Q3 2024 Vimeo Inc Earnings Call
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Hi, I'm, Philip Moyer Vimeo, CEO, we had a strong performance in the third quarter.
Bookings growth turned slightly positive we delivered $105 million in revenue and.
$21 million in operating cash flow.
This performance is a testament to the incredible work our team has done.
And I'm excited about what more we can accomplish on October 23rd we hosted our inaugural sold out user conference Vimeo refrain, which brought together creators across professions and industries to share best practices for integrating video into business operations. The following clips from the event.
Highlight why I'm. So excited about the value we can provide for our customers.
And the opportunity for Vimeo head check it out.
All right.
Yes.
On behalf of all of US at Vimeo Order welcome you to reframe.
And to the next generation of video.
We brought through and through the back of the house, so that you're part of making the magic with us.
We have been trusted by some of the most discerning creators to help power their stories, where obviously so passionate about the medium and video.
Speaker Change: Reframe. This conference is really all about video and storytelling. Please welcome Michael.
How can we take Martha content, which is SaaS and what do we do with that video what can we do with that audio and how do we do that first and AI.
Michael: With our AI, it's great that you can easily translate and transcribe videos into multiple languages and that's exactly what reframe is all about redefining what is possible with video it assumes badassery like you've never seen before.
Michael: Relevant C is using the tool the technology the innovation well work.
Michael: We're constantly evolving and innovating to help our customers leverage the very best and video storytelling creators don't Wanna be replaced they want to be uplifted they want to be protected and they want to be accelerated youre getting a lot of like minded people are really passionate about storytelling community. Most importantly videos.
Michael: This is the moment to act build test and iterate, So don't wait for the future start building it today.
Speaker Change: Hello, and thank you for joining <unk> Q3, 2024 earnings live Q&A before we begin a few comments first this session will be recorded and available on the Vimeo Investor Relations site. Later today second we will discuss <unk> outlook and future performance.
Speaker Change: These forward looking statements typically may be preceded by words, such as we expect we believe we anticipate or other 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've also provided information regarding certain key metrics and our non-GAAP.
Speaker Change: 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 shareholder letter in <unk> filings with the SEC.
Speaker Change: 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 Philip lawyer Philip.
Philip Moyer: Thank you for joining us on our Q3 2020 for live Q&A video call I'm, hoping the highlights of our Vimeo Reframe Conference gives you a sense as to why we are so enthusiastic about the market and the company that we are a part of it is an exciting time for video and Vimeo is better positioned than ever to support <unk>.
Philip Moyer: Customers in their strategic video communications.
Philip Moyer: A huge thank you to our new Chief marketing Officer, Charlie younger Shack and his team for putting on such an impactful and customer focused event.
Speaker Change: We're looking forward to building on our compounding momentum and working to return to growth.
Speaker Change: And with that we'd be happy to take your questions.
Speaker Change: Our first question comes from the line of John Blackledge at TD Cowen John.
John Blackledge: Great. Thanks, a couple of questions. So the <unk> enterprise revenue and bookings.
John Blackledge: We're above our estimates could you just.
John Blackledge: Talk about the key drivers of the enterprise momentum in <unk> and as we round into <unk> and looking out into 2025.
Speaker Change: There's a couple of things I would say thank you for the question. We're really excited about the enterprise business increasingly cut in the consumer marketplace video was arrived for consumers and it's arriving right now for the enterprise.
Speaker Change: We like to say that on the public Internet, it's about 82% of all the Internet is video and we see that exact same trend coming into the enterprise and so a lot of the work that we've been doing in the business to improve our go to market fundamentals.
Speaker Change: A lot of the work we've been doing around packaging and pricing the a O V of our pipeline has gotten to a larger size. This already in Q3 and for Q4.
Speaker Change: And beyond and I think there's a lot of what we're doing inside of the enterprise business in particular, the investments that we're making in integrations and security are really resonating with customers. So doing a better job with fundamentals as well as innovating and the market. Just in general has become is a great place to be in.
Speaker Change: That's super helpful and just maybe one follow up on the on the cost side you guys have done a great job.
Speaker Change: Cutting out costs I'm, just curious over the last year or so I'm just curious.
Speaker Change: About the opportunities for investment in the business.
Speaker Change: As we look out into next year next couple of years. So the team here has done such a good job of getting us to a more efficient place. It's kind of interesting as you look back run rate, we've taken about 100 million in operating expenses annually out of the business and yet the gross profit dollars and stayed roughly the same which has given us such good EBIT.
Speaker Change: Our results, but we think that the second piece of that story is it that's making room.
Speaker Change: For us to make investments and because we see the opportunity is so big because we have such a strong balance sheet. We think we can apply more capital to invest in the business. So we will make some sizable investments as we look out into 2025, you already saw a small sequential increase in operating expense in Q3.
Speaker Change: We the pace of our hiring will really dictate how fast we can get money to work inside the business that said and I think it is important to remind everyone. We firmly believe that may actually be a profitable business. So these investments will be sizable but not the kind of thing that would put us in any kind of loss position.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Tom Champion at Piper Sandler Tom.
Tom Champion: Great. Thank you Hi, Phil had been Julian and good to see you.
Speaker Change:
Tom Champion: Maybe to kick off the leather explicitly said states kind of an intention to return to bookings growth next year and I'm wondering if you could Julian maybe maybe for you could you unpack that a little bit for us and like what are the components of that that you see that really give you a lot of confidence that.
Speaker Change: That's going to take place and for Philip maybe to just ask one more.
Speaker Change: I'm wondering if you could talk a little bit on the product side, we saw the announcement on the vision Pro App.
Speaker Change: And you've talked in the past about integrating AI and new products and features.
Speaker Change: What are you doing what what's the opportunity with.
Speaker Change: With kind of those two product sets on that.
Speaker Change: Vision pro side and within AI. Thank you. Thanks, Tom So let me just take the first one so we feel really good about our opportunity to grow the business next year. The math is really starting to work in our favor and some of the things we're executing inside the business are also going to help us. So just start from the top it's kind of an interesting quarter, it's a quarter of $100 million run rate.
Speaker Change: $100 million reduced production and operating expenses on an annualized basis, and we had $100 million of annualized bookings in Vimeo enterprise, that's a meaningful amount so that set the growth that we're having demand enterprise will continue to have a positive impact on the overall growth in fact, if nothing changes in any of the other products, we can grow vimeo on the VAT.
Speaker Change: Other than the Atlantic price product that said, we actually think there are other trends that are helping us.
Speaker Change: As we mentioned in the letter and we've talked about a little bit we are really doing a lot of active work on pricing and packaging and we think that will be a tailwind for the business as we look at next year secondarily, our OTT product, which has been run by a great team. That's in a great job stabilizing that product is now a stabilizing factor in the business and the other products that we've been deprecating.
Speaker Change: Fall away, having a much less impact on our business from a headwind perspective, and then just finally as we turn to more of an investment mode. We are taking away. Some portion of that headwind we've caused by really cutting costs as much as we have and we really think what's really interesting about that particularly as you look at our marketing <unk>.
Speaker Change: <unk> is that we've really pulled back on that and we've taken the risk to do that you've seen the strong stable gross margin that we've even done with hold up even in that environment.
Speaker Change: And the team has really learned about a lot about how to get to much more positive rois on our spend and as we kind of go back into an investment mode. We think that can help as well. So we feel really good about where we are both from a math perspective, but then also some of the initiatives we have going on the company and that's what gives us the confidence to indicate that we will come back at the Q4 earnings with more.
Speaker Change: Details on how all this might like lay out, but we wanted to make sure we highlighted that in the call, but yes, I am really excited about a lot of the announcements made around the Apple vision pro and a whole variety of announcements. We made at reframe you know one of the things that I think people were excited about artificial intelligence and some of the work we've done around translations were seeing tens of.
Speaker Change: Tens of thousands of minutes being translated already by the tool with a really small cohort of customers that we've opened this up to and so we're excited about everything we're doing that space. We think we can make video even more intelligently for enterprises, the ability to be able to ask a video a question if I'm an E learning or I want to find out what the CEO said in the last earnings call or in the last town Hall.
Speaker Change: We think there's a whole lot of things we can do in that space. We also think we can bring a lot of security to that space like enterprises really requiring a much higher grade security for video, but as it relates to the format like the Apple vision Pro.
Speaker Change: A lot of people I think our focus just today on four K 8-K is arriving 16 K is arriving 32 K formats are arriving if you watch the Olympics you sold 360 degree video where it would circle around a basketball player or a gymnast until these spatial content formats are starting to become normal in storytelling and certainly the.
Speaker Change: Apple Vision Pro is an example of one of those kind of spatial or virtual reality content types.
Speaker Change: Meta just released their quest three for work and so we do expect that this is a new immersive format that we're excited about partnering.
Speaker Change: With all the VR companies and it's just another example, where we have served these kind of formats as they've evolved in the past and we're showing again that we're gonna be serving these kind of formats in the future what does that need to the business. When most recently, we really modified packaging and pricing we used to have these cliffs and we used to have these walls and we weren't always.
Speaker Change: Sometimes we were making it hard for customers to buy sometimes they couldnt buy precisely what they wanted but in a world where you have different formats and you have different AI requirements of different storage requirements, we now with packaging and pricing have really smoothed out everything from free all the way up to a million dollar customers, we have mechanisms to be able to support customers in whatever they want to buy from us.
Speaker Change: And so we're excited when you put all those things together.
Speaker Change: We're able to I would say monetize a lot of the innovations that we're bringing to customers and make it a lot easier for customers to buy from us.
Speaker Change: Okay.
Speaker Change: Our next question will come from use of Squali at Truest Yusuf.
Yusuf Squali: Thank you Hey, guys.
Yusuf Squali: Nice quarter, so congrats on that.
Yusuf: So maybe can you just double click on the enterprise a little bit so talk about packaging and pricing that have helped spruce up more in demand can you talk about particular products within that business.
Speaker Change: It does.
Speaker Change: Optimization.
Speaker Change: Victor.
Victor: I have had the most impact on the paper sure so in the enterprise space.
Speaker Change: We tend to serve organizations that are in the e-commerce or marketing area. So we have some customers. Some very large ecommerce sites that joined us in Q3 that brought millions of videos to us to be able to serve in E. Comm in ecommerce architectures. We then all is well serve a lot of organizations that are doing E learning or internal communications.
Speaker Change: And we've got a number of great organizations that are doing precisely that with US mobile is a great example, and then we also have what we call kind of our streaming or media business and so we've got organizations like dropouts and try guys. We've got the church of England. As an example, and so we look at a wide array of use cases between all those organs.
Speaker Change: Nations now what we're really seeing.
Speaker Change: Take hold with the enterprise I think I mentioned this is the these enterprise grade security.
Speaker Change: Last quarter, we actually had a very large customer that was farms Ah pharmacy organization, where we're able to sign a be a a a HIPAA agreement and so that if a pharmacy with serving a particular user video. After they received a particular medication, we were able to adhere to HIPAA for them to be able to support that video distribution that kind of enterprise.
Speaker Change: Great Security is extremely important you know at our user conference. We also talked about the fact that we're gonna be supporting a lot of data residency requirements over in Europe, that's being received really really well as well we talked about the ability to be able to build water called workspaces, where it can build clusters of videos by different business units inside of an organization received really well.
Speaker Change: Integrations that we announced with Microsoft teams as well as Google meet really important we already support things like zoom. So if you could imagine being a video repository for all of those video conferences that youre doing or whether or not it's a sales call being able to do via video repository is very important and then as we look to integrations with organizations like hub spot as an example.
Speaker Change: Will you know if you want to do personalized marketing with video we announced a number of innovations in that space and then we were wrapping all of this with things like AI translation. So if you're a multinational organization you have to communicate to all your customers. We've got great capabilities to translate the ability to ask video a question to be able to get more information out of what was the.
Speaker Change: Our static file is now a lifestyle for you. So when we go into enterprises all of those things are selling that ability to be able to use it with ecommerce learning media.
Speaker Change: And to be able to make your assets what would you need them to be in your market and your and your company.
Speaker Change: At a high level of what you think is your closest comp for these kinds of services.
Speaker Change: It's really interesting because I'll see some organizations that might be focused just on E. Commerce are all see a couple of organizations that are just focused on live events. All see some organizations that might try to be a little bit in the E learning space.
Speaker Change: When I look across the all the use cases inside of the enterprise sales marketing public relations internal communications E Commerce customer support we are increasingly becoming the video repository for the enterprise we.
Speaker Change: We believe that we have the ability to become one of the largest private video distribution platforms in the world and we're bringing that enterprise grade security will bring enterprise grade intelligence, we're integrating with your existing systems and we're doing it with all the same ease of use that we had in our self service business and so I would tell you that I really it's very rare that we find an.
Speaker Change: And that is actually serving all the customer spaces that we're in.
Speaker Change: Okay. Thank you and then Julian maybe.
Speaker Change:
Speaker Change: As you look at the outlook that you had I know, it's broad outlook and I know youre going to need to provide any more detail or details later in January February but at a high level is your growth outlook contemplate positive growth for the self service business I think it was down 6%.
Speaker Change: Three maybe actually talk about what that implies for Q4.
Speaker Change: And then.
Speaker Change: Do you expect self serve to basically show positive growth next year at some point next year not necessarily every quarter. So we're not guiding yet by business and certainly we do need to continue to climb from where we are in the self serve business, but I think what we're trying to get across is that we do believe we can get that business back.
Speaker Change: To grow it and we believe there are a number of factors like our pricing and packaging like somebody that's heading products. We have coming out that are going to help us get there. So we feel really positive about that more details on that to come back at the year end call, but I think it's also really important to remember that the math is in our favor to meaning.
Speaker Change: Meaning in your enterprise is now at such a size that it can help lift the business and so any move to the positive is also a positive for our business.
Speaker Change: Self serve and then that the OTT platform now the vast majority of our other is also in a good spot in terms of the Q4 guide obviously, we don't guide bookings the guide revenue and if you. If you do the math on the revenue it would imply that growth rate comes down in Q4 that has to do with the fact that you have a waterfall.
Speaker Change: While our bookings into revenue and as you may recall, a quarter or so ago, we had a down bookings quarter. So that's got to flow through the revenue models, but we're looking forward and we really feel very excited about what's in store for the company in 2025.
Speaker Change: Super helpful. Thank you Bill.
Speaker Change: With that there are no further questions I'll hand, the call back to Philip.
Philip: Well again I want to thank everybody for joining us today.
Speaker Change: I think it's important to note that both Julian and I are both buyers of the stock in the previous quarter and that we are outside of water given to us as as employees of the company.
Speaker Change: We're really excited about the trends that we see in the business and we look forward to updating you again on our Q4 report.
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