- Third quarter revenue of $78.7 million, up 20%
year-over-year
- Achieves $322.8 million ARR, delivering 21% year-over-year
growth in the third quarter
- Net income increases to $4.2 million and Non-GAAP net income
improves to $8.4 million
- Delivering greater profitability, raises full year 2023
Non-GAAP net income guidance
Semrush Holdings, Inc. (NYSE: SEMR), a leading online visibility
management SaaS platform, today reported financial results for the
third quarter ended September 30, 2023.
"In the third quarter, we achieved strong results, with revenue
growth accelerating to 20%, ARR growth of 21%, and customers
increasing roughly 14% year-over-year," said Oleg Shchegolev, CEO
and Co-Founder of Semrush. "We have built a business focused on
driving strong, sustainable growth with improving profitability. We
remain focused on three main growth pillars to set us up for
long-term, durable success: increasing new user growth, maximizing
the value we generate from our users, and adding new products to
our portfolio to address client needs and market trends. Looking
ahead, we are excited about what the future holds and are committed
to making Semrush the platform of choice for businesses of all
sizes, across all industries, all around the world, to improve
their online visibility,” added Mr. Shchegolev.
Third Quarter Financial Highlights
- Third quarter revenue of $78.7 million, up 20%
year-over-year.
- ARR of $322.8 million as of September 30, 2023, up 21%
year-over-year.
- Dollar-based net revenue retention of 109% as of September 30,
2023, compared to 112% in the previous quarter.
- Approximately 106,800 paying customers as of September 30,
2023, up nearly 14% from a year ago.
- Net income of $4.2 million for the third quarter, compared with
a net loss of $9.1 million from a year ago.
- Non-GAAP net income of $8.4 million for the third quarter,
compared with non-GAAP net loss of $7.1 million from a year
ago.
See “Non-GAAP Financial Measures & Definitions of Key
Metrics” below for how Semrush defines ARR, dollar-based net
revenue retention, non-GAAP net income (loss), and the financial
tables that accompany this release for reconciliations of each
non-GAAP financial measure to its closest comparable GAAP financial
measure.
Third Quarter 2023 Business Highlights
We are committed to empowering our customers with the
best-in-class platform needed to boost their online presence and
gain an edge in the market. In the third quarter, we advanced and
expanded many of our offerings:
- Continued investments in Generative AI to provide enhanced,
more efficient content creation capabilities through Semrush’s
platform and App Center:
- Released two new ChatGPT features in the Listing Management
tool that allows customers to reply to online reviews faster and
find higher-quality keywords for their local business
listings.
- Introduced the AI Social Media Post Generator, an AI-powered
tool that generates social media posts based on trending topics,
enabling customers to amplify their social presence while speeding
up the content creation process.
- Launched the Ecommerce Booster app that uses built-in AI tools
to audit product page performance and create customized action
plans, helping businesses easily improve their Shopify
listings.
- Semrush customers who pay more than $10,000 annually grew by
more than 20% year-over-year.
- Ended the quarter with more than 987,000 registered free active
customers, up 25% year-over-year.
As of September 30, 2023, we had approximately 106,800 paying
customers, accounting for $322.8 million in ARR, an increase from
94,000 paying customers accounting for $267.3 million in ARR as of
September 30, 2022.
Business Outlook
“Looking at the fourth quarter, I am confident in the underlying
trends in the business and capabilities of our team as we continue
on the path to delivering strong growth and profitability. As a
result, we are meaningfully raising our non-GAAP net income
guidance to account for our improved efficiency and tightening our
previously issued top line guidance,” said Brian Mulroy, CFO of
Semrush. “We believe we will continue to make progress on our
revenue growth pillars and maintain a disciplined and balanced
approach to improving efficiency and profitability while also
investing in future growth opportunities that we expect will drive
long-term value.”
Based on information as of today, November 1, 2023, we are
issuing the following financial guidance:
Fourth Quarter 2023 Financial Outlook
- For the fourth quarter, we expect revenue in a range of $82.7
to $83.7 million, which at the mid-point would represent growth of
approximately 21% year-over-year.
- We expect fourth quarter non-GAAP net income of $4.1 to $6.1
million.
Full-Year 2023 Financial Outlook
- For the full year, we are tightening our revenue guidance to
$307.0 to $308.0 million, which would represent growth at the
midpoint of approximately 21% year-over-year.
- We are raising our non-GAAP net income guidance to $9.0 to
$11.0 million, up from our prior guidance of $2.0 to $4.0 million,
for the full year 2023.
Reconciliation of non-GAAP net income guidance to the most
directly comparable GAAP measure is not available without
unreasonable efforts on a forward-looking basis due to the high
variability, complexity and low visibility with respect to the
charges excluded from this non-GAAP measure, in particular the
measures and effects of share-based compensation expense, employer
taxes and tax deductions specific to equity compensation awards
that are directly impacted by future hiring, turnover and retention
needs. We expect the variability of the above charges to have a
significant, and potentially unpredictable, impact on our future
GAAP financial results.
Conference Call Details
Semrush will host a conference call and webcast to discuss its
financial results, business highlights, outlook and other matters,
the details for which are provided below.
Date: Thursday, November 2, 2023
Time: 8:30 a.m. ET
Hosts: Oleg Shchegolev, CEO, Eugene Levin, President, and Brian
Mulroy, CFO
Conference ID: 3520221
Participant Toll Free Dial-In Number: 1 (888) 350-3436
Participant International Dial-In Number: 1 (646) 960-0185
Registration:
The live webcast of the conference call as well as the replay
can be accessed for a limited time from the Semrush investor
relations website at http://investors.semrush.com/.
About Semrush
Semrush is a leading online visibility management SaaS platform
that enables businesses globally to run search engine optimization,
pay-per-click, content, social media and competitive research
campaigns and get measurable results from online marketing. Semrush
offers insights and solutions for companies to build, manage, and
measure campaigns across various marketing channels. Semrush, with
approximately 106,800 paying customers, is headquartered in Boston
and has offices in Philadelphia, Trevose, Austin, Dallas,
Amsterdam, Barcelona, Belgrade, Berlin, Limassol, Prague, Warsaw,
and Yerevan.
Forward-looking Statements
This press release contains forward-looking statements within
the meaning of the federal securities laws, which are statements
that involve substantial risks and uncertainties. Forward-looking
statements generally relate to future events or our future
financial or operating performance. In some cases, you can identify
forward-looking statements because they contain words such as
“may,” “will,” “shall,” “should,” “expects,” “plans,”
“anticipates,” “could,” “intends,” “target,” “projects,”
“contemplates,” “believes,” “estimates,” “predicts,” “potential” or
“continue” or the negative of these words or other similar terms or
expressions that concern our expectations, strategy, plans or
intentions. Forward-looking statements include, but are not limited
to, guidance on financial results for the fourth quarter and full
year of 2023, including revenue and non-GAAP net income; statements
about future operating results, growth opportunities, our ability
to add new products and address user needs, business trends,
capability to deliver profits, cost reduction and structures,
product development and consumer growth.
The forward-looking statements contained in this release are
also subject to other risks and uncertainties, including those more
fully described in our filings with the Securities and Exchange
Commission (“SEC”), including in the sections entitled “Risk
Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations'' in our filings with the
Securities and Exchange Commission ("SEC"), including our most
recent annual report on form 10-K, and our subsequently filed
quarterly reports and other SEC filings. Although we believe that
our plans, intentions, expectations, strategies and prospects as
reflected in or suggested by those forward-looking statements are
reasonable, we can give no assurance that the plans, intentions,
expectations or strategies will be attained or achieved. The
forward-looking statements in this release are based on information
available to us as of the date hereof, and we disclaim any
obligation to update any forward-looking statements, except as
required by law. These forward-looking statements should not be
relied upon as representing our views as of any date subsequent to
the date of this press release.
Additional information regarding these and other factors that
could affect our results is included in our SEC filings, which may
be obtained by visiting our Investor Relations page on its website
at investors.semrush.com or the SEC's website at www.sec.gov.
Non-GAAP Financial Measures & Definitions of Key
Metrics
Semrush has provided in this release the non-GAAP financial
measures of non-GAAP income (loss) from operations and non-GAAP net
income (loss). Semrush uses these non-GAAP financial measures
internally in analyzing its financial results and believes it is
useful to investors, as a supplement to GAAP measures, in
evaluating Semrush’s ongoing operational performance. Semrush
believes that the use of these non-GAAP financial measures provides
an additional tool for investors to use in evaluating ongoing
operating results and trends and in comparing its financial results
with other companies in Semrush’s industry, many of which present
similar non-GAAP financial measures to investors.
Non-GAAP financial measures have limitations as an analytical
tool and should not be considered in isolation from, or as a
substitute for, financial information prepared in accordance with
GAAP. Investors are encouraged to review the reconciliation of
non-GAAP measures to their most directly comparable GAAP financial
measures. A reconciliation of our non-GAAP financial measures to
their most directly comparable GAAP measures has been provided in
the financial statement tables included below in this press
release.
ARR is defined as of a given date as the monthly
recurring revenue that we expect to contractually receive from all
paid subscription agreements that are actively generating revenue
as of that date multiplied by 12. We include both monthly recurring
paid subscriptions, which renew automatically unless canceled, as
well as the annual recurring paid subscriptions so long as we do
not have any indication that a customer has canceled or intends to
cancel its subscription and we continue to generate revenue from
them.
Dollar-based net revenue retention is defined as (a) the
revenue from our customers during the twelve-month period ending
one year prior to such period as the denominator and (b) the
revenue from those same customers during the twelve months ending
as of the end of such period as the numerator. This calculation
excludes revenue from new customers and any non-recurring
revenue.
Non-GAAP income (loss) from operations. We define
non-GAAP income (loss) from operations as GAAP income (loss) from
operations, excluding stock-based compensation expense. We believe
non-GAAP income (loss) from operations provides our management and
investors consistency and comparability with our past financial
performance and facilitates period-to-period comparisons of
operations, as it eliminates the effect of stock-based
compensation, which is often unrelated to overall operating
performance.
Non-GAAP net income (loss). We define non-GAAP net income
(loss) as GAAP net income (loss), excluding stock-based
compensation expense. We believe non-GAAP net income (loss)
provides our management and investors consistency and comparability
with our past financial performance and facilitates
period-to-period comparisons of operations, as it eliminates the
effect of stock-based compensation, which is often unrelated to
overall operating performance.
Semrush Holdings, Inc.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per
share data)
Three months ended September
30,
Nine months ended September
30,
2023
2022
2023
2022
Revenue
$
78,718
$
65,793
$
224,281
$
185,531
Cost of revenue ¹
13,032
12,405
38,643
36,590
Gross profit
65,686
53,388
185,638
148,941
Operating expenses
Sales and marketing ¹
30,094
30,569
95,827
87,293
Research and development ¹
14,075
10,134
42,071
27,943
General and administrative ¹
18,769
17,007
56,797
45,388
Exit costs
—
5,932
1,292
9,417
Total operating expenses
62,938
63,642
195,987
170,041
Income (loss) from operations
2,748
(10,254
)
(10,349
)
(21,100
)
Other income, net
2,104
1,483
6,728
2,353
Income (loss) before income taxes
4,852
(8,771
)
(3,621
)
(18,747
)
Provision for income taxes
637
321
2,303
1,200
Net income (loss)
$
4,215
$
(9,092
)
$
(5,924
)
$
(19,947
)
Net income (loss) per share attributable
to common stockholders:
Basic
$
0.03
$
(0.06
)
$
(0.04
)
$
(0.14
)
Diluted
$
0.03
$
(0.06
)
$
(0.04
)
$
(0.14
)
Weighted-average number of shares of
common stock used in computing net income (loss) per share
attributable to common stockholders:
Basic
142,837
141,256
142,247
141,034
Diluted
146,271
141,256
142,247
141,034
¹ includes stock-based compensation
expense as follows:
Three months ended September
30,
Nine months ended September
30,
2023
2022
2023
2022
Cost of revenue
$
33
$
20
$
82
$
52
Sales and marketing
822
189
2,190
599
Research and development
579
329
1,464
836
General and administrative
2,769
1,442
7,028
3,629
Total stock-based compensation
$
4,203
$
1,980
$
10,764
$
5,116
Three months ended September
30,
Nine months ended September
30,
2023
2022
2023
2022
Reconciliation of Non-GAAP income
(loss) from operations
Income (loss) from operations
$
2,748
$
(10,254
)
$
(10,349
)
$
(21,100
)
Stock-based compensation expense
4,203
1,980
10,764
5,116
Non-GAAP income (loss) from
operations
$
6,951
$
(8,274
)
$
415
$
(15,984
)
Three months ended September
30,
Nine months ended September
30,
2023
2022
2023
2022
Reconciliation of Non-GAAP net income
(loss)
Net income (loss)
$
4,215
$
(9,092
)
$
(5,924
)
$
(19,947
)
Stock-based compensation expense
4,203
1,980
10,764
5,116
Non-GAAP net income (loss)
$
8,418
$
(7,112
)
$
4,840
$
(14,831
)
Semrush Holdings, Inc.
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
(in thousands)
As of
September 30, 2023
December 31, 2022
Assets
Current assets
Cash and cash equivalents
$
41,189
$
79,765
Short-term investments
188,882
157,774
Accounts receivable
5,820
3,559
Deferred contract costs, current
portion
8,192
6,974
Prepaid expenses and other current
assets
16,403
9,307
Total current assets
260,486
257,379
Property and equipment, net
5,661
8,076
Operating lease right-of-use assets
10,942
12,009
Intangible assets, net
12,901
10,286
Goodwill
7,738
6,529
Deferred contract costs, net of current
portion
3,189
2,082
Other long-term assets
1,045
2,329
Total assets
$
301,962
$
298,690
Liabilities and stockholders'
equity
Current liabilities
Accounts payable
$
9,904
$
15,495
Accrued expenses
17,923
17,847
Deferred revenue
55,240
49,354
Current portion of operating lease
liabilities
3,713
3,694
Other current liabilities
1,878
2,311
Total current liabilities
88,658
88,701
Deferred revenue, net of current
portion
405
122
Deferred tax liability
24
11
Operating lease liabilities, net of
current portion
7,880
8,929
Other long-term liabilities
226
1,023
Total liabilities
97,193
98,786
Stockholders' equity
Class A common stock
1
—
Class B common stock
—
1
Additional paid-in capital
285,831
274,057
Accumulated other comprehensive
deficit
(2,191
)
(1,206
)
Accumulated deficit
(78,872
)
(72,948
)
Total stockholders’ equity
204,769
199,904
Total liabilities and stockholders'
equity
$
301,962
$
298,690
Semrush Holdings Inc.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended
September 30,
2023
2022
Operating Activities
Net loss
$
(5,924
)
$
(19,947
)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities
Depreciation and amortization expense
4,807
6,626
Amortization of deferred contract
costs
7,510
7,145
Amortization (accretion) of premiums and
discounts on investments
(4,667
)
—
Non-cash lease expense
2,828
—
Stock-based compensation expense
10,764
5,116
Non-cash interest expense
158
149
Change in fair value of convertible debt
securities
(335
)
(889
)
Deferred taxes
12
290
Loss on disposal of subsidiaries
—
1,738
Other non-cash items
771
—
Changes in operating assets and
liabilities
Accounts receivable
(2,261
)
(344
)
Deferred contract costs
(9,835
)
(8,358
)
Prepaid expenses and other current
assets
(5,411
)
(1,395
)
Accounts payable
(5,570
)
4,824
Accrued expenses
174
(2,772
)
Other current liabilities
—
1,562
Deferred revenue
6,198
6,299
Other long-term liabilities
—
(38
)
Change in operating lease liability
(2,786
)
—
Net cash (used in) provided by operating
activities
(3,567
)
6
Investing Activities
Purchases of property and equipment
(1,065
)
(4,016
)
Purchases of short-term investments
(182,381
)
—
Proceeds from sales and maturities of
short-term investments
154,741
—
Purchases of convertible debt
securities
(319
)
(2,000
)
Capitalization of internal-use software
development costs
(3,913
)
(1,273
)
Cash paid for acquisition of businesses,
net of cash acquired
(1,232
)
(13,993
)
Purchases of other investments
(150
)
—
Net cash used in investing activities
(34,319
)
(21,282
)
Financing Activities
Proceeds from exercise of stock
options
746
1,539
Proceeds from issuance of shares in
connection with Employee Stock Purchase Plan
264
257
Payment of finance leases
(1,938
)
(1,967
)
Net cash used in financing activities
(928
)
(171
)
Effect of exchange rate changes on cash
and cash equivalents
238
(1,664
)
Decrease in cash, cash equivalents and
restricted cash
(38,576
)
(23,111
)
Cash, cash equivalents and restricted
cash, beginning of period
79,765
269,665
Cash, cash equivalents and restricted
cash, end of period
$
41,189
$
246,554
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101780295/en/
INVESTOR Brinlea C. Johnson Managing Director The
Blueshirt Group brinlea@blueshirtgroup.com
MEDIA Jesse Platz VP of Analyst and Public Relations
Semrush Holdings, Inc. jesse.platz@semrush.com
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