Q2 2023 Vimeo Inc Earnings Call - Q&A

[noise] good morning, and thank you for joining videos Q2 2023 earnings wide Q&A before we begin a few comments first this session will be recorded and available on the vimeo invest.

Relations site later today second we will discuss with him. He is outlook in future performance. These forward looking statements typically may be preceded by word such as we expect we believe we anticipate or other such statements.

Looking statements are subject to risks and uncertainties at our actual results could differ materially from the views expressed today.

We've also provided information regarding certain key metrics and are non-GAAP financial measures, including certain forward looking measures you should be considered in addition to and not as a substitute or in isolation from GAAP measures additional information regarding vimeo financial performance, including reconciliations with comparable GAAP measures can be.

Founded our shareholder letter and Vimeo filings with the SEC as well as in supplemental information posted on the Investor Relations section of our website with that I'll turn it over to our CFO Julian.

Good morning, Thank you for joining <unk>, two 220 23 earnings Q&A session.

Jillian <unk> and I'm happy to be joined for the first time.

Quarterly earnings by Adam gross recently named interim CEO .

Adam has been with us for about a month and is quickly wrapping up on all things Vimeo. We're excited to happened on board, particularly given his wealth of experience as a leader in the fast pace and as a member of this board over the past two years.

Looking forward to working with him going forward.

Before we jump into the Q&A I'll mention a few main highlights from the corner first we continue to believe we are on track to return bookings to growth in the back half of this year.

Second or efficiency initiatives continued to pay off with gross margin up operating expenses down and improved profitably year over year in the corner.

And third we showed that we could control costs, while still investing in innovation with our AI powered video creation suite, which we believe will help make video easier and more accessible for all.

It's still very early days in terms of where video communication can go, particularly in the business World I'm confident that vimeo platform and products can be part of facilitating this evolution I believe we're making good progress against our calls we look forward to taking your questions.

Our first question comes from Brian Fitzgerald at Wells Fargo, Brian .

Thanks, Adam welcome we're looking forward to working with you give me your experience with access businesses in past.

Wondering if there's anything you can share about what you'd like to bring a new business in an operating role any new priorities and strategy or go to market. Thank you.

Yeah. Thanks, so much for the question really three things I'm excited about as I get up to speed here. The first is the technology I think we're in the early days of seeing videos impact on business I think it's gonna be an exciting decade ahead as we what video is evolves in the applications for it in the enterprise expand and we have an opportunity.

Kennedy to find a new.

A new strategic ways to partner with our customers and bringing video value to them and the second is the team I've been a member of the board for two years I've had a hand in recruiting most of the management team and working with them in the board room, and so that's really helps get up to speed quickly and very much looking forward to working with them.

We continue to execute on the strategy.

Last is really are kind of our go to market bottle and if you look at my career and I experienced the places like Salesforce and drawbacks in parochial what are the common themes is really being able to marry really innovative technology with innovative go to market models and when you look at the opportunity we have to connect to the self Sir business with the enterprise.

His business you need to look at how really successful companies have done that in the past again like the sales horses drop boxes of the world I think that's a really exciting opportunity for us here.

Our next question comes from Tom Champion at Piper Sandler Tom.

Thanks, Good good morning, everyone.

First question is around the AI powered video creation, Sweden, and just curious Jillian if you could talk about the early experience here.

If the product is available for enterprise and self serve customers I think last quarter you shared an interesting sat around users that upload video and use Ah Ah Ah creation tool and and the the the.

The related bookings there just just curious if that place.

Plays into the thinking here.

So you want me to check their yeah, yeah. Please for Ya. So on the <unk> <unk>, it's very new so I think that it's too early to give you a status on how it's doing but it's important to remember that name. He has been on a journey with AI for quite a while and we use AI and a variety of places throughout the product all with the main goal of our.

[noise] strategy, which is to make video more accessible particularly for business users and so that is a theme throughout our products and the <unk>. It's just one great example of how you can get up and productive on video fast. He was named him out. So I encourage you all to use it you probably can use it for some of your research reports over time.

I know that for us frequent arenz cough, it's been a helpful tool for us to get the whole process done easier faster and and make it less scary. If you will to make video something you use every day in terms of the strategy. We've talked a lot about this the mail has really expanded how customers use the products and I think we talk.

Ah last time about how we've gone from folks who are just uploading to folks were using lots of different vimeo tools to amend the video create the video distribute the video and that continues to be a trend and this is one of those type of tools. The AI creation suite is available on our enterprise products and and a handful of our higher and self Sir <unk>.

<unk> at the at the lower end of the product line you'd have to upgrade Tuesday I tools.

Okay, well that makes sense, maybe if I could sneak in one more.

Julian maybe.

Just remind us I know I know S. P C was.

A little bit of a odd results this quarter, but just remind us how we should be thinking about that through the balance of the year and curious with with Martin is generally better than expected are you thinking about investing.

Investing behind growth does it make sense that.

Think more about investing behind.

The top a funnel within self serve or other investments to help stabilize and grow the business sure Uhm you snuck in two questions their time, but I'm not sure catch on that okay. So far stock-based comp we are really on entering the stock-based cop to bring it down and hanging out and that's gonna happen in a couple of different ways. The key thing that struck me as <unk>.

Sense to us and we think to our shareholders is delicious.

And as we look at the business, we think that we had been a little too free in terms of the amount of stock we gave away, particularly in 2022. Some of that was just required as we had a new management team come into the company, but we have gold ourselves to meaningfully bring that down and on a path to doing that now stock-based cop expense I was a little bit of a trailing indicator.

Of that initiative and also reflects some of the board and management changes you've seen happen over the last couple of quarters. So when you look specifically at Q2 Ah Stock-based comp was actually a benefit and the reason for that is as honestly announced her departure, we had to reverse some of the cumulative expense via taken for some of the sure she won't be.

Taking with her so that's what that is now when I look at Stock-based cop overall, I think we talked about this a few quarters ago that we were running in and around $20 million a quarter, which we felt was too high a number with all the different changes and our hard work to make sure. We keep dilution lower on burn rate, we think that those those figures are going to be more in the <unk>.

$10 million to $12 million quarterly as we look forward here in terms of where we sit today.

Okay, then in terms of expenses and investing so we have always believed that vimeo has strong profit capability and that inherent in the businesses really great profitability. We have a 78 per cent gross margin as a solid continuing to bring expenses down I think one thing we've done really nicely in 2023 his show.

Even in a transitional revenue period, we can get profitable and we can be free cash flow positive. So underlying that are actually continued investments to drive growth and we're really trying to balance delivering profitability in a transitional time, and then a little bit of an uncertain time, while also investing so inherent.

Lee, we actually think of business could be more profitable, but the delta. There is some of the investment we are making we really focused on great product really focused on making sure. Our customers are are getting to the products easily and so we will continue to make investments and sort of make those trade offs between profitability investment our balance sheet and a really strong.

Cash position puts us in a great position to do that but we are also doing that while generating cash flow right now, which I think is a really nice thing for a company.

Thanks for the comments you're welcome.

Our next question will come from William Kurt T D Cohen William.

Great. Thank you. So bookings growth was was a lot better than we expected and and Reacceleration enterprise was especially encouraging could you just touch on the current booking trends in three Q and then maybe fundamentally how it should be thinking about the relationship between bookings in revenue.

Absolutely happy to so as you know we've been working our way through a period of down bookings I think bookings were down and for the last four or five corners and what happens is your bookings procedure revenue. So what is starting to see and have seen in the last couple of course at three of the last corners is that revenue has fallen as well followed.

And those fucking trends so as we look at the business. We are on a path to return bookings to gross that's our strategy and we want a return bookings to growth and then we believe that revenue would follow and we want to do this all profitably as we have talked about so in terms of the business. We continue to believe when we confirmed and the shareholders.

Better that we believe we can get bookings back to growth by the end of the year and everything we are doing is oriented around that we did uhm reduce the rate of decline in bookings in queue to buy a couple of points, which is great. But we're <unk>. We've got a lot of work to do and a lot of heavy lift to move our way to the end of the year.

As you frame it and you think about how to think about bookings as that leading indicator.

We continue to believe it will be led by V. That's where the strongest growth is in the business and we continue to C. V E growing as a percentage of the business and as a percentage of our bookings. It was just under 20 per cent of bookings in the corner off setting that has been other which is R. O T T product and a and a.

Which is a really great ongoing product for us and in addition, some products that we've been deprecated that's now down closer until about 10% of bookings. So S. V gets the V grew up now <unk> will overcome that and lead us into growth in the middle of self Sir which is the core of the business and the thing that we've always talked about growth <unk>.

Through self serve and so we want to turn that to grow with as well as we work our way to the end of the year I'll put it all together you'll be led by V. E self Sir we hope to turn to growth and the other portion of our business will get to be such a small portion of bookings that it's not gonna be as much of a headwind on the overall growth rates over time. So that's how we're thinking of.

<unk>.

Great great. Thank you and and that kind of rolls into my second question, which is on self serve how do you think about you know some stabilization versus.

Versus price purchase pricing and getting that as you get that back to to growth over you know over the coming quarters, Yeah, and self Sir what you're seeing in terms of some declines mirrors, what you're seeing in terms of bookings decline, but if you step back and look at it on a macro basis, what you're seen for the overall vimeo and you're gonna.

C start to see itself service that we are focused on going to a higher level customer a business customer business customers use the product more retain better have all those financial factors that we think are beneficial for the business. So over time, we are trying to work up <unk> in self Sir it starts with a.

L V. It starts with where do you bring customers in and we felt really nice double digit growth in a O V. In the quarter now it takes a while to roll those a O V through your overall <unk>, but that's the strategy. So ultimately my suspicion this will be at a place where the <unk> is probably a little bit faster growth and say the subs.

As we continue to mix shift the business towards businesses over time right now.

Everything of the company is working on turning both bookings and subs back to growth and then the pricing will be the X factor in terms of what that looks like in terms of velocity.

Alright, Thank you very much I appreciate the time.

Our next question will come from <unk> Ah Truest, Chris.

Alright. Thank you I hope this question on behalf of your social Cory what do you think is the level of <unk> and enterprise business is the situation normalized for Danielle.

Well, we're right now really focused on getting the overall business back to grow. So we're not we don't really guide by business, but but I'll call back to kind of where I I really want to make sure people understand the framing V E as having very strong double digit growth 72 per cent in the corner and we continue to believe that's where you're gonna have your <unk>.

That's M. A M and then self Sir we Wanna get back to growth and then as we get it back to breath and we'll figure out at what growth rate. We we land over time, but right now our orientation is around tiny the overall bookings back to growth by virtue of that strong V. E. And then turning itself Sir back to growth <unk>.

Too soon to kind of peg longterm growth rates, but I would expect that you will always see the V E product have much stronger growth overall in our portfolio.

We do appreciate your time.

Our next question will come from David <unk>, a jeffries David.

Hey, Thanks, and good morning, guys. This is David alphabet.

Around video enterprise wanted to ask what the <unk> dynamics Mmm wondering if you can tease out what's going on in the declines there between you know different product mix first you know see based would be helpful. Absolutely. So our <unk> has been about $20000 for quite a few quarters here and.

Alternately we think it's going higher we think we can get to hire wallet Sharon companies overall the.

The challenge with <unk> of course is that when you are growing a business as fast you have a mix of both customer sizes and new customer incoming price points that you have to sort of mixed in to get to an overall <unk>. So over time, we expect that to go up but because it's still a smaller business it can be a little bit lumpy as <unk>.

Our way through so when we look at their no trends between customers are customer sizes that were particularly notable in the corner I think overall, our aim is to get <unk> up there'll be a number of factors that get their another indicator that we're making progress along that would be R. N. R. So as you saw on the quarter in her arms over 100% that that again.

Is is kind of where we were last quarter as well and coming up and so will we want to move and are up we want to move a O V up we want to move <unk> out, but we are also really excited when ever any customer wants to come to vimeo. So in this early stage of growing the business if people come in lower than they are appealing we can move them up over time, that's an opportunity for.

<unk> that will take so it will probably take a little time for the averages to move but the trend is the same is is it to the positive and then as it relates to V E over the overall business. When you look at Vimeo I think two years ago <unk>, our overall ARP, who was less than $200 and it has come up meaningfully over the last couple of years.

As a result of V east growth and some of the other work for doing business.

Got it that's that's Super helpful. And then you know maybe to follow up on you beat me to my next question on but.

But I think it's it's two consecutive quarters of over 100 per cent. Maybe if you could provide you know any call I know you guys, maybe a little bit more locked about the numbers, but how that trying to specifically vice last quarter. If it's if it's high or low around the same and then you know I know you said that you plan on you know continuing to raise that higher is that a dynamic of hey like.

Past the the Kobe cohort that kind of came on and turned off and you guys feel that that could be more of a steady increase over time as we get more to this normalised environment. Yeah. A couple of factors on on in our Covid cohorts don't really have too much to do with our V. E business that really is a business that we almost kind of really took off.

A very very small and has grown much more meaningfully into <unk> in the post COVID-19 period. The Covid cards kind of has more to do with the self serve business in terms of enter or we think of it as a holy Grail of customers being happy expanding their use of <unk> and that's what we're aiming both the product teams that in turn.

With all the the new features and functions are bringing to enterprises as well as ourselves for us in terms of their relationships with customers. So and are are to US is a really good sign that we're doing a good job at that the way, we expect to expand our poo inside inside customers is both by expanding the use of vimeo across the company. So.

Oftentimes the meal will start in one department and then expand out because people say Oh wait. This is really dead simple way to do video and while my my partner over here might want to use it I of course, you always believed that the hold financed team should use the meal and then the H R team in the marketing team actually it tends to start more in the H R and the marketing than <unk>.

Or to a finance team, but that's the idea. So it's both gonna be expansion of the number of people using the meal and with all the kind of cool new features that we continue to bring out expansion of feature. So it's along both lines is where our strategy says.

Great. Thank you you're welcome.

At this point there are no further questions I'd like to end the call back to Julian.

Thank you for joining our queue to Twenty-twenty three live Q&A, we look forward to update and you again next corner have a great day.

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