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Shutterstock (SSTK)

Filed: 26 Oct 21, 7:05am
Table of Contents                            
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 September 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)
 ________________________________________________________
Delaware80-0812659
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareSSTKNew 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 filerSmaller 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).YesNo
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of October 22, 2021, 36,549,234 shares of the registrant’s common stock, $0.01 par value per share, were outstanding.

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Table of Contents                            
Shutterstock, Inc.
FORM 10-Q
Table of Contents 

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Table of Contents                            
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,” “PicMonkey,” “Pattern89,” “Shotzr” 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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Table of Contents                            
PART I.     FINANCIAL INFORMATION
Item 1.        Financial Statements.
Shutterstock, Inc.
Consolidated Balance Sheets
(In thousands, except par value amount)
(unaudited)
September 30,December 31,
20212020
ASSETS
Current assets:
Cash and cash equivalents$300,579 $428,574 
Accounts receivable, net of allowance of $2,463 and $4,94245,323 43,846 
Prepaid expenses and other current assets29,774 16,650 
Total current assets375,676 489,070 
Property and equipment, net48,866 50,906 
Right-of-use assets36,194 39,552 
Intangible assets, net130,196 25,765 
Goodwill219,822 89,413 
Deferred tax assets, net8,721 13,566 
Other assets21,702 21,372 
Total assets$841,177 $729,644 
LIABILITIES AND STOCKHOLDERSEQUITY
Current liabilities:
Accounts payable$5,118 $2,442 
Accrued expenses95,043 67,909 
Contributor royalties payable29,516 26,336 
Deferred revenue171,131 149,843 
Other current liabilities14,646 10,399 
Total current liabilities315,454 256,929 
Deferred tax liability, net3,193 — 
Lease liabilities38,209 41,620 
Other non-current liabilities9,425 9,170 
Total liabilities366,281 307,719 
Commitments and contingencies (Note 13)00
Stockholders’ equity:
Common stock, $0.01 par value; 200,000 shares authorized; 39,191 and 38,803 shares issued and 36,591 and 36,245 shares outstanding as of September 30, 2021 and December 31, 2020, respectively392 389 
Treasury stock, at cost; 2,600 and 2,558 shares as of September 30, 2021 and December 31, 2020, respectively(104,885)(100,027)
Additional paid-in capital368,320 360,939 
Accumulated comprehensive loss(9,233)(7,681)
Retained earnings220,302 168,305 
Total stockholders’ equity474,896 421,925 
Total liabilities and stockholders’ equity$841,177 $729,644 
See Notes to Unaudited Consolidated Financial Statements.
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Table of Contents                            
Shutterstock, Inc.
Consolidated Statements of Operations
(In thousands, except for per share data)
(unaudited)
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
Revenue$194,439 $165,227 $567,632 $485,742 
Operating expenses:
Cost of revenue69,634 60,331 199,223 193,265 
Sales and marketing54,456 36,655 142,273 114,872 
Product development13,565 10,617 36,289 36,171 
General and administrative34,615 28,277 96,335 83,761 
Total operating expenses172,270 135,880 474,120 428,069 
Income from operations22,169 29,347 93,512 57,673 
Other (expense) / income, net(1,749)(1,168)(2,888)(506)
Income before income taxes20,420 28,179 90,624 57,167 
Provision for income taxes4,391 5,597 15,627 11,280 
Net income$16,029 $22,582 $74,997 $45,887 
Earnings per share:
Basic$0.44 $0.63 $2.05 $1.28 
Diluted$0.43 $0.62 $2.01 $1.27 
Weighted average shares outstanding:
Basic36,62235,96236,51035,713
Diluted37,41736,49437,28536,095
See Notes to Unaudited Consolidated Financial Statements.
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Table of Contents                            
Shutterstock, Inc.
Consolidated Statements of Comprehensive Income
(In thousands)
(unaudited)
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
Net income$16,029 $22,582 $74,997 $45,887 
Foreign currency translation loss(1,842)(714)(1,552)(2,908)
Other comprehensive loss(1,842)(714)(1,552)(2,908)
Comprehensive income$14,187 $21,868 $73,445 $42,979 
 
See Notes to Unaudited Consolidated Financial Statements.
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Table of Contents                            
Shutterstock, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands)
(unaudited)
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income / (Loss)
Retained
Earnings
Common StockTreasury Stock
Three Months Ended September 30, 2021SharesAmountSharesAmountTotal
Balance at June 30, 202139,173 $392 2,558 $(100,027)$360,404 $(7,391)$211,956 $465,334 
Equity-based compensation— — — — 8,743 — — 8,743 
Issuance of common stock in connection with employee stock option exercises and RSU vesting28 — — — 217 — — 217 
Common shares withheld for settlement of taxes in connection with equity-based compensation(10)— — — (1,044)— — (1,044)
Repurchase of treasury shares— — 42 (4,858)— — — (4,858)
Cash dividends paid— — — — — — (7,683)(7,683)
Other comprehensive income— — — — — (1,842)— (1,842)
Net income— — — — — — 16,029 16,029 
Balance at September 30, 202139,191 $392 2,600 $(104,885)$368,320 $(9,233)$220,302 $474,896 
Three Months Ended September 30, 2020
Balance at June 30, 202038,245 $382 2,558 $(100,027)$319,412 $(8,414)$132,147 $343,500 
Equity-based compensation— — — — 8,285 — — 8,285 
Issuance of common stock, net of issuance costs516 — — 23,148 — — 23,153 
Issuance of common stock in connection with employee stock option exercises and RSU vesting25 — — — — — — — 
Common shares withheld for settlement of taxes in connection with equity-based compensation(10)— — — (417)— — (417)
Cash dividends paid— — — — — — (6,149)(6,149)
Other comprehensive loss— — — — — (714)— (714)
Net income— — — — — — 22,582 22,582 
Balance at September 30, 202038,776 $387 2,558 $(100,027)$350,428 $(9,128)$148,580 $390,240 
Nine Months Ended September 30, 2021
Balance at December 31, 202038,803 $389 2,558 $(100,027)$360,939 $(7,681)$168,305 $421,925 
Equity-based compensation— — — — 26,639 — — 26,639 
Issuance of common stock in connection with employee stock option exercises and RSU vesting629 — — 2,012 — — 2,018 
Common shares withheld for settlement of taxes in connection with equity-based compensation(241)(3)— — (21,270)— — (21,273)
Repurchase of treasury shares— — 42 (4,858)— — — (4,858)
Cash dividends paid— — — — — — (23,000)(23,000)
Other comprehensive loss— — — — — (1,552)— (1,552)
Net income— — — — — — 74,997 74,997 
Balance at September 30, 202139,191 $392 2,600 $(104,885)$368,320 $(9,233)$220,302 $474,896 
Nine Months Ended September 30, 2020
Balance at December 31, 201938,055 $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, 202038,055 $381 2,558 $(100,027)$312,824 $(6,220)$120,940 $327,898 
Equity-based compensation— — — — 17,681 — — 17,681 
Issuance of common stock, net of issuance costs516 — — 23,148 — — 23,153 
Issuance of common stock in connection with employee stock option exercises and RSU vesting314 — — 626 — — 629 
Common shares withheld for settlement of taxes in connection with equity-based compensation(109)(2)— — (3,851)— — (3,853)
Cash dividends paid— — — — — — (18,247)(18,247)
Other comprehensive loss— — — — — (2,908)— (2,908)
Net income— — — — — — 45,887 45,887 
Balance at September 30, 202038,776 $387 2,558 $(100,027)$350,428 $(9,128)$148,580 $390,240 
See Notes to Unaudited Consolidated Financial Statements.
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Table of Contents                            
Shutterstock, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
 Nine Months Ended
September 30,
 20212020
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income$74,997 $45,887 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization33,731 31,120 
Deferred taxes420 (206)
Non-cash equity-based compensation26,639 17,681 
Bad debt expense182 1,586 
Changes in operating assets and liabilities:
Accounts receivable(1,628)(3,135)
Prepaid expenses and other current and non-current assets(11,469)7,184 
Accounts payable and other current and non-current liabilities24,639 5,297 
Long-term incentives related to acquisitions— (7,759)
Contributor royalties payable1,200 (183)
Deferred revenue13,147 2,753 
Net cash provided by operating activities$161,858 $100,225 
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures(21,167)(20,277)
Business combination, net of cash acquired(181,772)— 
Asset acquisitions(31,440)— 
Acquisition of content(7,890)(2,107)
Security deposit (payment) / release(138)296 
Net cash used in investing activities$(242,407)$(22,088)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock— 23,153 
Purchase of treasury shares(4,171)— 
Proceeds from exercise of stock options2,018 629 
Cash paid related to settlement of employee taxes related to RSU vesting(21,273)(3,861)
Payment of cash dividend(23,000)(18,247)
Net cash (used in) / provided by financing activities$(46,426)$1,674 
Effect of foreign exchange rate changes on cash(1,020)(2,558)
Net (decrease) / increase in cash, cash equivalents and restricted cash(127,995)77,253 
Cash, cash equivalents and restricted cash, beginning of period428,574 305,874 
Cash, cash equivalents and restricted cash, end of period$300,579 $383,127 
Supplemental Disclosure of Cash Information:
Cash paid for income taxes$14,811 $2,767 
See Notes to Unaudited Consolidated Financial Statements.
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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 applications 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. Contributors upload their content to the Company’s web properties in exchange for royalty payments based on customer download activity.
The Company’s key offerings include:
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 - consisting of 3D models, used in a variety of industries such as advertising, media and video production, gaming, retail, education, design and architecture, following the Company’s acquisition of TurboSquid, Inc. on February 1, 2021. See Note 3 Acquisitions.
Creative Design Software - consisting of the Company’s online graphic design and image editing platform. On September 3, 2021, the Company completed the acquisition of substantially all of the assets and assumption of certain liabilities from PicMonkey, LLC. See Note 3 Acquisitions.
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 September 30, 2021, and the Consolidated Statements of Operations, Comprehensive Income and Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020, and the Consolidated Statements of Cash Flows for the nine months ended September 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 September 30, 2021, and its consolidated results of operations, comprehensive income and stockholders’ equity for the three and nine months ended September 30, 2021 and 2020, and its cash flows for the nine months ended September 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 nine months ended September 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.
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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 bank deposits and money market funds.
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 nine months ended September 30, 2021, the Company recorded bad debt expense of $0.2 million. As of September 30, 2021 and December 31, 2020, the Company’s allowance for doubtful accounts was approximately $2.5 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 September 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 September 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 September 30, 2021 and December 31, 2020, the Company had cash equivalent balances of $205.1 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 September 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 September 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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Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



(3) Acquisitions
PicMonkey, LLC
On September 3, 2021, the Company completed the acquisition of substantially all of the assets and assumption of certain liabilities from PicMonkey, LLC (“PicMonkey”), for approximately $110 million. The total purchase price was paid with existing cash on hand in the three months ended September 30, 2021. In connection with the acquisition, the Company incurred approximately $2 million of transaction costs, which is included in general and administrative expenses on the Consolidated Statements of Operations.
PicMonkey is a Washington-based company that operates an online graphic design and image editing platform that enables creators of any skill level to design high-quality visual assets. The Company believes this acquisition provides Shutterstock’s global customer community with professional-grade, easy-to-use design tools.
The identifiable intangible assets, which include customer relationships, developed technology and trade names, have a weighted average life of approximately 9.8 years. The goodwill arising from the transaction is primarily attributable to expected operational synergies and is expected to be deductible for income tax purposes. The allocation of the purchase price is preliminary and will be finalized within the allowable measurement period once independent valuations of the fair value of the assets acquired and liabilities assumed are completed.

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. In connection with the acquisition, the Company incurred approximately $1.6 million of transaction costs, which is included in general and administrative expenses on the Consolidated Statements of Operations.
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 identifiable intangible assets, which include customer relationships, developed technology, trade names and contributor content, have a weighted average life of approximately 8.2 years. The goodwill arising from the transaction is primarily attributable to expected operational synergies and is not deductible for income tax purposes.

The PicMonkey and TurboSquid transactions were accounted for using the acquisition method and, accordingly, the results of the acquired businesses have been included in the Company’s results of operations from the respective acquisition dates. For the three and nine months ended September 30, 2021, revenue of $8.9 million and $20.6 million, respectively, was included in the Consolidated Statements of Operations related to these acquired companies. The fair value of consideration transferred in these business combinations have been allocated to the intangible and tangible assets acquired and liabilities assumed at the acquisition date, with the remaining unallocated amount recorded as goodwill. The identifiable intangible assets of these acquisitions 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.

12

Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



The aggregate purchase price for these acquisitions have been allocated to the assets acquired and liabilities assumed as follows (in thousands):
Assets acquired and liabilities assumed (in thousands):
PicMonkey1
TurboSquidTotal
Cash and cash equivalents$— $5,165 $5,165 
Other assets502 1,553 2,055 
Property and equipment— 472 472 
Right of use asset1,420 — 1,420 
Intangible assets:
Customer relationships28,800 9,000 37,800 
Trademarks3,000 2,200 5,200 
Developed technology12,900 7,800 20,700 
Content library— 2,500 2,500 
Intangible assets44,700 21,500 66,200 
Goodwill71,247 59,491 130,738 
Deferred tax asset2,456 — 2,456 
Total assets acquired$120,325 $88,181 $208,506 
Accounts payable, accrued expenses and other liabilities(747)(4,685)(5,432)
Contributor royalties payable— (2,243)(2,243)
Deferred revenue(8,068)— (8,068)
Deferred tax liability(533)(3,923)(4,456)
Lease liability(1,420)— (1,420)
Total liabilities assumed(10,768)(10,851)(21,619)
Net assets acquired$109,557 $77,330 $186,887 
____________________________________________________
1 The allocation of the purchase price is preliminary and will be finalized within the allowable measurement period once independent valuations of the fair value of the assets acquired and liabilities assumed are completed.

13

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 nine months ended September 30, 2021 and 2020, as if the PicMonkey and TurboSquid acquisitions had been completed on January 1, 2020, after giving effect to certain purchase accounting adjustments, primarily related to intangible assets and transaction costs. 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 September 30,Nine Months Ended September 30,
2021202020212020
Revenue
As Reported$194,439 $165,227 $567,632 $485,742 
Pro Forma199,090 178,965 589,715 525,037 
Income before income taxes
As Reported$20,420 $28,179 $90,624 $57,167 
Pro Forma22,884 29,090 95,738 52,983 

Asset Acquisitions
In July 2021, the Company completed the acquisitions of Pattern89, Inc., Datasine Limited and assets from Shotzr, Inc. These 3 entities provide data driven insights through their artificial intelligence platforms. The aggregate purchase price for these transactions was approximately $35 million, and is subject to customary working capital and other adjustments and was paid from existing cash on hand. Approximately $3.6 million of the total purchase consideration was subject to contractual holdback provisions and is expected to be paid within the next 12 months. The Company has accounted for these transactions as asset acquisitions and has recorded a total of $41 million of developed technology intangible assets, which are being amortized on a straight-line basis over a useful life of three years.

(4) Property and Equipment
Property and equipment is summarized as follows (in thousands):
 As of September 30, 2021As of December 31, 2020
Computer equipment and software$214,571 $193,141 
Furniture and fixtures10,241 10,235 
Leasehold improvements19,356 19,382 
Property and equipment244,168 222,758 
Less accumulated depreciation(195,302)(171,852)
Property and equipment, net$48,866 $50,906 

Depreciation expense related to property and equipment was $7.9 million and $8.4 million for the three months ended September 30, 2021 and 2020, respectively, and $23.8 million and $27.3 million for the nine months ended September 30, 2021 and 2020, respectively. Cost of revenues included depreciation expense of $7.1 million and $7.5 million for the three months ended September 30, 2021 and 2020, respectively, and $21.3 million and $24.3 million for the nine months ended September 30, 2021 and 2020, respectively. General and administrative expense included depreciation expense of $0.8 million and $0.9 million for the three months ended September 30, 2021 and 2020, respectively, and $2.5 million and $3.0 million for the nine months ended September 30, 2021 and 2020, respectively.
Capitalized Internal-Use Software
The Company capitalized costs related to the development of internal-use software of $6.7 million and $6.1 million for the three months ended September 30, 2021 and 2020, respectively, and $20.9 million and $19.3 million for the nine months ended September 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.
14

Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



The portion of total depreciation expense related to capitalized internal-use software was $6.7 million and $7.1 million for the three months ended September 30, 2021 and 2020, respectively, and $20.1 million and $22.0 million for the nine months ended September 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 September 30, 2021 and December 31, 2020, the Company had capitalized internal-use software of $38.8 million and $38.0 million, respectively, net of accumulated depreciation, which was included in property and equipment, net.

(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 nine months ended September 30, 2021.
The following table summarizes the changes in the Company’s goodwill balance during the nine months ended September 30, 2021 (in thousands):
 Goodwill
Balance as of December 31, 2020$89,413 
Goodwill related to acquisitions130,738 
Foreign currency translation adjustment(329)
Balance as of September 30, 2021$219,822 

Intangible Assets
Intangible assets consisted of the following as of September 30, 2021 and December 31, 2020 (in thousands):
 As of September 30, 2021As 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$55,720 $(12,787)$42,933 11$18,132 $(11,032)$7,100 
Trade name11,821 (6,638)5,183 86,669 (6,328)341 
Developed technology68,029 (9,613)58,416 46,930 (5,039)1,891 
Contributor content37,023 (13,490)23,533 826,669 (10,378)16,291 
Patents259 (128)131 18259 (117)142 
Total$172,852 $(42,656)$130,196  $58,659 $(32,894)$25,765 

Amortization expense was $5.6 million and $1.3 million for the three months ended September 30, 2021 and 2020, respectively, and $9.9 million and $3.8 million for the nine months ended September 30, 2021 and 2020, respectively. Cost of revenue included amortization expense of $4.2 million and $0.7 million for the three months ended September 30, 2021 and 2020, respectively, and $6.5 million and $2.0 million for the nine months ended September 30, 2021 and 2020, respectively. General and administrative expense included amortization expense of $1.4 million and $0.6 million for the three months ended September 30, 2021 and 2020, respectively, and $3.4 million and $1.8 million for the nine months ended September 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: $7.1 million for the remaining three months of 2021, $28.3 million in 2022, $27.9 million in 2023, $20.8 million in 2024, $10.1 million in 2025, $8.1 million in 2026 and $27.9 million thereafter.

15

Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



(6) Accrued Expenses 
Accrued expenses consisted of the following (in thousands):
As of September 30, 2021As of December 31, 2020
Compensation$38,257 $31,499 
Non-income taxes20,784 17,164 
Website hosting and marketing fees16,385 9,991 
Other expenses19,617 9,255 
Total accrued expenses$95,043 $67,909 


(7) Stockholders’ Equity and Equity-Based Compensation
Stockholders’ Equity
Common Stock
The Company issued approximately 18,000 and 15,000 shares of common stock during the three months ended September 30, 2021 and 2020, respectively, and 388,000 and 206,000 for the nine months ended September 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.
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.
During the three and nine months ended September 30, 2021, the Company repurchased approximately 41,900 shares of its common stock at an average per share cost of $115.95. During the nine months ended September 30, 2020, the Company did not repurchase any shares of its common stock under the share repurchase program. As of September 30, 2021, the Company had $95 million of remaining authorization for purchases under the share repurchase program.
Dividends
The Company declared and paid cash dividends of $0.21 and $0.63 per share of common stock, or $7.7 million and $23.0 million, during the three and nine months ended September 30, 2021, respectively, and $0.17 and $0.51 per share of common stock, or $6.1 million and $18.2 million, during the three and nine months ended September 30, 2020, respectively.
On October 18, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.21 per share of outstanding common stock payable on December 16, 2021 to stockholders of record at the close of business on December 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.
16

Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



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 nine months ended September 30, 2021 and 2020 (in thousands): 
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Cost of revenue$(49)$125 $309 $275 
Sales and marketing638 467 2,031 1,301 
Product development1,675 1,263 4,703 3,456 
General and administrative6,479 6,430 19,596 12,649 
Total$8,743 $8,285 $26,639 $17,681 
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 nine months ended September 30, 2021 and 2020 (in thousands):
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Stock options$179 $179 $531 $1,909 
RSUs8,564 8,106 26,108 15,772 
Total$8,743 $8,285 $26,639 $17,681 
Stock Option Awards
During the nine months ended September 30, 2021, no options to purchase shares of its common stock were granted. As of September 30, 2021, there were approximately 318,000 options vested and exercisable with a weighted average exercise price of $34.38. As of September 30, 2021, the total unrecognized compensation charge related to non-vested options was approximately $1.1 million, which is expected to be recognized through 2023.
Restricted Stock Unit Awards
During the nine months ended September 30, 2021, the Company had RSU grants, net of forfeitures, of approximately 367,000. As of September 30, 2021, there are approximately 1,203,000 non-vested RSUs outstanding with a weighted average grant-date fair value of $59.37. As of September 30, 2021, the total unrecognized non-cash equity-based compensation charge related to the non-vested RSUs was approximately $49.8 million, which is expected to be recognized through 2024.
During the nine months ended September 30, 2021 and 2020, shares of common stock with an aggregate value of $21.3 million and $3.9 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 2 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.
17

Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



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 nine months ended September 30, 2021 and 2020 are as follows (in thousands):
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
E-commerce$121,707 $102,816 $360,822 $300,716 
Enterprise72,732 62,411 206,810 185,026 
Total Revenues$194,439 $165,227 $567,632 $485,742 
The September 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. $125.5 million of total revenue recognized for the nine months ended September 30, 2021 was reflected in deferred revenue as of December 31, 2020.

(9) Other (Expense) / Income, 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 nine months ended September 30, 2021 and 2020 (in thousands):
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Foreign currency (loss) / gain$(1,761)$(1,170)$(2,994)$(1,636)
Interest income, net12 106 1,130 
Total other (expense) / income$(1,749)$(1,168)$(2,888)$(506)


(10) Income Taxes
The Company’s effective tax rates yielded a net expense of 21.5% and 19.9% for the three months ended September 30, 2021 and 2020, respectively, and a net expense of 17.2% and 19.7% for the nine months ended September 30, 2021 and 2020, respectively.
During the three months ended September 30, 2021, the net effect of discrete items increased the effective tax rate by 1.3%. For the nine months ended September 30, 2021, the net effect of discrete items decreased the effective tax rate by 3.0%. The discrete items for the nine months ended September 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 20.2% for the three and nine months ended September 30, 2021.
During the three months ended September 30, 2020, the net effect of discrete items increased the effective tax rate by 2.9%. For the nine months ended September 30, 2020, the effective tax rate increased by 0.9% as a result of a loss jurisdiction with no tax benefit. Discrete items further increased the effective tax rate by 1.8%. Excluding the discrete items, the Company’s effective tax rate would have been 17.0% for the three and nine months ended September 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 nine months ended September 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.
18

Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



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 nine months ended September 30, 2021 and 2020.
During the nine months ended September 30, 2021 and 2020, the Company paid net cash taxes of $14.8 million and $2.8 million, respectively.

(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 nine months ended September 30, 2021 and 2020 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net income$16,029 $22,582 $74,997 $45,887 
Shares used to compute basic net income per share36,622 35,962 36,510 35,713 
Dilutive potential common shares
Stock options255 104 240 70 
Unvested restricted stock awards540 428 535 312 
Shares used to compute diluted net income per share37,417 36,494 37,285 36,095 
Basic net income per share$0.44 $0.63 $2.05 $1.28 
Diluted net income per share$0.43 $0.62 $2.01 $1.27 
Dilutive shares included in the calculation1,279 1,385 1,312 1,182 
Anti-dilutive shares excluded from the calculation778 1,024 

19

Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



(12) Geographic Information
The following table presents the Company’s revenue based on customer location (in thousands): 
 Three Months Ended September 30,Nine Months Ended
September 30,
 2021202020212020
North America$77,264 $59,252 $210,527 $172,481 
Europe60,301 53,291 187,356 159,294 
Rest of the world56,874 52,684 169,749 153,967 
Total revenue$194,439 $165,227 $567,632 $485,742 
The United States, included in North America in the above table, accounted for 33% and 32% of consolidated revenue for the nine months ended September 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 September 30,As of December 31,
20212020
North America$41,260 $43,451 
Europe7,424 7,192 
Rest of the world182 263 
Total long-lived tangible assets$48,866 $50,906 
The United States, included in North America in the above table, accounted for 76% and 75% of total long-lived tangible assets as of September 30, 2021 and December 31, 2020, respectively. Ireland, included in Europe in the above table, accounted for 11% of total long-lived tangible assets as of September 30, 2021. No other country accounts for more than 10% of the Company’s long-lived tangible assets in any period presented.

(13) Commitments and Contingencies
As of September 30, 2021, the Company had total non-lease obligations in the amount of approximately $59.0 million, which consisted primarily of minimum royalty guarantees and unconditional purchase obligations related to contracts for infrastructure and other business services. As of September 30, 2021, the Company’s non-lease obligations for the remainder of 2021 and for the years ending December 31, 2022, 2023, 2024, 2025 and 2026 were approximately $21.5 million, $17.7 million, $12.7 million, $4.7 million, $2.1 million and $0.3 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.
20

Shutterstock, Inc.
Notes to Consolidated Financial Statements 
(unaudited)



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 10000 dollars but can range to $250,000, with certain exceptions for which our indemnification obligation are uncapped. As of September 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.

21

Table of Contents                            
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 applications 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 Company’s key offerings include:
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 - consisting of 3D models, used in a variety of industries such as advertising, media and video production, gaming, retail, education, design and architecture, following our acquisition of TurboSquid, Inc. (“TurboSquid”) on February 1, 2021.
Creative Design Software - consisting of our online graphic design and image editing platform. On September 3, 2021, we completed the acquisition of substantially all of the assets and assumption of certain liabilities from PicMonkey, LLC (“PicMonkey”).
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.
In addition, in July of 2021, through our newly formed entity Shutterstock.AI, Inc. (“Shutterstock.AI”), we acquired Pattern89, Inc., Datasine Limited, and assets from Shotzr, Inc., three artificial intelligence entities that provide data driven insights through their artificial intelligence platforms.
Shutterstock.AI will commercialize data assets within our content library and enable companies to grow their capabilities in computer vision and content insights. In addition, with artificial intelligence tools obtained from these acquisitions, we plan to develop predictive performance capabilities to help customers make more data-informed content decisions.
Over 2.0 million active, paying customers contributed to our revenue for the twelve-month period ended September 30, 2021. As of September 30, 2021, more than 1.9 million approved contributors made their images, footage and music tracks available in our collection, which has grown to more than 390 million images and more than 23 million footage clips as of September 30, 2021. This makes our collection of content one of the largest of its kind, and we delivered 135.0 million paid downloads to our customers across all of our brands during the nine months ended September 30, 2021.
22

Table of Contents                            
Through our platform, we generate revenue by licensing content to our customers. During the nine months ended September 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 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 nine months ended September 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.

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 nine months ended September 30, 2021 and 2020:
Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
 
Subscribers (end of period)1
336,000 255,000 336,000 255,000 
Subscriber revenue (in millions)1
$81.5 $67.6 $236.1 $194.2 
Average revenue per customer (last twelve months)1
$361 $328 $361 $328 
Paid downloads (in millions)44.3 43.4 135.0 134.2 
Revenue per download$4.20 $3.79 $4.11 $3.60 
Content in our collection (end of period, in millions):
Images390 350 390 350 
Footage clips23 20 23 20 
___________________________________________________
1 Subscribers, subscriber revenue and average revenue per customer exclude customers and revenue related to our acquisitions of TurboSquid and PicMonkey.

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 excluding customers from our acquisitions of TurboSquid and PicMonkey. 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 excluding revenues from our acquisitions of TurboSquid and PicMonkey. 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, excluding revenues from our recent acquisitions of TurboSquid and PicMonkey. We define customers as total active, paying customers that contributed to total revenue over the last twelve-month period, excluding customers from our recent acquisitions of TurboSquid and PicMonkey. 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 content related to custom content, downloads of content that are offered to customers for no charge, including our free image of the week, and downloads associated with our computer vision offering. 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.
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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, revenue that is not derived from or associated with content licenses and revenue associated with our computer vision offering. 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.
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.

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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 nine months ended September 30, 2021 and 2020 are as follows (in thousands):
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
E-commerce$121,707 $102,816 $360,822 $300,716 
Enterprise72,732 62,411 206,810 185,026 
Total Revenues$194,439 $165,227 $567,632 $485,742 

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 (Expense) / Income, Net. Other (expense) / income, 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.
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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 September 30,Nine Months Ended September 30,
 2021202020212020
 (in thousands)
Consolidated Statements of Operations:    
Revenue$194,439 $165,227 $567,632 $485,742 
Operating expenses:
Cost of revenue69,634 60,331 199,223 193,265 
Sales and marketing54,456 36,655 142,273 114,872 
Product development13,565 10,617 36,289 36,171 
General and administrative34,615 28,277 96,335 83,761 
Total operating expenses172,270 135,880 474,120 428,069 
Income from operations22,169 29,347 93,512 57,673 
Other (expense) / income, net(1,749)(1,168)(2,888)(506)
Income before income taxes20,420 28,179 90,624 57,167 
Provision for income taxes4,391 5,597 15,627 11,280 
Net income$16,029 $22,582 $74,997 $45,887 

The following table presents the components of our results of operations for the periods indicated as a percentage of revenue:
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Consolidated Statements of Operations:    
Revenue100 %100 %100 %100 %
Operating expenses:
Cost of revenue36 %37 %35 %40 %
Sales and marketing28 %22 %25 %24 %
Product development%%%%
General and administrative18 %17 %17 %17 %
Total operating expenses89 %82 %84 %88 %
Income from operations11 %18 %16 %12 %
Other (expense) / income, net(1)%(1)%(1)%— %
Income before income taxes11 %17 %16 %12 %
Provision for income taxes%%%%
Net income%14 %13 %%
__________________________________
Note: Due to rounding, percentages may not sum to totals.
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Comparison of the Three Months Ended September 30, 2021 and 2020
The following table presents our results of operations for the periods indicated:
 Three Months Ended September 30,
 20212020$ Change% Change
 (in thousands) 
Consolidated Statements of Operations:    
Revenue$194,439 $165,227 $29,212 18 %
Operating expenses:  
Cost of revenue69,634 60,331 9,303 15 
Sales and marketing54,456 36,655 17,801 49 
Product development13,565 10,617 2,948 28 
General and administrative34,615 28,277 6,338 22 
Total operating expenses172,270 135,880 36,390 27 
Income from operations22,169 29,347 (7,178)(24)
Other (expense) / income, net(1,749)(1,168)(581)50 
Income before income taxes20,420 28,179 (7,759)(28)
Provision for income taxes4,391 5,597 (1,206)(22)
Net income$16,029 $22,582 $(6,553)(29)%

Revenue
Revenue increased by $29.2 million, or 18%, to $194.4 million in the three months ended September 30, 2021 compared to the same period in 2020. On a constant currency basis, revenue increased approximately 17% in the three months ended September 30, 2021, compared to the same period in 2020.
The Company’s E-commerce revenues increased by 18%, to $121.7 million in the three months ended September 30, 2021, compared to the same period in 2020. Foreign currency fluctuations did not have a significant impact on E-commerce revenues in the three months ended September 30, 2021, compared to the same period in 2020. During the three months ended September 30, 2021, growth in our E-commerce sales channel was primarily driven by increased subscriber revenue and revenue generated from our acquisitions of TurboSquid and PicMonkey, which were completed on February 1, 2021 and September 3, 2021, respectively.
The Company’s Enterprise revenues increased by 17%, to $72.7 million in the three months ended September 30, 2021, compared to the same period in 2020. On a constant currency basis, the Company’s Enterprise revenues increased by 15% in the three months ended September 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 September 30, 2021.
In the three months ended September 30, 2021 and 2020, we delivered 44.3 million and 43.4 million paid downloads, respectively, and our revenue per download was $4.20 and $3.79 for the three months ended September 30, 2021 and 2020, respectively. During the three months ended September 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 $18.0 million, or 30%, to $77.3 million, revenue from Europe increased by $7.0 million, or 13%, to $60.3 million and revenue from outside Europe and North America increased by $4.2 million, or 8%, to $56.9 million, in the three months ended September 30, 2021 compared to the same period in 2020.
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Costs and Expenses
Cost of Revenue. Cost of revenue increased by $9.3 million, or 15% to $69.6 million in the three months ended September 30, 2021 compared to the same period in 2020. This increase was primarily driven by: (i) higher royalty expense, which is in line with the increase in revenue and paid downloads; (ii) increased depreciation and amortization expense driven by our recent acquisitions, and (iii) higher content procurement costs. 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 $17.8 million, or 49%, to $54.5 million in the three months ended September 30, 2021 compared to the same period in 2020. As a percent of revenue, sales and marketing expenses increased to 28% for the three months ended September 30, 2021, from 22% for the same period in 2020. This was primarily driven by a (i) $13.0 million increase in marketing spend, and (ii) $3.8 million in higher employee-related costs, primarily related to commissions associated with increased enterprise billings. 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 increased by $2.9 million, or 28%, to $13.6 million in the three months ended September 30, 2021 compared to the same period in 2020. This increase was driven by $3.0 million in higher employee and third-party contractor related costs, net of capitalized labor, for the three months ended September 30, 2021, as compared to the same period in the prior year. 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 $6.3 million, or 22%, to $34.6 million in the three months ended September 30, 2021 compared to the same period in 2020. During the three months ended September 30, 2021, general and administrative expenses included $3.1 million in higher employee-related costs and $2.5 million in higher professional fees primarily related to our acquisition of PicMonkey.
Other (Expense) / Income, Net. In the three months ended September 30, 2021, other (expense) / income, net substantially consisted of $1.8 million of unfavorable foreign currency fluctuations. During the three months ended September 30, 2020, other (expense) / income, net substantially consisted of $1.2 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 decreased by $1.2 million for the three months ended September 30, 2021 as compared to the same period in 2020. Our effective tax rates yielded a net expense of 21.5% and 19.9% for the three months ended September 30, 2021 and 2020, respectively.
For the three months ended September 30, 2021, the net effect of discrete items increased the effective tax rate by 1.3%. Excluding discrete items, our effective tax rate would have been 20.2% for the three months ended September 30, 2021.
For the three months ended September 30, 2020, the net effect of discrete items increased the effective tax rate by 2.9%. Excluding these items, our effective tax rate would have been 17.0% for the three months ended September 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.

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Comparison of the Nine Months Ended September 30, 2021 and 2020
The following table presents our results of operations for the periods indicated:
 Nine Months Ended September 30,
 20212020$ Change% Change
 (in thousands) 
Consolidated Statements of Operations Data:    
Revenue$567,632 $485,742 $81,890 17 %
Operating expenses:  
Cost of revenue199,223 193,265 5,958 %
Sales and marketing142,273 114,872 27,401 24 %
Product development36,289 36,171 118 — %
General and administrative96,335 83,761 12,574 15 %
Total operating expenses474,120 428,069 46,051 11 %
Income from operations93,512 57,673 35,839 62 %
Other (expense) / income, net(2,888)(506)(2,382)*
Income before income taxes90,624 57,167 33,457 59 %
Provision for income taxes15,627 11,280 4,347 39 %
Net income$74,997 $45,887 $29,110 63 %
______________________________________
*    Not meaningful
Revenue
Revenue increased by $81.9 million, or 17%, to $567.6 million in the nine months ended September 30, 2021 compared to the same period in 2020. On a constant currency basis, revenue increased approximately 15% in the nine months ended September 30, 2021, compared to the same period in 2020.
The Company’s E-commerce revenues increased by 20%, to $360.8 million in the nine months ended September 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 nine months ended September 30, 2021, compared to the same period in 2020. During the nine months ended September 30, 2021, growth in our E-commerce sales channel was driven by increased subscriber revenue and revenue generated by our acquisitions of TurboSquid and PicMonkey, which were completed on February 1, 2021 and September 3, 2021, respectively.
The Company’s Enterprise revenues increased by 12%, to $206.8 million in the nine months ended September 30, 2021, compared to the same period in 2020. On a constant currency basis, the Company’s Enterprise revenues increased by 9% in the nine months ended September 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 September 30, 2021.
In the nine months ended September 30, 2021 and 2020, we delivered 135.0 million and 134.2 million paid downloads, respectively, and our revenue per download was $4.11 and $3.60 for the nine months ended September 30, 2021 and 2020, respectively. During the nine months ended September 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 $38.0 million, or 22%, to $210.5 million, revenue from Europe increased by $28.1 million, or 18%, to $187.4 million and revenue from outside Europe and North America increased by $15.8 million, or 10%, to $169.7 million, in the nine months ended September 30, 2021 compared to the same period in 2020.
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Costs and Expenses
Cost of Revenue.   Cost of revenue increased by $6.0 million, or 3%, to $199.2 million in the nine months ended September 30, 2021 compared to the same period in 2020. This increase was primarily driven by: (i) higher royalty expense and credit card fees, which are in line with the increase in revenue and paid downloads, and (ii) increased depreciation and amortization expense driven by our recent acquisitions. In addition, for the nine months ended September 30, 2020, cost of revenue includes severance charges of $1.2 million. 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 $27.4 million, or 24%, to $142.3 million in the nine months ended September 30, 2021 compared to the same period in 2020. As a percent of revenue, sales and marketing expenses increased to 25% for the nine months ended September 30, 2021, from 24% for the same period in 2020. The increase in sales and marketing expenses was primarily driven by (i) $17.0 million in higher marketing spend, and (ii) $9.1 million in higher employee-related costs, primarily related to commissions associated with increased enterprise billings. In addition, for the nine months ended September 30, 2021 and 2020, sales and marketing includes severance charges of $1.3 million and $1.7 million, respectively. 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 increased by $0.1 million, to $36.3 million in the nine months ended September 30, 2021 as compared to the same period in 2020. This increase was primarily driven by higher non-cash compensation expense, attributable to certain performance-based awards, partially offset by a reduction in software and other IT-related costs, for the nine months ended September 30, 2021, as compared to the same period in the prior year. 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 $12.6 million, or 15%, to $96.3 million in the nine months ended September 30, 2021 compared to the same period in 2020. This increase was primarily driven by: (i) $6.9 million in higher non-cash compensation expense, attributable to certain performance-based awards; (ii) $4.2 million in higher professional fees, which were impacted by transaction costs associated with our acquisitions of TurboSquid and PicMonkey, and (iii) $3.3 million in higher employee-related costs. These increases were partially offset by a $1.4 million decline in bad debt expense, and other reductions associated with ongoing vendor management initiatives.
Other (Expense) / Income, Net. During the nine months ended September 30, 2021, other (expense) / income, net substantially consisted of $3.0 million of unfavorable foreign currency fluctuations. During the nine months ended September 30, 2020, approximately $1.6 million of other (expense) / income, net consisted unfavorable foreign currency fluctuations, which was partially offset by $1.1 million of interest income. 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 $4.3 million for the nine months ended September 30, 2021 as compared to the same period in 2020. Our effective tax rates for the nine months ended September 30, 2021 and 2020 were 17.2% and 19.7%, respectively. 
For the nine months ended September 30, 2021, the effective tax rate decreased by 3.0% related primarily to windfall tax benefits associated with equity-based compensation. Excluding discrete items, our effective tax rate would have been 20.2% for the nine months ended September 30, 2021.
For the nine months ended September 30, 2020, the effective tax rate increased by 0.9% as a result of a loss jurisdiction with no tax benefit. Discrete item further increased the effective tax rate by 1.8%. Excluding these items, our effective tax rate would have been 17.0% for the nine months ended September 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.
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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 September 30, 2021, we had cash and cash equivalents totaling $300.6 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 and asset acquisitions 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 $0.63 per share of common stock, or $23.0 million during the nine months ended September 30, 2021.
On October 18, 2021, our Board of Directors declared a quarterly cash dividend of $0.21 per share of outstanding common stock payable on December 16, 2021 to stockholders of record at the close of business on December 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 September 30, 2021, we have repurchased approximately 2.6 million shares of our common stock under the share repurchase program at an average per-share cost of $40.33. During the nine months ended September 30, 2021, we repurchased approximately 41,900 shares of our common stock at an average per share cost of $115.95. As of September 30, 2021, we had $95 million of remaining authorization for purchases under the share repurchase program.
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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 nine months ended September 30, 2021, shares with an aggregate value of $21.3 million were withheld upon vesting of RSUs and paid in connection with related remittance to taxing authorities.
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 September 30, 2021.
Cash Flows 
The following table summarizes our cash flow data for the nine months ended September 30, 2021 and 2020 (in thousands).
 Nine Months Ended September 30,
 20212020
Net cash provided by operating activities$161,858 $100,225 
Net cash used in investing activities$(242,407)$(22,088)
Net cash (used in) / provided by financing activities$(46,426)$1,674 
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 $161.9 million for the nine months ended September 30, 2021, compared to $100.2 million for the nine months ended September 30, 2020. In the nine months ended September 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 nine months ended September 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 nine months ended September 30, 2021 was $242.4 million, consisting primarily of (i) $181.8 million cash used in the acquisitions of TurboSquid and PicMonkey, net of cash acquired; (ii) $31.4 million cash used in the asset acquisitions of Pattern89, Inc., Datasine Limited and assets from Shotzr, Inc.; (iii) capital expenditures of $21.2 million for internal-use software and website development costs and purchases of software and equipment, and (iv) $7.9 million paid to acquire the rights to distribute certain digital content into perpetuity.
Cash used in investing activities in the nine months ended September 30, 2020 was $22.1 million, consisting primarily of capital expenditures of $20.3 million for internal-use software and website development costs and purchases of software and equipment, and $2.1 million paid to acquire the rights to distribute certain digital content in perpetuity.
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Financing Activities
Cash used in financing activities in the nine months ended September 30, 2021 was $46.4 million, consisting primarily of (i) $23.0 million, related to the payment of the quarterly cash dividend; (ii) $21.3 million paid in settlement of tax withholding obligations related to employee stock-based compensation awards, and (iii) $4.2 million in connection with the repurchase of common stock under our share repurchase program. These amounts were partially offset by approximately $2.0 million received from the issuance of common stock in connection with the exercise of stock options.
Cash provided by financing activities in the nine months ended September 30, 2020 was $1.7 million, consisting primarily of $23.2 million of proceeds from our stock offering on August 14, 2020, after deducting underwriting discounts, commissions and offering expenses paid, and approximately $0.6 million received from the issuance of common stock in connection with the exercise of stock options. These amounts were partially offset by $18.2 million, related to the payment of the quarterly cash dividend, and $3.9 million, 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 $51.8 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 September 30, 2021, aggregate undiscounted future minimum lease payments under other operating leases are approximately $6.8 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 September 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 $21.5 million, $17.7 million, $12.7 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 September 30,Nine Months Ended September 30,
2021202020212020
Non-GAAP Financial Measures:(in thousands)
Adjusted EBITDA$44,400 $47,382 $153,882 $106,474 
Adjusted net income26,354 29,326 100,925 60,647 
Free cash flow$44,318 $57,041 $132,801 $85,600 
Revenue growth on a constant currency basis17 %%15 %%

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
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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 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.

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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 September 30,Nine Months Ended September 30,
 2021202020212020
(in thousands)
Net income$16,029 $22,582 $74,997 $45,887 
Add / (less) Non-GAAP adjustments:
Depreciation and amortization13,488 9,750 33,731 31,120 
Non-cash equity-based compensation8,743 8,285 26,639 17,681 
Other adjustments, net(1)
1,749 1,168 2,888 506 
Provision for income taxes4,391 5,597 15,627 11,280 
Adjusted EBITDA$44,400 $47,382 $153,882 $106,474 
Adjusted EBITDA margin22.8 %28.7 %27.1 %21.9 %
_______________________________________________________________________________
(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 September 30,Nine Months Ended September 30,
 2021202020212020
(in thousands)
Net income$16,029 $22,582 $74,997 $45,887 
Add / (less) Non-GAAP adjustments:
Non-cash equity-based compensation8,743 8,285 26,639 17,681 
Tax effect of non-cash equity-based compensation(1)
(2,055)(1,947)(6,260)(4,155)
Acquisition-related amortization expense4,754 531 7,253 1,613 
Tax effect of acquisition-related amortization expense(1)
(1,117)(125)(1,704)(379)
Adjusted net income$26,354 $29,326 $100,925 $60,647 
Adjusted net income per diluted common share$0.70 $0.80 $2.71 $1.68 
(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 September 30,Nine Months Ended September 30,
 2021202020212020
(in thousands)
Reported revenue (in thousands)$194,439 $165,227 $567,632 $485,742 
Revenue growth18 %%17 %— %
Revenue growth on a constant currency basis17 %%15 %%
E-commerce reported revenue (in thousands)$121,707 $102,816 $360,822 $300,716 
E-commerce revenue growth18 %%20 %%
E-commerce revenue growth on a constant currency basis18 %%18 %%
Enterprise reported revenue (in thousands)$72,732 $62,411 $206,810 $185,026 
Enterprise revenue growth17 %(1)%12 %(4)%
Enterprise revenue growth on a constant currency basis15 %(1)%%(4)%

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 September 30,Nine Months Ended September 30,
 2021202020212020
(in thousands)
Net cash provided by operating activities$54,642 $63,882 $161,858 $100,225 
Capital expenditures(5,830)(6,311)(21,167)(20,277)
Content acquisitions(4,494)(530)(7,890)(2,107)
Payments related to long-term incentives related to acquisitions— — — 7,759 
Free Cash Flow$44,318 $57,041 $132,801 $85,600 


Off-Balance Sheet Arrangements
As of September 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 35% for the nine months ended September 30, 2021 and 2020. 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 nine months ended September 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 September 30,Nine Months Ended September 30,
2021202020212020
U.S. DollarsOriginating CurrencyU.S. DollarsOriginating CurrencyU.S. DollarsOriginating CurrencyU.S. DollarsOriginating Currency
Euro$35,930 30,333 $32,949 28,940 $112,573 94,876 $99,397 60,095 
British pounds14,678 £10,681 12,439 £9,743 43,587 £31,802 35,916 £18,509 
All other non-U.S. currencies(1)
14,261 12,567 42,290 35,770 
Total foreign currency64,869 57,955 198,450 171,083 
U.S. dollar129,570 107,272 369,182 314,659 
Total revenue$194,439 $165,227 $567,632 $485,742 
(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 September 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 September 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 September 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 completed several business combinations and asset acquisitions during 2021 and are in the process of integrating the acquired businesses 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 September 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.
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EXHIBIT INDEX
Exhibit  
Number Exhibit Description
31.1# 
31.2# 
32# 
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
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
______________________________________ 
#    Filed herewith.

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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: October 26, 2021By:/s/ Jarrod Yahes
  Jarrod Yahes
  Chief Financial Officer
  (Principal Financial Officer)
   
Dated: October 26, 2021By:/s/ Steven Ciardiello
  Steven Ciardiello
  Chief Accounting Officer
  (Principal Accounting Officer)

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