Q2 2021 Vimeo Inc Earnings Call
Yeah.
[music].
Good morning, and thank you for joining Vimeo is Q2 earnings event, we're excited to be here in front of you.
If all we begin a few comments first the session will be recorded and available on the Vimeo and Investor Relations site later today.
Second we will discuss vimeo outlook and future performance. These forward looking statements typically may be preceded by words, such as we expect we believe we anticipate or similar such statements. These forward looking views are subject to risks and uncertainties and our actual results could differ materially from the views expressed today.
We have also provided and information regarding certain key metrics and on non-GAAP financial measures, including search and forward looking measures.
These should be considered and addition to and not as a substitute for or in isolation from GAAP measures additional information regarding vimeo is financial performance, including reconciliations with comparable GAAP measures can be found in our earnings release, and Vimeo filings with the SEC as well as and supplemental information posted on the Investor Relations section of our.
Website with that I'll turn it over to our CEO Anthony.
Good morning, everyone. We just reported our first quarter as an independent capital I went and welcome all our new shareholders. Thank all of our 230 million users globally and give a virtual high 5 to the now 950, Vimeo employees, who serve the disease areas of passion.
And care.
18 months into COVID-19, and the demand for business video continues at an elevated level.
Employees, no longer and differentiate between consumer and contact at work or at home and as a result organizations are increasingly planning for a future that is video first no matter where they're located.
We've long believed that any business with a website social media accounts online store are distributed team will use professional quality video and the same way they use email and chat image attacks today.
So why aren't they.
Because professional quality video is still too hard too expensive clunky time intensive and intimidating.
We solve this with an all in 1 software solution that makes it easy for every employee to be a content creator and for every business to be video first.
This vision is being validated daily by our customers.
2 months ago, we listed on NASDAQ It was a special moment for Vimeo and for our team.
Celebrating this milestone together being our software being used by NASDAQ to broadcast the event of a longtime customer it was awesome.
And then we woke up the next morning, and we got right back to work.
Because and nothing has fundamentally changed for us as a public company. This is just 1 step on our journey to enable professional quality video for all.
As we look forward our market is large and underpenetrated organizations of every size are looking to leverage video in their digital transformations as we speak.
And our focus is clear we're investing to achieve 2 things in 2020, 1 expand vimeo within the enterprise and radically simplified video for F N B.
We're also growing up as a company this quarter, we welcomed the largest group of new vignettes and our 16 year history.
We're still new to the enterprise space and we're maturing our operation hiring world class talent and intentionally designing our functions for scale.
Most critically we are aligning all our efforts to drive product led growth.
Everything from our internal data tracking to our product roadmap is being oriented to activate business users and our freebase and organically inspire them to become paying customers.
We're also improving how we market and sell into the enterprise.
We're on track to more than double our sales head count this year and as part of that expansion, we're investing in key supporting functions like products marketing and sales enablement and customer success.
Finally, with our scale balance sheet and now as a public company, we can make bets in ways others can't.
Lanting multiple feeds across the company to accelerate existing opportunities and to find new growth vectors.
And we won't be right all the time, but we'll double down where we have validation and structural advantages.
Were an early leader in this market and we'll continue to lean into it with both the strength of our conviction and our assets.
So let me give you my highlights from the quarter, where we made real progress across the board.
First our self serve business continues to benefit from a healthy free funnel and a natural upsell into our paid plans.
We believe the key to fueling that funnel is to make content creation and frictionless, so more businesses make more videos.
Our most recent launch share was vimeo record free screen recording tool, that's our usage increase over 80% quarter over quarter.
Screen recordings now account for nearly 10% of total uploads to vimeo.
We also continue to invest and partnerships, we recently announced new partnerships and native integrations with the sauna and Tic Tac and have expanded our existing partnership with Facebook Shopify and Godaddy we.
We expect to launch more native integrations this year that bring the power of vimeo directly to other platform.
This not only allows us to diversify user acquisition, but it also gives vimeo users more choice more reach and more utility across the internet.
And our enterprise business, we made significant strides and expanding our product breadth to serve more video use cases across an organization.
This quarter, we launched video library, a centralized hub for employees to share and access knowledge across team.
All videos are automatically transcribes searchable and can be organized by department or team with enterprise level permission ing and security.
Our goal is from video library to eventually become the system of record for all video and the enterprise from executive comp and internal collaboration to marketing training and development.
And we're leaning into our creative and filmmaker routes to make the UX intuitive and to provide employees with a high quality cinematic viewing experience on par with what they get at home.
We've on boarded more than 250 enterprise customers to video library since June we've.
We see the value proposition resonating with those customers with companies expanding both the number of employees and departments using the product metrics like the number of team invites and number of seats are all trending up with tens of thousands of employees accessing the product to date.
For the rest of the year, we're building out and many more enterprise features from webinar and capabilities to new event experiences to deeper analytics to serve the world's largest companies.
Our roadmap is designed to increase employee team and customer engagement and to bring vimeo closer to existing and emerging business workflows.
We're relentlessly pushing our pace of innovation and working closely with our customers ask me, though.
We also continue to benefit from a self propelling funnel.
Our free and self serve users drove nearly 70% of new enterprise customers and the quarter.
And we're still very early and developing repeatable motions for identifying and converting such customers.
So plenty of untapped potential.
My favorite example from this quarter is the economist I've been an avid reader for years. So it was great to see their events team start using us for a few 1 off events last year as a self serve customer.
This quarter, they upgraded to Vimeo enterprise to leverage both video library and host speaker panels, and marquee events, such as their sustainability week and innovation series with tens of thousands and fewer.
They chose us for our reliability intuitive tools and cinematic viewing experience.
For us that as table Stakes, we have so much more innovation ahead, and our roadmap to delight them.
I keep saying that we think of our market and decades not years.
A few weeks ago, we held our annual Vimeo Jam Hackathon, where our engineers are free to build whatever inspires them for 3 days.
We had hundreds of people around the world coding working on concepts that re imagined everything from how to edit a video the same way you would a word doc to automatically improving video quality using machine learning algorithms.
It was a great reminder, from me that we are just scratching the surface of how video will be used and business and at work.
To borrow a mantra from our former parent company IAC we.
We believe and patients on vision impatience on execution.
That means we will build value for our users with discipline and rigor and urgency, but always with a long term view.
I'll now pass it over and Ryan to walk you through the financial results the quarter.
Thank you Angela.
Thank you all for joining our call today, we are on.
Understand how overwhelming it's earning season can become and we truly appreciate your time.
In Q2, we delivered strong results across the board.
Total revenue was $96 million up 43% year over year, and 7% sequentially with healthy growth across both customer segments.
We added about 40000 paying subscribers and ended the quarter with more than 1.6 million total subscribers up 17% year over year.
Our ARPA hit another all time high of $240 and increase of 18% compared to Q2 of last year.
Well itself and enterprise Harpoon continued to show a healthy year on year increases and total ARPA was further aided by the increasing mix of enterprise revenue.
Specifically on the enterprise side, we now have over 5200 paying customers and our enterprise revenue grew more than 80 per cent this quarter.
Our enterprise net revenue retention remains healthy with its fifth straight quarter above 100 per cent.
The remainder of my comments will refer to non-GAAP measures.
Moving to expenses and profitability, our gross margin expanded to 73, 3% and Q2 and a sequential improvement of more than 100 basis points.
Once again infrastructure optimization economies of scale and operating leverage were the 3 main drivers of improvement.
We continue to make steady progress towards our stated medium term gross margin target of 75 per cent.
R&D was $21.3 million for the quarter, which was up 37 per cent year over year.
We continue to invest here at the board broaden and deepen our product suite and maintain our position as the innovator and professional quality video.
We are also accelerating recruiting to ensure our R&D organization is appropriately resource going forward.
Our sales and marketing spend for the quarter was $38.7 million and increase of 47 per cent compared to Q2 of last year.
We have been adding sales capacity and digital marketing spend and a disciplined manner to drive sustainable customer growth, both domestically and abroad.
There was also an increase 1 time brand spend related to our spin.
Adjusted EBITDA was negative $3.8 million as we continue to invest and growth.
As we have stated before we expect our revenue growth rate to decelerate and the second half of the year as we lap tough comps for 2020 to be more specific we expect revenue growth and the low thirty's range in Q3, and dipping slightly below 30% and Q4.
Nothing has fundamentally changed and our view of the market and growth opportunity ahead of us and as you can see from our hiring and continued investment intensity appropriately resourcing the company from growth and for scale.
And the near term, we see higher potential variability due to a few specific factors none of it we see a fundamentally impacting our ability to drive sustainable revenue growth and the future.
First companies and consumers and right sizing their consumption patterns as it relates to bandwidth and storage needs after a significant spike and purchases last year.
Additionally, live streaming frequency and demand is changing as quarantine and stay at home orders win.
Both of these remained significantly above pre pandemic levels, but the exact impact on revenue is harder to predict and yet though.
That said, we continue to see a lot of runway to improve pricing and packaging and expand use cases to better grow and scale with our customers' needs.
Second and.
With rapidly expand our product breadth, we are selling larger deployments to different decision makers within the enterprise.
This requires us to adopt our sales motion and will likely lead to longer sales cycles. Ultimately this should also lead to larger deal sizes and better retention.
So we view this as a natural and positive evolution and our business, though 1 that may cause volatility in the near term.
Despite some unknown our platform breadth here works to our advantage with a broad broad product portfolio diverse set of customers and multiple funnels. We believe we have many levers for growth to capitalize on the opportunities ahead of us and video.
We have laid out how we think about investing to penetrate the market and as we said before do not expect the full year of 2021to be adjusted EBITDA positive.
However, we expect to have another healthy cash flow positive year in 2020, 1 similar to last year.
In summary, Q2 was a very strong quarter that represents continued validation of our market opportunity and our execution.
We are confident and our ability to build a and in product and business and video software and will continue to release, our monthly results as part of our commitment to investor transparency. So you will be able to see and track our progress and real time.
Now, we will move to Q&A Yao, our head of Investor Relations will be moderating so yeah, let's open it up for the first question. Please.
As a reminder, please try to keep your questions focused to 1 and 1 follow up Jason on your camera and on mute your microphone when called upon and I'm going to open up the first question to Youssef Squali from Truest uses.
Hey, Greg Good morning, Happy Friday, everybody 2 questions, 1 for Angela and months from Orion and Julie So you've now been and independent.
Public company for 60 days or so I think you spoke a little bit about this in your prepared remarks, what were the 1 or 2 thanks debt I guess surprised you the most either on the upside on the downside here and this.
And time and how long are you tackling them and then maybe lora and.
July's growth decelerated, a year on year on relatively easier comps did and Ms. <unk>. It just seems like youre kind of getting to that 30% long term growth a bit faster than what we had thought you just spoke to getting to sub 30% growth and Q4, what gives you the confidence.
And.
And how do you reaccelerate growth next year to maintain that 30% plus growth for the next 5 thank you.
Thanks Youssef as your first question, Yeah, we're about 2 months and as a public company I've never been a couple of things that I think have been a better than expected and definitely things that we're learning and on.
On the positive side I think I said at the last earnings call that our biggest risk was execution and specifically product because we have a very ambitious road map and we're launching a bunch of new features to expand particularly and the enterprise.
And I can tell you 2 months and as a public company I feel really really good about our execution and traction there we shipped the video library, we're seeing the right early signals that are exciting about what role that can play and our portfolio and we do have a very healthy steady.
And a slate of new launches coming up all of which are on track. So for me. You know that is that is the most critical thing that we really needed to nail this year and I think we're in a great position I'd also say if I look back at the quarter, we're seeing more opportunities to invest and you know we've accelerated our hiring we're bringing in.
World Class talent, and we did end up spending more money and the quarter than we expected, which we think is a good thing because it just means there's more opportunity for us to grow and and use our assets to to really take advantage of the market.
And then the third and I talked about partnerships a lot and certainly we're seeing good traction there. This quarter, we launched our first native integration with enterprise collaboration software with a sauna and that I think it was a really positive signal and I look at the pipeline and the interest from a lot of enterprise software companies to partner with US I think that Bo.
It's very well for us in terms of building competitive differentiation and long term.
Things that I think has been sort of a surprise I wouldn't say a surprise, but for sure and as I said in my prepared remarks, we are having to mature a lot of our functions. We're growing up as a company you know as we've scaled our sales team and launched all these new products. There are whole areas like customer success product marketing planning and enable.
And.
And that we do have to kind of really really invested in ways. We had it before and we're on track to do that and then you know the biggest thing and is an obvious 1 which is.
You know and you can say it and theory, but until you feel it and practices just what it feels like when you are public you have to keep the focus on the long term and that can be hard and it can be hard and this market and.
And I would say you know that's something we're doing I think a good job of keeping ourselves internally very focused on ultimately what matters were early and it's in this market and we are leading and the market, but I think that's always harder and and practice that in theory.
Yeah, I'll add a couple of notes from my Vantage point is a good morning.
As we look at as we look at the Q2 result, strong financial results across the board and strong revenue growth gross margin continues to accelerate.
Good growth on deferred revenue all of that looks very positive and we are very happy about it.
1 of the things coming into this year that.
1 of the unknowns for US was how would the customers who joined US last year, how would they behave.
When they come up for renewal 1 of the good things that we are seeing is that if you adjust for the product mix and everything on the seltzer side retention remains very solid on the enterprise side logo retention remained solid flat to slightly up. So we are very happy about it. Obviously, we are not declaring victory yet and that is something that would be a very focused on making sure that.
They find the value and continued to stay with us, but yeah. Good signals so far.
The other thing that I would say is that we were able to scale and.
Build the infrastructure to be a public company, we will be publishing our 10-Q tomorrow. So all of that we were very happy with the progress we have made over the last few months on the other side.
You're now Comping against Covid, it's really hard and the business trends have changed significantly everything is new.
We are still trying to work through all of those things visibility is not great and so you can imagine we are on the middle of a global pandemic people are adjusting debt consumer behavior. So it is really hard to see very far ahead as to how things would play out.
And the last thing I would add is hiring has been a little difficult I wouldn't anticipate especially at the beginning of the year, how hard it might be but as Angela said, we have significantly invested in that last quarter. We brought on our largest contingent of nuomi and into the organization and we had almost always and employees now so I think we have.
We have that under control, but again. This is another 1 we are very focused on not declaring victory yet, but we want to keep keep working those things those are the things from my vantage point.
And the second question you had on revenue and <unk>.
And you declines and guidance listen we are all well.
Now that we and the middle of this pandemic with changing consumption patterns and.
Businesses and and.
Consumers and employees, everybody adjusting to a post COVID-19 era and in some cases, 2 or 3 COVID-19 era. So it's very hard to predict with precision how revenue is going to look and the near term I'll give you a couple of examples.
And <unk>.
Live streaming demand spiked during COVID-19. Since then it has come down it is still significantly higher step function higher than where it was pre pandemic, but it is a headwind and it put some pressure on our forecasting revenue and veneer done.
Another example.
B.
With our enhanced product breadth now we have Vimeo library of immuno record. In addition to the livestream and capabilities that we had before all of this.
And now we are in conversations with large enterprises and with multiple decision makers multiple departments are we believe.
It's a positive thing.
But it.
It does tend to lead our sales cycles to be longer.
If you think about this video purchases is not just a tactical decision anymore. It's a very strategic 1 for especially for enterprises, who are looking looking to be a video first and now I see departments are involved procurement teams are involved and it's all a good thing we are excited about it because it's very much in line with our vision that video is not going to be 1 thing.
Use case, but there are multiple use cases video will be ubiquitous with and in enterprise and strategic so it's all positive and will lead to a larger a obese and better retention, but.
This longer sales cycles.
So that's 1 thing that we are seeing.
It puts a little pressure on revenue and push us out revenue a little bit, but overall, a positive and the maturation of the business and this cycle. So these are things that we are seeing and the business but.
If you step back and look at the larger picture. We are doing all the things that we should be doing we are investing and product. We are shipping products. We are growing our sales teams. We are hiring aggressively. So if you ask me how I think about it I am very happy with the investments that we're making and we continue to push hard because we knew.
And that the market is large.
It's still underpenetrated.
And there is huge opportunities ahead of us and we want to be investing into that as you know.
These technology costs don't happen on a straight line and there is a there is an S curve and we want to be investing to be ahead of that and be ready when that when that really Bob's and in fact, we want to be to help make it Bob. So that's our focus that's where we are focused on and that's what we're doing.
Okay. That's super helpful. Thank you and good luck. Thank you. Thank you that's great. We'll go on to our next question is John Blackledge from Cowen.
Great and good morning. Thank you 2 questions first could you expand on the competitive environment.
Who do you see kind of trying to penetrate this large and the large tam, particularly on the enterprise side and then on the enterprise sales could you discuss the head count growth how is the pacing versus expectations and how are you expanding the sales head count across Geos.
Thank you.
Sure Hi, John.
So on competition first I'll start by sort of reminding everyone and as Ryan just said that we are very early in the adoption by businesses of professional quality video right. I mean, the last year or every business is doing video conferencing. The video conferencing is just a tiny sliver of how video can be use the vast majority.
And HR and sales teams are not using video for training and the vast majority of customer support teams are not using video to serve their users.
And so we really think of this market even competitively as the winner will be the company and the product that can actually introduced more people and businesses to professional quality video and naturally get them to expand their usage over time that is what we think will win and the market as we sit here today no question the market.
Getting more competitive you do have bigger players.
And software, we're starting to add some of the capabilities that we have.
But the truth is that video is hard professional quality video is harder we've been at this for 16 years and and we have incredible amount of institutional knowledge. We're far ahead of the market right now as it relates to quality product breadth, we have the advantage of a global brand that is loved and not.
Tolerated a we have the advantage of scale and this freemium funnel and ultimately we have focus we.
We live and die by professional quality video and that's very different from a larger platform. That's going after many many things I have great respect from some of the players in the space and we're starting to enter this market I think ultimately competition is good for all of us it pushes us to build more value for users, but I think we're well positioned.
And to be the leader with the depth and breadth and professional quality video and you'll see us just continue to to lean into our strength there and I'll also add our routes you know in and sort of the external side of video I think it is a real advantage.
I think what we expect as consumers from marketing.
And is going to translate internally and to companies and if you think about some of the bigger players out there you don't see marketers you know using the zoom video player to put a product demo on their website, you don't see small businesses, creating and publishing video ads for Tictac using.
And if any of these other alternatives. So I think we have a real advantage and.
And that we can build upon it is absolutely on us to keep the pace of innovation, but as I said I feel very good about our ability to do that.
I'll take the next question on enterprise sales and good morning, John.
I'm actually quite pleased with where we are on our international expansion, let's start with EMEA.
Our first EMEA office wasn't U K and the team there is doing a fantastic job day.
We are ahead of forecast and their plan.
We have hired significantly there you have some.
And some great new logos coming from their large deals so very pleased with our progress there.
Earlier this year, we started our second office and EMEA and Ukraine, and if you recall, we have an R&D center and the Ukraine. So there is a natural extension there. It's early days, but a good strong signals early signals there.
And in APAC.
Last time, we had talked about that we started and office in Sydney.
Hired a sales leader there a few months ago now the team has grown and has almost been.
Sales, perhaps I think they're now.
Early days, but yeah.
And bookings are still are still low given that it's very early but strong pipeline, which is very positive and we are very happy and excited about APAC. We also start and office in Singapore to cover the far East Asia. We have a couple of employees. There again very very happy with the early signals there.
We also are looking to hire a sales layer and India are there is a breakout there. If there are any great enterprise sales force listening to this call I would encourage you to apply it.
Good job on Vimeo is a great place to work. So please do so great progress in APAC and we also hired our sales leader for Latam earlier, this and <unk>.
Last month, so we are making significant progress across the board. The LTV took accessed staying strong productivity is good.
It's better than what you had expected better than what it was pre pandemic. So.
And progress on hiring early strong signals in the more mature markets. It is really translating into big logos and larger a obese so very very happy with where you're at today.
Yeah, and I would just add you know that the need for video and global we're certainly seeing that and we are still early on the international side, but I would in general I think our enterprise sales team is also you know where we're going.
And more from generalized and specialized we're learning more how to sell these larger deployments you know we're only 2 months into video library figuring out how to do that right with the right sales motion.
It's a good we've got a smart scrappy kind of team that's able to adapt and this is on muscle we want a home right because we're going to keep launching new capabilities and features we want to rapidly expand what we can sell and I.
I think what we're well on track to both grow the team also bringing great talent and build that muscle that enables us to add on new product offerings repeatedly and then have that directly improve our ourselves and ocean.
Thank you.
Our next question will come from Brent Thill of Jefferies.
Good morning, just following on the enterprise theme there is a lot of questions around self serve to enterprise and maybe if you could just highlight what what the mix is today.
We're time kind of where you'd like to see that that mix on on the enterprise side and I guess, just as a follow up I think there is.
Some confusion around your visibility into the next couple of quarters and maybe if you could just describe that visibility. If it is more self serve do you have the type of visibility that you'd like to have and I guess over time that will change as you build out the enterprise team.
Thank you Sir.
Hi, Bryan. Thank you for that so on the sort of self serve the enterprise side and we shared that nearly 70% of our new enterprise customers in Q2 came from our free and self serve users.
That's on a big change from what we've seen in the past so continue to see that as the main funnel for the enterprise that's great. We like that but what's more important is that we still have haven't sort of unlocked. This product led growth the ability to have within the product naturally <unk>.
Poser to our enterprise offering and then moving people into enterprise without a salesperson and being involved or without them actually raising their hand, and so to me you know where I would assess where we are today is clear signals that are free and self serve base and CAD and actually feed our growth on enterprise for years to come.
And good progress and laying the foundation to develop that product led growth.
And that some of that comes from things like Vimeo record building on our team's capability aligning our pricing and packaging launching products like video library. These are all the sort of building blocks that we have laid out and where to get there, but we're still very early and so my hope would be that in the future. We will always have a.
Massive funnel coming from our free and softer user base of employees corporate domains, who are experiencing our product for free and using it more adding team members and then eventually getting graduated from our enterprise offering and I see no signal that that wont.
Won't be a major growth driver for us and the future.
Great on the visibility question good morning, Brent.
Listen I think FEMSA, we have reentered the south flow business for a longer period of time. So there is definitely more data and more trends that we can lean on and to understand the business better enterprises and newer motion. If you remember our Vimeo enterprise was launched in the fall of 2019, so it's less than 2 years. So there is definitely.
More visibility on the self serve side that on the enterprise side, but I want to be very clear the guidance that we just gave for Q3 and Q4, we are very comfortable with it what I'm talking about is on the edges, if you're talking a percentage or 2 of growth. That's the level of precision that we are talking about we are not worried about too much variable.
The in the Q3 and Q4 guidance that'd be gave a little a little while ago.
Hopefully that answers your question.
Great well next go to Cory Carpenter from JP Morgan.
Hey, Hey, good morning.
I have 2 questions I think first just as customers you acquired during the pandemic come up on their anywhere he holds for <unk>.
And in the past couple of months could you talk about what youre seeing from this cohort and terms.
Retention and pricing as well and then.
On the pricing side, you've previously talked about testing per seat pricing. This year any update on how you're thinking about that thanks.
Yeah sure ASO and.
And as Ryan mentioned, good solid signals as it relates to retention of Covid cohorts, we track a bunch of different metrics here. We're looking at obviously usage and activity on a daily weekly and monthly basis, Our act percentage of active users holding steady and that's been the case, we obviously can see.
Now the retention and churn behavior of a lot of these cohorts very steady and similar to what we've seen in the past and then we have leading indicators are things like the percentage of our subscribers that you know opt out of auto renew and and all of those metrics look really solid so.
We feel really good about the sort of stability of of the sub base and then also on the enterprise side logo retention and as Ryan mentioned flat to slightly up so all really good signals there.
As it relates to pricing and packaging are I don't have anything new to share other than we continue to believe that we can better align pricing and packaging with our customers' needs per.
The pricing is absolutely 1 of the things we are testing.
Testing and we'll continue to look at and we're on track I think to to sort of do what we set out to do at the beginning of the year, which is to better align that pricing and packaging in 2020.1 and.
It's not going to be you know a sort of overnight thing, it's not going to be a straight line, but but for sure. You know we have a lot of legacy pricing right now based on our routes at the hosting platform and the biggest unlock to sort of better adjust that with product and getting the right product features out and because we're on track for that I feel very.
Good about this lever and I think it's going to be a big 1 over the next few years.
Great. Thank you. The next question Tom champion from Piper.
Yeah.
Hey, good morning, EBITDA turned negative this quarter, but only modestly so.
And I'm curious if you could just talk a little bit about your level of investment and how you think about balancing profitability and I guess the other question would be why not lean in more heavily given the size of the long term opportunity.
Any thoughts on that would be really helpful.
Yeah. So EBITDA, yes, we have been saying that we will be EBITDA negative for for the full year. So yeah. We are very happy that we were able to invest as much as we wanted to invest and get to a place where we.
And we can continue to grow our R&D team continued to accelerate our sales expansion internationally all of those things are strategically worse for us and we will continue to lean in and we will continue to grow the teams.
And improve our product portfolio as until he talked about earlier.
We are seeing significant traction from some of our newer products from your library. For example, so those are things that we'll continue to lean and more there is obviously the physics of investment also you can just throw a lot of money and assume everything would work you have to do it methodically we have to hire people hiring takes time, especially as we talked about hiring.
And on boarding employees during a pandemic is not the easiest thing to do as we are learning and we are accelerating that but you know all of these things take time and at the same time and we don't want to be doing these things without a without a plan and without a Saturday and just randomly doing things we are doing it.
Very strategically very methodically and investing and that I think you'll continue to see us investing and all the areas that we talked about and you know our focus right now is to build the product and the company for the future. It is not to be profitable as we.
Talked multiple times, we see the market is very early underpenetrated.
And we have a significant opportunity to really help make that.
Make the whole.
On the business and the market grow significantly over the over the next many years. So it's a long term investment strategy a very stark.
Very methodical very thoughtful and we will continue to see us invest.
Yeah.
Great and next question will come from Dan Salmon with BMO.
Dan Please and good morning, everyone.
Angela you spoke briefly about the new partnerships with Tic Toc and dishonor and highlighted established ones with Facebook Shopify Godaddy can.
Can you talk to us a little bit more about the role of these partnerships within your go to market strategy are they really SMB focused or other supporting the enterprise side as well it sounds like that's more of a focus with the Sino So would love to hear just a little bit more about the evolution of the program. Thanks.
Sure Dan and you know, we sort of planted the seeds for partnerships back last year, and our sort of goals, where a couple 1 we wanted to diversify our user acquisition right. We don't Wanna be relying on paid marketing and media costs to bring and users at.
And at the very top of our funnel because we know that the freemium model that we have is very valuable and so you want to continue to invest in it and so 1 of the golf was we can actually open up the market by exposing more businesses, whether they're S. M DS or employee that adequate large organizations expose them to the power of video and Vimeo on these.
Other platforms, where they are and then develop and actual relationship with them that will lead to you know if you have a relationship with vimeo. So that's sort of 1 big goal. The other is that with every partnership and integration. We do we also increase the value of being a vimeo user right. We are now providing a vimeo user.
There are more reach more choice and more utility.
Ross the Internet and so on both of these goals I think are our other long term strategic goals. We've set the right sort of stage, we've planted the right seed and we're starting to see them Bloom.
But still a very early on.
And so what you saw from US this quarter I think is indicative of what youll see going forward. So you'll see us focus on partnerships to help small businesses create content. That's really what we're doing with tic Toc, we're partnering with them and to help our small businesses create video ads for Tictoc seeing really interesting results, there, where we're actually partnering with nektar.
Okay are these small businesses, then able to drive higher clicks higher engagement higher sales when they actually use our tool. That's all really great you'll see us lean and more there and then the enterprise side same strategy applied and Hassan as case, they are enabling through vimeo, a screen recording so that sarnia users.
Directly within the us on and interface can't easily sand on video messages to collaborate and.
Over time after they've done that a certain amount with no friction and for free then Hassan and actually pushes them within their product to become a vimeo user.
And again, that's an early 1 you'll absolutely see us extend that model to other enterprise collaboration software partners by the way. The same thing is also happening on e-commerce, you'll see us look at the e-commerce vertical and how we can help them we have on our our shopify partnership today, that's been extremely successful how can we actually help more.
Sellers and unlock the power of video on all of their product detail pages CIT to help increase conversion. So I think of partnerships is pretty broad for us and we staffed our team and continue to grow that team to be able to go after each of these areas with focus and intensity and.
And again, it's early I'd say are our sort of priority right now is getting embedded with these platforms, adding value to these users and then sort of demonstrating that we are able and we have sort of a funnel back to vimeo and that feels really strong exactly how that plays out in terms of monetization for Vimeo I think is more of a 'twenty 2.
2 areas.
Okay.
1 quick 1 for you Ryan you've already spoken at length about the challenges of near term forecasting and things like that but you are kind enough to continue doing the monthly reporting like.
And our former parent company just the July number specifically was that in line with your expectations internally, yes, absolutely. It was very much in line with our expectations.
Okay, great. Thank you.
Thank you Dan.
Next question, Justin Patterson from Keybanc.
Great. Thank you and good morning, and happy Friday.
And the Ryan and how should we think about the puts and takes around gross margin going forward does it change and storage and hosting needs by customers affect that and then perhaps a higher level 1 for Anjali and Orion noted vimeo is a little over 2 years, and Deutsch enterprise and Germany, and Italy, when you think of creating a best in class enterprise culture.
And what are the next steps to get there. Thank you.
Thanks, Dustin on gross margins, we are very happy with the progress we have made if you look back.
8 quarters ago view on at about 60% gross margins now we are at 73, 3%. So significant progress and we are well on our way to our stated medium term gross margin target of 75 per cent and then.
On a few things at play here obviously.
As I mentioned earlier in my and my prepared remarks.
Infrastructure optimization continues to be our area of focus for US we have a dedicated team who are looking at making that better every day.
And the pricing and price.
Price negotiations and volume discounts all of that help us and.
And generally broadly operational and <unk>.
Average as we continue to be a bigger a bigger.
And our player and enterprise mix of enterprise also helps and making gross margins better but it can be.
Honestly, our focus is not just on reducing the costs and getting to a higher gross margin we want to make sure that we provide a very high quality professional quality video for our customers, we want them to have the best possible.
Hosting experience, we want them to use all the capabilities and features and functionality is that'd be per why is the most optimal viewing experience. So we want to make sure that this this isn't just about cost is what I'm trying to say we want to provide the best experience for our customers. So that's the puts and takes if you want we want to make sure.
Matt and as the gross margins appropriately, but at the same time, providing the best possible experience for our customers and give them the right value, they're looking for and even.
Provide them, but even more than what they're looking for that's helpful. Chris.
And then your question on the steps to creating a best in class Enterprise culture.
I think there's probably 2 aspects of that first is everything needs to be aligned with our customers' success.
And that I think has to happen at the product level, what we choose to build.
And how we go to market in and how we align our pricing and packaging to match the needs of our customers and their own success with video and then obviously as we scale our sales team, how we interact daily with those customers and I think I.
I think we're doing the right things, we're building customer empathy within the organization at all levels.
And we're trying to do that as we scale and that's going to be really important and then you know this is where things like the pricing work that we're doing things like the new products that we're launching all have to kind of ladder up to our customer success and I think the best enterprise companies do that and put that first and then.
Other 1 I think is it talks about product led growth, but we want our product to be our marketing we want to take advantage of the fact that we have you know hundreds of millions of users on our platform for free.
Many many many of which are our.
Employees or a decision makers and enlarge departments and we want to take advantage of that and make sure that we have a very scalable.
And sort of low touch flow to introduce them into our products and and I think the best enterprise companies.
Don't have to rely on going out and fishing and other ponds to generate demand and find their customers and we have those ingredients, we have them and stays and for US. It's really just about harnessing that power in a way that's scalable and.
That's a really hard thing to bill no amount of of of money that you raise or engineers that you hire can get that kind of scale and so again I think we have the ingredients there, but a lot of a real execution work to do ahead to unlock it and I think generally on track to do so.
Thank you.
Great next question comes from Brian Fitzgerald with Wells Fargo.
Thanks.
On a follow up on Dan's questions on <unk>.
And you've had social integrations with for a while but this seems a bit different and that should position us creative tools, specifically in relation to and so a lot of different places you can go and your product roadmap, but what opportunity is there around and tools or even and checked.
More specific integrated part of your mission and then I've got 1 more follow up thanks.
Sure on that question, you know AD tech specifically as the as a key part of our mission is not something we're focused on the way we kind of think of it is every small business. There are over 300 million small businesses and the world, whether theyre going to post on any social media, whether they're gonna post organically to their own base or are they wanted your advertising they wanted.
And as video they don't want to just use and is your tax they know video performs better.
And so we're just trying to lower the barriers and to create that content and I think frankly that goal and and of itself. We're very early on and have a lot of room to go right for debt all of the hundreds of millions of small businesses on all of your social platforms using video and so we're squarely focused on that right now so no near term plant and <unk>.
We're getting into it so the more advanced part of AD Tech.
Got it and then the follow up is just on China, We think of them as project management and our work management and.
So we're curious about the intersection there and how customers are using it it sounds like there is an element of asynchronous communication to how vimeo and assign and work together, which sounds pretty compelling given the crowded kind of E Mail Inboxes and June fatigue, a lot of people are experiencing so and just wanted to know if you can unpack that a bit.
Yeah, and that's exactly right, so vimeo record as our free and free screen recording tool and it's specifically designed to enable asynchronous internal communication and collaboration so some of the use cases, our product teams sharing product demos creative team sharing design walk throughs and.
And really to your point why do you need a meeting for us walk through a presentation versus recording that presentation with the slides on your face and then sharing it out a synchronously means you don't have to grapple with scheduling something with time zone and that content then gets archived putting your video library and it's easily access.
The ball to any employee at any point they can quickly search for the content that they want we can help them pinpoint exactly where in the presentation and somebody said X y and Z.
And so the that type of capability is exactly what we thought to be fueling with vimeo record and so we've effectively natively integrated that capability into a sauna and so Hassan as you do users are in fact doing exactly what you just said, which is you sharing video messages to collaborate internally with.
Their teams.
And so the opportunity for US is obviously to bad debt a lot of these employees and teams who are on a users to become vimeo users and then obviously to graduate them over time into the enterprise.
And I think you'll see us do do similar types of of integrations and the future again, leveraging that screen recording a synchronous video collaboration tool.
Great. Thanks, Ron really helpful sure.
All right that wraps it up for questions and the queue I'm going to turn it back over to Anthony who will leave us with some closing remarks.
Oh, Thank you off on our questions and your time today I just want to leave you with a few key takeaways from the quarter.
First we believe the trends of video is irreversible our market is large and underpinned and underpenetrated and our execution is on track, we're doing well and the enterprise with improved product breadth and go to market and again, we're just scratching the surface of this opportunity.
Second, we're investing strategically and aggressively to deepen our competitive moats.
Past success will not be a straight line, but we are making the appropriate basketball and long term view and a short path to validation.
Third we are more energized than ever to unlock the power of video for every business and we're excited to be honest journey with you and thank you all again.
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