- Vimeo is a cloud-based video production, hosting, sharing and editing platform used by over 287 million content creators worldwide.
- Vimeo turned GAAP profitable after 15 years, driven by growth in its Enterprise segment, which grew bookings by 55% YoY.
- Vimeo shares trade at 46.25X forward earnings and have a 3% short interest, while the company has little debt and $1.73 in cash per share.
The name Vimeo (NASDAQ:VMEO) may sound familiar to many. You may recall social media videos, training videos and music videos with the Vimeo watermark at the bottom of the screen. The company is in the Business Services sector and commanded a stock price as high as $58.00 in May of 2021. Vimeo provides cloud-based video hosting, sharing and streaming services along with video creation and editing tools for companies, social media content creators and enterprises.
Videos can be created, customized, tagged, hidden, monetized, analyzed and seamlessly updated using the same URL. Produced videos can be shared instantly on popular social media sites, including X, Alphabet (NASDAQ:GOOGL) owned YouTube, and Meta Platforms (NASDAQ:META), making Vimeo a must-have for content creators. However, it's the enterprise clients driving the majority of its growth as bookings grew 55% YoY in Q3 2023.
Platform Features
Vimeo provides software-as-a-service (SaaS) through a subscription model that ranges from the free signup with 3 videos and screen recording capabilities to the $108 monthly plan, which includes 500 videos, virtual events and webinars, simulcasting, streaming, branded invites, artificial intelligence (AI) powered script generator and brand kit. The enterprise plan provides unlimited capacity at a premium that’s only available through engagement with its sales team.
Vimeo provides AI-powered video creation tools to more than 278 million content creators worldwide. It also assures creators that videos will “never be tarnished” by in-video ads, pre-roll, post-roll or overlaps. Its corporate clients appreciate the password-protected, ad-free videos they can post for employees and training purposes.
Bookings Growth is Accelerating Again.
On Nov. 16, 2023, Vimeo reported Q3 2023 GAAP earnings of 5 cents per share, beating consensus analyst estimates for a loss of 4 cents by 9 cents. Revenues fell 1.7% YoY to $106.25 million, beating analyst estimates of $101.3 million. Total bookings rose 4% YoY to $99.9 million. GAAP gross profit margin was 79%, and non-GAAP gross margins were 80%. The company has $290 million or $1.73 in cash with just $13 million in debt.
As with subscription pricing models, the revenues are recognized during the life of the contract, while bookings reflect a more accurate view of the business. Its Self-Serve and Add-On offerings, which are the retail subscription plans up to Advanced and bandwidth services) have been slower as they were down 4% YoY, but the pace has improved. The company believes it will be a growth driver again with more time as the economy improves.
Driving Efficiencies
Stock-based compensation fell 63% YoY to $7 million versus $12 million. GAAP general and administrative expenses fell 30% YoY to 17% of revenue. Interest rate gains were $4 million, income was $8 million, and adjusted EBITDA was $13 million.
Notable Enterprise Vimeo Customer Wins in Q3.
Vimeo pointed out some notable enterprise customer wins in the quarter. The Boston Consulting Group signed up for e-learning. Forrester Research (NASDAQ:FORR) signed up for marketing on social media and the web. Shutterstock (NYSE:SSTK) signed for executive communications. Justworks, Omni Hotels & Resorts, SHEIN, Alarm.com Holdings (NASDAQ:ALRM) and Oxford University signed on to organize and manage their videos.
Interim CEO Insights
Vimeo's interim CEO Adam Gross commented, "We are opening up our product to more free users as we believe that they are more likely to buy after trying. We are fortunate to have a funnel of millions of free users to source from - it is among the many assets we have built over the last decade. Additionally, we believe a stronger product focus should benefit retention over time. Shifting in this direction could cause some headwinds on new bookings in 2024, but we believe we will generate more, and higher margin, long-term revenues.” This was Gross’s first quarter as interim CEO as its previous CEO of nine years left to join ad-sponsored streaming network Tubi.com own by Fox Corp (NASDAQ:FOXA)
Daily Bull Flag
The daily candlestick chart for VMEO illustrates a daily bull flag set-up. Shares spiked on its Q3 2023 earnings report as the company turned a GAAP profit, shooting shares up to $4.19 the following morning. The stock gap crapped as it sold off to form the daily market structure high (MSH) sell trigger at $3.54. Shares were chopped around, forming a descending price channel comprised of lower highs and lower lows.
The parallel nature of the price moves also indicates the formation of a bull flag with the potential trigger on a breakout through the $3.78 upper descending trendline. The daily relative strength index (RSI) is attempting to bounce off the 50-band. The daily 200-period moving average resistance sits at $3.75. Pullback support levels are at $3.54, $3.38, $3.20 and $3.02.