Vimeo(VMEO) - 2023 Q2 - Quarterly Report

PART I Consolidated Financial Statements This section presents Vimeo's unaudited consolidated financial statements for the period ended June 30, 2023, covering balance sheets, operations, cash flows, and detailed notes Consolidated Balance Sheet The consolidated balance sheet provides a snapshot of Vimeo's financial position, detailing assets, liabilities, and equity at period-end Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $596,061 | $605,431 | | Cash and cash equivalents | $278,445 | $274,497 | | Goodwill | $245,406 | $245,406 | | Total Liabilities | $243,168 | $251,573 | | Deferred revenue | $173,995 | $167,388 | | Total Shareholders' Equity | $352,893 | $353,858 | Consolidated Statement of Operations Vimeo's Q2 2023 operations show a revenue decrease but a significant turnaround to net earnings, driven by reduced operating expenses Statement of Operations Highlights (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $101,835 | $110,977 | $205,417 | $219,331 | | Gross Profit | $78,990 | $84,099 | $158,900 | $165,697 | | Operating Income (Loss) | $4,595 | $(27,297) | $1,790 | $(53,552) | | Net Earnings (Loss) | $5,871 | $(26,502) | $5,173 | $(53,060) | | Diluted EPS | $0.03 | $(0.16) | $0.03 | $(0.33) | Consolidated Statement of Cash Flows The statement of cash flows highlights a significant improvement in net cash provided by operating activities for the first half of 2023 Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $11,196 | $(48,710) | | Net cash provided by investing activities | $532 | $1,002 | | Net cash used in financing activities | $(7,615) | $(5,729) | | Net increase (decrease) in cash | $3,959 | $(53,925) | Note 2—Revenue Revenue is primarily derived from SaaS subscriptions, with detailed disaggregation by category and geographic region for the period Disaggregated Revenue (Six Months Ended June 30, in thousands) | Category | 2023 | 2022 | | :--- | :--- | :--- | | Self-Serve & Add-Ons | $142,423 | $154,337 | | Vimeo Enterprise | $24,471 | $18,896 | | Other | $38,523 | $46,098 | | Total | $205,417 | $219,331 | Revenue by Geography (Six Months Ended June 30, in thousands) | Region | 2023 | 2022 | | :--- | :--- | :--- | | United States | $108,899 | $109,881 | | All other countries | $96,518 | $109,450 | | Total | $205,417 | $219,331 | Note 5—Revolving Credit Facility The company terminated its $100 million revolving credit facility, effective June 30, 2023, with all outstanding obligations settled - Vimeo terminated its $100 million revolving credit facility effective June 30, 2023[60] Note 8—Stock-Based Compensation Significant changes in stock-based compensation resulted from amendments to executive agreements and a reversal of previously recognized expenses - Following the resignation of Chairman Joseph Levin, his Restricted Stock Agreement was amended, reducing the share count by one-third and leading to a reversal of $14.8 million in stock-based compensation expense in Q1 2023[71][72][74] - CEO Anjali Sud's RSU award agreement was amended in March 2023, but the award is not expected to vest following her announced intention to step down as CEO, effective August 31, 2023[75] Note 11—Contingencies Vimeo is involved in several significant legal proceedings, primarily related to copyright infringement and a class action lawsuit - Vimeo is appealing an EUR 8.5 million judgment in a copyright case brought by Italian broadcaster RTI, which has initiated proceedings in New York to enforce the judgment[99] - The company is defending against copyright infringement lawsuits from EMI/Capitol Records in the U.S. and Sony, Universal, and Warner Music in Italy[89][103] - A preliminary approval has been granted for a $2.3 million settlement in a class action lawsuit concerning the Illinois Biometric Information Privacy Act (BIPA)[106] Note 13—Restructuring Vimeo completed a restructuring plan in Q1 2023, reducing its workforce by 11% and incurring one-time termination benefits Restructuring Costs (Six Months Ended June 30, 2023, in thousands) | Category | Cost | | :--- | :--- | | Cost of revenue | $298 | | Research and development expense | $2,813 | | Sales and marketing expense | $1,078 | | General and administrative expense | $699 | | Total | $4,888 | - The restructuring plan involved a workforce reduction of approximately 11% of employees[110] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a strategic shift towards profitability, achieving positive operating income and Adjusted EBITDA despite revenue declines Key Operating Metrics (Q2 2023 vs Q2 2022) | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Self-Serve & Add-Ons | | | | | Average Subscribers (k) | 1,455.2 | 1,566.3 | (7)% | | ARPU | $195 | $200 | (3)% | | Vimeo Enterprise | | | | | Average Subscribers (k) | 2.6 | 1.9 | 42% | | ARPU | $19,672 | $21,220 | (7)% | | Bookings (k) | $18,205 | $10,575 | 72% | - Achieved positive operating income of $4.6 million in Q2 2023, compared to a loss of $27.3 million in Q2 2022, driven by a 33% reduction in total operating expenses[141][142] - Adjusted EBITDA improved to $5.0 million in Q2 2023 from a loss of $6.4 million in Q2 2022[144] - The company maintains a strong liquidity position with $278.4 million in cash and cash equivalents and no debt as of June 30, 2023[169] Quantitative and Qualitative Disclosures about Market Risk No material changes in the company's market risk have occurred since previous annual and quarterly disclosures - No material changes in market risk have occurred since the last annual and quarterly reports[172] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of the end of the reporting period[175] - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[176] PART II Legal Proceedings Information regarding legal proceedings is incorporated by reference from the detailed disclosures in Note 11 of the financial statements - Information regarding legal proceedings is detailed in Note 11 of the financial statements[180] Risk Factors No material changes to the company's risk factors have occurred since the last annual report on Form 10-K - There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K[181] Unregistered Sales of Equity Securities and Use of Proceeds Vimeo did not conduct any unregistered sales of equity securities or repurchase common stock during the quarter - Vimeo did not conduct any unregistered sales of its equity securities during Q2 2023[182] - Vimeo did not purchase any of its common stock during Q2 2023[183] Other Information No directors or officers entered into, modified, or terminated Rule 10b5-1 trading plans during the second quarter of 2023 - No directors or officers entered into, modified, or terminated Rule 10b5-1 trading plans during the quarter[185] Exhibits This section lists the exhibits filed with the Form 10-Q, including management contracts and officer certifications