Getty Images, Inc. (NYSE:GYI), the world’s leading creator and distributor of visual content and other digital media, today reported results for the fourth quarter and full year ended December 31, 2007.
Quarterly Highlights
— Revenue increased 7 percent over the fourth quarter of 2006 to $218 million
— Earnings per diluted share were $0.48
— Cash provided by operating activities was $78.7 million in the quarter with cash and short-term investments of $364 million at year end
“We are making tremendous progress toward our goal of becoming a complete digital media company and we are pleased with our record revenue for the quarter,” said Jonathan Klein, co-founder and chief executive officer. “We experienced sequential growth in every product line compared to the third quarter of 2007 and continue to see strong progress on our many initiatives to stabilize our traditional creative stills business while growing revenue across all other areas of our business.”
Revenue increased 7.1 percent to $218.1 million from $203.6 million in the fourth quarter of 2006. Excluding the effects of changes in currency exchange rates, revenue grew 1.0 percent. Revenue growth over the prior year came from increasing licenses of editorial imagery, significant growth in micro payment revenue, and increased revenue from digital asset management and publicity distribution. This year over year growth was partially offset by lower revenue in the company’s traditional creative stills business.
As a percentage of revenue, cost of revenue was 27.0 percent, compared to 26.3 percent in the prior year due to mix, in particular in the composition of the company’s royalty free business where “other” royalty free revenue is growing faster and has lower gross margins than the traditional single image royalty free licensing.
Selling, general and administrative expenses (SG&A) totaled $86.4 million or 39.6 percent of revenue for the fourth quarter of 2007, compared to $77.0 million or 37.8 percent of revenue in the fourth quarter of 2006. The increase over the prior year is attributable to recently acquired companies, the impact of changes in foreign exchange rates, certain non-recurring costs and investments that the company is making in growth areas, including editorial imagery, multi-media products, footage, micro payment, music and consumer.
Income from operations was $47.8 million or 21.9 percent of revenue in the fourth quarter of 2007 compared to $44.1 million or 21.7 percent of revenue in the fourth quarter of 2006. Excluding $1.1 million of professional fees associated with the review of strategic alternatives and restructuring costs, operating income in the fourth quarter of 2007 was $48.9 million or 22.4 percent of revenue. Excluding $11.1 million of restructuring costs and professional fees associated with the review of the company’s historical equity compensation grant practices, operating income in the fourth quarter of 2006 was $55.2 million or 27.1 percent of revenue.
Net income for the fourth quarter of 2007 was $28.5 million with diluted earnings per share of $0.48 compared to $30.9 million and $0.51, respectively, in the fourth quarter of 2006. Excluding the items noted above, diluted earnings per share were $0.49 for the fourth quarter of 2007 compared to $0.63 for the fourth quarter of 2006.
Total cash and short-term investments were $364.5 million at December 31, 2007, compared to $303.0 million at September 30, 2007. Net cash provided by operating activities during the fourth quarter of 2007 was $78.7 million.
Full Year Highlights
— Revenue grew 6 percent to $858 million
— Editorial imagery revenue grew 38 percent, helped by the acquisition of MediaVast
— Earnings per diluted share were $2.10
— The company generated strong cash from operations of $249.3 million
For 2007, revenue grew 6.3 percent to $857.6 million compared to $806.6 million in the prior year. As a percentage of revenue, cost of revenue was 26.6 percent in 2007 compared to 25.6 percent in the prior year.
For 2007, selling, general and administrative expenses (SG&A) were $335.9 million or 39.2 percent of revenue compared to $302.7 million or 37.5 percent of revenue in the prior year. Excluding $6.0 million for certain non-recurring professional fees associated with the review of the company’s historical equity compensation grant practices, a terminated transaction, and exploration of strategic alternatives in 2007, SG&A would have been $329.9 million or 38.5 percent of revenue.
Income from operations was $196.3 million or 22.9 percent of revenue compared to $198.1 million or 24.6 percent of revenue in 2006. Excluding $11.2 million of restructuring costs and professional fees noted above, income from operations for 2007 was $207.5 million or 24.2 percent of revenue. In 2006, excluding $27.9 million for items noted above, income from operations was $226.0 million or 28.0 percent of revenue in the prior year.
Net income for 2007 was $125.9 million or $2.10 per diluted share compared to $130.4 million or $2.11 per diluted share in 2006. Excluding certain costs noted above and a loss on short term investments in 2006, earnings per diluted share was $2.22 in 2007 compared to $2.46 per share in 2006.
For the full year 2007, the company generated cash from operating activities of $249.3 million, compared to $269.1 million in 2006. Significant uses of cash during the year included $254.7 million for business acquisitions and $62.9 million for the acquisition of property and equipment. The company finished the year with total cash and short term investments of $364.5 million.
Business Outlook
The following forward-looking statements reflect Getty Images’ expectations as of January 31, 2008. The company currently does not intend to update these forward-looking statements until the next quarterly results announcement.
For the first quarter of 2008, the company expects revenue of approximately $220 million and diluted earnings per share of $0.45. For the full year 2008, the company expects revenue of approximately $900 million and diluted earnings per share of $2.00 to $2.10. Certain professional fees associated with the company’s exploration of strategic alternatives are included in the guidance for the first quarter and full year of 2008.
The company expects fully diluted shares just over 60 million shares for both the first quarter and the full year of 2008.
For CONDENSED CONSOLIDATED STATEMENTS click here
About Getty Images
Getty Images is the world’s leading creator and distributor of visual content and the first place creative professionals turn to discover, purchase and manage imagery. The company’s award-winning photographers and imagery help customers create inspiring work which appears every day in the world’s most influential newspapers, magazines, advertising campaigns, films, television programs, books and Web sites. Headquartered in Seattle, WA and serving customers in more than 100 countries, Getty Images believes in the power of imagery to drive positive change, educate, inform, and entertain. Visit Getty Images at http://www.gettyimages.com.
Some of the statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s expectations, assumptions and projections about our business as of the time the statements are made. These forward-looking statements are not guarantees of future performance and are subject to certain risks and uncertainties that could cause our actual results to differ materially from our past performance and our current expectations, assumptions and projections. Differences may result from actions taken by us as well as from risks and uncertainties beyond our control. These risks and uncertainties include, among others, the risks associated with currency fluctuations, risks associated with our ability to integrate and grow recently acquired businesses and pursue new business strategies, changes in the economic, political, competitive and technological environments, and the risks associated with system security, upgrades, updates and service interruptions. The foregoing list of risks and uncertainties is illustrative, but by no means exhaustive. For more information on factors that may affect future performance, please review the reports filed by us with the Securities and Exchange Commission, in particular our Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 and Amended Annual Report on Form 10-K/A for the year ended December 31, 2006. Except as required by law, we do not intend to update or revise any forward-looking statements until our next quarterly earnings release.
