			20,243			21,370
Non-cash equity-based compensation	9,686			3,636			17,896			9,396
Other adjustments, net(1)	(1,323)			(149)			1,139			(662)
Provision for income taxes	5,094			3,707			11,236			5,683
Adjusted EBITDA	$	53,063		$	37,032		$	109,482		$	59,092
Adjusted EBITDA margin	27.9		%	23.3		%	29.3		%	18.4		%

_______________________________________________________________________________

(1)Included in other adjustments, net are foreign currency transaction gains and losses and interest income and expense.

Adjusted Net Income and Adjusted Net Income Per Diluted Common Share

We define adjusted net income as net income adjusted for the impact of non-cash equity-based compensation, the amortization of acquisition-related intangible assets and the estimated tax impact of such adjustments. We define adjusted net income per diluted common share as adjusted net income divided by weighted average diluted shares.

The following is a reconciliation of net income to adjusted net income for each of the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(in thousands)
Net income	$	29,454	$	18,987	$	58,968	$	23,305
Add / (less) Non-GAAP adjustments:
Non-cash equity-based compensation	9,686		3,636		17,896		9,396
Tax effect of non-cash equity-based compensation(1)	(2,276)		(854)		(4,205)		(2,208)
Acquisition-related amortization expense	1,400		514		2,499		1,082
Tax effect of acquisition-related amortization expense(1)	(329)		(121)		(587)		(254)
Adjusted net income	$	37,935	$	22,162	$	74,571	$	31,321
Adjusted net income per diluted common share	$	1.02	$	0.62	$	2.00	$	0.87

(1)Statutory tax rates are used to calculate the tax effect of the adjustments.

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Revenue Growth (including by distribution channel) on a Constant Currency Basis

We define revenue growth (including by distribution channel) on a constant currency basis (expressed as a percentage) as the increase in current period revenues over prior period revenues, utilizing fixed exchange rates for translating foreign currency revenues for all periods in the comparison.

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
	(in thousands)
Reported revenue (in thousands)	$	189,912		$	159,230		$	373,193		$	320,515
Revenue growth	19		%	(2)		%	16		%	(1)		%
Revenue growth on a constant currency basis	16		%	(1)		%	13		%	(1)		%
E-commerce reported revenue (in thousands)	$	120,715		$	98,164		$	239,115		$	197,900
E-commerce revenue growth	23		%	1		%	21		%	1		%
E-commerce revenue growth on a constant currency basis	20		%	2		%	18		%	2		%
Enterprise reported revenue (in thousands)	$	69,197		$	61,066		$	134,078		$	122,615
Enterprise revenue growth	13		%	(6)		%	9		%	(6)		%
Enterprise revenue growth on a constant currency basis	9		%	(5)		%	6		%	(5)		%

Free Cash Flow

We define free cash flow as our cash provided by operating activities, adjusted for capital expenditures and content acquisition, and, with respect to the three months ended March 31, 2020, a payment associated with long-term incentives related to our 2017 acquisition of Flashstock.

The following is a reconciliation of net cash provided by operating activities to free cash flow for each of the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(in thousands)
Net cash provided by operating activities	$	71,388	$	29,484	$	107,216	$	36,343
Capital expenditures	(6,789)		(6,247)		(15,337)		(13,966)
Content acquisitions	(2,907)		(854)		(3,396)		(1,577)
Payments related to long-term incentives related to acquisitions	—		—		—		7,759
Free Cash Flow	$	61,692	$	22,383	$	88,483	$	28,559

Off-Balance Sheet Arrangements

As of June 30, 2021, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

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Item 3.         Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business, including risks related to foreign currency exchange rate fluctuation, interest rate fluctuation and inflation.

Foreign Currency Exchange Risk 

Our sales to international customers are denominated in multiple currencies, including but not limited to the U.S. dollar, the euro, the British pound, the Australian dollar and the Japanese yen. Revenue denominated in foreign currencies as a percentage of total revenue was approximately 36% and 35% for the six months ended June 30, 2021 and 2020, respectively. Changes in exchange rates will affect our revenue and certain operating expenses to the extent that our revenue is generated and expenses are incurred in currencies other than the U.S. dollar. Royalties earned by and paid to contributors are denominated in the U.S. dollar and will not be affected by changes in exchange rates. Based on our foreign currency denominated revenue for the six months ended June 30, 2021, we estimate that a 10% change in the exchange rate of the U.S. dollar against all foreign currency denominated revenues would result in an approximately 3% impact on our revenue.

We have established foreign subsidiaries in various countries and have concluded that the functional currency of these entities is generally the local currency. Business transacted in currencies other than each entity’s functional currency results in transactional gains and losses. Translation adjustments resulting from converting the foreign subsidiaries’ financial statements into U.S. dollars are recorded as a component of accumulated other comprehensive loss in stockholders’ equity. We do not currently enter into derivatives or other financial instruments in order to hedge our foreign currency exchange risk, but we may do so in the future.

Our historical revenue by currency is as follows (in thousands):

	Three Months Ended June 30,								Six Months Ended June 30,
	2021				2020				2021				2020
	U.S. Dollars		Originating Currency		U.S. Dollars		Originating Currency		U.S. Dollars		Originating Currency		U.S. Dollars		Originating Currency
Euro	$	38,753	€	32,588	$	32,756	€	29,717	$	76,643	€	64,543	$	66,448	€	60,095
British pounds	14,915		£	10,806	11,274		£	9,039	28,909		£	21,122	23,477		£	18,509
All other non-U.S. currencies(1)	14,083				11,408				28,029				23,203
Total foreign currency	67,751				55,438				133,581				113,128
U.S. dollar	122,161				103,792				239,612				207,387
Total revenue	$	189,912			$	159,230			$	373,193			$	320,515

(1)Includes no single currency which exceeded 5% of total revenue for any of the periods presented.

Interest Rate Fluctuation Risk

Our cash and cash equivalents consist of cash and money market accounts. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. The fair value of our cash and cash equivalents is not particularly sensitive to interest rate changes.

We did not have any long-term borrowings as of June 30, 2021. 

Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

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Item 4.         Controls and Procedures.

Evaluation of Disclosure Controls and Procedures 

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. However, any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objective.

Based on the evaluation of our disclosure controls and procedures as of June 30, 2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We acquired TurboSquid, Inc. during the first quarter of 2021 and are in the process of integrating the acquired business into our overall internal control over financial reporting process.

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PART II.     OTHER INFORMATION

Item 1.        Legal Proceedings.

Although we are not currently a party to any material active litigation, from time to time, third parties assert claims against us regarding intellectual property rights, employment matters, privacy issues and other matters arising during the ordinary course of business. Although we cannot be certain of the outcome of any litigation or the disposition of any claims, nor the amount of damages and exposure, if any, that we could incur, we currently believe that the final disposition of all existing matters will not have a material adverse effect on our business, results of operations, financial condition or cash flows. In addition, in the ordinary course of our business, we are also subject to periodic threats of lawsuits, investigations and claims. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 1A.    Risk Factors.

We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our 2020 Form 10-K, which could materially affect our business, financial condition or future results. During the three months ended June 30, 2021, there were no material changes to these risk factors as described in our 2020 Form 10-K.

Item 6.        Exhibits.

See the Exhibit Index, which immediately precedes the signature page of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

38

EXHIBIT INDEX

Exhibit
Number	Exhibit Description
31.1#	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2#	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32#	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

______________________________________ 

#    Filed herewith.

39

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SHUTTERSTOCK, INC.
Dated: July 27, 2021	By:	/s/ Jarrod Yahes
		Jarrod Yahes
		Chief Financial Officer
		(Principal Financial Officer)
Dated: July 27, 2021	By:	/s/ Steven Ciardiello
		Steven Ciardiello
		Chief Accounting Officer
		(Principal Accounting Officer)

40

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Stan Pavlovsky, certify that:

1.          I have reviewed this quarterly report on Form 10-Q of Shutterstock, Inc.;

2.          Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.          Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.          The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.          Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.          Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.          Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.          Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.          The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.          All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.          Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 27, 2021	By:	/s/ Stan Pavlovsky
		Stan Pavlovsky
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Jarrod Yahes, certify that:

1.          I have reviewed this quarterly report on Form 10-Q of Shutterstock, Inc.;

2.          Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.          Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.          The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.          Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.          Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.          Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.          Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.          The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.          All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.          Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 27, 2021	By:	/s/ Jarrod Yahes
		Jarrod Yahes
		Chief Financial Officer
		(Principal Financial Officer)

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Shutterstock, Inc., for the quarterly period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stan Pavlovsky, as Chief Executive Officer of Shutterstock, Inc., hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Shutterstock, Inc.

Date: July 27, 2021	By:	/s/ Stan Pavlovsky
		Stan Pavlovsky
		Chief Executive Officer
		(Principal Executive Officer)

In connection with the Quarterly Report on Form 10-Q of Shutterstock, Inc., for the quarterly period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jarrod Yahes, as Chief Financial Officer of Shutterstock, Inc., hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Shutterstock, Inc.

Date: July 27, 2021	By:	/s/ Jarrod Yahes
		Jarrod Yahes
		Chief Financial Officer
		(Principal Financial Officer)

XML

Cover Page - shares	6 Months Ended
	Jun. 30, 2021	Jul. 23, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2021
Document Transition Report	false
Entity File Number	001-35669
Entity Registrant Name	SHUTTERSTOCK, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	80-0812659
Entity Address, Address Line One	350 Fifth Avenue, 21st Floor
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10118
City Area Code	646
Local Phone Number	710-3417
Title of 12(b) Security	Common Stock, $0.01 par value per share
Trading Symbol	SSTK
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		36,622,833
Entity Central Index Key	0001549346
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2

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Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 411,046	$ 428,574
Accounts receivable, net of allowance of $2,425 and $4,942	49,756	43,846
Prepaid expenses and other current assets	23,615	16,650
Total current assets	484,417	489,070
Property and equipment, net	49,990	50,906
Right-of-use assets	36,336	39,552
Intangible assets, net	46,409	25,765
Goodwill	149,069	89,413
Deferred tax assets, net	7,867	13,566
Other assets	21,764	21,372
Total assets	795,852	729,644
Current liabilities:
Accounts payable	5,402	2,442
Accrued expenses	73,889	67,909
Contributor royalties payable	30,317	26,336
Deferred revenue	161,935	149,843
Other current liabilities	10,993	10,399
Total current liabilities	282,536	256,929
Lease liabilities	38,678	41,620
Other non-current liabilities	9,304	9,170
Total liabilities	330,518	307,719
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.01 par value; 200,000 shares authorized; 39,173 and 38,803 shares issued and 36,615 and 36,245 shares outstanding as of June 30, 2021 and December 31, 2020, respectively	392	389
Treasury stock, at cost; 2,558 shares as of June 30, 2021 and December 31, 2020	(100,027)	(100,027)
Additional paid-in capital	360,404	360,939
Accumulated comprehensive loss	(7,391)	(7,681)
Retained earnings	211,956	168,305
Total stockholders’ equity	465,334	421,925
Total liabilities and stockholders’ equity	$ 795,852	$ 729,644

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Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 2,425	$ 4,942
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	200,000	200,000
Common stock, shares issued (in shares)	39,173	38,803
Common stock, shares outstanding (in shares)	36,615	36,245
Treasury stock, shares held in treasury (in shares)	2,558	2,558

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Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Income Statement [Abstract]
Revenue	$ 189,912	$ 159,230	$ 373,193	$ 320,515
Operating expenses:
Cost of revenue	67,757	63,811	129,589	132,934
Sales and marketing	45,896	35,557	87,817	78,217
Product development	11,993	12,485	22,724	25,554
General and administrative	31,041	24,832	61,720	55,484
Total operating expenses	156,687	136,685	301,850	292,189
Income from operations	33,225	22,545	71,343	28,326
Other income / (expense), net	1,323	149	(1,139)	662
Income before income taxes			70,204	28,988
Provision for income taxes	5,094	3,707	11,236	5,683
Net income	$ 29,454	$ 18,987	$ 58,968	$ 23,305
Earnings per share:
Basic (in dollars per share)	$ 0.81	$ 0.53	$ 1.62	$ 0.65
Diluted (in dollars per share)	$ 0.79	$ 0.53	$ 1.58	$ 0.65
Weighted average shares outstanding:
Basic (in shares)	36,570	35,652	36,453	35,587
Diluted (in shares)	37,189	35,906	37,218	35,894

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Statement of Comprehensive Income [Abstract]
Net income	$ 29,454	$ 18,987	$ 58,968	$ 23,305
Foreign currency translation gain / (loss)	64	254	290	(2,194)
Other comprehensive gain / (loss)	64	254	290	(2,194)
Comprehensive income	$ 29,518	$ 19,241	$ 59,258	$ 21,111

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Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Cumulative Effect, Period of Adoption, Adjusted Balance	Common Stock	Common Stock Cumulative Effect, Period of Adoption, Adjusted Balance	Treasury Stock	Treasury Stock Cumulative Effect, Period of Adoption, Adjusted Balance	Additional Paid-in Capital	Additional Paid-in Capital Cumulative Effect, Period of Adoption, Adjusted Balance	Accumulated Other Comprehensive Income / (Loss)	Accumulated Other Comprehensive Income / (Loss) Cumulative Effect, Period of Adoption, Adjusted Balance	Retained Earnings	Retained Earnings Cumulative Effect, Period of Adoption, Adjustment	Retained Earnings Cumulative Effect, Period of Adoption, Adjusted Balance
Beginning balance (in shares) at Dec. 31, 2019				38,055	38,055	2,558	2,558
Beginning balance at Dec. 31, 2019	$ 328,145	$ (247)	$ 327,898	$ 381	$ 381	$ (100,027)	$ (100,027)	$ 312,824	$ 312,824	$ (6,220)	$ (6,220)	$ 121,187	$ (247)	$ 120,940
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Accounting standards update	Accounting Standards Update 2016-13
Equity-based compensation	$ 9,396							9,396
Issuance of common stock in connection with employee stock option exercises and RSU vesting	629			$ 3				626
Issuance of common stock in connection with employee stock option exercises and RSU vesting (in shares)				289
Common shares withheld for settlement of taxes in connection with equity-based compensation	(3,436)			$ (2)				(3,434)
Common shares withheld for settlement of taxes in connection with equity-based compensation (in shares)				(99)
Cash dividends paid	(12,098)											(12,098)
Other comprehensive income (loss)	(2,194)									(2,194)
Net income	23,305											23,305
Ending balance at Jun. 30, 2020	343,500			$ 382		$ (100,027)		319,412		(8,414)		132,147
Ending balance (in shares) at Jun. 30, 2020				38,245		2,558
Beginning balance (in shares) at Mar. 31, 2020				38,119		2,558
Beginning balance at Mar. 31, 2020	327,727			$ 381		$ (100,027)		316,823		(8,668)		119,218
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity-based compensation	3,636							3,636
Issuance of common stock in connection with employee stock option exercises and RSU vesting	629			$ 2				627
Issuance of common stock in connection with employee stock option exercises and RSU vesting (in shares)				180
Common shares withheld for settlement of taxes in connection with equity-based compensation	(1,675)			$ (1)				(1,674)
Common shares withheld for settlement of taxes in connection with equity-based compensation (in shares)				(54)
Cash dividends paid	(6,058)											(6,058)
Other comprehensive income (loss)	254									254
Net income	18,987											18,987
Ending balance at Jun. 30, 2020	$ 343,500			$ 382		$ (100,027)		319,412		(8,414)		132,147
Ending balance (in shares) at Jun. 30, 2020				38,245		2,558
Beginning balance (in shares) at Dec. 31, 2020	36,245			38,803		2,558
Beginning balance at Dec. 31, 2020	$ 421,925			$ 389		$ (100,027)		360,939		(7,681)		168,305
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity-based compensation	17,896							17,896
Issuance of common stock in connection with employee stock option exercises and RSU vesting	1,801			$ 6				1,795
Issuance of common stock in connection with employee stock option exercises and RSU vesting (in shares)				601
Common shares withheld for settlement of taxes in connection with equity-based compensation	(20,229)			$ (3)				(20,226)
Common shares withheld for settlement of taxes in connection with equity-based compensation (in shares)				(231)
Cash dividends paid	(15,317)											(15,317)
Other comprehensive income (loss)	290									290
Net income	58,968											58,968
Ending balance at Jun. 30, 2021	$ 465,334			$ 392		$ (100,027)		360,404		(7,391)		211,956
Ending balance (in shares) at Jun. 30, 2021	36,615			39,173		2,558
Beginning balance (in shares) at Mar. 31, 2021				39,010		2,558
Beginning balance at Mar. 31, 2021	$ 440,504			$ 391		$ (100,027)		357,422		(7,455)		190,173
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity-based compensation	9,686							9,686
Issuance of common stock in connection with employee stock option exercises and RSU vesting	492			$ 2				490
Issuance of common stock in connection with employee stock option exercises and RSU vesting (in shares)				244
Common shares withheld for settlement of taxes in connection with equity-based compensation	(7,195)			$ (1)				(7,194)
Common shares withheld for settlement of taxes in connection with equity-based compensation (in shares)				(81)
Cash dividends paid	(7,671)											(7,671)
Other comprehensive income (loss)	64									64
Net income	29,454											29,454
Ending balance at Jun. 30, 2021	$ 465,334			$ 392		$ (100,027)		$ 360,404		$ (7,391)		$ 211,956
Ending balance (in shares) at Jun. 30, 2021	36,615			39,173		2,558

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 58,968	$ 23,305
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	20,243	21,370
Deferred taxes	1,782	693
Non-cash equity-based compensation	17,896	9,396
Bad debt expense	213	1,086
Changes in operating assets and liabilities:
Accounts receivable	(6,056)	(3,279)
Prepaid expenses and other current and non-current assets	(5,892)	49
Accounts payable and other current and non-current liabilities	6,359	(4,045)
Long-term incentives related to acquisitions	0	(7,759)
Contributor royalties payable	1,750	(840)
Deferred revenue	11,953	(3,633)
Net cash provided by operating activities	107,216	36,343
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(15,337)	(13,966)
Business combination, net of cash acquired	(72,165)	0
Acquisition of content	(3,396)	(1,577)
Security deposit (payment) / release	(65)	105
Net cash used in investing activities	(90,963)	(15,438)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options	1,801	629
Cash paid related to settlement of employee taxes related to RSU vesting	(20,229)	(3,436)
Payment of cash dividend	(15,317)	(12,098)
Net cash used in financing activities	(33,745)	(14,905)
Effect of foreign exchange rate changes on cash	(36)	(717)
Net (decrease) / increase in cash, cash equivalents and restricted cash	(17,528)	5,283
Cash, cash equivalents and restricted cash, beginning of period	428,574	305,874
Cash, cash equivalents and restricted cash, end of period	411,046	311,157
Supplemental Disclosure of Cash Information:
Cash paid for income taxes	$ 9,495	$ 927

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Summary of Operations and Significant Accounting Policies

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Summary of Operations and Significant Accounting Policies

Summary of Operations and Significant Accounting Policies

Summary of Operations

Shutterstock, Inc. (the “Company” or “Shutterstock”) is a leading global creative platform offering full-service solutions, high-quality content, and tools for brands, businesses and media companies. The Company’s platform brings together users and contributors of content by providing readily-searchable content that our customers pay to license and by compensating contributors as their content is licensed.

The content licensed by the Company’s customers includes:

•Images - consisting of photographs, vectors and illustrations. Images are typically used in visual communications, such as websites, digital and print marketing materials, corporate communications, books, publications and other similar uses.

•Footage - consisting of video clips, premium footage filmed by industry experts and cinema grade video effects, available in HD and 4K formats. Footage is often integrated into websites, social media, marketing campaigns and cinematic productions.

•Music - consisting of high-quality music tracks and sound effects, which are often used to complement images and footage.

•3D Models - following the Company’s acquisition of TurboSquid, Inc. on February 1, 2021, Shutterstock now offers 3D models, used in industries such as advertising, media & video production, gaming, retail, education, design and architecture. See Note 3 Acquisition.

The Company licenses content to its customers. Contributors upload their content to the Company’s web properties in exchange for royalty payments based on customer download activity.

Basis of Presentation

The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all information and footnotes required by GAAP for complete financial statements.

The interim Consolidated Balance Sheet as of June 30, 2021, and the Consolidated Statements of Operations, Comprehensive Income and Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020, and the Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020, are unaudited. The Consolidated Balance Sheet as of December 31, 2020, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures required by GAAP. These unaudited interim financial statements have been prepared on a basis consistent with the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, which include all normal recurring adjustments necessary to fairly state the Company’s financial position as of June 30, 2021, and its consolidated results of operations, comprehensive income and stockholders’ equity for the three and six months ended June 30, 2021 and 2020, and its cash flows for the six months ended June 30, 2021 and 2020. The financial data and the other financial information disclosed in the notes to the financial statements related to these periods are also unaudited. The results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2021 or for any other future annual or interim period.

These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on February 11, 2021. The unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain immaterial changes in presentation have been made to conform the prior period presentation to current period reporting.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements. Actual results could differ from those estimates. Such estimates include, but are not limited to, the determination of the allowance for doubtful accounts, the volume of expected unused licenses for our subscription-based products, the assessment of recoverability of property and equipment, the fair value of acquired goodwill and intangible assets, the amount of non-cash equity-based compensation, the assessment of recoverability of deferred tax assets, the measurement of income tax and contingent non-income tax liabilities and the determination of the incremental borrowing rate used to calculate the lease liability.

Cash and Cash Equivalents

The Company’s cash and cash equivalents consist primarily of cash on hand, bank deposits, money market funds and commercial paper.

Allowance for Doubtful Accounts

The Company’s accounts receivable consists of customer obligations due under normal trade terms, carried at their face value less an allowance for doubtful accounts, if required. The Company determines its allowance for doubtful accounts based on an evaluation of (i) the aging of its accounts receivable considering historical receivables loss rates, (ii) on a customer-by-customer basis, where appropriate, and (iii) the economic environments in which the Company operates.

During the six months ended June 30, 2021, the Company recorded bad debt expense of $0.2 million. As of June 30, 2021 and December 31, 2020, the Company’s allowance for doubtful accounts was approximately $2.4 million and $4.9 million, respectively. The allowance for doubtful accounts is included as a reduction of accounts receivable on the Consolidated Balance Sheets.

The Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU 2016-13”) on January 1, 2020, using the modified retrospective method and recorded a cumulative-effect adjustment of $0.2 million, net of tax, in retained earnings as of January 1, 2020.

Chargeback and Sales Refund Allowance

The Company establishes a chargeback allowance and sales refund reserve allowance based on factors surrounding historical credit card chargeback trends, historical sales refund trends and other information. As of June 30, 2021 and December 31, 2020, the Company’s combined allowance for chargebacks and sales refunds was $0.5 million, which was included as a component of other current liabilities on the Consolidated Balance Sheets.

Revenue Recognition

The majority of the Company’s revenue is earned from the license of content. Content licenses are generally purchased on a monthly or annual basis, whereby a customer pays for a predetermined quantity of content that may be downloaded over a specific period of time, or, on a transactional basis, whereby a customer pays for individual content licenses at the time of download. 

The Company recognizes revenue upon the satisfaction of performance obligations, which generally occurs when content is downloaded by a customer. The Company recognizes revenue on both its subscription-based and transaction-based products when content is downloaded, at which time the license is provided. In addition, management estimates expected unused licenses for subscription-based products and recognizes the estimated revenue associated with the unused licenses as digital content is downloaded and licenses are obtained for such content by the customer during the subscription period. The estimate of unused licenses is based on historical download activity, and future changes in the estimate could impact the timing of revenue recognition of the Company’s subscription products. The Company expenses contract acquisition costs as incurred, to the extent that the amortization period would otherwise be one year or less.

Collectability is reasonably assured at the time the electronic order or contract is entered. The majority of the Company’s customers purchase products by making an electronic payment with a credit card at the time of a transaction. Customer payments received in advance of revenue recognition are contract liabilities and are recorded as deferred revenue. Customers that do not pay in advance are invoiced and are required to make payments under standard credit terms. Collectability for customers who pay on credit terms allowing for payment beyond the date at which service commences is based on a credit evaluation for certain new customers and transaction history with existing customers. 

The Company recognizes revenue gross of contributor royalties because the Company is the principal in the transaction, as it is the party responsible for the performance obligation and it controls the product or service before transferring it to the customer. The Company also licenses content to customers through third-party resellers. Third-party resellers sell the Company’s products directly to customers as the principal in those transactions. Accordingly, the Company recognizes revenue net of costs paid to resellers.

Recently Adopted Accounting Standard Updates

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes (“ASU-2019-12”). ASU 2019-12 eliminates certain exceptions to the guidance in Topic 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes, enacted changes in tax laws or rates and clarifies the accounting transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. The Company adopted ASU 2019-12, effective January 1, 2021. The impact of adoption of this standard on the consolidated financial statements, including accounting policies, processes and systems, was not material.

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Fair Value Measurements and Long-term Investments

6 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements and Long-term Investments

Fair Value Measurements and Long-term Investments

Fair Value Measurements

The Company had no assets or liabilities requiring fair value hierarchy disclosures as of June 30, 2021 or December 31, 2020, except as noted below.

Cash Equivalents

Cash equivalents includes money market accounts and are classified as a level 1 measurement based on quoted prices in active markets for identical assets that the reporting entity can access at the measurement date. As of June 30, 2021 and December 31, 2020, the Company had cash equivalent balances of $280.1 million and $250.0 million, respectively.

Other Fair Value Measurements

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments. The Company’s non-financial assets, which include property and equipment, intangible assets and goodwill, are not required to be measured at fair value on a recurring basis. However, if the Company is required to evaluate a non-financial asset for impairment, whether due to certain triggering events or because annual impairment testing is required, a resulting asset impairment would require that the non-financial asset be recorded at fair value.

Long-term Investments

As of June 30, 2021 and December 31, 2020, the Company’s long-term investments were in equity securities with no readily determinable fair value, totaled $20.0 million, and were reported within other assets on the Consolidated Balance Sheets. The Company uses the measurement alternative for these equity investments and their carrying value is reported at cost, adjusted for impairments or any observable price changes in ordinary transactions with identical or similar investments.

On a quarterly basis, the Company evaluates the carrying value of its long-term investments for impairment, which includes an assessment of revenue growth, earnings performance, working capital and general market conditions. As of June 30, 2021, no adjustments to the carrying values of the Company’s long-term investments were identified as a result of this assessment. Changes in performance negatively impacting operating results and cash flows of these investments could result in the Company recording an impairment charge in future periods.

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Acquisition

6 Months Ended

Jun. 30, 2021

Business Combinations [Abstract]

Acquisition

Acquisition

TurboSquid, Inc.

On February 1, 2021, the Company completed its acquisition of all of the outstanding shares of TurboSquid, Inc. (“TurboSquid”), for approximately $77.3 million. The total purchase price was paid with existing cash on hand in the three months ended March 31, 2021. The transaction was accounted for using the acquisition method and, accordingly, the results of the acquired business have been included in the Company’s results of operations from the acquisition date. In connection with the acquisition, the Company incurred approximately $1.6 million of transaction costs.

TurboSquid is a Louisiana-based company that operates a marketplace offering more than one million 3D models, a marketplace for 2D images derived from 3D objects and a digital asset management solution. The Company believes this acquisition establishes Shutterstock as the premium destination for 3D models as well as 3D models in an easy-to-use 2D format.

The fair value of consideration transferred in this business combination was allocated to the intangible and tangible assets acquired and liabilities assumed at the acquisition date, with the remaining unallocated amount recorded as goodwill.

The aggregate purchase price was allocated to the assets acquired and liabilities assumed as follows (in thousands):

Assets acquired and liabilities assumed:	Fair Value at Acquisition Date
Cash and cash equivalents	$	5,165
Other assets	1,553
Property and equipment	472
Intangible assets	21,500
Goodwill	59,491
Total assets acquired	$	88,181
Accounts payable, accrued expenses and other liabilities	(4,685)
Contributor royalties payable	(2,243)
Deferred tax liability	(3,923)
Total liabilities assumed	(10,851)
Net assets acquired	$	77,330

The identifiable intangible assets, which include customer relationships, developed technology, trade names and contributor content, have a weighted average life of approximately 8.2 years and are being amortized on a straight-line basis. The fair value of the customer relationships was determined using a variation of the income approach known as the multiple-period excess earnings method. The fair value of the trade names and developed technology were determined using the relief-from-royalty method and the fair value of the contributor content was determined using the cost-to-recreate method.

The goodwill arising from the transaction is primarily attributable to expected operational synergies and is not deductible for income tax purposes.

The following unaudited pro forma consolidated financial information (in thousands) reflects the results of operations of the Company for the three and six months ended June 30, 2021 and 2020, as if the TurboSquid acquisition had been completed on January 1, 2020, after giving effect to certain purchase accounting adjustments, primarily related to intangible assets. These pro forma results have been prepared for comparative purposes only and are not necessarily indicative of what the Company’s operating results would have been, had the acquisitions actually taken place at the beginning of the previous annual period:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue
As Reported	$	189,912	$	159,230	$	373,193	$	320,515
Pro Forma	189,912		164,762		375,256		331,485
Income before income taxes
As Reported	$	34,548	$	22,694	$	70,204	$	28,988
Pro Forma	34,548		22,728		71,505		27,569

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Property and Equipment

6 Months Ended

Jun. 30, 2021

Property, Plant and Equipment [Abstract]

Property and Equipment

Property and Equipment

Property and equipment is summarized as follows (in thousands):

	As of June 30, 2021		As of December 31, 2020
Computer equipment and software	$	208,018	$	193,141
Furniture and fixtures	10,246		10,235
Leasehold improvements	19,380		19,382
Property and equipment	237,644		222,758
Less accumulated depreciation	(187,654)		(171,852)
Property and equipment, net	$	49,990	$	50,906

Depreciation expense related to property and equipment was $7.9 million and $9.6 million for the three months ended June 30, 2021 and 2020, respectively, and $15.9 million and $18.9 million for the six months ended June 30, 2021 and 2020, respectively. Cost of revenues included depreciation expense of $7.1 million and $8.6 million for the three months ended June 30, 2021 and 2020, respectively, and $14.2 million and $16.8 million for the six months ended June 30, 2021 and 2020, respectively. General and administrative expense included depreciation expense of $0.8 million and $1.0 million for the three months ended June 30, 2021 and 2020, respectively, and $1.7 million and $2.1 million for the six months ended June 30, 2021 and 2020, respectively.

Capitalized Internal-Use Software

The Company capitalized costs related to the development of internal-use software of $7.2 million and $6.5 million for the three months ended June 30, 2021 and 2020, respectively, and $14.2 million and $13.1 million for the six months ended June 30, 2021 and 2020, respectively. Capitalized amounts are included as a component of property and equipment under computer equipment and software on the Consolidated Balance Sheets.

The portion of total depreciation expense related to capitalized internal-use software was $6.6 million and $7.8 million for the three months ended June 30, 2021 and 2020, respectively, and $13.3 million and $14.9 million for the six months ended June 30, 2021 and 2020, respectively. Depreciation expense related to capitalized internal-use software is included in cost of revenue in the Consolidated Statements of Operations.

As of June 30, 2021 and December 31, 2020, the Company had capitalized internal-use software of $38.9 million and $38.0 million, respectively, net of accumulated depreciation, which was included in property and equipment, net.

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Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill

The Company’s goodwill balance is attributable to its Content reporting unit and is tested for impairment annually on October 1 or upon a triggering event. No triggering events were identified during the six months ended June 30, 2021.

The following table summarizes the changes in the Company’s goodwill balance during the six months ended June 30, 2021 (in thousands):

	Goodwill
Balance as of December 31, 2020	$	89,413
Goodwill related to acquisitions	$	59,491
Foreign currency translation adjustment	165
Balance as of June 30, 2021	$	149,069

Intangible Assets

Intangible assets consisted of the following as of June 30, 2021 and December 31, 2020 (in thousands):

	As of June 30, 2021							As of December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Life (Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing intangible assets:
Customer relationships	$	27,282	$	(12,181)	$	15,101	10	$	18,132	$	(11,032)	$	7,100
Trade name	8,926		(6,592)		2,334		8	6,669		(6,328)		341
Developed technology	14,763		(6,131)		8,632		4	6,930		(5,039)		1,891
Contributor content	32,623		(12,416)		20,207		8	26,669		(10,378)		16,291
Patents	259		(124)		135		18	259		(117)		142
Total	$	83,853	$	(37,444)	$	46,409		$	58,659	$	(32,894)	$	25,765

Amortization expense was $2.3 million and $1.2 million for the three months ended June 30, 2021 and 2020, respectively, and $4.4 million and $2.5 million for the six months ended June 30, 2021 and 2020, respectively. Cost of revenue included amortization expense of $1.2 million and $0.7 million for the three months ended June 30, 2021 and 2020, respectively, and $2.3 million and $1.3 million for the six months ended June 30, 2021 and 2020, respectively. General and administrative expense included amortization expense of $1.1 million and $0.5 million for the three months ended June 30, 2021 and 2020, respectively, and $2.0 million and $1.2 million for the six months ended June 30, 2021 and 2020, respectively.

The Company determined that there was no indication of impairment of the intangible assets for any period presented. Estimated amortization expense is: $4.6 million for the remaining six months of 2021, $8.9 million in 2022, $8.6 million in 2023, $7.6 million in 2024, $4.3 million in 2025, $3.2 million in 2026 and $9.2 million thereafter.

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Accrued Expenses

6 Months Ended

Jun. 30, 2021

Payables and Accruals [Abstract]

Accrued Expenses

Accrued Expenses Accrued expenses consisted of the following (in thousands):

	As of June 30, 2021		As of December 31, 2020
Compensation	$	27,016	$	31,499
Non-income taxes	20,937		17,164
Website hosting and marketing fees	12,831		9,991
Other expenses	13,105		9,255
Total accrued expenses	$	73,889	$	67,909

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Stockholders’ Equity and Equity-Based Compensation

6 Months Ended

Jun. 30, 2021

Share-based Payment Arrangement [Abstract]

Stockholders’ Equity and Equity-Based Compensation

Stockholders’ Equity and Equity-Based Compensation

Stockholders’ Equity

Common Stock

The Company issued approximately 163,000 and 126,000 shares of common stock during the three months ended June 30, 2021 and 2020, respectively, and 370,000 and 190,000 for the six months ended June 30, 2021 and 2020, respectively, related to the exercise of stock options and the vesting of Restricted Stock Units.

Treasury Stock

In October 2015, the Company’s Board of Directors approved a share repurchase program, authorizing the Company to purchase up to $100 million of its common stock. In February 2017, the Company’s Board of Directors approved an increase to the share repurchase program, authorizing the Company to repurchase up to an additional $100 million of its outstanding common stock. During the six months ended June 30, 2021 and 2020, the Company did not repurchase any shares of its common stock under the share repurchase program. As of June 30, 2021, the Company had $100 million of remaining authorization for purchases under the share repurchase program.

The Company expects to fund future repurchases, if any, through a combination of cash on hand, cash generated by operations and future financing transactions, if appropriate. Accordingly, the share repurchase program is subject to the Company having available cash to fund repurchases. Under the share repurchase program, management is authorized to purchase shares of the Company’s common stock from time to time through open market purchases or privately negotiated transactions at prevailing prices as permitted by securities laws and other legal requirements, and subject to market conditions and other factors.

Dividends

The Company declared and paid cash dividends of $0.21 and $0.42 per share of common stock, or $7.7 million and $15.3 million, during the three and six months ended June 30, 2021, respectively, and $0.17 and $0.34 per share of common stock, or $6.1 million and $12.1 million, during the three and six months ended June 30, 2020, respectively.

On July 19, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.21 per share of outstanding common stock payable on September 16, 2021 to stockholders of record at the close of business on September 2, 2021. Future declarations of dividends are subject to the final determination of the Board of Directors, and will depend on, among other things, the Company’s future financial condition, results of operations, capital requirements, capital expenditure requirements, contractual restrictions, anticipated cash needs, business prospects, provisions of applicable law and other factors the Board of Directors may deem relevant.

Equity-Based Compensation

The Company recognizes stock-based compensation expense for all equity-based payment awards, including employee Restricted Stock Units and Performance-based Restricted Stock Units (“PRSUs” and, collectively with Restricted Stock Units, “RSUs”) and stock options granted under the Company’s Amended and Restated 2012 Omnibus Equity Incentive Plan (the “2012 Plan”), based on the fair value of each award on the grant date.

The following table summarizes non-cash equity-based compensation expense, net of forfeitures, by financial statement line item included in the accompanying Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (in thousands): 

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Cost of revenue	$	194	$	99	$	358	$	150
Sales and marketing	926		374		1,393		834
Product development	1,799		1,068		3,028		2,193
General and administrative	6,767		2,095		13,117		6,219
Total	$	9,686	$	3,636	$	17,896	$	9,396

The following table summarizes non-cash equity-based compensation expense, net of forfeitures, by award type included in the accompanying Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Stock options	$	177	$	414	$	352	$	1,730
RSUs	9,509		3,222		17,544		7,666
Total	$	9,686	$	3,636	$	17,896	$	9,396

Stock Option Awards

During the six months ended June 30, 2021, no options to purchase shares of its common stock were granted. As of June 30, 2021, there were approximately 300,000 options vested and exercisable with a weighted average exercise price of $34.43. As of June 30, 2021, the total unrecognized compensation charge related to non-vested options was approximately $1.3 million, which is expected to be recognized through 2023.

Restricted Stock Unit Awards

During the six months ended June 30, 2021, the Company had RSU grants, net of forfeitures, of approximately 382,000. As of June 30, 2021, there are approximately 1,242,000 non-vested RSUs outstanding with a weighted average grant-date fair value of $56.89. As of June 30, 2021, the total unrecognized non-cash equity-based compensation charge related to the non-vested RSUs was approximately $56.7 million, which is expected to be recognized through 2024.

During the six months ended June 30, 2021 and 2020, shares of common stock with an aggregate value of $20.2 million and $3.4 million were withheld upon vesting of RSUs and paid in connection with related remittance of employee withholding taxes to taxing authorities.

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Revenue

6 Months Ended

Jun. 30, 2021

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

The Company distributes its content offerings through two primary channels:

E-commerce: The majority of the Company’s customers license content directly through the Company’s self-service web properties. E-commerce customers have the flexibility to purchase a subscription plan that is paid on a monthly or annual basis or to license content on a transactional basis. These customers generally license content under the Company’s standard or enhanced licenses, with additional licensing options available to meet customers’ individual needs. E-commerce customers typically pay the full amount of the purchase price in advance or at the time of license, generally with a credit card.

Enterprise: The Company also has a base of customers with unique content, licensing and workflow needs. These customers benefit from communication with dedicated sales professionals, service and research teams which provide a number of tailored enhancements to their creative workflows including non-standard licensing rights, multi-seat access, ability to pay on credit terms, multi-brand licensing packages, increased indemnification protection and content licensed for use-cases outside of those available on the E-commerce platform.

The Company’s revenues by distribution channel for the three and six months ended June 30, 2021 and 2020 are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
E-commerce	$	120,715	$	98,164	$	239,115	$	197,900
Enterprise	69,197		61,066		134,078		122,615
Total Revenues	$	189,912	$	159,230	$	373,193	$	320,515

The June 30, 2021 deferred revenue balance will be earned as content is downloaded or upon the expiration of subscription-based products, and nearly all is expected to be earned within the next twelve months. $99.2 million of total revenue recognized for the six months ended June 30, 2021 was reflected in deferred revenue as of December 31, 2020.

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Other Income / (Loss), net

6 Months Ended

Jun. 30, 2021

Other Nonoperating Income (Expense) [Abstract]

Other Income / (Loss), net

Other Income / (Loss), netThe following table presents a summary of the Company’s other income and expense activity included in the accompanying Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Foreign currency gain / (loss)	$	1,277	$	132	$	(1,233)	$	(466)
Interest income, net	46		17		94		1,128
Total other income / (loss)	$	1,323	$	149	$	(1,139)	$	662

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Income Taxes

6 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company’s effective tax rates yielded a net expense of 14.7% and 16.3% for the three months ended June 30, 2021 and 2020, respectively, and a net expense of 16.0% and 19.6% for the six months ended June 30, 2021 and 2020, respectively.

During the three months ended June 30, 2021, the net effect of discrete items decreased the effective tax rate by 5.3%. For the six months ended June 30, 2021, the net effect of discrete items decreased the effective tax rate by 4.0%. The discrete items for the three and six months ended June 30, 2021, primarily relate to windfall tax benefits associated with equity-based compensation. Excluding discrete items, the Company’s effective tax rate would have been 20.0% for the three and six months ended June 30, 2021.

During the three months ended June 30, 2020, the net effect of discrete items decreased the effective tax rate by 0.3%. For the six months ended June 30, 2020, the effective tax rate increased by 1.6% as a result of a loss jurisdiction with no tax benefit. Discrete items further increased the effective tax rate by 1.4%. Excluding the discrete items, the Company’s effective tax rate would have been 16.6% for the three and six months ended June 30, 2020.

The Company has computed the provision for income taxes based on the estimated annual effective tax rate excluding a loss jurisdiction with no tax benefit and the application of discrete items, if any, in the applicable period.

During the three and six months ended June 30, 2021 and 2020, uncertain tax positions recorded by the Company were not significant. To the extent the remaining uncertain tax positions are ultimately recognized, the Company’s effective tax rate may be impacted in future periods.

The Company recognizes interest expense and tax penalties related to unrecognized tax benefits in income tax expense in the Consolidated Statements of Operations. The Company’s accrual for interest and penalties related to unrecognized tax benefits was not significant for the three and six months ended June 30, 2021 and 2020.

During the six months ended June 30, 2021 and 2020, the Company paid net cash taxes of $9.5 million and $0.9 million, respectively.

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Net Income Per Share

6 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Net Income Per Share

Net Income Per Share

Basic net income per share is computed using the weighted average number of shares of common stock outstanding for the period, excluding unvested RSUs and stock options. Diluted net income per share is based upon the weighted average shares of common stock outstanding for the period plus dilutive potential shares of common stock, including unvested RSUs and stock options using the treasury stock method.

The following table sets forth the computation of basic and diluted net income per share for the three and six months ended June 30, 2021 and 2020 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	29,454	$	18,987	$	58,968	$	23,305
Shares used to compute basic net income per share	36,570		35,652		36,453		35,587
Dilutive potential common shares
Stock options	242		39		233		53
Unvested restricted stock awards	377		215		532		254
Shares used to compute diluted net income per share	37,189		35,906		37,218		35,894
Basic net income per share	$	0.81	$	0.53	$	1.62	$	0.65
Diluted net income per share	$	0.79	$	0.53	$	1.58	$	0.65
Dilutive shares included in the calculation	1,221		1,304		1,328		1,080
Anti-dilutive shares excluded from the calculation	2		1,152		10		1,148

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Geographic Information

6 Months Ended

Jun. 30, 2021

Segment Reporting [Abstract]

Geographic Information

Geographic Information

The following table presents the Company’s revenue based on customer location (in thousands): 

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
North America	$	68,954	$	56,211	$	133,263	$	113,229
Europe	64,778		52,207		127,055		106,003
Rest of the world	56,180		50,812		112,875		101,283
Total revenue	$	189,912	$	159,230	$	373,193	$	320,515

 The United States, included in North America in the above table, accounted for 31% and 32% of consolidated revenue for the six months ended June 30, 2021 and 2020, respectively. No other country accounts for more than 10% of the Company’s revenue in any period presented.

The Company’s long-lived tangible assets were located as follows (in thousands):

	As of June 30,		As of December 31,
	2021		2020
North America	$	42,324	$	43,451
Europe	7,470		7,192
Rest of the world	196		263
Total long-lived tangible assets	$	49,990	$	50,906

The United States, included in North America in the above table, accounted for 75% of total long-lived tangible assets as of June 30, 2021 and December 31, 2020. No other country accounts for more than 10% of the Company’s long-lived tangible assets in any period presented.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

As of June 30, 2021, the Company had total non-lease obligations in the amount of approximately $45.4 million, which consisted primarily of minimum royalty guarantees and unconditional purchase obligations related to contracts for infrastructure and other business services. As of June 30, 2021, the Company’s non-lease obligations for the remainder of 2021 and for the years ending December 31, 2022, 2023, 2024 and 2025 were approximately $14.2 million, $14.2 million, $9.9 million, $4.7 million and $2.1 million, respectively.

Legal Matters

From time to time, the Company may become party to litigation in the ordinary course of business, including direct claims brought by or against the Company with respect to intellectual property, contracts, employment and other matters, as well as claims brought against the Company’s customers for whom the Company has a contractual indemnification obligation. The Company assesses the likelihood of any adverse judgments or outcomes with respect to these matters and determines loss contingency assessments on a gross basis after assessing the probability of incurrence of a loss and whether a loss is reasonably estimable. In addition, the Company considers other relevant factors that could impact its ability to reasonably estimate a loss. A determination of the amount of reserves required, if any, for these contingencies is made after analyzing each matter. The Company reviews reserves, if any, at least quarterly and may change the amount of any such reserve in the future due to new developments or changes in strategy in handling these matters. Although the results of litigation and threats of litigation, investigations and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these matters will not have a material adverse effect on its business, consolidated financial position, results of operations, or cash flows. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. The Company currently has no material active litigation matters and, accordingly, no material reserves related to litigation.

Indemnification and Employment Agreements

In the ordinary course of business, the Company enters into contractual arrangements under which it agrees to provide indemnification of varying scope and terms to customers with respect to certain matters, including, but not limited to, losses arising out of the breach of the Company’s intellectual property warranties for damages to the customer directly attributable to the Company’s breach. The Company is not responsible for any damages, costs, or losses to the extent such damages, costs or losses arise as a result of any modifications made by the customer, or the context in which content is used. The standard maximum aggregate obligation and liability to any one customer for any single claim is generally limited to ten thousand dollars but can range to $250,000, with certain exceptions for which our indemnification obligation are uncapped. As of June 30, 2021, the Company had recorded no material liabilities related to indemnification obligations for loss contingencies. Additionally, the Company believes that it has the appropriate insurance coverage in place to adequately cover such indemnification obligations, if necessary.

Pursuant to the Company’s charter documents and separate written indemnification agreements, the Company has certain indemnification obligations to its executive officers, certain employees and directors, as well as certain former officers and directors.

The Company has also entered into employment agreements with its executive officers and certain employees. These agreements specify various employment-related matters, including annual compensation, performance incentive bonuses, and severance benefits in the event of termination in the event of a change in control or otherwise, with or without cause.

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Subsequent Events	6 Months Ended
	Jun. 30, 2021
Subsequent Events [Abstract]
Subsequent Events	Subsequent EventsIn July 2021, the Company acquired Pattern89 Inc., Datasine Limited and assets from Shotzr, Inc. The aggregate cash consideration was approximately $35 million, and is subject to customary working capital and other adjustments, paid from existing cash on hand. These three entities provide data driven insights through their artificial intelligence platforms. The Company is currently evaluating the accounting model for these transactions.

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Summary of Operations and Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of PresentationThe unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all information and footnotes required by GAAP for complete financial statements.

Unaudited Interim Financial Statements

The interim Consolidated Balance Sheet as of June 30, 2021, and the Consolidated Statements of Operations, Comprehensive Income and Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020, and the Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020, are unaudited. The Consolidated Balance Sheet as of December 31, 2020, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures required by GAAP. These unaudited interim financial statements have been prepared on a basis consistent with the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, which include all normal recurring adjustments necessary to fairly state the Company’s financial position as of June 30, 2021, and its consolidated results of operations, comprehensive income and stockholders’ equity for the three and six months ended June 30, 2021 and 2020, and its cash flows for the six months ended June 30, 2021 and 2020. The financial data and the other financial information disclosed in the notes to the financial statements related to these periods are also unaudited. The results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2021 or for any other future annual or interim period.These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on February 11, 2021. The unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain immaterial changes in presentation have been made to conform the prior period presentation to current period reporting.

Use of Estimates

Use of EstimatesThe preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements. Actual results could differ from those estimates. Such estimates include, but are not limited to, the determination of the allowance for doubtful accounts, the volume of expected unused licenses for our subscription-based products, the assessment of recoverability of property and equipment, the fair value of acquired goodwill and intangible assets, the amount of non-cash equity-based compensation, the assessment of recoverability of deferred tax assets, the measurement of income tax and contingent non-income tax liabilities and the determination of the incremental borrowing rate used to calculate the lease liability.

Cash and Cash Equivalents

Cash and Cash EquivalentsThe Company’s cash and cash equivalents consist primarily of cash on hand, bank deposits, money market funds and commercial paper.

Allowance for Doubtful Accounts

Allowance for Doubtful AccountsThe Company’s accounts receivable consists of customer obligations due under normal trade terms, carried at their face value less an allowance for doubtful accounts, if required. The Company determines its allowance for doubtful accounts based on an evaluation of (i) the aging of its accounts receivable considering historical receivables loss rates, (ii) on a customer-by-customer basis, where appropriate, and (iii) the economic environments in which the Company operates.

Chargeback and Sales Refund Allowance and Revenue Recognition

Chargeback and Sales Refund Allowance

The Company establishes a chargeback allowance and sales refund reserve allowance based on factors surrounding historical credit card chargeback trends, historical sales refund trends and other information. As of June 30, 2021 and December 31, 2020, the Company’s combined allowance for chargebacks and sales refunds was $0.5 million, which was included as a component of other current liabilities on the Consolidated Balance Sheets.

Revenue Recognition

The majority of the Company’s revenue is earned from the license of content. Content licenses are generally purchased on a monthly or annual basis, whereby a customer pays for a predetermined quantity of content that may be downloaded over a specific period of time, or, on a transactional basis, whereby a customer pays for individual content licenses at the time of download. 

The Company recognizes revenue upon the satisfaction of performance obligations, which generally occurs when content is downloaded by a customer. The Company recognizes revenue on both its subscription-based and transaction-based products when content is downloaded, at which time the license is provided. In addition, management estimates expected unused licenses for subscription-based products and recognizes the estimated revenue associated with the unused licenses as digital content is downloaded and licenses are obtained for such content by the customer during the subscription period. The estimate of unused licenses is based on historical download activity, and future changes in the estimate could impact the timing of revenue recognition of the Company’s subscription products. The Company expenses contract acquisition costs as incurred, to the extent that the amortization period would otherwise be one year or less.

Collectability is reasonably assured at the time the electronic order or contract is entered. The majority of the Company’s customers purchase products by making an electronic payment with a credit card at the time of a transaction. Customer payments received in advance of revenue recognition are contract liabilities and are recorded as deferred revenue. Customers that do not pay in advance are invoiced and are required to make payments under standard credit terms. Collectability for customers who pay on credit terms allowing for payment beyond the date at which service commences is based on a credit evaluation for certain new customers and transaction history with existing customers. 

The Company recognizes revenue gross of contributor royalties because the Company is the principal in the transaction, as it is the party responsible for the performance obligation and it controls the product or service before transferring it to the customer. The Company also licenses content to customers through third-party resellers. Third-party resellers sell the Company’s products directly to customers as the principal in those transactions. Accordingly, the Company recognizes revenue net of costs paid to resellers.

Recently Adopted and Issued Accounting Standard Updates

Recently Adopted Accounting Standard UpdatesIn December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes (“ASU-2019-12”). ASU 2019-12 eliminates certain exceptions to the guidance in Topic 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes, enacted changes in tax laws or rates and clarifies the accounting transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. The Company adopted ASU 2019-12, effective January 1, 2021. The impact of adoption of this standard on the consolidated financial statements, including accounting policies, processes and systems, was not material.

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Acquisition (Tables)

6 Months Ended

Jun. 30, 2021

Business Combinations [Abstract]

Schedule of Aggregate Purchase Price Allocation to Assets Acquired and Liabilities Assumed

The aggregate purchase price was allocated to the assets acquired and liabilities assumed as follows (in thousands):

Assets acquired and liabilities assumed:	Fair Value at Acquisition Date
Cash and cash equivalents	$	5,165
Other assets	1,553
Property and equipment	472
Intangible assets	21,500
Goodwill	59,491
Total assets acquired	$	88,181
Accounts payable, accrued expenses and other liabilities	(4,685)
Contributor royalties payable	(2,243)
Deferred tax liability	(3,923)
Total liabilities assumed	(10,851)
Net assets acquired	$	77,330

Business Acquisition, Pro Forma Information

These pro forma results have been prepared for comparative purposes only and are not necessarily indicative of what the Company’s operating results would have been, had the acquisitions actually taken place at the beginning of the previous annual period:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue
As Reported	$	189,912	$	159,230	$	373,193	$	320,515
Pro Forma	189,912		164,762		375,256		331,485
Income before income taxes
As Reported	$	34,548	$	22,694	$	70,204	$	28,988
Pro Forma	34,548		22,728		71,505		27,569

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Property and Equipment (Tables)

6 Months Ended

Jun. 30, 2021

Property, Plant and Equipment [Abstract]

Summary of Property and Equipment

Property and equipment is summarized as follows (in thousands):

	As of June 30, 2021		As of December 31, 2020
Computer equipment and software	$	208,018	$	193,141
Furniture and fixtures	10,246		10,235
Leasehold improvements	19,380		19,382
Property and equipment	237,644		222,758
Less accumulated depreciation	(187,654)		(171,852)
Property and equipment, net	$	49,990	$	50,906

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Changes in Goodwill

The following table summarizes the changes in the Company’s goodwill balance during the six months ended June 30, 2021 (in thousands):

	Goodwill
Balance as of December 31, 2020	$	89,413
Goodwill related to acquisitions	$	59,491
Foreign currency translation adjustment	165
Balance as of June 30, 2021	$	149,069

Schedule of Intangible Assets

Intangible assets consisted of the following as of June 30, 2021 and December 31, 2020 (in thousands):

	As of June 30, 2021							As of December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Life (Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing intangible assets:
Customer relationships	$	27,282	$	(12,181)	$	15,101	10	$	18,132	$	(11,032)	$	7,100
Trade name	8,926		(6,592)		2,334		8	6,669		(6,328)		341
Developed technology	14,763		(6,131)		8,632		4	6,930		(5,039)		1,891
Contributor content	32,623		(12,416)		20,207		8	26,669		(10,378)		16,291
Patents	259		(124)		135		18	259		(117)		142
Total	$	83,853	$	(37,444)	$	46,409		$	58,659	$	(32,894)	$	25,765

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Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2021

Payables and Accruals [Abstract]

Schedule of Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	As of June 30, 2021		As of December 31, 2020
Compensation	$	27,016	$	31,499
Non-income taxes	20,937		17,164
Website hosting and marketing fees	12,831		9,991
Other expenses	13,105		9,255
Total accrued expenses	$	73,889	$	67,909

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Stockholders’ Equity and Equity-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2021

Share-based Payment Arrangement [Abstract]

Summary of Non-cash Equity-based Compensation Expense Included in the Company's Statement of Operations

The following table summarizes non-cash equity-based compensation expense, net of forfeitures, by financial statement line item included in the accompanying Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (in thousands): 

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Cost of revenue	$	194	$	99	$	358	$	150
Sales and marketing	926		374		1,393		834
Product development	1,799		1,068		3,028		2,193
General and administrative	6,767		2,095		13,117		6,219
Total	$	9,686	$	3,636	$	17,896	$	9,396

The following table summarizes non-cash equity-based compensation expense, net of forfeitures, by award type included in the accompanying Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Stock options	$	177	$	414	$	352	$	1,730
RSUs	9,509		3,222		17,544		7,666
Total	$	9,686	$	3,636	$	17,896	$	9,396

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Revenue (Tables)

6 Months Ended

Jun. 30, 2021

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

The Company’s revenues by distribution channel for the three and six months ended June 30, 2021 and 2020 are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
E-commerce	$	120,715	$	98,164	$	239,115	$	197,900
Enterprise	69,197		61,066		134,078		122,615
Total Revenues	$	189,912	$	159,230	$	373,193	$	320,515

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Other Income / (Loss), net (Tables)

6 Months Ended

Jun. 30, 2021

Other Nonoperating Income (Expense) [Abstract]

Summary of the Company's other (expense) income, net activity

The following table presents a summary of the Company’s other income and expense activity included in the accompanying Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Foreign currency gain / (loss)	$	1,277	$	132	$	(1,233)	$	(466)
Interest income, net	46		17		94		1,128
Total other income / (loss)	$	1,323	$	149	$	(1,139)	$	662

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Net Income Per Share (Tables)

6 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Schedule of Weighted Average Number of Shares

The following table sets forth the computation of basic and diluted net income per share for the three and six months ended June 30, 2021 and 2020 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	29,454	$	18,987	$	58,968	$	23,305
Shares used to compute basic net income per share	36,570		35,652		36,453		35,587
Dilutive potential common shares
Stock options	242		39		233		53
Unvested restricted stock awards	377		215		532		254
Shares used to compute diluted net income per share	37,189		35,906		37,218		35,894
Basic net income per share	$	0.81	$	0.53	$	1.62	$	0.65
Diluted net income per share	$	0.79	$	0.53	$	1.58	$	0.65
Dilutive shares included in the calculation	1,221		1,304		1,328		1,080
Anti-dilutive shares excluded from the calculation	2		1,152		10		1,148

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Geographic Information (Tables)

6 Months Ended

Jun. 30, 2021

Segment Reporting [Abstract]

Revenue from External Customers by Geographic Areas

The following table presents the Company’s revenue based on customer location (in thousands): 

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
North America	$	68,954	$	56,211	$	133,263	$	113,229
Europe	64,778		52,207		127,055		106,003
Rest of the world	56,180		50,812		112,875		101,283
Total revenue	$	189,912	$	159,230	$	373,193	$	320,515

Long-lived Assets by Geographic Areas

The Company’s long-lived tangible assets were located as follows (in thousands):

	As of June 30,		As of December 31,
	2021		2020
North America	$	42,324	$	43,451
Europe	7,470		7,192
Rest of the world	196		263
Total long-lived tangible assets	$	49,990	$	50,906

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Summary of Operations and Significant Accounting Policies - Allowance for Doubtful Accounts and Chargeback and Sales Refund Allowance (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Accounting Policies [Abstract]
Bad debt expense	$ 213	$ 1,086
Allowance for doubtful accounts	2,425		$ 4,942
Chargeback and sales refund allowances	$ 500		$ 500

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Summary of Operations and Significant Accounting Policies - Accounting Standards Update (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity	$ (465,334)	$ (440,504)	$ (421,925)	$ (343,500)	$ (327,727)	$ (328,145)
Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity	$ (211,956)	$ (190,173)	$ (168,305)	$ (132,147)	$ (119,218)	(121,187)
Cumulative Effect, Period of Adoption, Adjustment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity						247
Cumulative Effect, Period of Adoption, Adjustment | Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity						247
Cumulative Effect, Period of Adoption, Adjustment | Accounting Standards Update 2016-13 | Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity						$ 200

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Fair Value Measurements and Other Long-term Investments (Details) - USD ($) $ in Millions	Jun. 30, 2021	Dec. 31, 2020
Fair Value Disclosures [Abstract]
Cash equivalents	$ 280.1	$ 250.0
Long-term investments	$ 20.0	$ 20.0

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Acquisition - Narrative (Details) - TurboSquid, Inc. $ in Millions	Feb. 01, 2021 USD ($)
Business Acquisition [Line Items]
Purchase price	$ 77.3
Professional fees	$ 1.6
Estimated useful life	8 years 2 months 12 days

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Acquisition - Schedule of Acquisition (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Feb. 01, 2021	Dec. 31, 2020
Assets acquired and liabilities assumed:
Goodwill	$ 149,069		$ 89,413
TurboSquid, Inc.
Assets acquired and liabilities assumed:
Cash and cash equivalents		$ 5,165
Other assets		1,553
Property and equipment		472
Intangible assets		21,500
Goodwill		59,491
Total assets acquired		88,181
Accounts payable, accrued expenses and other liabilities		(4,685)
Contributor royalties payable		(2,243)
Deferred tax liability		(3,923)
Total liabilities assumed		(10,851)
Net assets acquired		$ 77,330

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Acquisition - Pro Forma (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Business Acquisition [Line Items]
Revenue - As Reported	$ 189,912	$ 159,230	$ 373,193	$ 320,515
Income before income taxes - As Reported			70,204	28,988
TurboSquid, Inc.
Business Acquisition [Line Items]
Revenue - As Reported	189,912	159,230	373,193	320,515
Revenue - Pro Forma	189,912	164,762	375,256	331,485
Income before income taxes - As Reported	34,548	22,694	70,204	28,988
Income before income taxes - Pro Forma	$ 34,548	$ 22,728	$ 71,505	$ 27,569

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Property and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Property and Equipment
Property and equipment	$ 237,644		$ 237,644		$ 222,758
Less accumulated depreciation	(187,654)		(187,654)		(171,852)
Property and equipment, net	49,990		49,990		50,906
Capitalized amount	7,200	$ 6,500	14,200	$ 13,100
Amortization expense	6,600	7,800	13,300	14,900
Internal use software	38,900		38,900		38,000
Computer equipment and software
Property and Equipment
Property and equipment	208,018		208,018		193,141
Furniture and fixtures
Property and Equipment
Property and equipment	10,246		10,246		10,235
Leasehold improvements
Property and Equipment
Property and equipment	19,380		19,380		$ 19,382
Property And Equipment
Property and Equipment
Depreciation	7,900	9,600	15,900	18,900
Cost of revenue
Property and Equipment
Depreciation	7,100	8,600	14,200	16,800
Selling, General and Administrative Expenses
Property and Equipment
Depreciation	$ 800	$ 1,000	$ 1,700	$ 2,100

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Goodwill and Intangible Assets - Changes in Goodwill (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2021 USD ($)
Changes in goodwill
Balance at the beginning of the period	$ 89,413
Goodwill related to acquisitions	59,491
Foreign currency translation adjustment	165
Balance at the end of the period	$ 149,069

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Goodwill and Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Amortizing intangible assets
Gross Carrying Amount	$ 83,853	$ 58,659
Accumulated Amortization	(37,444)	(32,894)
Net Carrying Amount	46,409	25,765
Customer relationships
Amortizing intangible assets
Gross Carrying Amount	27,282	18,132
Accumulated Amortization	(12,181)	(11,032)
Net Carrying Amount	$ 15,101	7,100
Weighted Average Life (Years)	10 years
Trade name
Amortizing intangible assets
Gross Carrying Amount	$ 8,926	6,669
Accumulated Amortization	(6,592)	(6,328)
Net Carrying Amount	$ 2,334	341
Weighted Average Life (Years)	8 years
Developed technology
Amortizing intangible assets
Gross Carrying Amount	$ 14,763	6,930
Accumulated Amortization	(6,131)	(5,039)
Net Carrying Amount	$ 8,632	1,891
Weighted Average Life (Years)	4 years
Contributor content
Amortizing intangible assets
Gross Carrying Amount	$ 32,623	26,669
Accumulated Amortization	(12,416)	(10,378)
Net Carrying Amount	$ 20,207	16,291
Weighted Average Life (Years)	8 years
Patents
Amortizing intangible assets
Gross Carrying Amount	$ 259	259
Accumulated Amortization	(124)	(117)
Net Carrying Amount	$ 135	$ 142
Weighted Average Life (Years)	18 years

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Goodwill and Intangible Assets - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Amortizing intangible assets
Amortization expense	$ 2.3	$ 1.2	$ 4.4	$ 2.5
Remainder of 2021	4.6		4.6
2022	8.9		8.9
2023	8.6		8.6
2024	7.6		7.6
2025	4.3		4.3
2026	3.2		3.2
Thereafter	9.2		9.2
Cost of revenue
Amortizing intangible assets
Amortization expense	1.2	0.7	2.3	1.3
Selling, General and Administrative Expenses
Amortizing intangible assets
Amortization expense	$ 1.1	$ 0.5	$ 2.0	$ 1.2

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Accrued Expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Payables and Accruals [Abstract]
Compensation	$ 27,016	$ 31,499
Non-income taxes	20,937	17,164
Website hosting and marketing fees	12,831	9,991
Other expenses	13,105	9,255
Total accrued expenses	$ 73,889	$ 67,909

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Stockholders’ Equity and Equity-Based Compensation - Narrative (Details) - USD ($)		3 Months Ended		6 Months Ended
	Jul. 19, 2021	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Feb. 28, 2017	Oct. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issued (in shares)		163,000	126,000
Payment of cash dividend (in dollars per share)		$ 0.21	$ 0.17	$ 0.42	$ 0.34
Cash dividend paid		$ 7,700,000	$ 6,100,000	$ 15,300,000	$ 12,100,000
Value of shares withheld				$ 20,229,000	$ 3,436,000
Subsequent Event
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Quarterly cash dividend, declared (in usd per share)	$ 0.21
Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issued (in shares)				370,000	190,000
Authorized purchase amount (up to)						$ 100,000,000	$ 100,000,000
Repurchase of treasury shares (in shares)				0	0
Value remaining for repurchase		$ 100,000,000		$ 100,000,000
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options vested and exercisable (in shares)		300,000		300,000
Options vested and exercisable, weighted average exercise price (in dollars per share)		$ 34.43		$ 34.43
Unrecognized compensation charge		$ 1,300,000		$ 1,300,000
RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares granted (in shares)				382,000
Weighted average grant-date fair value (in usd per share)		$ 56.89		$ 56.89
Nonvested shares outstanding (in shares)		1,242,000		1,242,000
Unrecognized non-cash equity-based compensation charge		$ 56,700,000		$ 56,700,000
Value of shares withheld				$ 20,200,000	$ 3,400,000

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Stockholders’ Equity and Equity-Based Compensation - Summary of non-cash equity-based compensation (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Non-cash equity-based compensation expense
Non-cash equity-based compensation	$ 9,686	$ 3,636	$ 17,896	$ 9,396
Stock options
Non-cash equity-based compensation expense
Non-cash equity-based compensation	177	414	352	1,730
RSUs
Non-cash equity-based compensation expense
Non-cash equity-based compensation	9,509	3,222	17,544	7,666
Cost of revenue
Non-cash equity-based compensation expense
Non-cash equity-based compensation	194	99	358	150
Sales and marketing
Non-cash equity-based compensation expense
Non-cash equity-based compensation	926	374	1,393	834
Product development
Non-cash equity-based compensation expense
Non-cash equity-based compensation	1,799	1,068	3,028	2,193
General and administrative
Non-cash equity-based compensation expense
Non-cash equity-based compensation	$ 6,767	$ 2,095	$ 13,117	$ 6,219

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Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Segment Reporting Information [Line Items]
Total revenue	$ 189,912	$ 159,230	$ 373,193	$ 320,515
Disposal group deferred revenue			99,200
E-commerce
Segment Reporting Information [Line Items]
Total revenue	120,715	98,164	239,115	197,900
Enterprise
Segment Reporting Information [Line Items]
Total revenue	$ 69,197	$ 61,066	$ 134,078	$ 122,615

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Other Income / (Loss), net (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Other Nonoperating Income (Expense) [Abstract]
Foreign currency gain / (loss)	$ 1,277	$ 132	$ (1,233)	$ (466)
Interest income, net	46	17	94	1,128
Total other income / (loss)	$ 1,323	$ 149	$ (1,139)	$ 662

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Income Tax Disclosure [Abstract]
Effective tax rate, expense	14.70%	16.30%	16.00%	19.60%
Effective tax rate decrease due to windfall tax benefits associated with equity-based compensation	5.30%		4.00%
Effective tax rate, excluding discrete items	20.00%		20.00%	16.60%
Increase (decrease) in effective tax rate, loss jurisdiction		(0.30%)		1.60%
Increase in effective tax rate, effect of discrete items				(1.40%)
Cash paid for income taxes			$ 9,495	$ 927

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Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Earnings Per Share [Abstract]
Net income	$ 29,454	$ 18,987	$ 58,968	$ 23,305
Shares used to compute basic net income per share (in shares)	36,570	35,652	36,453	35,587
Dilutive potential common shares
Stock options (in shares)	242	39	233	53
Unvested restricted stock awards (in shares)	377	215	532	254
Shares used to compute diluted net income per share (in shares)	37,189	35,906	37,218	35,894
Basic net income per share (in dollars per share)	$ 0.81	$ 0.53	$ 1.62	$ 0.65
Diluted net income per share (in dollars per share)	$ 0.79	$ 0.53	$ 1.58	$ 0.65
Dilutive securities included in the calculation (in shares)	1,221	1,304	1,328	1,080
Anti-dilutive securities excluded from the calculation (in shares)	2	1,152	10	1,148

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Geographic Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Geographic revenue based on customer location and long-lived tangible assets
Revenue	$ 189,912	$ 159,230	$ 373,193	$ 320,515
Total long-lived tangible assets	49,990		49,990		$ 50,906
North America
Geographic revenue based on customer location and long-lived tangible assets
Revenue	68,954	56,211	133,263	$ 113,229
Total long-lived tangible assets	42,324		$ 42,324		$ 43,451
United States | Revenue benchmark | Geographic concentration
Geographic revenue based on customer location and long-lived tangible assets
Concentration risk percentage			31.00%	32.00%
United States | Total long-lived tangible assets | Geographic concentration
Geographic revenue based on customer location and long-lived tangible assets
Concentration risk percentage			75.00%		75.00%
Europe
Geographic revenue based on customer location and long-lived tangible assets
Revenue	64,778	52,207	$ 127,055	$ 106,003
Total long-lived tangible assets	7,470		7,470		$ 7,192
Rest of the world
Geographic revenue based on customer location and long-lived tangible assets
Revenue	56,180	$ 50,812	112,875	$ 101,283
Total long-lived tangible assets	$ 196		$ 196		$ 263

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Commitments and Contingencies - Narrative (Details)	Jun. 30, 2021 USD ($)
Other Commitments [Line Items]
Other obligations	$ 45,400,000
Maturity of unconditional purchase obligations
Remainder of 2021	14,200,000
2022	14,200,000
2023	9,900,000
2024	4,700,000
2025	2,100,000
Indemnifications
Maximum aggregate obligation and liability for customer	250,000
Indemnification Agreement
Indemnifications
Maximum possible loss per customer	$ 10,000

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Subsequent Events (Details) $ in Millions	1 Months Ended
	Jul. 27, 2021 USD ($)
Subsequent Event | AI Companies
Subsequent Event [Line Items]
Cash payment	$ 35