SPACs. A quirky way to “go public” without all the scrutiny of a traditional IPO.
There were a lot of SPACs in the peak of the 2020/2021 Boom … and then they mostly stopped when the boom ended. But for the most part, SaaS and software companies didn’t SPAC. It was more for dream companies with little revenue and lots of promise, from EVs with no revenue to Bird to other dreams. For the most part, SaaS companies that were strong and wanted to bypass a traditional IPO instead did a Direct Listing, allowing them to “go public” with no dilution and minimal costs. SPACs, by contrast, for a while were easier than a traditional IPO to do, but with very high costs in terms of cash and especially dilution. So mostly, SPACs were of much lower quality than traditional IPOs.
A few interesting SPACs did go public. Getty Images was one of them. Getty Images has been selling images for the internet for … well, forever. It was founded way back in 1995! Today they’re at $930m in ARR but very mature, only growing 4% a year. Which is probably why they quietly SPAC’d just this July.
Still, incredibly, it got them public at a $10 Billion valuation — even with just 4% growth at $900m in ARR, even with today’s lowered multiples. That’s a far better revenue multiple than other SaaS and similar companies that are growing much faster.
Let’s dig in.
5+ Interesting Learnings:
#1. They’re finally a SaaS company (at least sort of) with almost 50% of their revenue from subscriptions. Image and content-based businesses often have one-off purchases and don’t really resemble SaaS businesses that much. But after years of working at it, Getty Images now gets almost half of its revenue from subscriptions. Pretty impressive, really.
#2. Profitable, cash flow positive, and high margins. Perhaps this is the secret to the high market cap. Profits and cash flow are back in fashion, and Getty Images has Net income margins of an impressive 16.6% and a stunning 31.7% EBITDA margin. It’s no Zoom or ZoomInfo, but this is a lucrative business now at scale. Even if it’s very slow growing as it passes a $1B run rate. $320m of EBITDA on $1B in revenue is impressive.
#3. Only 11% of their customers are subscribers, but that 11% makes up almost 50% of revenue. Getty Images has 843,000 total customers per quarter, but only 89,000 of them are on subscription. But boy, are these subscribers more valuable. As noted above, they make up 48.2% of revenue.
#4. SPACs can be wildly expensive. I don’t claim to be a SPAC expert, but while Getty Images now has a $10B+ market cap, it wasn’t cheap to get there. The total dilution from the SPAC is above 33%, including the fundraise.
#5. 68% of content is exclusive and 60% of revenue from it. But 50% of revenue is from content 2+ years old. Part of Getty Image’s efficiency is there is only so much of their content they have to refresh. Most is exclusive, however.
And a few other interesting learnings:
#6. Content Contributors make from 15% of revenue for non-exclusive images to 25% or more for exclusive content. Getty Images keeps the rest. This is a lot different than many more modern marketplaces where the marketplace might keep just 10%-20% of the revenue. Getty Images keeps most of it, not the content creator.
#7. About 50% of revenue outside the U.S. I always like to track this for companies in this series as a challenge to everyone to go more global, earlier if you can.
#8. 105% NRR from its subscription customers. This really illustrates the power of converting one-off customers to subscribers.
#9. Only Spend 5% of revenue on marketing. Growth however, as noted above, is also slow :). So I’m not sure how impressive this truly is, but it’s worth noting. You really can cut marketing to the bone if you have a strong brand. But growth does seem to suffer.
Getty Images. One of the early pioneers on the Internet that’s still around, and at almost $1B in annual revenue. And an interesting “Almost SaaS” company you may have missed that sort of IPO’d and is now worth a stunning $10B+.
And a deep dive with Unsplashed CEO here, which Getty Images bought to stay competitive: