VMEO - NASDAQ

[Presentation] Hello, and thank you for joining Vimeo's Q2 2025 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-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 hand it over to our CEO, Philip Moyer. Philip?

Good afternoon. Thank you for joining Vimeo's Q2 2025 Live Earnings Call. Vimeo had a strong Q2 2025, with bookings growing 6% year-over-year, the strongest growth since 2022. Self-serve grew bookings by an impressive 11%, reaching levels last seen in 2021. This success is attributed to the recent changes in packaging and pricing, but also early positive signals from all the new product improvements we've been making. Vimeo Enterprise grew revenue by 25% and saw its second highest booking level on a dollar basis. Despite falling slightly short of our bookings growth goals, the fundamentals are strong, and we are winning competitive deals by helping major brands consolidate their video technology and seeing traction across all of our AI offerings. We believe we will reaccelerate growth in this product's bookings in the second half. Our business is doing well. We continue to hope to end the year with a line of sight to double-digit growth. Moreover, our improved efficiency has enabled us to raise our 2025 adjusted EBITDA guidance to approximately $35 million, up from our previous range of $25 million to $30 million. Thank you again. And with that, we will take your questions.

[Operator Instructions] First, we'll talk to Youssef Squali.

Maybe, Philip, can you talk a little bit about the self-serve piece of the business, it seems like the upside came mostly through the pricing change that you discussed. Maybe talk about the underlying elements of what's driving subscriber decline still. And when you talk about having line of sight to double-digit growth by the end of the year, what's kind of baked in, in terms of subscriber growth for the self-serve business in particular? Do we get to a point where maybe we flattened the growth? Or is that something most likely for 2026?

Look, I am super thrilled with our -- the self-serve leadership that we have. I think earlier this year, I talked about the fact that we put in place a single threaded leader and that single threaded leader and that team are really doing some tremendous work. The pricing and packaging work was important and not just from an increasing a price perspective, but also from customer retention. And so the retention rates in that business continue to be strong even as we roll out new pricing and packaging across the entire customer base. So first and foremost, retention is absolutely essential to establishing a floor in that business to be able to grow from. The second thing is that we've been releasing a lot of really important features, capabilities that are -- that some of our customers have been asking for, for years. Some of the things that you saw in the lead-in video, the way that we actually -- the watch page for videos. People come to Vimeo for inspiration. A lot of marketers do, a lot of creators do. And so reinvigorating our brand as it relates to watch and it relates to that entire creator community is absolutely essential in the business. Simple things like re-releasing the Apple application that we did this past quarter are, again, starting to delight our customers even more. We just started rolling out AI features. I think I mentioned this on the last call, we had just started that with our self-service customer base. And so we're seeing really strong activity in the use of our AI features. And so when I combine together all the innovations that we're doing, the solid retention, satisfying customers more with the right pricing and the right packaging, I actually do continue to believe that, that business can be a growth business over a longer period of time than just from the enhancements that we're seeing in the pricing and packaging.

And Youssef, why don't I add to that a little bit? So you asked a little bit about the subscriber growth. I think likely mathematically, that is into 2026. But as we talked about before, pricing gives us a lot of room in that business if we look at the next several quarters. In fact, actually, in Q3, we are already seeing really nice trends in the self-serve business. And one of the things we've talked to a lot of you about is as we try to get back to growth and move the company back solidly into revenue growth, that one of the fastest paths back to that is through self-serve. Right now, as we look at it, we've always just thought let's get self-serve back to growth, right? Let's start there. But actually, given what we're seeing, we believe that with good execution, this could be a double-digit grower. So when you think about the math to get Vimeo itself back, that is really exciting to us. Of course, lots of execution to do, but the self- serve business is really, really -- we're really very enthusiastic there in terms of the business.

And then just very quickly on the enterprise and the slowdown in bookings. I think it was related, you said in the release to a particular customer. Can you maybe just drill a little deeper into that? And what gives you confidence for the reacceleration in the second half?

Yes. So let me start and then Phil can fill in some more about kind of where we're going with the product road map. So the customer we mentioned is kind of an interesting example for us and very much speaks to the strategy at Vimeo right now. So that customer happens to be an international customer that was very central bandwidth, a bandwidth user in a lot of ways. They had a Vimeo enterprise account, but a lot of what they were buying us for was bandwidth. And as you can see in our add-ons business, that bandwidth business has been gotten a little bit more commoditized. You've seen that business come down in the last -- a while for us. So this customer really never adopted our other features as well as we would have hoped. And when that happens, we have retention challenges. And we know that, and we are working on that. And that is why we are so focused on a product road map that includes more than that. So for us, internally, I think it's a good lesson to remind us that we have to continually work to get our customers up and running on our other features. This one obviously is unfortunate, but I think for us, it's a really good reminder of where we're going. It also, in our mind, makes us very excited about the product road map ahead. I think I'll focus in on some of the things we're bringing for enterprises that we just think are going to help avoid that kind of a situation going forward.

Yes. I would say a couple of things. When you're growing a $100 million enterprise business, as you push through that $100 million, it is always a little bit of -- it can be a bit rocky in making sure that you have all engines firing on all cylinders. There's 3 things that I think about when you really want to scale a $100 million enterprise business. You've got to do a fantastic job with new. And winning against your competitors. You do that by innovating, first and foremost, and really providing better service and a better product than your competitors. This quarter, I talked about the fact that we're very happy with the number of competitive wins that we have. We're seeing even more customers start to consolidate their video platforms into us. And so we're being very aggressive in the market, very, very aggressive in going after competitive deals, and we're excited about how we're winning those deals. And we believe that we're making a lot of customers that will be with us a long time. The second thing we've got to do is retain customers. And so we're spending a lot of time in retooling some of our customer service department and how we support customers and doing a better job to be able to identify customers like this larger one that might have a retention risk and proactively go and approach them with different offerings. The third thing that we've got to do a really good job of is expanding that -- those customer relationships. We made a lot of changes to start to invest in customer relationships. This past year and in the past 6 months, we've brought in a lot of new leadership that focuses on expansion. And so the things that I see inside of this business, and I spend a lot of time talking to customers is we've got customers that are excited about our products. We're winning with the innovations that we're bringing to market, and we see a path to expand customers. We're about to start rolling out some of the most important releases that we ever have in the enterprise business. We have some new technology that's hitting the marketplace here in Q3 and into Q4 called Workspaces. It's the #1 thing that's been requested by customers. It's higher-grade security down to the departmental level at the organizational unit level. The AI work that we're doing in translations, we're seeing now -- we're finally starting to generate revenue from the AI innovations that we did and the translations work, where we're seeing customers come in and translate literally their entire libraries using our AI features. And so I'm excited about the business. I'm excited about some of the customers that we've won. These are some of the most technologically advanced companies in the world, Spotify, as an example, and Jaguar Land Rover, FanDuel, some of the biggest names that have really extraordinarily software development organizations and enterprise-class technology, and they continue to choose Vimeo. So I continue to be very, very excited about the enterprise business. I believe it can continue to be a solid growth engine for us regardless of just a few minor ups or downs inside of a quarter.

And now we'll go to Tom Champion from Piper Sandler.

Great. Philip, I guess maybe on enterprise with the leadership changes you made at the start of the year and everything you see on the product side, maybe not to put too pointed a question out there, but we did see an enterprise customer decline sequentially. Just curious your thought on the ability to get that back to growth in the second half of the year. And I'm curious, as you think about enterprise over the last quarter, was there any impact from macroeconomic turmoil that maybe was in place at the start of 2Q and/or just any thoughts on if changes to the search landscape are impacting the enterprise side of the business? I don't know if it does or it doesn't, but search is clearly in a period of change. So any comments around those issues would be really helpful.

Sure. So first of all, what I would say is that we continue to win new customers. And we're excited about the fact that we're bringing more customers into Vimeo every single day. We do have a number of customers that churn. This is a business that I would tell you that when I got here, the AOV in that business was much lower than where it is today. And so how we classify customers, whether or not they're a new Vimeo enterprise customer, self-serve customer, a custom customer or an add-on customer, we're still getting some packaging and pricing right in that space. We're launching some new SKUs in the mid-market. And it's -- increasingly, what we're doing is we're trying to provide a perfect stair step up from self-service all the way up to enterprise. I think I've said in the past that roughly about 70% of our customers in the enterprise business come out of that self-serve business. And so in any given quarter, it's been interesting to me to see that we sometimes change customers back and forth between those businesses. But overall, I've been pretty pleased with our ability to bring new customers into the business. So still excited about it. I would say on the macroeconomic trends, we've seen a few challenges in some geographies from tariffs and some uncertainty. We've seen a little bit of uncertainty in some areas, health care, as an example, and education that maybe are not as strong as what we'd like to see. But I would also tell you that we've got a stronger value proposition than ever in some of those places. Our ability to be able to do interactive video, we think, is going to be important. Our ability to be able to do HIPAA and compliant video with the health care organizations, we continue to have a strong value proposition. And then your last question as it relates to search. Look, we've seen a lot of organizations fall off a cliff in terms of SEO. I've seen some numbers as high as like 30% to 40% drop off. Our team is doing a better job than they ever have in doing return on ad spend. We've focused really, really, really tight on that. And I think that we're probably more efficient than we've ever been in that space. We also think what I'm excited about is with some of the work we're doing in Agentic AI, we actually have the ability to be able to help customers with SEO and search and really make video part of that longer-term SEO strategy. So while there are some challenges in the environment in that space, we also view what we're releasing in the marketplace as something that might be a solution.

Okay. Maybe if I could just ask one more. Gillian, I'd love to have you talk a little bit about the investment plans for the year. I think last quarter, it was up to $30 million in R&D, and it seems like maybe there's been a change there or some learnings. And just maybe talk to us about the investment plans for the year.

Absolutely. So I think what we're finding is that we're able to invest more efficiently than we expected. So when you look at our guidance overall, the top line guidance is roughly the same as where we were before, but we've been able to bring up the adjusted EBITDA guidance. And that really is because we're able to get more done with less. I think it is not at all an indication of any less enthusiastic approach to investing. But as we go and deploy the money, I think we're being very, very careful about is every dollar something we want to spend, and we've been adjusting along the way. So we're delighted that we can have that kind of an EBITDA result even while we invest. What I think it really speaks to is something we've talked about for a long time, which is the Vimeo business model is great. This business really can generate very attractive margins even when we're in a lower growth environment. So as we build this business, we have always had the approach of let's invest very, very carefully with our shareholders' money. And you're seeing us be able to put up better EBITDA margins, which has actually been a trend we've seen over the last 2 years as well.

I want to add one thing in addition. I think we're super proud of how efficient we've been in this space. The other thing is that we are taking a business that has had close to a dozen different products, and we're bringing that entire business down and that code base down to a single code base over a period of time. As we deprecate older products, as we converge these products together, we get more efficient and we get faster. And so our pace of innovation, I talk a lot about this in our shareholder letters about pace of innovation. It is so, so important to customers right now in a world where AI is changing the interface to information that we are able to keep pace and actually outpace our competitors in taking customers and the entire video platform we have into this next era of AI. And so I'm excited both about our efficiency, but also our speed at which we're innovating.

And our last question, Bill Kerr from TD Cowen.

So you mentioned on the shareholder video that you're testing Agentic AI features with customers now. I was hoping you might be able to describe what some of those features look like and what the potential time line might look like for a broader rollout of those features that you're testing now?

I've recently seen some statistics that state that over 64% of companies in the world are rolling out AI agents. And we intend to make Vimeo a part of that AI agent ecosystem. The ability to be able to use any AI agent that you want and be able to query the Vimeo library to be able to ask questions. Can you find a video that has my old logo? What is the most frequently watched video inside of my video library? And how long do people watch it? Is there a particular color palette that's being used inside of this video or being able to allow a customer support department to be able to integrate video directly into that customer support experience. Say, for example, you have a complex product. And instead of you having to just put out text to be able to guide the user, you can go right to a section of a video. The idea of agentic video is literally making Vimeo like almost like ChatGPT for Vimeo, being able to provide access to the entire library through a simple agent, a simple natural language interface. And we're really excited. We see huge uses for this in things like health care to be able to augment the patient experience. We see the opportunity to bring down customer support costs by being -- if a picture is worth a thousand words, video is worth a million words and the ability to be able to deliver that video right at the right moment to -- in a customer support situation is exciting. The ability to be able to onboard employees. One of the biggest contributors to our video library is

Okay. Great. And then I just had one more on capital allocation. You guys continue to generate a significant amount of free cash flow. And you maintain a strong cash balance. Can you talk about how you're thinking about deploying that capital, especially since it seems like you guys have gotten more efficient with your investments for this year. So yes, just looking to get some more color on where you're deploying that capital.

We're always looking at sort of the 3 legs of the capital allocation stool, invest in the business, buy back shares and M&A. And as we really came into this year very focused on the invest in the business angle on that. And so that's what we've been really focused on at least near term. But we believe that we are a very attractive acquirer. We are stable. We have a great business model. We're in a really exciting space. And so we do look at a lot out there. I think our bar to have something be something that we want to devote the team's energy to and distract from other things we're doing is pretty high. So, so far, nothing has passed that test, if you will. And then you've seen us buy back shares over time, and we clearly have an appetite for our shares out there as we work through the years.

And that's all for our questions. With that, I'll turn it back over to our CEO, Philip Moyer.