Vimeo, Inc.

Hello, and thank you for joining Vimeo's Q4 and Fiscal Year 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 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 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 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 in 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 shareholder letter 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 CFO, Jillian Munson. Jillian?

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. We're even more excited to talk to you about our future, including our plans for 2025 and our view on where we believe 2025 can lead for our company. Philip 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 would be great to have him share with you a bit of what he has seen in the market and how that is framing our strategy for 2025. Philip.

Thank you, Jillian. Good afternoon, everyone, and welcome. I believe that Vimeo will succeed by putting customers first. As a rule, I try to spend about half of my time with customers, listening to them and talking about what our platform can provide them and what else they need. You know, I've got a couple insights from my recent travels. First of all, Vimeo's opportunity is as big or bigger than I thought when I joined. Video is more accepted than ever in the enterprise. It used to be highly scripted. And now, culturally, all forms, casual and scripted video, are far more accepted. This is driving significant increases in video across the enterprise. And there is an explosion of video creation tools, which is dropping the cost of creation. You know, finally, this is the video generation and they are growing up with video and increasingly video is the expected form of communication across all elements of personal and professional life. You know, the sheer volume of videos uploaded and embedded and shared on our platform is staggering. And yet, The market continues to demand more. We are the answer for private and secure video, and we have never been better positioned to help customers, and as a result, create value for our company and you, the shareholders. The second thing I want to make a point of is that the time for AI in 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. Finally, I'm excited to say that we have the right team and now is the right moment to invest for our future. We've rebuilt our management team, aligned our goals for 2025, and delineated key focus areas to invest against the opportunity ahead. 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 are going to make to capture this opportunity. With that, look forward to taking your questions.

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. First, Tom Champion from Piper Sandler.

Hi, good afternoon, guys. Apologies for being off camera today, traveling, but Philip

Tom, we lost you there. Can you repeat that last bit?

Sorry about that. Philip, can you talk about what you're seeing from customers adopting AI in the enterprise? Why don't we start there?

You know, first of all, video, the amount of video, I mentioned this a couple times, is exploding in the enterprise. So the barriers are coming down, and video is going across every single department inside of the enterprise. This becomes a management challenge for most enterprises. If you're a financial services organization, you don't know what videos comply and which ones don't comply. So the ability to be able to discover all of your video and being able to ask it questions and to be able to extract information out of it, it's very, very important because it's becoming more and more important that you use artificial intelligence to manage video. The second thing is that organizations are trying to make video more accessible. In some cases, that means language. We've mentioned before that over 45% of our business is coming from outside of the United States, and increasingly, customers expect multilingual video. And our artificial intelligence, we launched last year 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 our translation and the AI capabilities that we have inside of the product. 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 and people don't watch the entire thing. They really just want a single answer inside of that video. You know, our new indexing capability and ask a video a question allows you to go right to that spot inside of the video and present the exact answer at the right time. So you're going to see video go into customer workflows across the entire customer journey in ways that I would say that you haven't been able to see in the past 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.

Okay, great. Jillian, can you talk about the investment this year, the up to $30 million you're looking to deploy?

Absolutely. 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 in 2024, they accounted for fully 30% of new bookings in Vimeo Enterprise. AI alone, after we came out with that mid-year, was 40% of bookings. in Vimeo Enterprise. So it's a big deal to have a team here who understands where to go. So from here, our view is that given our cash balance and the strength in this business model, we have made huge progress. If you think about it, our EBITDA in 2024 is three times all the EBITDA we created in the three years prior. So our view is we're in a great position to make an investment. Our size is about 30 million. That would lead you to EBITDA of about 25 to $30 million. And I think where that lands in the end will be based on how fast we can deploy capital. 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, creating an ROI for the business. As you think about what that can do for our business, as you may have seen in the guidance, while our overall revenue growth would be in the 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 percent of Vimeo, you basically have paid back that investment already. So we 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.

So probably first and foremost is that 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 4K, whether or not it's landscape, whether or not it's portrait, whether or not it's for podcasts, whether or not it's high definition, whether or not it's interactive or shoppable, customers want to use video in more and more 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. We recently opened up China for streaming a video for our corporate clients. You'll also see us actually adhere to GDPR and other data requirements in Europe. We're doing a lot of deep work in granular security and permissions that enterprise customers need. And then 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 in education, whether or not this is in e-learning, or whether or not this is inside of financial services, or whether or not this is inside of health care, you're going to see us go deeper into this enterprise solutions area. And then I'll say again, we actually have an even deeper roadmap than 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 and more exciting. And so a lot of the deep areas that we're going to be going into are in those four areas. Again, it's going to be in formats, in security, in solutions, and in AI. And these are deep investments in our R&D. Great. Thank you.

And our next caller, Bill Kerr from TD Cowen.

Great. Thanks for taking my questions. So enterprise booking growth was higher than we expected and accelerated slightly. Can you just provide some color on the key drivers that you saw there in 4Q? And then what sort of, how you're thinking about the drivers for the growth of enterprise between ARPU and subs as we move through 2025?

So let me take the numbers, and I'm sure Philip 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, the way the enterprise business is growing right now is basically double-digit growth. unit growth in terms of new subscribers coming in, and then double digit ARPU and AOV 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 base in total. In terms of the business, you saw a little bit of a mixed shift to higher end products. I think it's interesting to see the growth in our $100,000 plus customers in the year. 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. As I just said a minute ago, the investments we made in product in 24 alone drove 30% of new bookings in 2024, let alone the strong pipeline we have for 2025 in terms of what that can do for us. Philip, any other anecdotes from customers?

Sure. Well, I have to go to probably my favorite Vimeo customer as an example, and that would have to be my own Philadelphia Eagles. They are 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 a great example of an enterprise customer. And what's happening, 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, or we might be doing something in e-commerce, I should say in marketing, and we very quickly go across all the divisions inside of an organization. So increasingly, salespeople are starting to use video in their interactions. Financial advisors are actually giving portfolio reviews in video. We're seeing healthcare organizations, when you provide a video after a healthcare visit, instead of a stack of paper, you actually get higher adherence to care protocols. When you go to customer support, you get 91% better retention and you 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 WiFi, or change the password on my Wi-Fi. And so this ability to be able to land inside of one organization, inside of a company, and very quickly be able to meet all the requirements across the rest of the company is what's driving a lot of our expansion. You know, 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 video companies on the planet work at. However, we also go in with ease of use. And so a lot of our competitors are either enterprise or they're consumer. And the fact that we live in both of those worlds actually makes a lot more video come on to us much quicker inside of a company. So our time to get a customer up and running is actually decreasing. And as a result, the sheer amount of minutes that are on us inside of an enterprise are 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, you know, 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. And so we're able to scale from organizations like the Eagles. We're able to scale from individual healthcare providers all the way up into some of the biggest telecommunications companies in the world, you know, with this ease of use, the security and with the workflow that we're providing and the artificial intelligence that we're providing at enterprise grade.

You know, 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. In 2025, we are actually going to market in a little bit of a different way. We've brought on a terrific new chief revenue officer. And what we've done this year is kind of two things there. One, we've had that team break a bit in terms of those who focus on our smaller customers and those who focus on our larger customers. And then there's an important addition to that. As you all know, OTT is a business that 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's done a terrific job. What we're doing with the sales team is bringing OTT and the Vimeo Enterprise teams together Because increasingly, as Philip said, as customers expand their video use, streaming is a key fundamental enterprise 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 as we look into 25.

Great. Thank you. And then just a quick question on self-serve as well. You know, the self-serve subscriber numbers, you know, continue to face a little bit of pressure. I was wondering whether, you know, what sort of impact the pricing changes had on that 4Q and if you can expect that to persist in 2025 and just sort of how you're thinking about self-serve in 2025 as we move through the year.

Absolutely. So let me just take the numbers piece, and then Philip can talk to you about a little bit how we're running SelfServe in 25. We continue to believe that subscribers can grow in SelfServe, and that is absolutely our aim, and that is what we are focused on. What's really interesting about how we ended 2024 is that we rolled out price increases in SelfServe across more than half the business. And we were able to bring AOVs up in the double digits. You'll see the ARPUs 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 have work to do in terms of bringing the subs numbers back up, those ARPU 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 our 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 Philip will give you a little color on how we're running self-serve in 25.

Yeah, I think that one of the most important things that I would say that we've done in Q4 is that we've 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 there's been some self-inflicted wounds over the course of the past few years. And it's 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, we're presenting them with too many options from a pricing and packaging perspective. In some cases, we were actually limiting the amount of videos that they could upload to us. And so when we saw some of these issues inside of the business, we said we needed to get an even more focused, single-threaded team. And so in Q4, we established that single-threaded leadership and a single-threaded team. I have to tell you, it's very rare that you increase prices and you start seeing better retention and higher AOV 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 we're cleaning up a lot of our user flows. We're responding to a lot of the things that we're hearing from the customer base. And quite frankly, you're going to see actually in the coming quarter here, we're actually releasing all the AI capabilities out to our self-serve population. It turns out that school teachers, individual creators, nonprofits, filmmakers, they actually love the idea of translations into 29 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 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 to the enterprise, making sure they're enterprise grade, and then you're going to see us bring those kind of capabilities down to the self-service user population. You know, I just got back from the Berlin Alley Film Festival, and it was stunning to me. I met filmmakers that were from Brazil. I met filmmakers from all over the world. And one of the things I heard consistently from both the European Film Association or Academy, 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 Cannes, we power South by Southwest, we power a whole variety of film festivals for some of their capabilities. And Vimeo continues to be one of the most important ways that people share a link of a private video. We get literally billions of people throughout the course of our years coming to us to look at videos, 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, not just about the price that we're charging, but also about the future of that subs business.

And Bill, one thing I want to make sure I underline, because 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 30%. And to have stable retention is a terrific sign to us. So when we are explaining the enthusiasm we have for our opportunity to turn self-serve back to growth. 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.

Got it. But really appreciate all the color. Thank you.

And next, we'll go to Yusuf Swali with Truist.

Thank you for taking the question. Apologies. This problem. I don't know if this question was asked, but I just joined. But can you maybe just talk about at a high level your capital allocation, the intensity that you see in the business in terms of the need for organic investment versus maybe returning cash to shareholders, just considering how strong your balance sheet is and the 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. In terms of the buyback itself, our average price is still less than $5. And we continue to buy here in Q1 as well. So 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 opportunities we have, investing in the business makes a lot of sense. 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 we think the profit potential of this business is excellent. So when we think about the size, we think $30 million is about the right size. And working with our teams, we've gone through program by program to understand what's possible in there. That's going to yield you about an EBITDA of $25 to $30 million. And we will spend that very responsibly. 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've basically paid back that investment in the course of a 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 at the business and how we have evolved this business over the last three years. I mean, we have taken $100 million of expenses out of this business. When I look at our non-GAAP APEX 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.

You know, I just want to add on to that a little bit in that, you know, 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. Now, these are new capabilities we had just released earlier in the year, and we proved very quickly to ourselves when we developed new capabilities, released them to customers, they sell. We saw the same thing with our OTT streaming business. When we started putting more capabilities and responding quicker to customer requirements, that business actually returned 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 develop things that the customers want, we actually can drive 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 these R&D investments.

Thank you. That's helpful. And then maybe just on the Q1 guide, Gillian, can you maybe speak to the, I guess, double click on that a little bit between growth in self-serve versus enterprise. Enterprise is obviously being grown really fast. Self-serve, it seems like you're doing a lot of things to finally starting to get it back to growth, although it may take several quarters, but how should we be thinking about it near term?

I think you're thinking about it the right way. The way we are thinking about how the year is 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 on the revenue side, you're really starting from a place of water falling through past bookings, right? So you're going to really first watch for bookings. 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 in accelerating both bookings and revenue over the course of the year so we're really enthusiastic about both but but certainly the vimeo enterprise side will absolutely be the faster grower okay well thank you good luck thank you and that concludes the q a portion of our call before we close i'll take