Industry Insider: A Look Into Vimeo's Q1 2023 Earnings Call

On May 4th, Vimeo (NASDAQ: VMEO) streamed its 2023’s First Quarter Earnings Call, presented by CEO Anjali Sud and CFO Gillian Munson. The call’s format was unconventional, as it used one of the company’s newest and most successful products: an interactive video. Vimeo is focusing on product development, especially increasing awareness – therefore, making their very own quarterly report an explicit demonstration of their product’s potential is the best way to effectively pursue their objective.

Sud starts by delineating three goals for 2023: simplification, return to growth, and efficiency.

Simplification is the fil rouge that runs across all actions taken by Vimeo, with a focus on the product. Munson expects growth from 2021’s acquisitions, such as Wirewax, a set of tools used for interactive videos, and Wibbitz, an online video editor. The vertical integration of these services has turned out to be the right move for Vimeo, as now 30% of the users who upload content have created that content using Vimeo’s editing tools. The company still wants to increase customer awareness of these services: Vimeo is largely known as a rather simple platform used to distribute and watch videos; therefore, the addition of content-creating tools must be highlighted to take advantage of the full potential customer base. For example, in 2023 Vimeo has been introduced as an academic device used by prestigious universities such as UCLA, as data shows that, when using interactive videos, engagement reportedly increases by fivefold. Interactive videos have been used also outside of the academic environment: Wizards of the Coast, the company behind Dungeons and Dragons, just released the movie Dungeons and Dragons (2023), which was promoted with Vimeo’s interactive videos in the style of a choose-your-own-adventure game.

As highlighted by CFO Gillian Munson, by the very nature of its business, Vimeo saw non-organic growth during the height of the pandemic, and its financials are still absorbing the rebound decrease in use. Traffic is stabilizing, and by normalizing the COVID peaks of 2020 and 2021, Self-Serve business is growing. Sud stated:

“It’s important to remember that Self-Serve is a critical driver of Vimeo’s overall growth, both due to its size and as the primary feeder for Vimeo Enterprise, as Self-Serve customers graduate to more advanced product offerings. So, we remain focused on a return to growth here as our top priority.”

Self-Serve relates to subscription plans and add-on services that are tied to those subscriptions, while Vimeo Enterprise is a video service designed for businesses and organizations. Vimeo Enterprise is growing on a quarter-by-quarter basis and has shown a 62% increase with respect to last year’s results. Simultaneously, the service has strong customer retention, as proven by the 100% NRR (Net Revenue Retention, the total revenue after subtracting cancellations, expirations, and downgrades). This figure is an impressive one in the world of SaaS, as it determines the health of the company by measuring its ability to both expand and retain current customers. Other companies that have joined Vimeo Enterprise are Warner Brothers, Canon, and the BBC.

Revenues primarily come from the Self-Serve segment, which counted for $71 million in 1Q23. Vimeo Enterprise’s revenues were of $11 million, while an additional $20 million is classified as “Other”: additional products and services outside of the two main cash-inflows. In particular, these additional services relate to the OTT (Over-The-Top) market, as users have the possibility to launch and run their own streaming channels through web portals and mobile apps.

Lastly, efficiency stems from the third consecutive quarter of positive EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) and Free Cash Flow, which Sud plans to invest in high-growth opportunities (the company does not pay any dividends to shareholders). Vimeo has an enviable liquidity position, with $268.4 million in cash and cash equivalents as of March 31st, and no debt. The restructuring plan that was enacted during 1Q23 constituted an expense of $4.9 million, as well as an 11% cut in the workforce. Although the company has never been profitable, and the executives warn against considering the inflated Covid-19 growth as any sort of indicator of future growth, there are positive expectations regarding next quarter’s results, as far as saying that they expect to breakeven – if not even make a profit. When asked about it by Thomas Champion (Piper Sandler & Co.), Munson stated:

“It’s a great early start, and we’re really putting one foot in front of the other. We’re on track. And I think 2023 so far looks like it’s going to play out just s we had thought going into the year.”