Q4 2024 Vimeo Inc Earnings Call

And available on the Vimeo Investor relation site later today.

Second we will discuss <unk> outlook and future performance.

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. Please refer to the earnings release, we furnished to the SEC on form.

8-K earlier today, which is posted on our website for additional information regarding those risks and uncertainties.

We've 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 shareholder letter and Vimeo filings with the SEC as well as in supplemental information posted on the Investor Relations section of our website.

Speaker Change: With that I'll turn it over to our CFO Gillian Munson Julien.

Hello, and welcome to our Q4 earnings call. We are very proud of what our team delivered in 2024 and are happy to be here to answer your questions.

Speaker Change: We're even more excited to talk to you about our future, including our plans for 2025, and our view on where we believe 2020.

Speaker Change: Well it has been traveling the world talking to our team members and clients over the last couple of months and before we get to your questions. We thought it'd be great to have him share with you a bit of what is seen in the market and how that is framing our strategy for 2025 Hello. Thank.

Speaker Change: Thank you Julien good afternoon, everyone and welcome.

Speaker Change: I believe that <unk> will succeed by putting customers first as a rule I try to spend about half of my time with customers listening to them.

Speaker Change: Form can provide them and what else maybe.

Speaker Change: Travels first of all Vimeo is offered.

Speaker Change: I joined.

Speaker Change: Video is more.

Speaker Change: It used to be highly scripted.

Speaker Change: Oh and scripted video are far more accepted this is driving significant.

Speaker Change: The explosion of video.

Speaker Change: Okay.

Speaker Change: The second thing I want to make a point of views.

Speaker Change: The time for Asia.

Guy and video is now the pace of innovation and increase in tools for video is astounding at Vimeo. We are excited to be playing a central role in helping enterprises of all sizes harness artificial intelligence in video for themselves.

Speaker Change: Finally, I'm excited to say that we have the right team and now is the right moment to invest for our future.

Speaker Change: We have rebuilt our management team aligned our goals for 2025 and delineated key focus areas to invest against the opportunity ahead.

Speaker Change: You know when you see the opportunity like we are seeing you have a brand and you have a customer base like Vimeo, you must invest and as shareholders. I Hope you are as excited as we are about the investments we're going to make to capture this opportunity with that.

Speaker Change: Look forward to taking your questions.

Speaker Change: Before we begin the Q&A portion of our call I'd like to remind you if possible. Please turn on your cameras and microphones.

Tom Champion: First Tom champion from Piper Sandler.

Tom Champion: Hi, good afternoon guys.

Tom Champion: Apologies for being off of camera today are traveling but.

Tom Champion: Philip.

Speaker Change: Video Tom We lost you there can you repeat that last bit.

Tom Champion: Sorry about that.

Bill: Bill can you talk about what you're seeing.

Bill: Customers adopting AI in the enterprise what are we what are we start there.

Bill: First of all video the amount of video like I mentioned, a couple of time is exploding in.

Bill: In the enterprise so the barriers are coming down and video is growing across every single department inside of inside of the enterprise. This becomes a management challenge for most enterprises, you know pure financial services organization, you don't know what video's comply and what they don't what which ones don't comply so the ability to be able to discover all of your video.

Bill: Oh, and being able to ask questions and to be able to extract information out of it it's very very important because it's become more and more important that use artificial intelligence to manage video. The second thing is that organizations are trying to make video more accessible you know in some cases that means language. You know we've mentioned before that over 45% of our business is coming from outside of the United States.

Bill: And increasingly customers expect multilingual video and our artificial intelligence, we launched last year to translations in 28 languages and this is really exciting and as a matter of fact, roughly about 40% of the deals that we did in Q4 came from that our translation and the AI capabilities that we have inside of the product.

Bill: And so this ability to be able to translate a video is really important the last thing that we're seeing more and more requests for is what I call kind of just in time video. So oftentimes you create a large video when people don't watch the entire thing they really just want a single answer inside of that video in our new indexing capability and ask a video a question allows you to go right to that spot.

Bill: Inside of the video and present the exact answer at the right time, So youre going to see video work go into customer workflows across the entire customer journey in ways that I would say that you haven't been passed because the barriers have been too high. So we're dropping those barriers and we're making it more both accessible and discoverable throughout the enterprise.

Bill: Okay great.

Julian: Julian can you talk about the investment.

Julian: This year, the up to 30 million Youre looking to deploy absolutely.

Speaker Change: Now that we have Philip here and the team here, we have a really good sense of what customers want when you look at 2024 and the products. We came out with a new client. Therefore, they accounted for fully 30% of new bookings and Damiao enterprise AI alone. After we came out with that mid year. It was 40% of bookings and Vimeo enterprise. So it's a.

Big deal to have a team here, who understands worried about so from here our view is that given our cash balance and the strength in this business model. We have made huge progress as you think about it our EBITDA in 'twenty 'twenty four is three times all the EBITDA, we what we created in the three years. Prior so our view is we're in a great.

Speaker Change: Positioned to make an investment or size is about $30 million that would lead you to EBITDA of about $25 million to $30 million.

Speaker Change: And I think the where that lands in the end will be based on how fast we can deploy capital in and we're really wanting to be very responsible about looking at rois and so we will be prudent about how we spend that money because we really do have an eye for that create an ROI for the business as you think about what that can do for.

Speaker Change: Our business as you may have seen in the guidance, while our overall revenue growth would be in a low single digits, we expect acceleration through the year. So as we get to the end of the year. We absolutely believe that we'll have line of sight to double digit growth and if you just take 10% of Vimeo is basically a paid back that investment already so I will.

Speaker Change: Do you think this is a great way for us to use our capital to continue to drive the growth and we think we have the right team here now to make that happen now as for the specific areas of growth I thought maybe I'll have Philip give you a little more detail there in terms of where we're going to spend the money.

Speaker Change: So probably first and foremost is that'd be a sheer number of format types of video are exploding in the enterprise and across even our traditional creators so whether or not it's for K, whether or not it's landscape portrayed whether or not it's for podcast, whether or not its high definition, whether or not it's interactive or shopper bull customers want to use video and more and more.

Speaker Change: Our ways and so the video formats, we're investing significantly to maintain our leadership in this area. The second is in the area of security Youre going to see US. We recently opened up China upper streaming a video for our corporate clients Youll also see us actually adhere to GDP or in other data requirements in Europe, we're doing a lot of deep work in Grand.

Speaker Change: <unk> security and permissions that enterprise customers need.

Speaker Change: The other area, that's really exciting for us as I mentioned, I think we're going to be able to go deeper and deeper into customer workflows and find more outlets for video by actually integrating into what we call enterprise solutions, so whether or not this is in marketing whether or not this is an education, whether or not this is in <unk>.

Speaker Change: <unk> learning or whether or not this is inside of financial services or whether or not this is inside of health care youre going to see US go deeper into this enterprise solutions area, and then I'll say again, we actually haven't even deeper roadmap and what I've talked about in artificial intelligence. We think there's a whole variety of things that we can do to improve streaming experiences to make streaming experiences more interactive.

Speaker Change: And more exciting and so a lot of the deeper areas that we're going to be going into are in those four areas again, it's going to be in formats, and security and solutions and in AI and these are deep investments in our R&D.

Speaker Change: Great. Thank you.

Speaker Change: And our next caller.

Speaker Change: Bill Kirk from TD Cowen.

Speaker Change: Great. Thanks for thanks for taking my questions.

Speaker Change: So enterprise booking growth, which was higher than we expected and accelerated slightly can you just provide some color on the key drivers that you saw there in <unk> and then what sort of.

Speaker Change: How youre thinking about the drivers for the growth of enterprise and between <unk> and subs as we move through 2025. So let me just take the numbers and I'm sure. Phil will have some color to add he really does spend half his time with customers and is right in front of them every single day. So when you look at the business and you can see it underneath the numbers.

Speaker Change: The way the enterprise business is growing right now is basically double digit unit growth in terms of new subscribers coming in and then double digit <unk> growth. So we are really benefiting both from the new features we have our ability to land and expand with customers. In addition to expanding the overall subscriber.

Speaker Change: This in total.

Speaker Change: In terms of the business you saw a little bit of a mix shift to higher end products.

Speaker Change: I think it is interesting to see the growth in our $100000 plus customers in the year and so I think we're feeling really good about the momentum in the enterprise business and our view is that the investments, we're making are going to only underline what that business can do no. As I said, just said a minute ago. The investments we made in product and 24.

Speaker Change: Alone drove 30% of new bookings in 2024 level, let alone the strong pipeline, we have for 'twenty five in terms of what that can do for us. So if any other anecdotes of customers sure well have to go to probably my favorite.

Speaker Change: Vimeo customer take as an example, and that would have to be my own Philadelphia Eagles.

The World Champions I, just have to kind of remind everybody on this call and so what I'd consider the greatest football team. This year is user is a great example of an enterprise customer.

Speaker Change: And what's happening and as I mentioned inside of the enterprise is very quickly we're not just landing with new customers. We're also expanding with existing customers because we might start with say for example inside of doing a live event or we might be doing webinars, we might be doing something in E. Commerce and honestly say I should say in marketing and we very quickly go across all the divisions inside of an organization.

Speaker Change: <unk>, so increasingly salespeople, who are starting to use video in their in their interactions financial advisors are actually giving portfolio reviews. In video we're seeing health care organizations. You know when you when you provide a video after a health care visit instead of a stack of paper you actually get higher adherence to care protocols. When you go to customer support you get.

Speaker Change: 91% better retention and can actually get off the phone quicker. If you watch a video say for example, if I need to know how to plug in my Wi Fi or change the password when my Wi Fi and so this ability to be able to land inside of one organization inside of inside of a company and very quickly be able to meet all the requirements across the the rest of the company is what's driving a lot of <unk>.

Speaker Change: Our expansion the amazing thing about this company is that when we go into an enterprise, we're going in with security and we're going in with a scale that very few other of video companies on the planet Workwear worked at.

Speaker Change: However, we also go in with ease of use and so a lot of our competitors are either enterprise or their consumer and the fact that we live in both of those worlds actually makes a lot more video come onto us much quicker inside of a company. So our time to get a customer up and up and running is actually decreasing.

Speaker Change: As a result, the sheer amount of minutes that are on us inside of an enterprise. Our arch also growing it's a very important statistic that we kind of keep an eye on and so those multiple divisions. The multiple customer types. One of the other ones that I mentioned recently was orange became a customer. This is one of the biggest telecommunications company over in Europe. So we're able to scale for.

Speaker Change: Organizations like the Eagles, where we're able to scale from individual health care providers, all the way up into some of the biggest telecommunications companies in the world with this ease of use the security and with the workflow that we're providing and the artificial intelligence that will providing an enterprise grade.

Speaker Change: One other thing I'd love to add is and it's in our letter, but I think it is an interesting and important point in terms of how we're addressing this business.

Speaker Change: In 2025, we are actually going to market in a little bit of a different way and we brought on a terrific new chief revenue officer, and what we've done. This year is kind of two things there one with how that team break a bit in terms of focus those who focus on our smaller customers and also focus on our larger customers.

Speaker Change: Then there is an important addition to that as you all know OTT is a business that we have we had we had thought might be in a state of decline and in fact in 24, what we saw was really good resilience in that business and that team has done a terrific job what we're doing with the sales team is bringing OTT and the vimeo enterprise teams together because increasingly.

Speaker Change: As Bob said as customers extend their video you're screening is a key fundamental enterprise demand piece piece of demand of their video installations and so what we're doing is really focusing on customers, where they're at and then addressing them in a way they want to be addressed and we think that also is going to be really great for this side of the business actually.

Speaker Change: And 25.

Speaker Change: Great. Thank you and then just.

Speaker Change: Just a quick question on self serve as well.

Speaker Change: The self serve subscriber numbers.

Speaker Change: <unk> continued to face a little bit of pressure.

Speaker Change: I was wondering whether what sort of impact the pricing changes had on that <unk> and you can expect that persist in 2025, and just sort of how youre thinking about self serve in 2025 as we move through the year absolutely. So let me just take the numbers piece and Philip can talk to you about a little bit have a running self serve and 25, we continue to believe that.

Speaker Change: Subscribers can grow in seltzer and that is absolutely our aim and that is what we're focused on.

What's really interesting about how we ended 2024 is that we rolled out price increases and self serve across more than half the business and we were able to bring all of these up in the double digits Youll see the arcturus come through a little later because of the waterfall nature of how the business goes and so what's happening right. Now is while we know we still didn't have work to do in terms of bringing the subs numbers back up.

Speaker Change: Those are who increases are really helping us in terms of where the bookings trajectory is going in that business. So we think that's a really great bridge as we work ethic way through 2025 and get the subs turned towards the positive as well. So that's how we're thinking about it and we're really excited about what can happen in that business, maybe I'll give you a little.

Speaker Change: Color on how we're running in self serve in 'twenty five yes, I think that one of the most important things that I would say that we've done in Q4 is that we really established single threaded leadership around that business. This has been really important to us because one of the things. We've discovered is that theres been some self inflicted wounds over the course of the past few past few years and it's.

Speaker Change: Small little things, it's never a single large thing that might be having a customer churn on us in some cases, they're not happy with the user interface. In some cases were not presented we're presenting them with too many options from a pricing and packaging perspective.

Speaker Change: Some cases, we were actually limiting the amount of video so they could upload to us and so we saw some of these issues inside of the business. We said we needed to get them, even more focused single credit team and so in Q4, we establish that single threaded leadership and a single threaded Jean I have to tell you.

Speaker Change: Rare that you increased prices and you start seeing better retention and higher E. O V. At the levels that we're seeing and so we're really excited about that that tells us that customers actually want to stay with us. So.

Speaker Change: So we're cleaning up a lot of our user flows we're enhancing a where we're responding to a lot of the things that we're hearing from the customer base and quite frankly, youre going to see actually in the coming quarter here were actually releasing all the AI capabilities out to our self serve population.

Speaker Change: Turns out that school teachers.

Speaker Change: Individual creators nonprofits filmmakers they actually love the idea of translations into 'twenty nine or even more languages. They love the idea of having their video more discoverable around the world. They love the idea of being able to actually go right to the spot in their video that they need for one of their customers and so all of the capabilities that I've been.

Speaker Change: Talking about as it relates to artificial intelligence and even in some cases security scale neatly down to that self service business and so in some cases right now we're releasing the features of the enterprise, making sure their enterprise grade and then you're going to see us bring those kind of capabilities down to the self service user population I just got back from the Berlin Alley Film Festival and it was a stunning to me.

Speaker Change: I met filmmakers that were from Brazil, I met filmmakers from all over the world.

Speaker Change: And one of the things I heard consistently from both a European film Association Orchotomy and then also from Berlin Alley that thousands and thousands of Vimeo links were being shared at this film Festival, we power the Sundance Film Festival, we power.

Speaker Change: John we power south by southwest and we power a whole variety of film festivals for some of their capabilities and Vimeo continues to be one of the most important ways of People's Cheryl Linkup are private video.

Speaker Change: We get literally billions of people throughout the course of our years coming to us to look at videos to be able to store to be able to use the platform and we're going to get better and better with a single threaded leadership team of listening and ensuring that we are responding to those customer requirements and so I'm very very very I would say optimistic.

Speaker Change: Not just about the price that we're charging but also about the future of that subs business.

Speaker Change: And the one thing I want to make sure I underlying cause Phil mentioned it is our retention rates both sequentially and year over year are stable. So whenever you change price and in some cases some of our prices are up over 3% and to have stable retention is a terrific sign to us. So when we are explaining the enthusiasm we have.

Speaker Change: Our our opportunity to turn self serve back to growth.

Speaker Change: These are the kinds of signals, we're looking at that make us very confident in how this is going to roll out as we look at 2025.

Speaker Change: Got it but really appreciate all the color. Thank you.

Unspecified: And next we'll go to Youssef Squali.

Speaker Change: With trust.

Speaker Change: Hi, guys.

Speaker Change: Thank you for taking the question apologies just from I don't know if this question was asked but I just joined but can you maybe just talk about.

Speaker Change: At a high level of your capital allocation the intensity.

Speaker Change: That you see in the business in terms of the need for organic investment versus maybe.

Speaker Change: Returning cash to shareholders, just considering how strong your balance sheet is.

Speaker Change: Free cash flow generation that the business is now starting to show. Thanks, absolutely. So when you look at where we are in 2024, you saw a meaningful increase in our EBITDA and our free cash flow and we returned a bunch of that to investors. So we bought back over $30 million of stock.

Speaker Change: In terms of the buyback itself with our average price is still less than $5 and we continue to buy here in Q1 as well so where we really think that is a very good use of our capital, particularly given that cash balance of ours, which is well over $300 million as we look at capital allocation for 2025, and we looked at the realm of <unk>.

Speaker Change: Opportunities, we have investing in the business makes a lot of sense.

Speaker Change: And we look at it and so in terms of sizing what we're talking about is we have an appetite for up to $30 million I think you've heard me say before and we've relayed in previous calls we want to be profitable. We think this business can be profitable and within the profit potential of this business is excellent. So when we think about the size I think $30 million above.

Out the right size and working with our teams they've gone through program by program to understand what was possible and that that's going to yield you about an EBITDA of $25 million to $30 million and what we will spend that very responsibly.

Speaker Change: What we've said is that we think we will exit the year with line of sight to double digit growth. If you just run double digit growth on Vimeo, you basically pay back that investment in the course of the year. So we feel really good about it and we're really excited about what it can do for the business and I think we're really proud of what we've gone through the business and how we've evolved this business over the last.

Speaker Change: Three years, I mean, we have taken a $100 million of expenses out of this business.

Speaker Change: Look at our non-GAAP.

Speaker Change: Opex run rate, it's gone from 90 to 70 roughly over the course of the last couple of years, and that's giving us the opportunity and the stability to go make these investments and really drive for growth here.

To add onto that a little bit in that.

Speaker Change: If you didn't hear at the very beginning of the call one of the things that we said was that in Q4, 40% of our customer deals were driven by our new AI capabilities of these new capabilities. We have just released earlier in the year and we've proved very quickly to ourselves. When we started when we develop new capabilities released them to customers they sell.

Speaker Change: We saw the same thing without with our OTT streaming business, we started putting more capabilities responding quicker to customer requirements was that business actually return to bookings growth in Q4, as well and so we're proving to ourselves that when we get the flywheel of listening to our customers working it actually results and we've developed things with the customers one we actually can dry.

Growth and so we believe that one of the best uses of capital right. Now is this ability to be able to drive organic growth with with these R&D investments.

Speaker Change: Thank you that's helpful. And then maybe just on the Q1 guide.

Speaker Change: Julian can you maybe speak to the.

Speaker Change: I guess double click on that a little bit between growth in self serve versus enterprise enterprise has obviously been growing really fast self service seems like youre doing a lot of thanks to finally, starting to get it back to growth. Although it may take several quarters that how should we be thinking about it near term.

Speaker Change: Youre thinking about it the right way the way we are thinking about how the year's going to lay out is that we will see accelerating rates of bookings and revenue growth. So you sort of start from where you start which is the ramp on the revenue side, you're really starting from a place of water falling through past bookings right. So youre going to really fresh watch for book.

Speaker Change: Vimeo enterprise is for sure going to be our leading growth driver, but as we work our way through the year. We continue to believe that we are going to turn self serve back towards a growth mode and that will help and aid and accelerating both bookings and revenue over the course of the year. So we're really enthusiastic about both but certainly the vimeo enterprise.

Speaker Change: Syed will actually be the faster grower.

Speaker Change: Okay well. Thank you good luck. Thank you.

Speaker Change: Yes.

Speaker Change: And that concludes the Q&A portion of our call before we close I will turn it over to our CEO Philip Moyer for some final words I just want to thank everyone again for joining us today.

Speaker Change: We're very much looking forward to this year and we look forward to updating you again on our Q1 progress.

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