Vimeo, Inc.

Good morning, and thank you for joining Vimeo's Q1 earnings event. We are excited to be here in front of you. Before we begin, a few comments. First, this session will be recorded and available on Vimeo's site and on IAC's 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. Some of these risks have been set forth in the joint registration statement filed by IAC and Vimeo with the SEC. Third, we may discuss the proposed spinoff of Vimeo from IAC. On May 14th, IAC shareholders are scheduled to vote on the proposal to effect the spinoff of Vimeo. We expect Vimeo to begin trading on NASDAQ with the ticker symbol V-M-E-O on May 25th. 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 the spinoff and Vimeo's financial performance, including reconciliations with comparable GAAP measures, can be found in our earnings release and in IACs and Vimeo's filings with the SEC. With that, I'll turn it over to Anjali.

Good morning, everyone. Welcome to Vimeo's first ever earnings event. Q1 was a great quarter, not just because we delivered strong results, but because every signal we see points clearly in one direction. Video is transforming how businesses operate, and the trend is irreversible. We hear this from the CEOs of the world's largest companies who say that post pandemic, they plan to accelerate their digital transformations. We see this from our users who are uploading over 350,000 videos a day and publishing that content on millions of destinations. And we see this in our business. One year into the pandemic, our sales pipeline is the largest it's ever been. Our average time to close a sale is under three weeks, and about a quarter of our new enterprise customers are signing multi-year contracts. On the self-serve side, an increasing percentage of our users are adopting multiple features and unlocking more value from our product. And while we're still building out a team's first experience, we now have over 160,000 teams on Vimeo, up nearly 90% year over year. One example from the quarter is Amazon. Having worked there for years, I know firsthand how strategic customer support is for them. When e-commerce spiked with the pandemic, Amazon saw an influx in their support requests and they had to respond. they turned to video. In Q1, their US support team started using Vimeo to host customer education videos on topics from device setup to technical help with Alexa. This quarter, their UK support team signed on to do the same. Today, Vimeo is powering a better support experience for tens of millions of Amazon customers. And now their support leaders are looking to tap into video in more ways, from training their teams to providing regular updates to their support reps. This same trend is happening beyond customer support. It's happening in HR, in the CEO's office, in marketing, PR, and IT. Businesses are rapidly adopting video across all the ways they communicate, the same way they have with email and chat. And this is often happening without even a nudge by a Vimeo salesperson. This speaks to how Vimeo can seamlessly move through an organization. Our solution has the potential to market itself, and as Narayan will no doubt remind us, show up in powerful net revenue retention. So what are we doing to capture this enormous opportunity? We entered the year with two priorities. First, to expand within the enterprise, and second, to radically simplify video for SMBs. On the enterprise side, we now have over 4,400 customers, and our enterprise revenue grew over 100% for the third straight quarter. In Q1, we welcomed new customers from Intuit, SoftBank, and Spotify to the San Antonio Spurs and University of Florida. And we saw existing customers like Comcast, Amazon, and Pottery Barn significantly increase their contract value as they expanded their usage across teams. In 2021, our focus is on expanding our enterprise product. Our roadmap is full of new capabilities that we believe will unlock wall-to-wall adoption across departments and teams. This includes investing in our screen recording tool, launching a corporate video library solution, and rethinking the future of webinars and virtual events. We'll also plan to more explicitly target the many large companies in our existing user base. Our free and self-serve users already drove nearly 70% of new enterprise customers in the quarter, and we have yet to automate or optimize that funnel. Finally, we expect to double our global sales force and test new pricing and packaging to scale more naturally within large organizations. For SMBs, we're making it easy for any size business to reach their customers with video. In Q1, we improved our free product and our AI-based video creation tool. We saw users produce nearly 1 million videos using that tool, up nearly 70% from the previous quarter. In 2021, we plan to expand the types of videos that businesses can make using Vimeo, and we'll keep pushing to eliminate the friction in creating content while increasing the quality and performance of that content. Finally, we're investing more deeply in partnerships. We see growing adoption with existing partners like GoDaddy, Facebook, and Shopify, as well as with new partners like TikTok, MailChimp, HubSpot, and Constant Contact. We expect to launch more native integrations this year that bring the power of Vimeo directly to other platforms. I want to end with another story from the quarter about a customer in my home state of Michigan. Right now, Michigan is experiencing the most dangerous COVID outbreak in the US, and the Detroit Medical Center is on the front lines. They've been using Vimeo to educate their community about their COVID response. They launched a video series called Behind the Mask that seeks to humanize the healthcare professionals who are working around the clock to contain the outbreak. Now they're having their doctors record videos to directly appeal to the unvaccinated community. Their video messages have been seen over 15,000 times, helping to educate people and get more of them vaccinated at a time when it is so critically needed. This is the power of video. This is why we do what we do. On behalf of the over 800 Vimeo employees around the world, we are fired up about this journey and we look forward to sharing more next quarter.

Thank you, Anjali. In Q1, we had excellent results across the board. We accelerated our revenue growth, expanded our gross margins, and increased investment in our product and go-to-market. So let's start with the revenue. Total revenue increased 57% year-over-year to 89 million, and we crossed the 350 million annual revenue run rate. The revenue acceleration was driven by growth in both the number of paying subscribers and the average revenue per user, or ARPU. We added over 57,000 paying subscribers and ended the quarter with almost 1.6 million total subscribers, up 25% year over year. On ARPU, it hit an all-time high of $233, an increase of 27% compared to Q1 of last year. Both self-serve and enterprise ARPU increased double digits, and the total ARPU was further aided by an increasing mix of enterprise revenue. Moving to expenses and profitability, our gross margin expanded to 72% in Q1. This was an almost 200 basis point improvement sequentially. We achieved this through infrastructure optimization, better pricing from scale, and operating leverage. We are well on our way to achieve our medium-term margin target of 75%. We invested more than 21 million in R&D for the quarter, which was up 40% year over year. We will continue to invest here to both broaden and deepen our product suite and maintain our position as an innovator in video. Our sales and marketing spend for the quarter was 32 million, which was an increase of 28% compared to Q1 of last year. We believe we can further expand our reach and acquire new customers at a healthy LTV2CAC, so we'll continue to add to our sales team and increase our marketing spend. operating loss was 5.6 million. While we weren't aiming to be profitable this quarter, adjusted EBITDA was again positive at 1.3 million. Now moving on to balance sheet. With most of our customers on annual subscription, deferred revenue increased to 149 million and was up 50% year over year. Our cash and cash equivalents at the end of Q1 were 316 million. We have fully retired the debt due to IAC, so we expect to start our life as a public company with zero debt on our balance sheet. I will also refer you to the shareholder table in our press release that lays out shares outstanding and the exchange ratio in the upcoming spin. Now let's talk about the future. As we said at our investor day in March, we believe revenue will grow at or about 30% for the next many years. This year, we expect the revenue growth rate to come down to in and around 40% in Q2 as we lap COVID. We expect the revenue growth rate to further decelerate and bottom out at the end of the year at about 30% growth. From there, we expect our revenue growth rate to accelerate in 2022 as the investments from this year start to show results. On profitability, while Q1 was another adjusted EBITDA positive quarter, we are increasing the pace of our investments, and we don't expect the full year of 2021 to be adjusted EBITDA positive. With the increase in deferred revenue, we expect to have another healthy cashflow positive year in 2021, similar to what we had in last year. In summary, Q1 was a clear validation that the opportunity in front of Vimeo is enormous. We are fortunate to enjoy tailwinds from many sectors of the economy as video use cases continue to proliferate. Our customers are using our products more and more, and our relationships with them are expanding. With our product leadership, repeatable sales motion, predictable revenue streams, and expanding margins, we are more confident than ever about our opportunity and our future. With that, now we will move to Q&A. Mark Schneider from IAC will be moderating.