Vimeo, Inc.

Good morning and thank you for joining Vimeo's Q2 earnings event. We're excited to be here in front of you. 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 Vimeo's 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 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 Vimeo's financial performance, including reconciliations with comparable gap measures, can be found in our earnings release and Vimeo's 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 CEO, Anjali.

Good morning, everyone. We've just reported our first quarter as an independent company. I want to welcome all our new shareholders, thank our over 230 million users globally, and give a virtual high five to the now 950 Vimeo employees who served these users with passion and care. 18 months into COVID-19, the demand for business video continues at an elevated level. Employees no longer differentiate between consuming content at work or at home. And as a result, organizations are increasingly planning for a future where that is video first, no matter where they're located. We've long believed that any business with a website, social media account, online store, or distributed team will use professional quality video, the same way they use email, chat, image, or text today. So why aren't they? Because professional quality video is still too hard, too expensive, clunky, time-intensive, and intimidating. We solve this with an all-in-one software solution that makes it easy for every employee to be a content creator and for every business to be video first. This vision is being validated daily by our customers. Two months ago, we listed on NASDAQ. It was a special moment for Vimeo and for our team. Celebrating this milestone together, seeing our software being used by NASDAQ to broadcast the event as a longtime customer, it was awesome. Then we woke up the next morning and we got right back to work because nothing has fundamentally changed for us as a public company. This is just one step on our journey to enable professional quality video for all. As we look forward, our market is large and under-penetrated. Organizations of every size are looking to leverage video in their digital transformations as we speak. And our focus is clear. We're investing to achieve two things in 2021. expand Vimeo within the enterprise, and radically simplify video for SMBs. We're also growing up as a company. This quarter, we welcomed the largest group of new Vimeons in our 16-year history. We're still new to the enterprise space, and we're maturing our operations, hiring world-class talent, and intentionally designing our functions for scale. Most critically, we're aligning all our efforts to drive product-led growth. Everything from our internal data tracking to our product roadmap is being oriented to activate business users in our free base and organically inspire them to become paying customers. We're also improving how we market and sell into the enterprise. We're on track to more than double our sales headcount this year, and as part of that expansion, we're investing in key supporting functions like product marketing, sales enablement, and customer success. Finally, with our scale, balance sheet, and now as a public company, we can make bets in ways others can't. We're planting multiple seeds across the company to accelerate existing opportunities and define new growth vectors. We won't be right all the time, but we'll double down where we have validation and structural advantages. We're an early leader in this market and will continue to lean into it with both the strength of our convictions and our assets. Let me give you my highlights from the quarter where we made real progress across the board. First, our self-serve business continues to benefit from a healthy free funnel and a natural upsell into our paid plan. We believe the key to fueling that funnel is to make content creation frictionless so more businesses make more videos. Our most recent launch here was Vimeo Record, a free screen recording tool that saw usage increase over 80% quarter over quarter. Screen recordings now account for nearly 10% of total uploads to Vimeo. We also continue to invest in partnerships. We recently announced new partnerships and native integrations with Asana and TikTok, and have expanded our existing partnerships with Facebook, Shopify, and GoDaddy. We expect to launch more native integrations this year that bring the power of Vimeo directly to other platforms. This not only allows us to diversify user acquisition, but it also gives Vimeo users more choice, more reach, and more utility across the internet. In our enterprise business, we made significant strides in expanding our product breadth to serve more video use cases across an organization. This quarter, we launched Video Library, a centralized hub for employees to share and access knowledge across teams. All videos are automatically transcribed, searchable, and can be organized by department or team with enterprise-level permissioning and security. Our goal is for Video Library to eventually become the system of record for all video in the enterprise, from executive comms and internal collaboration to marketing, training, and development. And we're leaning into our creative and filmmaker roots to make the UX intuitive and to provide employees with a high-quality cinematic viewing experience on par with what they get at home. We've onboarded more than 250 enterprise customers to Video Library since June. We see the value proposition resonating with those customers, with companies expanding both the number of employees and departments using the product. Metrics like the number of team invites and number of seats are all trending up, with tens of thousands of employees accessing the product to date. For the rest of the year, we're building out many more enterprise features, from webinar capabilities to new event experiences to deeper analytics to serve the world's largest companies. Our roadmap is designed to increase employee, team, and customer engagement and to bring Vimeo closer to existing and emerging business workflows. We're relentlessly pushing our pace of innovation and working closely with our customers as we build. We also continue to benefit from a self-propelling funnel. Our free and self-serve users drove nearly 70% of new enterprise customers in the quarter. And we're still very early in developing repeatable motions for identifying and converting such customers. so plenty of untapped potential. My favorite example from this quarter is The Economist. I've been an avid reader for years, so it was great to see their events team start using us for a few one-off events last year as a self-serve customer. This quarter, they upgraded to Vimeo Enterprise to leverage both video library and to host speaker panels and marquee events, such as their Sustainability Week and Innovation Series. for tens of thousands of viewers. They chose us for our reliability, intuitive tools, and cinematic viewing experience. For us, that is table stakes. We have so much more innovation ahead in our roadmap to delight them. I keep saying that we think of our market in decades, not years. A few weeks ago, we held our annual Vimeo Jam, a hackathon where our engineers are free to build whatever inspires them for three days. We had hundreds of people around the world coding, working on concepts that reimagined everything from how to edit a video the same way you would a Word doc to automatically improving video quality using machine learning algorithms. It was a great reminder for me that we are just scratching the surface of how video will be used in business and at work. To borrow a mantra from our former parent company, IAC, we believe in patience on vision, impatience on execution. That means we will build value for our users with discipline, rigor, and urgency, but always with a long-term view. I'll now pass it over to Narayan to walk you through the financial results of the quarter.

Thank you, Anjali. Thank you all for joining our call today. We understand how overwhelming each earnings season can become and we truly appreciate your time. In Q2, we delivered strong results across the board. Total revenue was 96 million, up 43% year-over-year, and 7% sequentially, with healthy growth across both customer segments. We added about 40,000 paying subscribers and ended the quarter with more than 1.6 million total subscribers, up 17% year-over-year. Our ARPU hit another all-time high of $240, an increase of 18% compared to Q2 of last year. Both SELSA and enterprise ARPU continued to show healthy year-on-year increases, and total ARPU was further aided by the increasing mix of enterprise revenue. Specifically on the enterprise side, we now have over 5,200 paying customers, and our enterprise revenue grew more than 80% this quarter. Our enterprise net revenue retention remains healthy, with its fifth straight quarter above 100%. The remainder of my comments will refer to non-GAAP measures. Moving to expenses and profitability, our gross margin expanded to 73.3% in Q2, a sequential improvement of more than 100 basis points. Once again, infrastructure optimization, economies of scale, and operating leverage were the three main drivers of improvement. We continue to make steady progress towards our stated medium-term gross margin target of 75%. R&D was 21.3 million for the quarter, which was up 37% year over year. We'll continue to invest here to both broaden and deepen our product suite and maintain our position as the innovator in professional quality video. We are also accelerating recruiting to ensure our R&D organization is appropriately resourced going forward. Our sales and marketing spend for the quarter was 38.7 million, an increase of 47% compared to Q2 of last year. we have been adding both sales capacity and digital marketing spend in a disciplined manner to drive sustainable customer growth, both domestically and abroad. There was also an increased one-time brand spend related to our spin. Adjusted EBITDA was negative 3.8 million as we continue to invest in growth. As we have stated before, we expect our revenue growth rate to decelerate in the second half of the year as we lap tough cons of 2020. To be more specific, We expect revenue growth in the low 30s range in Q3 and dipping slightly below 30% in Q4. Nothing has fundamentally changed in our view of the market and growth opportunity ahead of us. And as you can see from our hiring and continued investment intensity, we are appropriately resourcing the company for growth and for scale. In the near term, we see higher potential variability due to a few specific factors, none of which we see as fundamentally impacting our ability to drive sustainable revenue growth in the future. First, companies and consumers are right-sizing their consumption patterns as it relates to bandwidth and storage needs after a significant spike in purchases last year. Additionally, live streaming frequency and demand are changing as quarantines and stay-at-home orders wane. Both of these remain significantly above pre-pandemic levels, but their exact impact on revenue is harder to predict in the near term. That said, we continue to see a lot of runway to improve pricing and packaging and expand use cases to better grow and scale with our customers' needs. Second, as we rapidly expand our product breadth, we are selling larger deployments to different decision makers within the enterprise. This requires us to adopt our sales motion and will likely lead to longer sales cycles. Ultimately, this should also lead to larger deal sizes and better retention. So we view this as a natural and positive evolution in our business, though one that may cause volatility in the near term. Despite some unknowns, our platform breadth here works to our advantage. With our broad product portfolio, diverse set of customers, and multiple funnels, we believe we have many levers for growth to capitalize on the opportunities ahead of us in video. We have laid out how we think about investing to penetrate the markets. And as we said before, do not expect the full year of 2021 to be adjusted with a positive. However, we expect to have another healthy cash flow positive year in 2021, similar to last year. In summary, Q2 was a very strong quarter that represents continued validation of our market opportunity and our executions. We are confident in our ability to build a winning product and business in video software and will continue to release our monthly results as part of our commitment to investor transparency. So you will be able to see and track our progress in real time. Now we will move to Q&A. Yao, our head of investor relations, will be moderating. So Yao, let's open it up for the first question, please.