We came across a bullish thesis on Vimeo, Inc. (VMEO) on High Growth Investing's Substack by Stefan Waldhauser. In this article, we will summarize the bulls' thesis on VMEO. Vimeo, Inc. (VMEO)'s share was trading at $6.79 as of Nov 8. VMEO's trailing P/E was 33.95 according to Yahoo Finance.
Highlighting the company's sector and industry, a technician working on a complex SaaS in a technology lab.
Vimeo reported robust Q3 2024 results, exceeding both guidance and analyst expectations, marking a significant step forward for the company. Total bookings surpassed $100 million, matching last year's level, while revenue reached $105 million, only slightly down from the previous year. Impressively, Vimeo achieved a net profit of $9 million and generated $21 million in free cash flow. These strong financials reflect the growth trajectory of its three business segments, though each has evolved differently post-pandemic.
The Enterprise segment has emerged as Vimeo's star performer, driven by its appeal to medium and large enterprise customers. Bookings in this segment grew 39% year-over-year to $25 million, accounting for 25% of total bookings, while revenue surged 42% to $22 million. Vimeo now serves 3,800 Enterprise clients, reflecting a 26% growth in customer count, with annual revenue per customer up by 11% to over $23,000. This segment's success highlights the potential for Vimeo to position itself as a leading B2B video solutions provider, with Enterprise's growth likely to drive company-wide revenue gains in the near future.
In contrast, the Self-Serve & Add-Ons segment, historically Vimeo's largest business, continues to see declines as the COVID-19 boom fades. Bookings for this segment fell 8%, but the impact on revenue was mitigated by price increases, resulting in a milder 6% revenue decline. Vimeo's decision to cut advertising expenses by nearly 50% also contributed to this stabilization, with a smaller subscriber base counterbalanced by higher prices. This segment still represents two-thirds of Vimeo's total revenue, showing resilience even amid market challenges.
The "Other" segment, mainly composed of Vimeo's OTT product, saw another year-over-year decline of over 20% as legacy products were phased out. Despite this, OTT now contributes 82% of the segment's revenue, an increase from 62% last year, and has maintained stable bookings. This segment is set to stabilize further as older products are discontinued, potentially leading to an eventual rebranding solely as OTT, enhancing transparency and focus.