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Getty releases 4Q and Full Year 2006 financial results
Getty Images released its results for the end of 2006. The company’s revenue for both the 4th quarter and the full year grew by 10% to $203.5MM for the quarter and $807.3MM for the year. Margins suffered, however, as Selling, General and Administrative expenses grew at a faster pace due to higher staff expenses and expenses related to acquired companies. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization,) a gauge of the company’s operating efficiency, dropped from 40% of revenue in 4Q05 to 35% in 4Q06 and from 39% to 37% for the full year. Year over year, actual net profit and net profit margins also declined due to restructuring costs. The company posted a 15% net profit margin in 4Q06 ($30.3MM) compared to a 24% net profit margin in 4Q05 ($42.5MM.) For the full year, the net profit margin dropped from 20% in 2005 $149.7MM in 2005 to 16% or $129.5MM in 2006.
The improvement in revenue came from all sectors of the business except rights managed image licensing. RM revenue declined due to a 4% decrease in prices that offset a slight increase in volume. Interestingly, royalty free revenue grew by 12% while average single image fees for RF images remained stable at $240. This means the increase in RF revenue came from unit sales growth. In the quarterly results conference call with analysts, CEO Jonathan Klein argued the performance of the RF sector confirms iStockphoto, the micro-stock company Getty purchased in February, 2006, has not had the negative effect on the company over-all that many feared it might. Comparing micro-stock today to the royalty free model in its infancy nine years ago, Klein says Getty does not risk losing revenue through clients substituting the extremely low-priced images for the higher priced royalty free. During the Q&A, several analysts returned the question of micro-stock cannibalizing RF, but Klein insisted micro-stock is simply one of a variety of licensing models that helps Getty meet the needs of a wide variety of clients who want images at a variety of price points.
Other salient points made at the analyst call included:
- The company generated $269MM in cash from operations in 2006. According to Klein, this represents strong validation of the company’s business model.
- The company has successfully followed through with its stated plan to increase revenue from non-English speaking markets as evidenced by the higher revenue growth rates in such regions when compared to company’s overall growth rate.
- Klein says the company has nearly completed its plan to assign specific sales reps to most customers. The task will be entirely completed in the first quarter of 2007.
- Getty plans to invest significantly in the stock footage sector this year.
- The company will launch its new site for editorial imagery in the first quarter of 2007 and will launch an entirely new site for creative imagery in the second quarter.
- iStockphoto’s membership increased from half a million a year ago to 1.2MM by the end of 2006.
- iStock customers downloaded over 3MM images in the 4th quarter of 2006.
- The company projects revenue of $210mm for the first quarter and mid-single revenue growth for the full year while SG&A will decline in Q3 and Q4 of ’07.
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Related Stories:
Getty Images delays 10-Q filing while committee investigates stock option grants (November 13, 2006)
Klein outlines plan for growth after disappointing 3rd quarter; Getty’s stock hits new low (October 26, 2006)
Rumors of staff lay-offs at Getty Images (October 20, 2006)
Getty releases 2nd quarter 2006 financials (July 26, 2006)
Getty hires Thomas Oberdorf to replace outgoing CFO (May 31, 2006)
Getty Posts Improved Sales, Flat EBITDA for 1Q '06, Stock Declines (April 24, 2006)
Getty releases Q4 2005 numbers (January 27, 2006)
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