Q1 2024 Earnings Summary
- Phenomenal Subscriber Growth in E-commerce Subscriptions from New Customers in New Markets: The company is experiencing significant subscriber growth, particularly in smaller e-commerce subscriptions from brand-new customers in markets they are just starting to tap into. This growth provides an opportunity to upsell and grow these customers over time as their content needs and budgets expand.
- Strong Revenue Renewal Rates for Enterprise Subscribers: Despite macroeconomic challenges and the impact of the Hollywood strikes, revenue renewal rates for enterprise subscribers remain robust, averaging north of 100%. This indicates strong customer retention and stable revenue from enterprise clients.
- Significant Upsell Opportunities in Video Attach Rates: While the video attachment rate has flattened this quarter, there is a substantial upsell opportunity as many new e-commerce subscribers currently do not have video included in their subscriptions. As these customers grow in budget and content needs, the company can migrate them to higher-value subscriptions that include video, representing potential future revenue growth.
- Revenue retention rate decreased to 90%, down from prior levels of 99.8%, indicating challenges in retaining revenue from existing customers and a contraction in a la carte spending due to macroeconomic impacts and residual effects from Hollywood strikes.
- The agency business declined by approximately 11% in Q1 2024, worsening from higher single-digit declines in Q4 2023, suggesting ongoing pressures in this segment.
- Video attachment rate flattened in Q1 2024 after consistent growth in previous quarters, reflecting challenges in upselling video content to customers, especially as smaller e-commerce subscriptions—which don't include video options—constitute a significant portion of new subscriber growth.
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Subscriber Retention Rate
Q: Will retention rates return to the mid-90% range, and when?
A: Management expects the revenue retention rate to gradually tick back up into the mid-90% range over time as they exit 2024, unwinding the impacts of the Hollywood strikes and macro challenges. The current dip to 90% is driven by a mix shift toward smaller e-commerce subscriptions from new customers, which start with lower retention rates but offer growth opportunities as their content needs and budgets expand. Additionally, a contraction in a la carte spending outside subscriptions, attributed to residual strike impacts and budget contractions, has affected retention rates.
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Impact of Hollywood Strikes
Q: When will operations normalize post-Hollywood strikes and macro challenges?
A: Management anticipates a return to normal levels by the second half of the year, with some slowness continuing into Q2. While they don't expect a full return to pre-strike conditions, the company is largely tracking expectations in their guidance and budgeting from a timing standpoint.
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Enterprise Renewal Rates
Q: Did enterprise renewal rates remain at roughly 100% in Q1?
A: Yes, enterprise revenue renewal rates continued to average north of 100% in Q1.
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Corporate and Agency Trends
Q: How did corporate and agency segments perform in Q1?
A: The corporate segment remained in growth during Q1, continuing the positive trend from Q4 2023. The agency segment experienced a low double-digit decline of approximately 11%, aligning with prior trends.
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Video Attach Rate Outlook
Q: What is the outlook for the video attach rate growth?
A: The video attach rate flattened in the quarter after previous periods of growth. This is influenced by the influx of new e-commerce subscribers who don't yet have video options turned on. Management sees this as an upsell opportunity over time, aiming to migrate customers as their budgets and content needs grow. They plan to focus on merchandising video offerings and expect to introduce video options to more subscribers in the future.