Vimeo.com, Inc. (VMEO) Earnings Call Transcript & Summary

Hello, and thank you for joining Vimeo's Q1 2025 Earnings Live Q&A. Before we begin, a few comments. First, this session will be recorded and available on the Vimeo Investor Relations website later today. Second, we will discuss Vimeo's outlook and future performance. These future-looking statements typically may be preceded by words such as we expect, we believe, we anticipate or other such statements. These forward-thinking 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 Vimeo's financial performance, including reconciliations with comparable GAAP 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. And with that, I'll turn it over to our CEO, Philip Moyer. Philip?

Thank you for joining us for our Q1 2025 live question-and-answer earnings call. This April marked my 1-year anniversary at Vimeo. It has been an incredible journey so far, and we are thrilled that 2025 is off to a solid start. After 2-plus years of rightsizing our operations, we are now at a place of investing to drive growth, and the results are starting to show. Self-service bookings grew 6%, marking the first growth in 3 years. This is a 16-point swing from the low point for this product of a negative 10% decline in year-over-year bookings in Q2 2023. This growth in bookings has cut the rate of decline in revenue from self-serve by nearly half as well. Vimeo Enterprise revenue was up 32% and bookings were up 13%. As our Enterprise business becomes larger with more complex deals, we are increasingly focused on revenue growth and may adjust or remove some KPIs to best reflect how we are operating our business going forward. But I will note that in the first quarter, our quarterly revenue in this product was more than double the level from just 2 years ago. We are making calculated investments in critical areas that we believe can show return on investment for our business in a reasonably short period of time. We're already seeing our pace of innovation speed up this year and our recent releases of Vimeo Streaming, new Vimeo Central features and expanded AI for self-service is generating good momentum across our business. While the economy is unpredictable and could create risks, we remain committed to our 2025 goal of profitable growth for the full year. With that, we are looking forward to your questions.

[Operator Instructions] First, we'll go with Tom Champion from Piper Sandler.

Philip, let's start with self-serve. Great to see the business returning to bookings growth. Can you talk a little bit more about the impact of the pricing changes you made at the end of last year? Has that completely cycled its way through the base? What are you seeing on the retention side? And maybe what do you foresee as the trend in self-serve through the balance of the year?

Sure. So we're very pleased. Again, I think I had mentioned back in Q3 and Q4 that we were pleased with the results that we were seeing from the price increase. One of the things we did is we increased prices by as much as, in some cases, 20% with some of our customers. But when we did that price increase, we also gave the customers more. And as a result, we saw actually lower churn rates. We continue to see that trend. We're rippling more pricing changes through our base as we get into the higher priced plans. We're starting that as we talk here in the month of May. But in general, as you know, we get self-service bookings or we renew and the price increase kicks in as customers renew. So we're expecting to see continued growth if the trends of churn continue and the trends that we're seeing inside of the business, we're expecting to see kind of similar growth going forward here this year.

Okay. Great. Maybe I'll just ask Gillian one more. Gillian, on the investment, the $30 million, do you think that's a good base case for us to consider? Do you think at this point, seeing what you can see that, that's the amount that you're going to reinvest back into the business? And what would you need to see to change for you not to invest the full amount?

Sure. So when we think about the investment, we've said we have an appetite for up to $30 million of investment. As I look at the business, if you sort of take the fourth quarter, annualize it, add a little bit of inflation, what you've seen in terms of where the guidance plays out for the guidance of EBITDA to be between $25 million and $30 million would imply something in the 20s running through the EBITDA line. What you will see is we have capitalized some expense because some of our projects are bigger, so that would add to it. So I think we continue to say up to $30 million. Don't expect it to be more than $30 million. And as we think about it, we're trying to be really, really responsible with the dollars, really looking at each project very specifically. So we're going to really try to not -- we don't want to spend all the way up to $30 million. We're going to really try to be very responsible as you've seen us be in the past. And we go through every quarter and look at every project and try to find the right balance of investment to growth potential for us.

And our next caller, Youssef Squali from Truist.

So maybe, Philip, can we just start at a high level. I know, obviously -- you provided the caveat of the macro being uncertain. Can you maybe talk about what you're seeing so far? What are you hearing exactly from your customers, both on the Enterprise side, on the Self-Serve side? And just in terms of maybe some of the challenges they're seeing, if any, at this point?

I think on the self-service side, we're seeing some consistency quarter-over-quarter just in terms of the macro conditions in that business. That business, as I mentioned, we're still seeing some good retention rates in Self-Service. In the Enterprise business, this past quarter, one of the things that we did was that we introduced a brand-new leader into our sales-assisted motion. So in that Vimeo Enterprise business, we have a new individual that's leading that business. We also made some foundational changes in that business to build on the relationships. Last year, we talked a lot about how we not just landed with customers, but expanded a lot. And we think that that's going to be a really important thing going forward with customers. One of the things that we're excited about, when we go out and talk to customers right now, cost is on everyone's mind. We believe that we represent an opportunity for cost takeout in a lot of these organizations because in some cases, we can replace 2, 3, 4 other products across different divisions. Some of our biggest customers are being used by in as many as 20 divisions inside of a company. And so a very big element of our sales motion is to go out and not just talk about the value that we can create, but also the cost that potentially we can take out for customers. And so that's an important conversation right now. There are some segments. There are some deals that actually slowed down and slipped into Q2 for us from Q1 in some businesses that are impacted by the macroeconomic elements of the business. We are not impacted by tariffs right now. As you can imagine, we don't ship physical goods, and so we're not seeing kind of a tariff overhang. But some of our customers are taking a step back. Some are slowing some deals down. But again, I think we're able to go in and actually have both a value and a cost conversation with those customers. So still optimistic around that Enterprise business, and we'll expect to get even more optimistic as our leadership, the new leadership kind of takes hold and some of the changes we made organizationally in Q1 also take hold with customers.

Okay. And maybe on the Enterprise side, when I look at bookings growth, it decelerated quite a bit between Q4 and Q1. I think you called out in the release that it's up against some tough comps, which we can clearly see. But you also called out this major transition in sales team. Any idea, any way we can kind of quantify that? And how do you see that transition going so far in April? And what's your expectations for the second quarter?

Yes. In Q2, we still have solid growth goals for that Enterprise team. The Enterprise business, the interesting thing about that business, unlike the Self-Service business, if you don't make your number in 1 month, you can make it in the next month. And the Enterprise business can be very lumpy, I mean I think that you're seeing that in -- as we cross over this $100 million in bookings. The focus that we have for that business is to expand ARPU and AOV in the business, getting larger relationships with customers. And so some of those deals actually can slip from month to month. We still have solid aggressive goals for that business. As I said at the remarks at the start, we're going to be increasingly focused on revenue inside of that business because bookings are not always necessarily translated in the very next quarter in the very next month. Sometimes you have Enterprise contracts that actually have requirements that you have to fulfill before you can start actually achieving the revenue. And so as I mentioned, bookings isn't always the best indicator of what growth is going to come. So still aggressive goals, still a great value proposition, still feel very good about that part of the business going forward.

And now we'll go to Bill Kerr from TD Cowen.

So maybe my first one would just be, can you just talk about how Gen AI and those features that you might be rolling out are coming up in conversations with customers and how that shifted over the last several months? And then maybe are there any features like that or just features broadly that we should be keeping an eye out on as we think about your product road map as we move through the rest of 2025? And then I have one more.

Sure. I think so far, we had rolled out our AI features, our Gen AI features to our Enterprise customers last year. And I think we had mentioned that a significant portion of our deals back in Q4 were being driven by our AI features. We continue to see really good traction in terms of interest in our AI features, things like translations, in particular, with our Enterprise customers. Roughly back in the second week of April, we actually started rolling that out to all of our Self-Service subscribers as well, that translations capability. Now that's been out for a grand total of a little bit over 2 weeks at this point. We're seeing some bright spots. We see some customers coming in and translating in some cases, some entire video libraries using some of our translation features. A very, very important element of what we rolled out, and I do not want to -- I can't overstate how important this is, is that we rolled out security for every single one of the customers that uses that so that every single customer has their own memory and has their own capability to be able to control their AI, very important to the creator community, whether or not you're the largest company in the world or whether or not you're an individual filmmaker. So a really important element. Second thing that we rolled out was that ability to be able to monetize so that if you have 100 minutes of video that you want to translate or 1,000 minutes of video that you want to translate that we have a mechanism to be able to monetize that as we go forward. So very important infrastructure that was just put out for our over 1 million customer base. And so translations just in general, continue to be, I'll say, a lot of interest in it because approximately 45% of our customer base is international. Some of the other capabilities that we're starting to talk about with our Enterprise customers is this ability to be able to have discovery and also the ability to be able to ask video questions. We are excited about the notion of agentic video. So you might be hearing a lot about agents. So whether or not Google's Agentspace or Glean's capabilities, NVIDIA's Agent technology. Vimeo is actually rolling out this ability to be able to have agentic video. So the video can be used by agents in line with workflow. We think that that's going to be a very powerful element for things like customer support and sales and other use cases. And then finally, some of our ability to be able to describe what's going on in a video, we think, is going to be very important for internal search, for internal learning and even in some cases, for external discovery. And so those capabilities, while they're not in our revenue today, we've got a very solid road map as we go in the next quarter and over the course of the rest of the year around a rollout of more and more AI capabilities. So we really expect to lead the market in video -- in AI as it relates to video and in this new category, what we call agentic video.

And Bill, when you think about it financially, I think there's another really important piece in this rollout, which is the idea of essentially a consumable. So an in-period revenue stream for Vimeo. And we think that this is a really great way to keep moving our ARPUs up over time across the whole business. So you've seen us be on a steady march up in ARPU across pretty much the 2 big products that we sell. And at the same time, you've seen a headwind in add-ons. The way we're thinking about this is AI is the beginning, just translations itself is the beginning of a number of items that we can sell to our customer base on an as-you-needed basis. And so I think that's a really important piece of our story and will be a big piece of how we think about our long-term growth as we move out even over years in terms of what we can do with our platform itself and then the consumables that customers might want for their specific uses and needs.

That's very helpful. And then I was wondering about whether there are any particular industries or categories that you're seeing particular strength or maybe even softness over the course of the first quarter and so far into 2Q? That would be really helpful.

Yes, I think there's a few. Marketing is a very important cohort to us where people are using more and more video in e-commerce and in their marketing environments. The second thing I would say is that we are seeing a tremendous amount of interest from regulated industries. We can go into a video and say, does this video promise any kind of returns that it shouldn't be promising or we can say, for a pharmaceutical company, does the video actually -- does the video talk about side effects of a particular medication. Because of the AI work that we're doing, you actually can interrogate videos in a way that you couldn't before. And so I think a lot of organizations that are in regulated industries are starting to look at some of our capabilities and saying that it's actually -- you can actually achieve compliance and achieve some of the regulatory requirements, both internally and externally in the marketplace with some of the technologies we're delivering. Additionally, some of the work that we've done around translations, again, in the marketing world, being able to have your video discoverable in more languages actually leads to better discovery. And so that translations capability for both marketing and even for educators is really -- is doing well. So marketing, education and regulated industries, we're seeing a lot of interest.

That concludes today's question-and-answer period. Now we're going to turn it back to Philip, our CEO. Philip?

I want to thank you again for joining our Q1 2025 earnings call. One other item of note. Last week, we filed our recent proxy statement, and we're saying goodbye and a huge thank you to our Board members, Alesia Haas and Ida Kane for their contributions to Vimeo since May 2021. We're also excited to nominate our new Board members for shareholder approval, Adam Cahan, Kirsten Kliphouse and Lydia Jett. I want to thank you again, and we'll see you for our Q2 update.