Q2 2022 Vimeo Inc Earnings Call
[music].
Yes.
Good morning, and thank you for joining <unk> Q2 earnings are that we're excited to be here in front of you before we begin a few comments first the session will be recorded and available on the vignette Investor Relations site. Later today second we will discuss damien's outlook and future performance. These forward looking statements typically may be preceded by words such as we.
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 information regarding certain key metrics and our non-GAAP financial measures, including certain forward looking measures. These should be considered in addition to and not as a substitute for or in isolation from GAAP measures additional information regarding <unk> financial performance, including reconciliations with comparable GAAP measures can be found in our earnings release and <unk> filing.
With the SEC as well as in the supplemental information posted on the Investor Relations section of our website with that I'll turn it over to our CEO virtually.
Good morning, everyone and thank you for joining our Q2 earnings are bad.
During the second quarter, we delivered year over year revenue growth of 16% gross profit growth of 20% and we made good progress on our near term path to profitability cutting our adjusted EBITA loss sequentially by almost half.
Stepping back the Neo is now a few years into an exciting transition into a software company that serves businesses, both big and small.
And this transition is working a few years ago, we were purely self serve housing is less constrained by selling gigabytes of video storage to individual.
Today, our video platform, serving the needs of some of the largest companies and teams in the world.
We've turned our self serve routes into an engaged user base of employees, who are using vimeo daily.
And he's built a sales force on top that's starting to gain real traction.
You can see our market opportunity expanding in front of us as our newest product from video library to Vimeo events to Vimeo interactive get the product market fit quickly.
There are three things I want to hit with you today.
First on growth, we continue to see lower demand than we expected primarily in our software business, which we attribute to both post post COVID-19 normalization and macroeconomic conditions.
Bookings is our leading indicator of revenue growth and given the environment, we're going to start talking about this metric more to give you transparency into what we expect.
In Q2, our sales assisted bookings grew double digits, but our overall bookings were flat year over year dragged down by a decline in software.
Bookings typically precedes revenue by roughly three quarters for Vimeo. So we're prepared to see our revenue growth continued to decelerate in 2022.
We believe we will exit 2022 sales assisted bookings growing healthy and accelerating but an acceleration in self serve continues to be hard to forecast.
So while we work to return to growth in software, we will rely on the strength of our sales assisted to propel our overall revenue growth in 2023, which we expect to accelerate in the second half.
Second unprofitability, we're proactively responding to our environment and our outlook.
We've made swift changes to the business. This includes reducing our operating expenses across the board to get to profitability faster and to invest from there based on validated results.
We believe we can deliver near breakeven adjusted EBITDA by Q4 of this year and we're positioning the company to be profitable in 2023 across a range of revenue outcomes.
We've also added several new executive with deep experience and proven track record to improve our execution across product sales and marketing.
Third on the long term our growth path remains clear to us.
Our sales assisted revenue grew 45% year over year in Q2 bookings.
Bookings grew nearly 20% even as he works through a reorientation of our salesforce and despite macro concerns.
Within sales has to fit our flagship Vimeo enterprise product is scaling.
Bookings are growing the fastest to act faster than our total sales assistant booking.
And we see leading indicators of further scale retention and <unk> of the new enterprise customers is rising year over year and the number of seats using those accounts is growing in the triple digits.
Strong indicators of both the value we're delivering today.
Our ability to drive product led growth in the future.
So let me give you some color on self serve which is a fundamental advantage for vimeo. Despite the current headwinds.
Self serve was roughly 65% of revenue in Q2 up 4% year over year.
And what self serve gives us is enviable scale in our industry, both financially and in our product and brand it's already our largest and most efficient source of enterprise fleets today with over 80% of our new sales assisted customers coming from softer in the quarter.
So we're very much focused on resuming growth here and are taking the following clear actions.
We're reallocating, our marketing spend and campaigns to more explicitly target key buyers of large organizations instead of the consumers that smbs, we were historically optimized for.
We're making key changes to our website and customer experience to better convert those buyers. This involved wholesale changes to our landing pages site navigation and marketing content.
We're building a far more collaborative product experience for self serve users to enable them to more easily create and share content with colleagues get feedback faster and save time.
And we're rolling out a new monetization model designed to simplify the purchasing process and upsell customers naturally through seat expansion.
These are big changes and with them, we believe that software can unlock an incredibly efficient and scalable sales funnel for vimeo that can fuel our growth for years to come and that can fund ourselves sales assistant growth in the future.
Next an update on sales assisted which was roughly 35% of revenue in Q2 and grew 45% year over year.
We continue to see exciting progress here with the largest companies in the world using video and Vimeo more.
These companies are live streaming town halls, and then recording those sessions and turning them into searchable Q&A in their video libraries.
They are training their employees and teaching our customers how to use their product.
And they are embracing interactive video to market and sell better.
These calls arent, new we just enable companies to give their employees and customers far more engaging experiences through video.
And as Workforces get more distributed video will keep moving from a nice to have to an absolute necessity, regardless of the economic landscape.
For Vimeo this translates into faster adoption of our products suite, which we expanded with the new events in November and the new interactive in June .
With these launches the percentage of sales assisted customers, who use two or more products in our suite continues to grow.
Our Salesforce transition is also moving along nicely of our Salesforce roughly 74% are fully ramped with the remaining 26% expected to ramp in Q4.
We've invested in specialization and a new motions like customer success, all of which are showing promising signs.
In Q2, we saw the fastest bookings growth from larger customers and then our APAC and EMEA regions.
And our new monetization model is rolling out nicely with new and renewing sales assisted customers now buying per seat plan.
We're also continuing to win new customers across industries, and verticals and we're getting better at expanding how existing customers used anyhow.
A good example is this fortune 50 company.
A person on this company's video production team started using us to livestream events years ago software customer.
That production team steadily expanded their use of EMEA overtime and moved to a sales assistant contract to stream all town halls for one of their business divisions.
This year, they expanded to a company wide contract driven by adoption of our video library product and our new per seat monetization model.
Now we're in active conversations to expand adoption further to their marketing teams through our newer products like the new events and interactive.
There is nothing about this deal this company or their needs that isn't replicable and extendable to the many other fortune 500 companies already in our software user base.
This is what we're focused on right now, bringing the pieces together of our product and go to market to make this example happen at scale.
Finally, we continue to make important structural changes at Danielle to set us up for the future.
In the last six months, we welcomed five new executives, who each bring exceptional experience to the table.
Julian is here today and her first full quarter as our CFO and you've heard me speak about Eric and Crystal in the past.
In Q2, we welcomed Lynn as our new Chief marketing Officer, and Arthur off as our new Chief product Officer Wynn has over 30 years of experience across <unk> and <unk> marketing at companies like Microsoft Starbucks and Getty images.
She has seen multiple companies scale and enterprise software, including taking tableau from a similar place that vimeo is today two significant scale.
<unk> is a proven product leader with expertise ranging from enterprise video at Brightcove and AWS, having run massive consumer experiences like Facebook watch matter.
Having led business units at Amazon.
Our strong executive team is even more essential in challenging times and I'm thrilled to be attracting the caliber of talent and to have this group of leaders in place for many of its next phase.
While we continue to invest in critical areas of the business. We're also right sizing our operating expenses to reflect our current outlook, we've made adjustments across the board, including a 6% reduction in workforce in July and an ongoing reduction and reallocation of our marketing spend.
We expect to continue hiring and investing in both product and go to market, but we will require more from these investments in the near term.
Specifically the performance indicator indicators, we will look forward to unlock additional investment or <unk>.
Reaccelerate, our bookings for growth continuing to grow <unk> and ensuring we approach breakeven adjusted EBITDA in Q4.
In summary, we know what we need to do and believe we have the tools to prove our growth path over the next few quarters.
We will continue to respond with speed and agility to challenging environment, while taking a long term view towards capturing an enormous market opportunity.
And while the current environment brings headwinds we will also enjoy the tailwind associated with the inevitable increase a video at work.
We think we're uniquely positioned and organized to come out of this period, a stronger company with industry, leading product seasoned team and a clear path to becoming both a fast growing and profitable business.
With that I will pass it over to Julian to walk through the financials.
Thanks Holly.
Have the opportunity to be CFO at Vimeo for a full quarter now and I really want to step back and explain what I'm excited about in terms of our opportunity from a strategic and financial perspective.
<unk> strategy the tailwind for video at work are undeniable and I'm already using the tools in my day to day work and longer term you should expect us to use more vimeo tools for our own IR program as well.
On the financial side, we have an enviable financial profile with high margin recurring revenue cash on hand, and embedded profitability that we are choosing to invest for growth today, but have the flexibility to moderate based on how our results unfold.
Given the size of our opportunity we aren't growing as fast today as we believe we will in the future and we are fortunate to be able to continue to invest in this environment to generate real shareholder value with low risk of significant cash burn.
Now there are three key messages stemming from our Q2 financials and our outlook that we want to make clear.
<unk>.
We continue to move through short term post pandemic and economic headwinds that are particularly impacting us on the sell on self serve.
Sales assistant is healthy thanks to momentum in Vimeo enterprise, but we continue to work through a reorientation of our salesforce and pressure on our more volume driven OTT product.
Second we remain committed to achieving near breakeven adjusted EBITDA by the end of 2022.
And have proactively taken steps to meet this goal.
In Q2, we already reduced our quarterly loss by approximately 40% sequentially.
We expect sequential improvement to continue.
Third we are setting up to be a healthier company as we move through this post pandemic period.
Fact, we believe we are setting ourselves up to deliver profitability against a number of potential revenue outcomes in 2023.
Now onto the quarter.
Q2 revenue reached $111 million and was up 16% year over year with growth across both self serve and sales assisted customers.
Sales assisted revenue grew 45% year over year, while self serve growth was 4%.
Our aim is to get to a place where we have stabilized software putting it in a position to grow while the faster growth part of our business sales assisted.
Gains to approach being the majority of our revenue, which combined should provide us an overall tailwind to our growth rates.
Now during an on bookings.
Revenue growth will be dictated by our bookings growth typically with a three quarter lag and in Q2 bookings were flat year over year with sales assisted growing 20% and self served out.
There are four drivers of our bookings at the top of the funnel demand conversion of that demand into customers and sales average value derived from each customer and customer retention.
As for top of the funnel demand and self serve traffic continues to decline in the double digits year over year and was down roughly 30% in Q2, our rate of decline, which we have plateaued near term.
And sales assisted we continue to move through this post pandemic period, and our sales team transformation in Q2, our overall pipeline was down year over year. However, the decline was in our more volume driven and post pandemic exposed products like OTT, whereas the Vimeo enterprise pipeline was up in the double digits.
Onto conversion.
In self serve our conversion rate has more than doubled since 2019 as measured by customer bookings over traffic and was flat in Q2 versus a year ago.
In sales assisted conversion rates from pipelines were up slightly quarter over quarter, but we still see room for improvement as the adjustments we have made to the sales team mature.
Our overall ARPA is rising thanks to the continued mix shift towards sales assisted customers.
<unk> was $264 overall, an increase of 10% year over year.
Self serve is essentially flat and sales assisted was down largely due to mix.
Within sales assisted Vimeo enterprise had rising <unk>, but products like OTT, how do you lower ARPA year over year.
Recently, we rolled out a new monetization model for customers across most sales assisted revenue and saw early signs of success for any price up to better reflect the value. We believe we deliver and create natural expansion from there based on seat usage.
For self serve we began to rollout early tests of our per seat model in select regions, but it's too early to make any conclusions from the data as we are three weeks into a limited pilot.
Finally retention.
As context renewals are approximately 70% of our bookings and our self serve funnel Q2 retention rates were down year over year, largely due to COVID-19 cohorts, where our shift to mobile and free trials was more evident.
In sales assisted our bookings our logo retention rates were up year over year.
Moving onto subscribers as you likely saw our monthly metrics, we grew paying subscribers to $1 7 million in June up 3% year over year.
<unk> fell slightly versus Q1 due to a reduction in <unk> subscribers, excluding majesco subscribers grew 7% year over year.
We now have more than 9000 pain sales assisted customers, which grew nicely year over year given its magnitude self serve had the same growth rates vimeo overall.
Now the remainder of my comments will refer to non-GAAP measures.
Our gross margin improved approximately 300 basis points year over year, and 50 basis points quarter over quarter to 76% in Q2, enabling us to deliver gross profit growth of 20% year over year.
We began to moderate our rate of operating expense growth in Q2 with expense growth of 22% year over year versus a 46% growth rate in Q1, and we finished Q2 with operating expenses down slightly sequentially.
R&D expense for the quarter was up 36% year over year due to the run rate cost of growing our team over the last two years.
Sales and marketing spend for the quarter was up just 5% year over year due to a strategic investment in sales head count and infrastructure offset by reduce paid marketing spend.
G&A rose, 48% year over year, reflecting growth in our team and related compensation and an increased provision for credit losses of $3 7 million as relayed last quarter. We are working through some unintended payment slowdowns due to a shift to a new billing system.
Finally, adjusted EBITDA loss for the quarter was $6 4 million a solid sequential drop in loss from Q1, thanks to delivering higher gross profit dollars quarter over quarter, while slightly dropping operating expenses.
We ended the quarter with a healthy $268 million in cash on our balance sheet cash.
Cash was down versus Q1 due to our EBITDA loss timing of accounts payable movements and increasing AAR from both the growth in sales assisted revenue, which has longer payment terms and the billing systems transition I mentioned.
I'll now discuss our outlook for the third quarter and full year 2022.
On our Q1 call. We said that we thought full year 2022 revenue growth would be in the double digits that we would be able to approach adjusted EBITDA breakeven by Q4 that 2022, adjusted EBITDA would be $25 million to $30 million loss and that our bookings would accelerate in Q4.
For Q3, we expect to exceed 5% revenue growth and posted an adjusted EBITDA loss of $3 million to $5 million for 2022, we expect to hit near double digit revenue growth and our improving our adjusted EBITDA loss outlook to $20 to $25 million.
Additionally, we continue to believe we can be near EBITDA breakeven even in Q4.
As Anjali previewed we believe we'll exit 2022 with sales assisted bookings growth accelerated however, and acceleration in software continues to be difficult to forecast.
We expect the strength of sales assisted to propel our overall revenue growth in 2023, our bookings trends would indicate that we should expect total vimeo growth to bottom out early in the year and accelerate in the second half.
As <unk> mentioned, we've begun to adjust our cost structure to reflect our outlook.
We are assuming flat gross margin through the rest of the year at 76%.
On operating expenses, we have made a small reduction in workforce in mid July and have embarked on reducing non comp expenses like marketing and real estate to aid in achieving our EBITDA target.
This has been a tough but healthy process for the company and we are grateful for the maturity and resiliency of our team.
From a financial perspective, we are not where we want to be today. However, I do want to be clear that we believe is differentiated in large part because of its solid financial profile at.
At our Q2 run rate Vimeo is margin gives us over $330 million of gross profit.
On an annualized basis. This is a tremendous asset because it proves provides us the unique opportunity to elect to invest to pursue our growth strategy and drive shareholder value with no risk of significant unsustainable cash burn.
We are confident about vimeo and its opportunity to create significant shareholder value through profitable growth as we move through this current environment.
With that I'll open it up for questions over to you on it.
Thank you as a reminder, please on mute your microphone is turned on your camera when called on and limit yourself to one question and one follow up in the interest of time. Our first question comes from Brent Thill of Jefferies Brent.
Brent Thill from Jefferies.
I think we lost Brian .
So next maybe we'll shift over to Cory Carpenter from JP Morgan Cory Please limit your line.
Thanks for the questions.
You can just talk a bit more about the macro environment and how that's impacting your business could you just parse.
Thats impacting that versus kind of the COVID-19.
Or if you will and then secondly on international about 50% of your business could you talk about the trends Youre seeing international markets. I think you called them out as actually some of your faster growing mortgage right now powertrain.
What you see in the U S. Thank you.
So let me take the financial side of that first on international actually international grew slightly faster than the U S in the quarter.
I'm going to just jump forward to a question I'm sure you'll want to know which is is there an FX impact on vimeo.
About 30% of our revenue is exposed to currency our sales assisted business is denominated in U S dollars.
And so we think FX had about a 1% impact in the quarter and we have planned for some FX headwinds going into the rest of the year and I am totally forgetting your second question macro environments.
I think it's a little hard to parse macro from Covid.
I think what we're really seeing is that the self serve business had a huge run up during the pandemic and we're just getting to the other side of that so in our view those two are kind of combined in terms of getting the self serve business to the right place one of the things we talk about internally is we can't force people to come.
Back from their vacations and use video tools, but we do think overall there is growth in that business and once we get to the other side of this sort of re balancing if you will that that business will be back in a growth position.
Sales assisted.
The OTT product and some of our more high volume products do have macro headwinds and post pandemic headwinds they did very very well during the pandemic and what we're really focused on is what's going on in our Vimeo enterprise business. Their bookings are growing twice overall sales assistant bookings hard to note that even go fast.
<unk>, if the macro environment wasn't there, but they feel really solid to us really healthy and we're really excited about the fact that that's a great indicator that our strategy is working.
I mean, the only thing I would add Corey I think on international is the need for video is global we continue to see opportunities or conversion rates arent as high outside the U S. As they are in the U S. So there is room for us to get better there and as we mentioned on sales as I said, we are seeing.
Faster bumping is growth in <unk>.
<unk> like APAC and EMEA.
Plenty of opportunity.
There and more broadly the thing that's exciting is our product is global two we're able to serve customers and get product market fit in different regions on both self serve and self assisted without having massive incremental investments that we need to make to our product. So very much still I think a huge untapped opportunity for us.
Yeah.
Great. Thanks next maybe we'll circle back to Brent Thill at Jefferies Brent.
Thanks.
Relative to the things that you can control obviously revenue is one that is a little harder in this environment can you just talk to the things that are.
In your <unk> and where are you taking.
And to ensure that you are setting yourself up for this new environment.
I'll start by just saying I think.
Timely question, Brian It has.
I was just sharing with us the vimeo team Yeah. There is definitely things we can't control like the economy.
Like exactly where post pandemic demand will settle and bringing people away from vacation as long as Baxter laptops, but but we do control the fundamentals of the business or product or marketing or selling and how we operate and youll definitely see and I think we've embarked on this about a year ago, and we're making a lot of changes in <unk>.
Finally to be more focused more disciplined more accountable. We've established an executive talent bench that I think is pretty incredible and their experience and have seen these types of.
Environments before and are sort of in that appropriate wartime mentality that I think we need.
You will also see just operationally what we're doing we're getting a lot more focused.
You're going to use this time to just get stronger and more disciplined I'll, let Julian talk about the investment side sure if I look at the business.
I really at the top of the business I really think about those four drivers of bookings and really focus us on the so you've got top of the funnel, that's where our new marketing orientation allow the work we're doing on marketing is going to really help us on top of the funnel conversion is both product and marketing, meaning let's make sure the leaves.
We're getting a really qualified and let's make sure the product can convert them really well.
In terms of <unk> as you know we have a big effort underway on pricing and packaging and that is a really important project for the business and retention.
Is <unk>.
Letting water come up the bottom of the bucket and we really are focused on the product group on engaging customers continuing to have them use vimeo to create and distribute really engaging video very simply so I think at the top those are the four areas. When we think about the different efforts are things, we can control to fight.
Headwind. It's those areas are where we are focused at a high level then in terms of the expenses.
You, we already took action on head count we have been getting much more efficient on our marketing spend and I think we're set up pretty well now so on our current outlook, we can get near EBITDA breakeven in Q4, and we really believe we're set up will give us the opportunity to be profitable at a variety of revenue growth rates next year.
And so while we will continue to look at expenses always we think we're in a good spot now, but I'm really impressed that the company is our ability to move pretty fast so to the extent we see.
And that look that changes, we will of course respond to that.
Thank you.
Next we'll go to Brian Fitzgerald from Wells Fargo, Brian .
We wanted to ask about.
Sure.
The library product it seems like it's more applicable to large.
Customers.
Ken person Yoga studios are going to use at Amazon.
Hilton will some of these new additions Este Lauder Splunk Carvana search now these are big University of Pennsylvania is a big organizations are they using more product from the get off from the from the start.
Hey.
Are they using library is there upside potentials, perhaps shortening up sell quicker.
Quicker is it easy.
Yes.
The answer to all of those is yes, but I'll give you more than that.
So on video library.
Recap the way, we think of that product is it's a foundational layer. We want every vimeo enterprise customer to have access to video library. So that they start using it and then the goal is to get seat expansion and adoption more and more video is being contributed to the library and more and more users.
Gauging to either add videos or watch videos.
And what I would say as we look at as our attach rate. So we look at our attach rate of when we have at the new enterprise customer how much theyre utilizing video library, we look at multi product use how much they're using multiple products and then we look at how many seats those accounts have and how those seats are growing.
And.
All of those metrics look really strong so on Vimeo enterprise I think Julien shared we're seeing our bookings grow two times faster than total sales assisted bookings within that we see <unk> growing in the double digits, we see retention, both logo and bookings retention, increasing and that more important indicator is the number of seats.
In these accounts is up triple digits year over year, that's a leading indicator of usage now on your question about pricing and how we're using that to upsell. We've just moved as we said to this per seat monetization model, which is now active with with our new and renewing vimeo enterprise customers and so that <unk>.
Leading indicator of more seats being used is now we have the right monetization model to have that drive actual contracts expansion for vimeo.
And then the last metric because on multi product use we shared last quarter that the percentage with over 50% using multi products that continues to increase as well and especially as we continue to expand our product suite with with products like the new interactive. So in general I think we see good validation video library is are found.
Dacian for expansion in our company and.
And we're starting to see the right indicators and it's showing up.
And the output of the growth in that business.
Thank you.
Next we'll go to Justin Patterson from Keybanc, Justin Please on mute your line.
Video.
Great. Thank you very much good morning, I was hoping you could elaborate a little bit more on just the.
The state of the sales assistant for enterprise.
Salesforce productivity is going and perhaps tuck in the product pipeline ahead. Thank you.
Okay.
Yeah.
Really quick on the sales team we are.
About 74% ramped on the sales team, which is great and the remainder should be ramped into the fourth quarter. So productivity is not where we'd want it today given that ramp time, but we have aims to get that up fast and as we look at 2023, we believe our sales team can have productivity that rivals any good.
SaaS company. So we're excited about that.
As we've talked about in this call a bunch of the trends, we're seeing in Vimeo enterprise really give us confidence that the strategy is the right strategy and that there is a lot of demand for these kinds of products and enterprises and then ill pass it over here and then just one other thing I'm, telling you now so we have done through this re orientation of our sales force.
Where are we now sell based on company size.
And even shared in Q2 that the fact that we had fastest brooklyn growth among larger companies. So good signal there is that that the intended effects of that change are starting to work for sure. We still have plenty to work through our new Chief revenue Officer Eric.
Is has made some pretty big changes.
Throughout the entire sales team and that's not just how we organize its setting up functions like customer success, it's getting bringing a much more data driven model to how we track and optimize our selling.
Also have a ton of room to improve how we enable and train our sales force.
The collateral that we used to actually market.
And that's what our new CMO is really focused on two so I would say good slow steady progress for sure marching in the right direction. We are not we're not best in class yet and we do have some real work to do to get there, but I think those are all what I would say our sort of levers for us to offset.
Some of the headwinds we're seeing more broadly.
You asked about product pipeline and so on that.
Just as a reminder, our a product opportunity is to power video for work and what we do better than anybody else is that we help anyone easily create and distribute pro level video with regardless of their budgets or expertise and there's three product pillars, we set out at the beginning of the year. The first is to help.
Employees and teams share knowledge and collaborate at work.
To define redefine the next generation of live experiences and the third is to flawlessly supports the largest companies in the world with their mission critical video needs.
All three are well on track so for knowledge sharing we launched a new interactive companies are using interactivity to train and engage their employees.
Could it be launching new collaboration features for teams to share.
Information and get feedback.
And we're also investing in AI machine learning and transcription to take all of our company's existing video content that millions of hours of meeting recordings and make them much more searchable structure discoverable and infinitely more useful.
On live experiences, we're going to keep building upon the foundation of the new events and Youll see us really look to scale that product within larger marketing teams and you'll see us launch things like more integrations with CRM software and then the last on on flawlessly supporting large companies a lot of investment in security.
<unk> and reliability, we want to be able to not just serve tens of thousands or hundreds of thousands, but even a million employees on a single account.
And we're making good progress there so I would say generally on the product side continuing to ship on time, continuing to see that we can reach product market fit quickly and very much staying the course on our three pillars.
Thanks. Thanks next we will go to Youssef Squali from Trust you Seth.
Yes, hi, thanks, guys.
One of them back to self serve issue maybe unduly expose us why do you think one is maybe not structural or may be a result of.
Very good dynamics to among the three or four different things that you said you have basically ahead of <unk> executed on which ones. Do you think are low hanging fruit versus ones that may take much longer like new monetization product et cetera, and just really the most important question. How long do you think it'll take before getting back.
Second back to growth.
So south or just as a reminder, it traffic is really only share traffic down 30% year over year, that's really what's what's hurting us the most conversion retention ARPA of all those other things we feel good about and that's the thing that frankly, we didn't anticipate and took us by surprise as we entered the year and when we look at traffic and we look at.
<unk>.
Softness that we're seeing it does to us look like it's mirroring Google search trends, what we're seeing from others on the self serve side.
We're not seeing any indication that we're losing share to another competitor and we're looking at a variety of signals like demand in search trends to ascertain that.
And then in terms of the levers on self serve it's sort of the same thing.
Think traffic is is never easy it's never easy to move in our case, we do have some low hanging fruit there, which is we know that we have historically not been very good and our marketing at targeting our highest value customers. These are the decision makers at large companies marketers HR comms professionals.
They don't think of any.
No. We're an enterprise software business that were not in their RFP process and if you search for enterprise video today, We don't show up in the rankings were not on Forrester and Gartner, It's really basic BTB marketing tactics that we just didn't have in our DNA and so youre going to see us, especially with our new CMO really shift how we market.
To drive traffic the other part of traffic is it doesn't just come from marketing comes from the product. So what we see is that we have inherently and opportunity to drive viral discoveries through our product every time or a video or shared.
And.
A great example is like somebody record their screen to send a demo to another colleague at work that gets shared with 10 other employees, that's a form of marketing and traffic for us.
And we have yet to unlock that but we have a pretty clear roadmap of how to do it and we also have a couple of signals of smaller startups in the space who have proven this motion. So we know it's doable and so I think those are some of the reasons why we have confidence that we can move on traffic.
On the other parts of your sort of I would say those I would say are all very clearly right in front of us so on conversion or <unk>.
Website still have our opportunity to really speak to the beta customer, we're making a bunch of changes there to our landing pages or navigation et cetera, We think theres clear low hanging fruit to optimize in fact, it's actually really hard still today.
To the place and the product and the website, where you can speak to a salesperson.
There's some really sort of clear opportunities there on <unk> that new monetization model is key it is now being tested out there and technically is working as we would hope so we feel like we will get good signal on that in the coming months. It will certainly be a multi quarter journey to roll it out fully but we.
Should have validation and confidence that it's working.
In short order and then on retention as Julian mentioned a lot of the efforts on our product side are designed to improve retention and I think what's exciting there is.
Our whole strategy of moving to proceed and team expansion.
One of the most correlated sort of things that we see that thing. That's most correlated to retention is adding seats and team members right because once you've done that you're inherently your account is more sticky and so we actually also think that by just doing the things. We wanted to do with the per seat model and with our team and collaboration capabilities, we have a very clear path.
To improve retention as well so those are all.
The opportunities how long before we get back to growth I think that's a tough one to predict I wish I could but what I can tell you is I think it's a matter of when not if and I think we will have very steadily as we progressed through Q3 and certainly in Q4 very good.
Line of sight and validation.
And the levers that we have.
Do you think this is like a multiyear process.
Process, a multi quarter process just to get an idea.
I hope, it's shorter than both of those things.
But I certainly don't think it should be multiyear.
But again I think the thing that the thing that we've learned is that we have not been great at predicting exactly where post post pandemic.
Demand will settle and we certainly not predicted some of the macro conditions. So so I think it's it would be premature for us to say, we have certainty there, but I do think what we will ship share and I don't think its multi years I think it's multi quarters because that the levers that we control that we will use them to move the business.
I just add one thing to that when we look at 2023.
And there's two things to consider one statistically our bookings growth translates to revenue growth and about three quarters. So we do have to work through some deceleration before we reaccelerate currently our line of sight would say that we reaccelerate in the second half of 2023 and 2023 from a growth perspective is.
Largely going to be driven on the sales assistant side and so I think that's really our focus in terms of where that growth comes from and as I as I said in my prepared remarks, we're.
We're setting the business up to be successful and profitable at a variety of revenue growth rates, because we don't want to be dependent on a fast turnaround and self serve.
It's hard to predict right now.
Okay.
Great next we'll go to bill curve from Cowen Bill.
Yeah, great. Thanks for the question I just had one on <unk>.
Free cash flow so based on the full year <unk> guidance, it looks like youre working towards roughly breakeven EBITDA in <unk>, but can you just walk us through how you're thinking about free cash flow and as we move through the as we move through the back half of the year and into 2023 and maybe beyond.
It would be super helpful absolutely.
Our business model is a huge asset for vimeo, the embedded profitability, we have really sets us up well to both be able to invest and have very little risk of significant unsustainable cash burn so as I look at the cash just from a working capital perspective, the EBITDA losses will be coming down in the second.
Half.
In terms of the use of cash from things like AP and AR on the AP side. Our AP has some just timing issues in Q2 in terms of when big payments went out I think that will swing back and be a generator of cash and as we go through the second half an AAR I've described the billing transition we made that has extended.
Some of our Dsos.
And sales assisted.
We are at or close to the end of that process in terms of peaking and that should go positive for us from a cash perspective, and so when I look at it from just the core cash capability of the business and think about the fact that we have a very large portion of our revenue coming in 12 month contracts. When you think about growing deferred over time.
That puts us in a position of really being a cash generator over the longer haul.
And so I feel really good about that because that lets us invest and be very stable as the business, which I think is really exciting profile to have I will mention just so as you think about cash.
About $15 million give or take of of items outside of the working capital that I would expect to go through cash in the second half of the year. They are severance for the risk we just did.
And largely and then theres two earn outs from some smaller acquisitions, we did last year that I'll go through and.
And so I think all in you would probably have another 15 or so million dollars of cash that's outside that sort of working capital bucket, but I think we're in a really great enviable position, where we have a very strong cash balance and really not a significant use of cash that I think puts us in a really great strategic position to do what we want to do here.
Great. Thank you.
Thanks next we will go to Tom champion from Piper Sandler.
Yeah.
Okay great.
Good morning.
Julian maybe for you given your one quarter deepened the business at this point I am just curious your thought.
On the enterprise market opportunity and then how you view it.
Especially in the context of competition out there in Vimeo is place competitively. Thank you absolutely.
Yeah.
Last time I spoke to you all I think it was three weeks on the job so.
Fairly.
Our knowledgeable, but what I find really striking about vimeo and our strategy is that the strategy of moving towards enterprises was set in place before the pandemic and then Vimeo had this huge boost from pandemic that really showed people why video. It works got a matter and so what is really interesting and now been here four months.
<unk> I guess, it's four months now is it that's actually really very much the case and it's embedded in how the company is operating so I'm really really excited about that and when I look at those those stacks from Vimeo enterprise in the quarter. They really gives me confidence that we're headed the right direction bookings growing at twice the overall LSA bookings returns.
Going up seat usage seats going up in the triple digits RVO coming up I think are the new enterprise <unk>, who is now over $20000. These are all really good signs that this is really the correct strategy now we've got to work through some transition post pandemic largely in the sales of self serve business, but I feel very confident in the <unk>.
Price strategy of the company set out and in fact, I actually have been using the tool. So I've been sending video messages out across the company and it's amazing how much more engagement you get when someone looks in your eyes. When you say please hand in your presentation for a quarterly business review on time.
And faster when you do it in video, it's highly engaging and Investor relations I am excited to use vimeo to do Investor Relations. Obviously, we're doing this call with vimeo, but we have a lot of really creative ideas for using vimeo in terms of how we communicate with you all and in a much more interactive and engaging way and you'll see us roll a lot of that out as we work in.
Two Q3.
And I would just want to add.
Because when you see a CFO get passionate video tools.
It speaks to your question about about competition and first I'll say very tactically, we look at who we win two and who we lose to and why and the Differentiators are holding very strong we win because we have is much more simple intuitive easy to use product that employees actually think is cool and want to use.
That's a huge win we win because of the breadth of our offering and increasingly I think a lot of companies are taking a second look at their software budgets right now and if you can centralize working with a bunch of different vendors into one offering it makes a ton of science and we win because the tools are effective they're high quality. They actually help you do things like engage their employees.
And so those are all very much resonating.
And when we lose it's usually because there's a very specific enterprise capability that we don't have yet.
Not because there's another player out there it's doing it better and when I think about our future Road map I think the other thing that we have is we have vision and we have innovation and we're not just sort of looking at okay. You know somebody is asking for this let's give them that.
We're going to do things that are going to be.
New we're imagining how video can be used in ways that I just don't see any other company that has the focus and the passion and the institutional knowledge on video that.
We will be able to do.
And I think the thing somebody had asked earlier about maybe your interactive and some of the examples of Este Lauder and some of the examples and what I will tell you is when we do a good job and we don't always when we do a good job of showing what that product can do to our customers. What I'm seeing is people say wow and when you have a product.
That wows people and in a market that's big it's ours to penetrate and so I think we really do feel very well positioned on the product side I think it's the go to market side that we've really got off our game.
Thank you both.
Great with that I'm seeing no more questions in queue I'm going to turn it back over to Julia for closing comments.
Thank you all.
We're not where we want to be on growth today.
Certainly have some headwinds in the near term to move through but we do believe the tailwind of video at work are inevitable. We think we have the best product and we intend to come out of this period with the best team.
And an incredibly exciting business and having proven a growth path.
That shows that we can be fast growing and profitable.
The team is all in we are getting into a fight mode and I look forward to demonstrating that to you all in the future. Thank you.
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