- First quarter revenue of $85.8 million, up 21%
year-over-year
- ARR of $354.2 million, up 21% year-over-year
- First quarter net cash provided by operating activities of
$14.8 million
- First quarter free cash flow of $12.0 million, free cash flow
margin of 14.0%
- New Enterprise SEO Platform now Generally Available (GA)
Semrush Holdings, Inc. (NYSE: SEMR), a leading online visibility
management SaaS platform, today reported financial results for the
first quarter ended March 31, 2024.
“We had a strong start to 2024, achieving first quarter revenue
and ARR growth of 21% year-over-year. Importantly, we reported
strong profitability exceeding our guidance, with income from
operations of $1.5 million and non-GAAP income from operations of
$9.7 million. In the first quarter, we reported nearly 112,000
paying customers and added several new products and features to our
platform. Looking ahead, we are very optimistic about our
potential. We continue to succeed in executing on our core growth
pillars by onboarding more customers, cross-selling and up-selling
to existing customers and leveraging AI in our platform to ensure
businesses of any size have the most valuable digital marketing
software suite. And now with our Enterprise SEO product generally
available, we expect to drive momentum by moving up-market to
larger accounts,” said Oleg Shchegolev, CEO and Co-Founder of
Semrush.
First Quarter 2024 Financial Highlights
- First quarter revenue of $85.8 million, up 21%
year-over-year.
- Income from operations of $1.5 million for the first quarter,
compared to a loss from operations of $10.8 million in the prior
year period.
- Operating margin of 1.7% for the first quarter, compared to
operating margin of (15.2)% in the prior year period.
- Non-GAAP income from operations of $9.7 million for the first
quarter, compared to a non-GAAP loss from operations of $6.5
million in the prior year period.
- Non-GAAP operating margin of 11.3% for the first quarter,
compared to non-GAAP operating margin of (9.1)% in the prior year
period.
- Q1 free cash flow of $12.0 million and free cash flow margin of
14.0%.
- ARR of $354.2 million as of March 31, 2024, up 21%
year-over-year.
- Nearly 112,000 paying customers as of March 31, 2024, up 10%
from a year ago.
- Dollar-based net revenue retention of 107% as of March 31,
2024, consistent with the previous quarter.
See “Non-GAAP Financial Measures & Definitions of Key
Metrics” below for how Semrush defines ARR, dollar-based net
revenue retention, non-GAAP income (loss) from operations, non-GAAP
operating margin, free cash flow, and free cash flow margin, and
the financial tables that accompany this release for
reconciliations of each non-GAAP financial measure to its closest
comparable GAAP financial measure.
First Quarter 2024 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 first 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:
- Introduced Semrush Copilot, a feature that provides AI-powered
SEO alerts and recommendations based on machine learning algorithms
that reference data from several Semrush tools at once.
- Launched AdCreative.ai, an AI-powered app that generates ad
creatives, product photoshoots, and texts for any social media or
display platform.
- We are pleased to announce our new Enterprise SEO Platform is
now generally available following a soft launch in October 2023. We
see strong demand for the product and it is now being used by
large, multinational corporations.
- We have upgraded .Trends, one of our Competitive Intelligence
(CI) products with daily and weekly competitor website traffic
data. Previously the data was tracked monthly. We believe the added
granularity will help businesses gain deeper insights on their
competitors’ content performance, shifts in strategy, website and
individual page traffic, special events, and seasonal
variations.
- Semrush customers who pay more than $10,000 annually grew by
32% year-over-year.
- Ended the quarter with more than 1,125,000 registered free
active customers, up 27% year-over-year.
Business Outlook
“We delivered a strong first quarter across the board, exceeding
our revenue and Non-GAAP operating margin guidance,” said Brian
Mulroy, CFO of Semrush. “Growth this quarter was driven by new
customer additions and expansion of our average revenue per
customer as we continue to execute on our cross-sell and up-sell
strategy. We continue to drive cost efficiencies, invest in the
business, and expand profitability. Looking ahead, we are raising
our full year 2024 guidance and are confident in our ability to
grow and scale our business. We expect to make incremental
investments to strengthen our position while also driving further
operating leverage in the business and delivering long-term value
to our shareholders.”
Based on information as of today, May 6, 2024, we are issuing
the following financial guidance:
Second Quarter 2024 Financial Outlook
- For the second quarter, we expect revenue in a range of $89.1
to $90.1 million, which at the mid-point would represent growth of
approximately 20% year-over-year.
- We expect second quarter non-GAAP operating margin to be
approximately 11.0%.
Full-Year 2024 Financial Outlook
- For the full year, we expect revenue in a range of $366 to $369
million, which represents growth of 19% to 20% year-over-year.
- We expect full year non-GAAP operating margin of 10.5% to
11.5%.
- We expect full year free cash flow margin to be approximately
8.0%.
As indicated in our fourth quarter 2023 and full year 2023
Financial Results, we are no longer providing guidance for non-GAAP
net income, and instead are guiding both non-GAAP operating margin
and free cash flow margin. We have also updated our definitions of
non-GAAP income (loss) from operations to exclude Amortization of
Acquired Intangible Assets, Acquisition Related Costs,
Restructuring Costs and other one-time expenses outside the
ordinary course of business (for example, our Exit Costs incurred
primarily in 2022) in addition to the prior exclusion of Stock
Based Compensation. Our guidance for the second quarter 2024 and
full year 2024, as well as actual results presented herein, reflect
this change.
Reconciliations of non-GAAP operating margin and free cash flow
margin guidance to the most directly comparable GAAP measures are
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 these non-GAAP measures,
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: Tuesday, May 7, 2024 Time: 8:30 a.m. ET Hosts: Oleg
Shchegolev, CEO, Eugene Levin, President, and Brian Mulroy, CFO
Conference ID: 283299 Participant Toll Free Dial-In Number: +1
833 470 1428 Participant International Dial-In Number: +1 929 526
1599
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
nearly 112,000 paying customers, is headquartered in Boston and has
offices in Philadelphia, Trevose, Austin, Dallas, Florida,
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 second quarter and full
year of 2024 (including revenue, non-GAAP operating margin, and
free cash flow margin); statements regarding the expectations of
demand for our products, including the .Trends product, onboarding
new customers, adoption of and demand for new products and
features; statements about expansion of our platform, and launching
new products; statements about future operating results, growth
opportunities, future spending and incremental investments,
business trends, capability to deliver profits, and growth and
value for shareholders.
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
We believe that providing non-GAAP information to investors, in
addition to the GAAP presentation, allows investors to view the
financial results in the way management views the operating
results. We further believe that providing this information allows
investors to not only better understand our financial performance,
but also to evaluate the efficacy of the methodology and
information used by management to evaluate and measure such
performance. We also believe that the use of non-GAAP financial
measures provides an additional tool for investors to use in
evaluating ongoing operating results and trends and in comparing
our financial results with other companies in our industry, many of
which present similar non-GAAP financial measures to investors. We
also believe free cash flow margin is useful to investors as we
monitor it as a measure of our overall business performance, which
enables us to analyze our future performance without the effects of
non-cash items and allows us to better understand the cash needs of
our business. The non-GAAP information included in this press
release should not be considered superior to, or a substitute for,
financial statements prepared in accordance with GAAP and may be
different from non-GAAP financial measures presented by other
companies. Investors are encouraged to review the reconciliation of
non-GAAP measures to their most directly comparable GAAP financial
measures provided in the financial statement tables included below
in this press release.
Annual Recurring Revenue (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.
Free cash flow and free cash flow margin. We define free
cash flow, a non-GAAP financial measure, as net cash provided by
(used in) operating activities less purchases of property and
equipment and capitalized software development costs. We define
free cash flow margin as free cash flow divided by GAAP
revenue.
Non-GAAP income (loss) from operations, and non-GAAP
operating margin. As described above, we have updated our
definitions for non-GAAP income (loss) from operations and have
introduced non-GAAP operating margin; the updated definitions,
which apply to our guidance for the second quarter and full year
2024, are as follows. We define non-GAAP income (loss) from
operations as GAAP income (loss) from operations, excluding
Stock Based Compensation, Amortization of Acquired Intangible
Assets, Acquisition Related Costs, Restructuring Costs and other
one-time expenses outside the ordinary course of business (for
example, our Exit Costs incurred primarily in 2022). We define
non-GAAP operating margin as non-GAAP income (loss) from
operations divided by GAAP revenue. We believe investors may want
to consider our results with and without the effects of these items
in order to compare our financial performance with that of other
companies that exclude such items and to compare our results to
prior periods.
Stock-based compensation. Stock-based compensation is a
non-cash expense accounted for in accordance with FASB ASC Topic
718. We believe that the exclusion of stock-based compensation
expense allows for financial results that are more indicative of
our operational performance and provide for a useful comparison of
our operating results to prior periods and to our peer companies
because stock-based compensation expense varies from period to
period and company to company due to such things as differing
valuation methodologies, timing of awards and changes in stock
price.
Amortization of acquired intangible assets. Excluding
amortization of acquired intangible assets from non-GAAP expense
and income measures allows management and investors to evaluate
results “as-if” the acquired intangible assets had been developed
internally rather than acquired and, therefore, provides a
supplemental measure of performance in which our acquired
intellectual property is treated in a comparable manner to our
internally developed intellectual property. These amounts are
inconsistent in amount and frequency and are significantly impacted
by the timing and size of acquisitions. Although we exclude
amortization of acquired intangible assets from our non-GAAP
expenses, we believe that it is important for investors to
understand that such intangible assets contribute to revenue
generation.
Restructuring and other costs. Restructuring and other
costs include restructuring expenses as well as other charges that
are unusual in nature, are the result of unplanned events, and
arise outside the ordinary course of our business. Restructuring
expenses consist of employee severance costs, charges for the
closure of excess facilities and other contract termination costs.
Other costs include litigation contingency reserves, asset
impairment charges, relocation expenses associated with the
migration of employees in 2022 that occurred throughout 2022 and
early 2023, and gains or losses on the sale or disposition of
certain non-strategic assets or product lines.
Acquisition-related costs, net. In recent years, we have
completed a number of acquisitions, which result in transition,
integration and other acquisition-related expense which would not
otherwise have been incurred, are unpredictable and dependent on a
significant number of factors that are deal-specific or outside of
our control, are not indicative of our operational performance (or
that of the acquired businesses or assets) and are likely to
fluctuate as our acquisition activity increases or decreases in
future periods. By excluding acquisition-related costs and
adjustments from our non-GAAP measures, management is better able
to evaluate our ability to utilize our existing assets and estimate
the long-term value that acquired assets will generate for us.
Semrush Holdings, Inc.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per
share data)
Three Months Ended March
31,
2024
2023
Revenue
$
85,812
$
70,870
Cost of revenue ¹
14,645
12,639
Gross profit
71,167
58,231
Operating expenses
Sales and marketing ¹
33,921
35,496
Research and development ¹
17,304
13,880
General and administrative ¹
18,474
18,640
Exit costs
—
983
Total operating expenses
69,699
68,999
Income (loss) from operations
1,468
(10,768
)
Other income, net
3,639
1,705
Income (loss) before income taxes
5,107
(9,063
)
Provision for income taxes
3,104
797
Net income (loss)
2,003
(9,860
)
Net loss attributable to noncontrolling
interest in consolidated subsidiary
(135
)
—
Net income (loss) attributable to Semrush
Holdings, Inc.
$
2,138
$
(9,860
)
Net income (loss) attributable to Semrush
Holdings, Inc. per share attributable to common
stockholders—basic:
$
0.01
$
(0.07
)
Net income (loss) attributable to Semrush
Holdings, Inc. per share attributable to common
stockholders—diluted:
$
0.01
$
(0.07
)
Weighted-average number of shares of
common stock used in computing net income (loss) per share
attributable to common stockholders—basic:
144,566
141,650
Weighted-average number of shares of
common stock used in computing net income (loss) per share
attributable to common stockholders—diluted:
147,698
141,650
¹ includes stock-based compensation
expense as follows:
Three Months Ended March
31,
2024
2023
Cost of revenue
$
39
$
17
Sales and marketing
770
528
Research and development
636
343
General and administrative
3,670
1,908
Total stock-based compensation
$
5,115
$
2,796
Three Months Ended March 31,
2024
Three Months Ended March 31,
2023
Reconciliation of Non-GAAP income
(loss) from operations
($)
(%)
($)
(%)
Income (loss) from operations
$
1,468
2
%
$
(10,768
)
(15
)%
Stock-based compensation expense
5,115
6
%
2,796
4
%
Non-GAAP income (loss) from operations
(prior definition)
$
6,583
8
%
$
(7,972
)
(11
)%
Amortization of acquired intangibles
692
1
%
522
1
%
Restructuring and other costs
2,124
2
%
983
1
%
Acquisition-related costs, net
338
—
%
—
—
%
Non-GAAP income (loss) from operations
(new definition)
$
9,737
11
%
$
(6,467
)
(9
)%
Three Months Ended March 31,
2024
Three Months Ended March 31,
2023
Reconciliation of Free cash
flow
($)
(%)
($)
(%)
Net cash provided by (used in) operating
activities
$
14,779
17
%
$
(3,609
)
(5
)%
Purchases of property and equipment
(759
)
(1
)%
(268
)
—
%
Capitalization of internal-use software
costs
(2,015
)
(2
)%
(1,056
)
(2
)%
Free cash flow
$
12,005
14
%
$
(4,933
)
(7
)%
Semrush Holdings, Inc.
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
(in thousands)
As of
March 31, 2024
December 31, 2023
Assets
Current assets
Cash and cash equivalents
$
41,388
$
58,848
Short-term investments
201,756
179,721
Accounts receivable
7,115
7,897
Deferred contract costs, current
portion
9,613
9,074
Prepaid expenses and other current
assets
16,914
10,014
Total current assets
276,786
265,554
Property and equipment, net
5,999
6,686
Operating lease right-of-use assets
12,225
14,069
Intangible assets, net
16,936
16,083
Goodwill
24,757
24,879
Deferred contract costs, net of current
portion
3,485
3,586
Other long-term assets
1,542
633
Total assets
$
341,730
$
331,490
Liabilities and stockholders'
equity
Current liabilities
Accounts payable
$
10,159
$
9,187
Accrued expenses
19,597
19,891
Deferred revenue
63,985
58,310
Current portion of operating lease
liabilities
4,143
4,274
Other current liabilities
2,642
2,817
Total current liabilities
100,526
94,479
Deferred revenue, net of current
portion
306
331
Deferred tax liability
633
839
Operating lease liabilities, net of
current portion
9,150
10,331
Other long-term liabilities
67
1,195
Total liabilities
110,682
107,175
Stockholders' equity
Class A common stock
1
1
Class B common stock
—
—
Additional paid-in capital
297,857
291,898
Accumulated other comprehensive loss
(1,981
)
(752
)
Accumulated deficit
(69,860
)
(71,998
)
Total stockholders' equity attributable to
Semrush Holdings, Inc.
226,017
219,149
Noncontrolling interest in consolidated
subsidiary
5,031
5,166
Total stockholders’ equity
231,048
224,315
Total liabilities and stockholders'
equity
$
341,730
$
331,490
Semrush Holdings, Inc.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended March
31,
2024
2023
Operating Activities
Net income (loss)
$
2,003
$
(9,860
)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities
Depreciation and amortization expense
2,183
1,487
Amortization of deferred contract
costs
3,016
2,397
Amortization (accretion) of premiums and
discounts on investments
(1,071
)
(1,716
)
Non-cash lease expense
1,164
895
Stock-based compensation expense
5,115
2,796
Non-cash interest expense
—
53
Change in fair value of convertible debt
securities
—
(134
)
Deferred taxes
(100
)
4
Other non-cash items
844
568
Changes in operating assets and
liabilities
Accounts receivable
782
(1,104
)
Deferred contract costs
(3,455
)
(2,587
)
Prepaid expenses and other current
assets
(2,275
)
(651
)
Accounts payable
1,012
(4,226
)
Accrued expenses
1,414
2,469
Other current liabilities
(390
)
4
Deferred revenue
5,658
7,005
Other long-term liabilities
—
—
Change in operating lease liability
(1,121
)
(1,009
)
Net cash provided by (used in) operating
activities
14,779
(3,609
)
Investing Activities
Purchases of property and equipment
(759
)
(268
)
Purchases of short-term investments
(46,706
)
(103,751
)
Proceeds from sales and maturities of
short-term investments
25,000
87,741
Purchases of convertible debt
securities
—
(323
)
Funding of investment loan receivable
(7,000
)
—
Capitalization of internal-use software
costs
(2,015
)
(1,056
)
Cash paid for acquisition of businesses,
net of cash acquired
(501
)
(1,082
)
Purchases of other investments
—
(150
)
Net cash used in investing activities
(31,981
)
(18,889
)
Financing Activities
Proceeds from exercise of stock
options
844
67
Proceeds from issuance of shares in
connection with employee stock purchase plan
—
264
Payment of finance leases
(410
)
(782
)
Net cash provided by (used in) financing
activities
434
(451
)
Effect of exchange rate changes on cash
and cash equivalents
(507
)
73
Decrease in cash, cash equivalents and
restricted cash
(17,275
)
(22,876
)
Cash, cash equivalents and restricted
cash, beginning of period
58,848
79,765
Cash, cash equivalents and restricted
cash, end of period
$
41,573
$
56,889
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240506064314/en/
Investor Brinlea C. Johnson The Blueshirt Group Semrush
Holdings, Inc. ir@semrush.com
Media Jesse Platz VP of Analyst and Public Relations
Semrush Holdings, Inc. jesse.platz@semrush.com
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