Q3 2022 Vimeo Inc Earnings Call
Good morning, and thank you for joining Vimeo is Q3 earnings live Q&A, we're excited to be here in front of you.
Before we begin if you comment first then he was Q3 shareholder video will be available on the new Investor Relations site second we will discuss any of its 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 in this video.
We have also provided information regarding certain key metrics in 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 filings 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 anjali.
Hi, folks and welcome to our Q3 earnings Q&A.
We are trying something new this quarter last night, we published an interactive shareholder of video our version of the new shareholder letter using Vimeo is product.
Julian and I were able to record our updates from our respective location me from the Vimeo HQ in New York and Julian from her BARDA office in Vermont.
We then stitch the video together and added our new interactive features so you can engage with the content. However, you want.
Hope you enjoy the experience we are experimenting so take the policy and to give us your vote on if you like it.
There are three things I want to call out from the quarter.
First we are seeing exciting momentum in vimeo enterprise, including growing that revenue retention to over 100%.
Second we are executing our strategic evolution and ourselves are offering to better serve higher value business users. While self serve is dragging our growth in the near term. We believe it will be a valuable and profitable grower in the long term.
And third our visibility is improving along with our execution.
This quarter, we ramped up our new management team and generated positive adjusted EBITDA and positive free cash flow.
That's it with that let's jump into some questions.
As a reminder, please on mute your microphone and turn on your camera one called on our first question comes from Bill Correct Cohen Bill.
Hi, yes, thanks for the questions I've got two if I can so we think that Reacceleration is really important for the <unk> story.
Just talk to us about how youre thinking about the Reacceleration of top line as we move into and through 2023.
Hi, Bill Yeah, sure and you're absolutely right I think for us as a company a reacceleration as a real critical priority for us in 2023.
As we shared in the video we do feel confident in our ability to accelerate bookings in the near term in sales assisted that's primarily driven through the momentum in Vimeo enterprise and there we see both the execution that we're experiencing this quarter improved sales efficiency, but also the great lead.
Indicators, so strong pipeline strong E O V increasing at our our number of seats being used within accounts growing all of a sudden kind of moving in the right direction pretty consistently that makes us feel great about that.
Self serve is harder to predict for sure.
But ultimately for softer we think it's a matter of when not if.
We see outside of macro trends, which are weighing on our top of funnel demand and traffic that even if traffic doesn't improve we think we have enough low hanging fruit in areas like increasing conversion, increasing our a O V and increasing retention that's in areas like product and marketing we have two new leaders in place that are.
Executing there and so really at the end of the day, it's sort of near term headwinds, but that we believe the tailwind over the long term for video will really overpass overtime.
Okay great.
You mentioned it briefly but my other question was just on product pipeline and how youre viewing that going into 'twenty, three as well and what sort of the balance might be between enterprise and the self serve.
What the mix might look like and how youre feeling about product velocity.
Yeah, well hopefully.
You got a chance to check out our interactive shareholder video, but what you will see from that is that we are committed to maintaining product leadership and innovation in the space and we will look to continue to do that in 2023.
You will see a lot of focus on products that enable teams departments at employees at the largest companies in the world to be able to use video.
But I'll also say if you look at our roadmap and how we're thinking about it we have launched a lot of new products in the last year.
In Vimeo enterprise in particular, we launched video library, we launched interactive we launched the new events and so you'll also see us look to just really improve and optimize the products that we have unified the user experience. So it's easier to adopt and discover the products that we have and then get people to really engage and be fixed.
So on those products. So there will be some net new innovation coming from us in a couple of critical areas that we think are differentiators in the long term, but I'd say the majority of our roadmap is really going to be about taking the power of vimeo that already exists and making it easier for people to discover it and I'll just say anecdotally.
When we released this interactive video like the number of people who have been pinging US, saying, we had no idea that you did this and that this kind of thing with was it within Vimeo suite I think it's just indicative of the clear opportunity we have to actually get our user experience on our product to actually be our marketing.
As you'll see I think a lot of our roadmap oriented around that as well.
It's important to remember that we've talked before a lot about the idea that sales assisted versus self serve is a go to market metric, it's really about how we sell the product the product is actually the same all the way from an individual user up to a large corporation. So what you saw honestly than I do.
Signals, you're seeing out of sales assisted the strength out of sales assisted that you can achieve that improvement based on a range of scenarios in and seltzer.
Yeah, I think that's the right way to think about it as he mentioned and the video we assume in our planning that the top of the funnel challenges we have in south for <unk> for awhile and that's for planning purposes, we're trying to make sure we stay <unk> a conservative.
Conservative about that in terms of sales assistant we see strong strength and a lot of leading indicators going into this fourth quarter that that that business has momentum. So if you take a look at the pipeline rebounding in the corridor the momentum and venue enterprise in terms of seat growth the bookings.
Even even the bookings we saw in the quarter amongst products and in particular, our sales productivity, where we really feel like the sales force is ramped and really now in a place of optimizing it makes us have a lot of enthusiasm both sales assistant so for sure the shift in bookings trend would be driven by sales assistant that's why we have the most confidence sulcer certainly.
<unk> is harder to forecast, but we think the blend will get us where we would like to be in terms of reaccelerating bookings.
Okay. If it if I could just ask one more.
Oh.
Maybe maybe for you to the letter talked about this trend is.
Free business domains within within self serve and it seems like that's that's a very strongly since 2019 <unk> on that what is this for you.
Walk us through why this is important.
I think you know obviously the question in South services, it's a large federal and uhm ultimately what we see is that it's really not about the the quantity of potential users about the quality right and so when we think about our strategy and Julianna. She said, we don't think about self serve a sales assistant those are just waves.
We sell want US there are websites want us through a sale for we believe a tailwind and video are such that any employee and team and any company of any size regardless of their budget, they're gonna Wanna use video in the future and some are always going to want to start for free or try before they buy or.
Purchase directly and immediately through a website instead of speaking to a human being and having an account manager and an invoice and a contact and we think that's great and.
And so some of those users we will look to serve shortly on self serve and we'll do it profitably and some of them, we will upselling upgrading to the Elvis is dead, but it really is all one kind of market that we're going after and so the reason I liked the highlight free business domain users is those are employees.
Teams and you know people at different companies and if you look at that that group. What we see is that they are our highest quality users. They convert higher they have a higher a O V. They are stickier. They are more profitable historically, we haven't that has focused and targeted and how to market.
And drive traffic that is optimized for those types of users nor has our website bad <expletive> optimize to convert and engage in delight those types of users and so what you're really gonna see in our marketing and product efforts on self serve is is we will always look to be a platform for anybody but more of a.
Started effort now that we really understand like this is the user that we must serve above all and speak to how can we both attract more of them and convert more of them into our products and the good news is the growth trend. There you know through the pandemic is strong.
And so that's I think ultimately what gives us a ton of confidence that over the long term seltzer will be a grower in a profitable grower. We just don't see a world in the future where people aren't gonna Wanna buy their software self serve do it yourself as well as a human being.
Got it thank you.
Thank you. Our next question comes from Brian Fitzgerald at Wells Fargo, Brian .
<unk>, we we thought it was really engaging informative I appreciate that.
We wanted to ask about the theater or at 100 work some few questions there.
Can you give us an idea of where there's been a recent quarters and you'd talk through some of the factors in terms of logar retention dollar attention seagroves and multi product adoption could you give us a sense of the dynamics for those drivers and where you see.
Over the next few quarters, so I'll I'll cover the the numbers. We're very glad you liked the video we really had a lotta fun, making it and I think our team is really loving it and I love that we're gonna reach out some Lincoln for people, who want to do it too so I I T. As if I can do it you can to to any of my peers out there in terms of you know.
It was below 100 for the last couple of quarters, and so popping up above 100 is a big deal in our minds in terms of really living up to the promise that we really want the product to have in terms of landing in expanding amongst customers.
And so we're really excited about that I'll I'll give it over to <unk> to give you a little more detail in terms of how she sees use cases that customers at an expansion more thing.
Yeah sure. So I think as it relates to the different parts of on our our what you're really seeing Brian is just very steady materializing of the fees. We've been planting. So I'll go through a couple first uhm when it when you look at logo retention certainly we've invested a lot and improving our product and in particular, if you recall.
Shifting away from just live stream as a use case to sticky or use cases, so livestreaming tends to be the least sticky use case and when we first launched vimeo enterprise and during the height of the pandemic most customers were using after livestream things like town halls. We then moved to more of a multi product strategy and we launched capable.
All of these like video library that are much stickier or at least should be and so what we're seeing is that we're seeing that start to show up at logo retention and then the other piece is we launched a per seat pricing model that we rolled out to our new sales assisted customers. This year there is enabling people.
To realize value, our our customers, who realised value and to pay based on expanding their seat usage. We think that is both better for their satisfaction and retention, but also for expansion and I think we've shared that we're seeing C usage on accounts grow in the triple digits you over here for the second.
Quarter. So that's a great leading indicator both of that logo retention, Andrew bookings reception and so it's really I think the combination of those two things are starting to work. The last thing I'll say is we did re orient ourselves for us at the beginning of the year to get better and more specialized in how we sell to larger companies.
And we did that by sort of looking at okay. Let's have a group of ourself worth really only look at what we called corporate accounts those are companies with greater than a thousand employees as are kind of the largest customers and I shared in the video that bookings for corporate accounts grew 65 per cent year on year this quarter.
That's really you know a sign that we are starting to really learn refining better at how we sell to the customers. They do by differently. It's a different selling motion still we have you know all good amount of room to go to become great, but we're starting to see that improvement in our sales force take shape, so all of those or contribute.
<unk> and the Great thing is that I think all will continue to pay dividends.
You know as we progress and we we have room to improve in all of them as well.
Got it.
The good for a Christian I had was just around the drivers of the <unk>.
<unk> it doesn't appear that.
Mature or change the word I would for Q4 were there any timing affection to three investments being shifted between 2324 <unk>. You know, we we think it's reasonable to expect that the Guy. This is the right guidance for your we're really happy to have been able to put up two quarters essentially in a role where that stays stable.
In terms of the third quarter itself and one of the things I always like to describe that our businesses. We have this great business model. It has strong profitability and we have a really solid cash balance and we really care about that we want to be a profitable business and so the dynamic of bookings in bookings being a leading indicator.
Revenue gives us a good sense of what our cost structure needs to be in any given quarter. So in Q3. There are two real factors that I think are important to think about in terms of how the EBITDA shifted up one is that we saw that the bookings the radio bookings.
Growth was declining and so we reacted by doing a small risks in early in the quarter and so there was some savings on the compensation side and in addition, the team executed well on recovering from some billing system issue. We had earlier in the year that we've discussed a little bit with you all and that was able to have us reduce the amount of bad <unk>.
<unk>, we had to taken the quarter that was a very nice swing for us in Q2 to Q3.
And so we feel really good about where we sit two four we've talked about near EBITDA breakeven that is in line with what we've talked about before and we're really executing to that and I'm really proud of the team for their strong results.
I appreciate that.
Thank you Brian that was our final question in queue Uhm. We appreciate you for joining US. This morning, I'll turn it back over to Audrey for closing statements.
I will wrap by saying that we are energized to close the restaurant and start 20th 23 off with more focus and momentum. We think we have a product that is changing how the world uses video and we look forward to translating that product into a great business, one that creates enduring shareholder value.
So thank you all for the time and if you haven't already check out the video I Hope you choose a picking me watching the instead of Jillian Orange is wash both of us because it's really entertaining. Thanks.
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