GETY - NYSE

Good afternoon, and welcome to Getty Images Third Quarter 2022 Earnings Conference Call. Today's call is being recorded. We have allocated one hour for prepared remarks and Q&A. At this time, I would like to turn the conference over to Steven Kanner, VP of Investor Relations and Treasury at Getty Images. Thank you. You may begin.

Good afternoon, and welcome to the Getty Images third quarter 2022 earnings call. Joining me on today's call are Craig Peters, Chief Executive Officer; and Jenn Leyden, Chief Financial Officer. Before we begin, we would like to remind you that this call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks, uncertainties and assumptions which could cause our actual results to differ materially from these statements. These risks, uncertainties and assumptions are highlighted in the forward-looking statements section of today's press release and in our filings with the SEC. Links to these filings and today's press release can be found on our Investor Relations website at investors.gettyimages.com. During our call today, we will also reference certain non-GAAP financial information, including adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA less CapEx, and free cash flow. We use non-GAAP measures in some of our financial discussions as we believe they represent our operational performance and underlying results of our business. Reconciliation of GAAP to non-GAAP measures, as well as the description, limitations and rationale for using each measure can be found in our filings with the SEC. After our prepared remarks, we'll open the call for your questions. With that, I will hand the call over to our Chief Executive Officer, Craig Peters.

Thanks, Steven, and thanks to everyone joining Getty Images third quarter 2022 earnings call. I will address high-level business performance and progress, before Jenn takes you through the more detailed third quarter financial results. Third quarter reported revenues were $230.5 million. This is down 2.8% year-on-year on a reported basis, but up 2.8% on a currency-neutral basis. Our adjusted EBITDA finished at $77.7 million, down 4.8% year-on-year, but up 2.3% on a currency-neutral basis. As Jenn will highlight in more detail, we continued to see positive operating performance. We are driving purchasing customer growth. We are growing our annual subscriptions. Our revenue retention for our annual subscribers continues to exceed 100%. Our customers are deriving more value from our offerings as our paid downloads continue to increase. More customers are downloading video as our video attachment rate continues to increase. From what we see, we believe we are taking market share based on the quality of our offerings. With that operational foundation as a backdrop, our third quarter results were impacted by a number of factors, first and foremost, the strength of the U.S. dollar. We are a global business with almost half of our revenues in local currencies. Like other global businesses, we are seeing the strength of the dollar impact our results. In our case, the impact is almost 6% on our topline revenue growth. We also faced a challenging year-on-year compare in the third quarter due to revenue recognition on certain uncapped subscription deals and due to the shift in timing of the Tokyo Summer Olympics to Q3 2021 from 2020 due to the pandemic. These items combined to reduce reported revenue growth by 4.6%. Lastly, like other businesses, we are seeing some macroeconomic headwinds. These are most pronounced in certain parts of Europe and within our agency segment. Again, our overall reporting metrics remain positive and we continue to see opportunity as our products would be countercyclical across many end customers and use cases as we help them create more efficiently and enhance their offerings. And consistent with our history, we're being prudent in our expense and margin management. Within the quarter, we announced several multi-year agreements that speak to how our content enhances our customer offerings. These included Amazon embedding our award-winning imagery within Amazon's Alexa services and their Fire TV software stack. Microsoft, including our Creative Content within M365, their new editing service, and the renewal of our longstanding Canva integration. The foundation of Getty Images is in its content. In the quarter, we were extremely excited to renew our exclusive global distribution partnership with BBC Studios to represent their iconic and world-class quality footage. We were so pleased to be named the Official House Photography Partner to the British Academy Film Awards, or BAFTAs, providing us with unique access to their prestigious event. And staying on the U.K. theme, we are extremely proud of our comprehensive coverage of the events surrounding the passing of Queen Elizabeth II. It really spoke to the strength of our archive, our unique access and coverage capabilities across news, sports and entertainment, and our ability to seamlessly support our global customers as they covered the story from all angles. On this side of the Atlantic, collegiate sports continues to evolve and we're excited to partner with the leading collegiate trademark licensing company CLC and leverage our unique capabilities to simplify commercial content licensing for brands and companies across more than a 150 CLC affiliated collegiate institutions. On the product front, in October, we launched Unsplash+ to further service the content needs of Unsplash users. Unsplash+ is an unlimited subscription, providing access to unique release content in an ad-free environment and with expanded legal protection. We're excited by the potential of this product and its ability to reach and serve an expanded customer base. We also announced our partnership with BRIA to embed their state-of-the-art AI editing capabilities across our websites and subscriptions. This partnership aligns to our core value propositions of enabling our customers to create at higher levels with greater efficiency. Lastly, the topic of AI generative content has certainly been in the news. We announced that we would not accept this content on our platform at this time. As our partnership with BRIA demonstrates is not because we are [indiscernible]. While the customer demand is still very much unknown, we believe AI generative content capabilities are likely to have in place. Our current stance is driven by the very real unsettled questions about the copyright for this imagery, and whether the proper permissions were obtained with respect to the content, metadata and the likenesses of individuals on which these models were trained. These questions present real risk for those using these services and the associated content. Getty Images has always focused on eliminating risks for our customers. We look forward to working to help resolve some of these risks and exploring how ethical and responsible development and adoption of these capabilities can further unlock and enhance the power of our imagery and creative customers. And with that, I'll hand the call over to Jenn, who will take you through the more detailed financials.

As Craig highlighted, we continued to execute well and delivered solid performance in Q3 across both our financial and our operating metrics. I'd like to begin by discussing some of our key operating metrics or KPIs that underpin our financial performance. Please note, today's press release contains information on all of our KPIs, but I'll highlight just a few here. All KPI metrics are as of the trailing 12 months or TTM period ended September 30, 2022, with comparisons to the comparable TTM period ended September 30, 2021. In addition, beginning with Q3 results, we did make two updates to our customer data reporting. First, we completed the integration of data from our LATAM, Turkey and Israel regions, which was previously not reported in our KPIs. And second, we updated the method used to aggregate our customer data to better align with our internal sales CRM system. We have not restated historical periods given an immaterial impact across all of these KPIs. That said, I will highlight the impact of the change on total active annual subscribers and annual subscriber revenue retention rate KPIs. While these reporting changes do have some impact on our KPIs and the year-on-year comparison, I'd point out that our Q3 KPI metrics trended positively even absent these two reporting changes. First, total purchasing customers, which measures every customer who made a purchase with us in the past 12 months, rose to 837,000 from 766,000, a year-on-year increase of 9.3%. Net total active annual subscribers finished at 107,000, up from 70,000, an increase of approximately 53% over the corresponding period in 2021. Absent the reporting changes I mentioned, this increase would have still been 43%. This is a very strong performance that is correlated to our growing mix of revenue in annual subscription products which grew to over 49% of total revenue. For our customers on those annual subscription products, which are defined as products with a duration of 12 months or longer, we retained revenue at an impressive 103%, up 70 basis points from the prior year period. Excluding those reporting changes, it would have been 101%. We increased our paid download volume by approximately 7.4% to 94 million driven by growth across both Editorial and Creative. And finally, our video attachment rate moved up to 12.7%, an increase from 12.1% in Q3 2021. This is an important metric for us, because it highlights the opportunity at hand. We believe we'll drive further growth in this metric by continuing to prove awareness about our video offerings across all of our channels, deepening our high-value differentiated video content in partnership with our contributors, and identifying opportunities as we help our customers find solutions for their content needs. Turning now to our financial performance. As Craig mentioned, our results this quarter were impacted by foreign currency headwinds from a stronger U.S. dollar relative to foreign currency, in particular, the euro and the pound. These headwinds drove meaningful differences between our reported and currency-neutral performance. We expect this to be an ongoing factor for the remainder of 2022. Total revenue was down low-single digits or 2.8% in the quarter compared to the prior year, due in large part to 560 basis points of foreign currency headwinds. Absent those FX pressures, we grew revenue by 2.8% in Q3. As Craig noted, our results also reflect challenging year-on-year comparisons due to certain impacts of the timing of revenue recognition and the shift of the Tokyo Summer Olympics into Q3 2021 as a result of the pandemic. These two items totaled approximately 460 basis points. Our annual subscription revenue as a percentage of our total revenue grew to 49.4% in Q3, up from 47.1% in Q3 2021 and also up from our 2021 finish, which was 45.6%. The progress this quarter was driven by further gains across our premium assets, iStock, and custom content offerings. As these numbers suggest, we continue to see strong momentum in our subscription business. And we see further opportunities for expansion with these products, including our newest subscription offering Unsplash+. Our subscriptions offer our customers the right content for their visual needs with access to unmatched quality, depth and breadth across our image, video and music content library. Creative revenue was $145.2 million, down 2.1% and up 3.2% on a currency-neutral basis. Within Creative, our annual subscription products delivered a strong performance led by premium access, our largest subscription product. Our overall e-commerce business posted solid results with the biggest gain seen in our iStock subscriptions, partially offset by softer results in our a la carte product. Overall, we continue to add customers. And absent the foreign currency headwinds, we delivered growth across each of our major geographical regions. We also saw 53.7% growth or 60.2% currency-neutral growth in our custom content subscription offerings as our corporate customers increasingly see the value proposition of this product for their business. Custom content leverages Getty Images' global network of photographers and videographers to create customized, cost-effective and exclusive project-specific content to meet the specific needs of our customers. Editorial revenue was $81.8 million in Q3, down 3% year-on-year and up 3.1% on a currency-neutral basis. Reflecting a return to a more normalized currency-neutral growth rate for our Editorial business, this was a solid result driven by our entertainment and archive vertical, partially offset by those tougher year-on-year comparison in sports, which, as previously mentioned, are due to the delay of sporting events, most notably the Tokyo Olympics into Q3 2021. Revenue grew across all major geographies on a currency-neutral basis, with year-on-year growth of 2.8% in the Americas, 0.7% in EMEA, and 9.2% in APAC. Revenue less our cost of revenue as a percentage of revenue remained consistently strong at 72.2% in Q3. This was down from 73.6% in Q3 2021 with that decrease driven primarily by the revenue recognition timing impact I mentioned earlier. Our total SG&A expense of $91.6 million, which is inclusive of stock-based compensation of $2.8 million was down $2.9 million this quarter, with our expense rate improving by 20 basis points to 39.7% of revenue from 39.9% last year, primarily driven by higher bonus expense in 2021. Adjusted EBITDA was $77.7 million for the quarter, down 4.8% or $3.9 million year-on-year. On a currency-neutral basis, adjusted EBITDA increased 2.2%. Our adjusted EBITDA margin was 33.7%, down from 34.4% in Q3 2021 due primarily to FX pressure on our topline revenue, but still in line with our historically strong margins. CapEx was $15.7 million, up $4.3 million year-on-year driven by costs associated with our London office relocation, acquisition of inventory related to the launch of our Unsplash+ subscription product and our cyclical purchases of camera equipment for our Editorial photographer staff. CapEx as a percentage of revenue was 6.8% compared to 4.8% in the prior year period. Adjusted EBITDA less CapEx was $62 million, down $8.2 million year-over-year, representing a decrease of 11.7% or 5.4% on a currency-neutral basis. Adjusted EBITDA less CapEx margin was 26.9% down from 29.6% in Q3 2021. Free cash flow was $33.2 million in Q3 compared to $31.2 million in Q3 2021. Free cash flow is stated net of cash interest expense of $35.8 million and cash taxes paid in the quarter of $4.7 million. Turning to our balance sheet. We ended the quarter with $71.9 million of balance sheet cash. This is a decrease of $71.4 million from Q3 2021 and a decrease of $114.4 million from our ending balance on December 31. This significant decrease in our cash balance was driven in large part by the voluntary Q3 $300 million paydown of our USD term loan. This debt paydown meaningfully reduced our net leverage to 4.3x from 5.1x as of 12/31/21. Net of that Q3 debt paydown as of September 30, we had total debt outstanding of $1.399 billion. This includes $300 million of 9.75% senior notes, $690 million of USD term loan with an applicable interest rate of 7.625%, and $409 million of euro term loan converted using exchange rates as of September 30, 2022, with an applicable rate of 5.625%. As of September 30, taking into consideration the applicable interest rates on our debt balance and the effect of $355 million of interest rate swap agreements, our annualized estimated cash expense is $104 million. That said, our actual annual interest expense remains subject to changes in the interest rate environment, which we outlined in more detail within our SEC filings. Before turning to guidance, I do want to reiterate that following the business combination we are in a much stronger financial position. We have reduced our total liabilities by approximately $1.1 billion, including the redemption of our preferred equity and the USD term loan debt paydown. Altogether, we believe this new structure, combined with our company's ability to generate high level of free cash and consistently strong adjusted EBITDA margins will enable us to continue to improve our leverage, while strategically investing in our growth, continuing to execute against our long-term priorities and driving shareholder value. Turning to our outlook for the full-year 2022. We continue to expect currency-neutral revenues of $955 million to $980 million, representing year-on-year growth of 4% to 6.7%. This remains unchanged from our prior guidance. Taking into consideration the estimated impact of the stronger U.S. dollar and broader FX volatility, this equates to total reported revenue guidance of $929 million to $953 million, or a growth of 1.1% to 3.8% over 2021. We continue to expect adjusted EBITDA on a currency-neutral basis of $310 million to $320 million, which translates to year-on-year growth of 0.2% to 3.5%. This also remains unchanged from our prior guidance. Including the estimated impact of ongoing FX headwinds, we expect adjusted EBITDA of $297 million to $307 million, or year-on-year decline of 4% to 0.9%. Please note the estimated FX impact included an assumption that FX rates remain consistent with those as of November 1, 2022. In addition, embedded within our guidance are the incremental costs tied to operating as a public company. With that, operator, we're happy to open up the call for questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Your first question comes from Ron Josey with Citi. Please go ahead.

Great. Thanks for taking the question. Craig, I've got two actually. Craig, one for you. Just I wanted to follow-up on your commentary around macro. I think you highlighted some pressures from agency revenue in Europe, but then also the countercyclicality of the business. So would love to hear the puts and takes here and adoption of corporates as you think about maybe the mix shift in the business and why it is countercyclical. And Jenn, thanks for the updates on the financials, on the balance sheet. Just to help us here, can you – are there any updated plans around the debt size in terms of retiring more debt over the next several years? Or is that pulled forward or still about the same timeline? Thank you.

Thanks, Ron, and I'll take the first and then throw to Jenn on your second. So with respect to macro, yes, I think we called out some softness in certain geos, most notably within Europe as well as the agency segment of the business. And we did highlight some countercyclical. I think if you really think about the core of our business, it's about saving customers' money, right, relative to alternative methods of producing or sourcing imagery. And I think that shows up clearly within the call out to content. That is a product, it's growing, it's growing strong. It's focusing on the corporate market and it's one that is much more cost efficient for companies in order to produce libraries of the bespoke content that is specific to their products or specific to their brands. And we think that those types of products can play very well into really a downturn. I would also highlight clearly some of our options on things like iStock and Unsplash that kind of play into the broader SMB and freelance world that clearly also tend to benefit from countercyclical trends as we saw over the COVID period. Jenn, do you want to pick up on the balance sheet side of things with that?

Sure, and thanks for the question, Ron. So yes, we definitely remain committed to continuing to pay down debt. Our long-term goal of getting net leverage down to about 2.5x to 3x over 24 to 36 month period is still the goal. As you know, this business generates tremendous free cash flow. So we'll continue to prioritize that debt pay down obviously with an eye to broader macro economic conditions when we make those decisions.

Thank you, Craig. Thank you, Jenn.

Next question Mark

Thank you. Hi, Craig and Jenn, good evening. Just two questions, one on custom content. Craig, you were just talking about the countercyclicality there. I'm just curious if you could maybe talk just generally speaking about demand that you're seeing there. And as you sort of think about the incremental investments you're making there and particularly on the outbound sales side of the equation, sort of how you're sort of contemplating that build out of that investment as you look to some of the macro pressures out there? Thanks.

Well, I think – Mark, thanks for the question. The beautiful thing about the custom content portion of our business is it really leverages all of the fundamental and foundational elements of Getty Images. So we are selling that product through our existing established sales team. We are fulfilling that product through our exclusive contributor base that is leveraging all of the systems and technology that we've put in place in order to kind of not only communicate our breeze to them, but feel their breeze and then go through the editing process. So it's one that we can be very competitive in terms of the pricing with that product relative to alternative methods of delivery. The quality is extremely high in terms of what gets delivered back. The creativity is extremely high. And it does it consistent with our margin model. So as we book revenue into that product, it has a very high contribution margin, again, because it's leveraging all of the existing infrastructure and teams and staff that we have embedded within the business.

Got it. And perhaps a second question for either you or Jenn. On average revenue per customer, there are some nuances in looking at that number itself with a la carte, I guess, subscription or move from a la carte to subscription. And I'm just curious if you can tell us how we perhaps should look at that trend line growth either quarter-over-quarter or year-over-year. And sort of how we should think about how that transition is going and impacting that particular metric? Thanks.

Yes. Well, there is – we have three brands. And so we have the Getty Images brand, which is very much focused in on the enterprise. We have the iStock brand that is focused in on small and medium-sized businesses. And now with the launch of Unsplash+, we have a brand and product offering in the subscription base, it's focused in on kind of freelancers and that creative long tail. The per customer economics of those can differ significantly. As you would expect, the enterprise spend per customer can be quite high. The iStock spend for personal business and medium-sized customers is going to be down from that. And the new Unsplash offering is going to be lower. So I think one of the things as we kind of put these out, you're going to see basically higher growth in annual subscribers. You're going to see higher growth in purchasing customers. And probably over time that's going to basically result in lower spend per customer. But in each and every case, we want to be growing customers across each of those three brands and growing annual commitment in ultimately ARPU and LTV across each of those brands. However, we do see the volume of customer growth being historically driven higher through the iStock brand and that will, with the launch of Unsplash+ will come in even more robustly given the volume of potential customers that sit on that space. So as we kind of move forward, we'll continue to try to give you some commentary over that. But I think generally we add more new customers into the iStock, increasingly we'll add more new customers into the Unsplash and that's going to over time drop that revenue per customer figure on an aggregate basis.

Yes. I mean the one other thing I'd add Mark is just if you take a look at our numbers this quarter, we remain consistently. If you're just looking at revenue per customer on average we remain consistently north of $1,000. So even absent some of those dynamics that's a pretty consistent metric for us this quarter.

I think one of the things that we really tried to report in on is that revenue retention per subscriber, that annual revenue retention per subscriber. And historically, we've given you some guidance between kind of our top clients and maybe what sits down more into the iStock world. And we'll try to continue to give you some guidance there. But the good news and all of this as we've kind of mentioned, our operational metrics were really strong in the quarter. We saw new purchasing customers. We saw lot of ads into annual subscriptions at really strong economics. We saw really strong revenue retention within our annual subscription base. And we increasingly see that video consumption and take up over time. And we know that our customers are getting value out of subscription is not just through those renewal metrics, but also through the downloads they're consuming. So these are active customers that are consuming the product.

Got it. Both of your comments are very helpful. Thank you.

Next question comes from Brett Feldman with Goldman Sachs. Please go ahead.

Yes. Thanks. And two questions, if you don't mind. The first one is, I believe that the Unsplash product is predominantly ad supported. So I was hoping you could just remind us at a sort of aggregate level what degree of revenue exposure you have to advertising. And maybe any context you can provide in terms of what's the trend lines has been like in that business. You've obviously seen some broader weakness across various advertising markets. And then on the guidance, how do you think about the swing factors between what is at the low end and what's at the high end? Putting aside currency, just thinking about pure operations what are the better outcomes versus the more challenging outcomes? And it looks like on the FX adjusted annual guidance, at the midpoint you'd have pretty healthy sequential revenue growth in the fourth quarter, but it looks like EBITDA would still probably step down. I'm just wondering if you can maybe explain the dynamic there in terms of what's going on operating expenses in the fourth quarter. Thank you.

Sure. I'll let Jenn pick up on the last with respect to the fourth quarter and guidance there. I'll pick up on the Unsplash side of things. So Unsplash up until October was predominantly an ad model. There we do run kind of site ads on the platform, but we also run kind of integrated advertising, so kind of very native advertising within this. It's been a really strong part of the Unsplash business model in terms of how unique that model is and the value it delivers back to our customers. While it's not a material portion of our revenue, it's well north of – well less than 5% of our business. It has been one that's been showing strong growth throughout the year and we see good strong renewals within that. So we've been certainly monitoring the ad business more broadly, but I'd say we haven't seen those trends within the Unsplash portion. But we're really excited to add the subscription model into Unsplash as announced we launched in October and excited to bring that new monetization online to that platform to continue its growth overall.

Yes. And on that guidance question, so it's a good question the swing factors in the range. I mean, even though you said kind of ignoring macro and FX, so I think those are some of the swing factors for us that we think about. I think the most important one internally for us which is largely always our answer is execution and just executing against our plans in the fourth quarter as we close out the year. Your question on just kind of what the implied guidance is there for Q4. So you're right, looking at the revenue implied guidance there, it's really kind of maintaining what we're doing. There were no implied heroics there for Q4 to hit that guidance. On the EBITDA side of things, we do have a little bit more of a conservative view to our revenue less cost of revenue as a percentage of revenue figure and that's purely because we do have some of the larger sporting events, most notably the World Cup in Q4. So that's a little bit of a higher cost revenue base for us. So we've factored that in as well as just again that continued FX impact flowing through topline down to that EBITDA bottom line guidance number.

Got it. Thank you.

Next question Tim Nollen with Macquarie. Please go ahead.

Hi. Thanks very much. I've got two or three as well. First off, maybe because we're new – I guess we're all fairly new at covering this as a public company. Would you mind walking us through a bit of what are the seasonal versus perhaps structural and/or cyclical effects on some of your KPIs. I'm noticing, for example, your total purchasing customers were down sequentially in the quarter, if I got that right. But you active annual subscribers were up quite a lot. And your subscriber retention rate was also up, although maybe it was little bit down given some of those accounting changes or reporting changes you mentioned. So I'm just kind of curious, are there seasonal factors we should know about in here? Or could you point to any structural or cyclical effects on those? And then I've got one or two more after that.

No. Thanks, Tim. So on the seasonal front, I wouldn't say that there's seasonal items at a quarter – at a level of the quarter. Clearly, we see some a little bit more when we look at things on a month-to-month basis. I think one of the interplays though it does come in is that purchasing customer metric and then annual subscriber growth. So as we drive more customers into annual subscriptions obviously their purchasing volume in any given quarter goes down because they're typically buying once from us on an annual subscription and so that reduces the volume of purchases that will be made by customers in corresponding. So there is some interplay there but it's one that we drive the business to a net increase and overall spend per customer. And obviously, we love the economics of servicing those annual customers in terms of the ability to grow them, upsell them, cross-sell them, and do that on a very efficient basis through our sales and customer service teams.

Okay. Yes, that makes sense. Thanks. One more, looking at your subscription rate 49% and also your video attachment rate, both of them going up. I wonder if you could speak to where those – what the trends might be and what numbers those might eventually get to? Thinking in terms of a recession in front of us whatever scope that may be often can accelerate trends. And if these are important trends for you, I'm just wondering what might we expect to see in both of those two lines for the next let's say a year.

Well, I think there are certainly elements that we think could be driven and accelerated in any economic climate. But – so just to start, when we think about subscriptions in this business, we've talked about how we see a lot of opportunity to continue to drive the business towards annual subscriptions. We've been making some changes and optimizations on the iStock front to put those products more front and center. Similarly, we just launched again what is focused annual subscription on Unsplash. So we're driving that number up into the right and we're using AV testing and such in order to optimize on that to the benefits of like I said, ARPU and LTV. But that's what we're seeing right now. And we think that that could be something that we see some level of acceleration over time, again as people are looking for alternative sources that content and our services make a lot of sense in that economic climate and they want to lock in what is lower per download pricing. So that's one area of business that we're driving to. What can it get to? I've always thought if we've got – we have certain portions of our business like segment – agency segment that it doesn't lend itself to subscription given their business model. We have new customers coming into business who don't start – tend to start an annual subscriptions. They might start an a la carte or monthly. But we kind of think we can push that up towards around 60% or so in the coming years and kind of thinking about it asymptotic towards that type of level over the next call it five years. On the video side of things, I think that's one where we know a large portion of our customers intend to use video, are using video, but still aren't using our video offering. We think as budgets become tighter and timeframes become constrained, we think our offering can play incredibly well across those needs. So we expect to kind of continue to tick that up and to the right. It's been going up at about one percentage point a year. We've taken actions that have tried to accelerate that a bit more and that includes bundling video into our subscriptions. We're now testing mixed grids on search returns between video and stills. Clearly, we're orientating a lot of our sales force towards video intensive end markets like broadcast and production. So we expect that to continue to go up into the right. Where does it asymptote to? I don't know that. I would expect it to be a very long-term trend that can drive growth into this business. Ultimately, I don't see a business that isn't producing video at some level and I don't see a business that doesn't have some need for our content and where we can benefit them in one scenario. So ultimately, I think it goes – we're talking very, very high percentage of our customers are using video, but I don't think it's one that it transforms that dramatically overnight, although there are things that we're working on to drive that more aggressively.

And Tim, if I can just chime in here. You rightly pointed out that the KPI for our purchasing customers looks like a sequential step down, Q2 to Q3. That is actually some of that customer grouping change. So if we looked at that without that change, it's actually sequential growth. So that's a bit of that noise and some of our reporting changes there.

Okay. Okay, I get it. Thanks. Could I add one more question, please and that's about this BRIA arrangement. And it's interesting talking about bringing this business in with the AI editing capability, but then also talking about how you're not going to accept AI content on your platform from, I guess, from outside. Maybe if you could just explain a bit more what BRIA does for you and how it's different from that aspect of that you're concerned about?

Well, BRIA is – it's a platform that is basically an editing platform. So it doesn't create imagery from training sets and from input, text inputs and to generate completely stand-alone imagery. What it can do is, it can take existing imagery and allow that to be easily transformed. A very simple example that's now live with our subscribers is we can allow our customers to remove backgrounds from imagery, very quickly, extremely high quality and take what – used to take a lot of work at a pixel by pixel basis using editing tools and allow them to do that at the snap of a finger. Now you can think about how over time we can allow for objects to be inserted into an image, objects to be removed from an image. Those could be brands, those can be products, et cetera. But allowing the customer to take an image and do what has historically been quite time consuming, and in some cases, capability prohibitive, and allow them to do that very quickly. We think we have an amazing corpus of inventory that is incredibly unique that delivers a high degree of quality, delivers on conceptual relevance and audience relevance and authenticity, and allow our customers to take that image as they always have and produce it into the specific imagery that best meets their needs. And that's what BRIA really does. So it's not a text to image generation platform. It's really a platform that allows an existing image to be quickly and easily transformed in high quality.

Great. Thanks very much.