SEATTLE, Nov, 2007 -- Getty Images, Inc., the world's leading creator and distributor of visual content, today reported results for the third quarter ended September 30, 2007.
Quarterly Highlights:
* Revenue increased 5.5 percent to $209 million compared to the third quarter of 2006
* Earnings per diluted share were $0.43 or $0.47 excluding a restructuring charge
* Cash provided by operating activities was $57 million in the quarter
* Re-engineered search with launch of new site
* Expanded multi-site strategy
* Entered commercial music licensing business
* Launched revolutionary low-resolution web use product
"We have made tremendous progress expanding beyond our traditional creative stills imagery business on our way to becoming a complete digital media company," said Jonathan Klein, co-founder and chief executive officer. "During the last few months, we have re-engineered search with the launch of the new gettyimages.com, cemented our leadership position in the fast growing entertainment imagery business, expanded our multi-media and editorial footage offerings, launched an innovative new web-resolution product, entered the music industry, and launched our new Soundtrack digital music service. We are seeing tremendous growth in many parts of our business, have excellent potential in large addressable markets for music licensing and consumer, and are realistic about the challenges as we lead our industry forward through a time of change and opportunity."
Revenue increased 5.5 percent to $208.9 million from $197.9 million in the third quarter of 2006. Excluding the effects of changes in currency exchange rates, revenue grew 2.1 percent. Revenue growth came from increasing licenses for editorial and micropayment imagery, digital asset management, photo assignments, and publicity distribution. This growth was partially offset by lower revenues in the company's traditional creative stills business.
As a percentage of revenue, cost of revenue was 26.9 percent, compared to 25.4 percent in the prior year due to changes in the composition of the company's royalty free business. Other royalty free revenue is growing fast and has a lower gross margin than the traditional single image royalty free collections.
Selling, general and administrative expenses (SG&A) totaled $84.0 million or 40.2 percent of revenue for the third quarter of 2007, compared to $73.6 million or 37.2 percent of revenue in the third quarter of 2006. The increase over the prior year is directly attributable to recently acquired companies, the impact of changes in foreign exchange rates and investments that the company is making in areas that will drive future growth. The company undertook a restructuring during the quarter to reduce certain expenses resulting in a charge of $4.2 million.
Income from operations was $39.8 million. Excluding the restructuring charge of $4.2 million, income from operations was $44.0 million or 21.1 percent of revenue in the third quarter of 2007 compared to $54.2 million in the third quarter of 2006.
Net income for the third quarter of 2007 was $25.7 million with earnings per diluted share of $0.43, or $0.47 excluding the restructuring charge, compared to $37.3 million and $0.62 in the third quarter of 2006.
Cash balances were $303.0 million at September 30, 2007. During the quarter, the company paid down $40 million on its senior credit facility from existing cash balances leaving $80 million outstanding. Net cash provided by operating activities during the third quarter of 2007 was $56.9 million.
Business Outlook
The following forward-looking statements reflect Getty Images' expectations as of November 1, 2007. The company currently does not intend to update these forward-looking statements until the next quarterly results announcement.
For the full year 2007, the company expects revenue of approximately $850 million. This implies revenue of approximately $210 million for the fourth quarter of 2007.
The company expects full year diluted earnings per share of approximately $2.10, which includes about $0.10 per share for non-recurring items, comprised of the costs associated with a terminated acquisition in the first quarter of 2007, professional fees associated with the stock option review in the first and second quarters, and the restructuring charge in the third quarter. Excluding these items, the company would have expected diluted earnings per share of approximately $2.20.
Assuming fully diluted shares of approximately 60 million for the fourth quarter and the full year, the implied guidance for diluted earnings per share for the fourth quarter of 2007 is $0.48.
For 2008, the company expects revenue of approximately $900 million.
Web cast information
The company will host a conference call today at 2:00 pm PT. The dial-in number is 800.432.7890 (North America) or 913.312.0958 (international). There will be a live web cast of the conference call, which can be accessed from the Investors page in the About Us section of the Getty Images Web site at http://www.gettyimages.com/. The company will also provide a replay of the conference call at 888.203.1112 (North America) or 719.457.0820 (international), confirmation number 4196288, until November 3, at 9:00 pm PT. The web cast will be archived on the Getty Images Web site and will be available until November 1, 2008. Supplemental statistical information referenced in the conference call will be available in the Investors section of the Web site.
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