Earnings Check-in: Maybe I’ll Learn It’s *Never* Priced In $VMEO

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Vimeo reported Q4 earnings yesterday and given they provide monthly stats, Q4 was not earth shattering. It was all about the outlook. As they say, let’s talk about the good, the bad, and the outlook.

With the stock down 31% from prior close at the time of writing, and down 83% from spin, the outlook was ugly.

Here’s the guide, along with the announcement that the CFO is out (I think someone’s head had to roll):

I wrote one time before that “things you think are priced in… are not” and maybe one day I’ll learn from that advice.

When I wrote up Vimeo a couple weeks ago, I highlighted all the reasons why investors were shunning it: growth decelerating, clearly a COVID beneficiary, management lost credibility as they were already under their 5 year target….

That said, I thought Vimeo was still a solid business at the end of the day and much of this was “priced in.”

If you take a long-term view, hammer estimates, you could earn a solid IRR. Well that’s not the case in the short-term!

Live and learn. Anyway, there are some bright spots outside of the headlines, but many puts and takes:

  • Mgmt admitted they were na├»ve about the COVID benefit.
    • That’s positive I guess, but might still mean they don’t really know where things 2, 3 years from now will shake out.
  • NRR actually dipped below 100
    • Mgmt attributed to COVID overbuying (and kind of suggested that since it is holding in so well, maybe that shows how sticky it is, but meh)
    • They think their new pricing will cause NRR to fluctuate short-term. But they also pointed to it improving long-term (over the balance of the year) and that it is a lagging indicator
  • Landed a 3-yr, 7 figure customer to highlight upsell is working. Customer will use video library for training and such.
    • This is a win, in their view, because VMEO just started the beta for this 6 months ago. It’s also a proof of “where the market is going”
    • Again, when your ARPU is ~$260, this is a large incremental
    • That said, when we think about the guide, if VMEO is winning more of these customers, shouldn’t that be a huge tailwind to growth?
  • EBITDA is likely negative this year as they plow money into a sales team effort to convert customers.
    • Puts and takes here: if the LTV / CAC makes sense, go for it.
    • I think it likely does, but mgmt flubbed their answer on the call, didn’t get specific which likely hurts them
  • Chief Revenue Officer from Adobe has started. Many people may remember Adobe was a pioneer in navigating customers to software subs.

That’s all for now. When a stock like this gets hammered, you know you are a bag holder when you start asking what the brand is worth!

Vimeo committed a felony. I knew it was coming and didn’t care. That’s a lesson. But I am sticking with it for now.

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