Semrush Announces First Quarter 2024 Financial Results

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 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.

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.

“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:

· 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%.

· 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.

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

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/.