United States securities and exchange commission logo
December 18, 2020
Oleg Shchegolev
Chief Executive Officer
SEMrush Holdings, Inc.
800 Boylston Street, Suite 2475
Boston, MA 02199
Re: SEMrush Holdings,
Inc.
Draft Registration
Statement on Form S-1
Submitted November
23, 2020
CIK No. 0001831840
Dear Mr. Shchegolev:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration on Form S-1
Prospectus Summary, page 1
1. You state that G2.com
refers to your platform as a leader in 14 different categories.
Please disclose the
basis for this statement and how your leadership was determined, such
as market share
information or other criteria within those 14 categories.
2. Please disclose the
source of the graphical information on page 3 regarding your holistic
online strategy. Also,
disclose the time period covered by the chart and quantify the
amount of traffic for
each strategy presented. Clarify whether the chart is based on
estimates, projections
or historical data.
3. You calculated the
market opportunity in part based on the size of companies and your
Oleg Shchegolev
FirstName LastNameOleg
SEMrush Holdings, Inc. Shchegolev
Comapany18,
December NameSEMrush
2020 Holdings, Inc.
December
Page 2 18, 2020 Page 2
FirstName LastName
average revenue per customer in each segment. To provide context,
please disclose the
number of your customers that represent small, medium, and large sized
companies and
the average revenue per customer in each segment.
4. You state that you haad 389,000 active free customers and over 63,000
paying customers
as of September 30, 2020. Please disclose the number of active free
customers and paying
customers for all periods presented in the prospectus.
Corporate Information, page 8
5. Please include an organizational chart and clarify the operations that
are performed by
each material subsidiary.
Risk Factors
We derive, and expect to continue to derive, substantially all of our
revenue..., page 15
6. You state that your paying customers predominantly choose monthly
subscription terms.
Please disclose the percentage of your paying customers who choose
monthly subscription
terms rather than annual subscriptions. Tell us whether annual
recurring revenue (ARR)
includes monthly subscription arrangements and, if so, explain your
basis for annualizing
revenue derived from monthly customers.
Management s Discussion and Analysis of Financial Condition and Results of
Operations
Key Factors Affecting Our Performance, page 66
7. You disclose that your growth strategy focuses on the conversion of
free customers to
paying customers. Additionally, your risk factor states that your
business and operating
results will be harmed if your paying customers do not upgrade their
premium
subscriptions or if they fail to purchase additional products. Please
tell us what
consideration was given in disclosing the number of paying customers
by your tiered
subscription offerings for each reporting period. In addition,
disclose the amount or
percentage of each tier in terms of your revenue. We refer you to
Section III.B of SEC
Release No. 33-8350.
8. Please disclose the number of customers that did not renew their
subscription. Indicate
whether a paying customer could become a free customer. Consider
disclosing new
customers added in each reporting period.
Results of Operations, page 71
9. You state that subscription revenues increased "as a result of
increases in the number of
paying customers, as well as increases of our sales to existing
customers". Please qualify
the impact of each of these factors. Clarify and quantify the increase
in sales to existing
customers that is attributable to a full year of sales in the current
year or whether its a
result of existing customers increasing the subscription tier or
adding new products.
Oleg Shchegolev
FirstName LastNameOleg
SEMrush Holdings, Inc. Shchegolev
Comapany18,
December NameSEMrush
2020 Holdings, Inc.
December
Page 3 18, 2020 Page 3
FirstName LastName
Business
Our Platform, page 88
10. On page 21, you reference that your website traffic may be reduced if
search engines such
as Google and Bing alters its search algorithms. Please provide a more
detailed
description as to how these changes in algorithms may impact your
platform and the
services that you provide your customers. Further, please address how
anti-spam policies
at Google or Facebook may impact your platform and the services that
you offer.
Sales and Marketing, page 93
11. Please clarify whether you generate a material amount of revenue
through your affiliate
and agency partnerships. If so, please provide a more detailed
description of these
arrangements and how they operate.
Executive Compensation, page 105
12. Please provide executive compensation disclosure for the year ended
December 31, 2019
which is the company's last completed fiscal year. See Item 402 of
Regulation S-K.
Certain Relationships and Related Party Transactions, page 114
13. Please describe any material terms of the Reorganization Transaction,
including any
ancillary agreements. Further, please clarify whether any of the
preferred stock
shareholders received any board appointment or nomination rights. We
note that one of
your directors, Dylan Pearce, is affiliated with Greycroft Growth II,
LP, a preferred
stockholder.
14. You reference the waiver of transfer restrictions for estate planning
purposes to entities
affiliated with Messrs. Shchegolev and Melnikov. Please provide a
description of these
arrangements and the entities involved.
Principal Stockholders, page 119
15. Please revise your beneficial ownership table to include the natural
persons that hold
voting and/or investment power of the shares held by SEMR Holdings
Limited and
Greycroft Growth II, LP.
.
Description of Capital Stock, page 121
16. Please provide a more detailed description of the exceptions to the
automatic conversion
provision of the Class B common stock upon sale or transfer, including
the estate planning
exceptions.
Oleg Shchegolev
SEMrush Holdings, Inc.
December 18, 2020
Page 4
Underwriting, page 135
17. Please describe the exceptions to the transfer restrictions to the
lock-up agreement.
Notes to Consolidated Financial Statements
Revenue Recognition, page F-8
18. You disclose that you offer your solutions on a tiered recurring
subscription basis. Please
tell us what consideration was given to disaggregating revenue by your
tiered subscription
pricing. We refer you to ASC 606-10-55-90 and 55-91.
General
19. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to do
so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
You may contact Amanda Kim, Staff Accountant, at (202) 551-3241 or
Stephen
Krikorian, Accounting Branch Chief, at (202) 551-3488 if you have questions
regarding
comments on the financial statements and related matters. Please contact Edwin
Kim, Staff
Attorney, at (202) 551-3297 or Jan Woo, Legal Branch Chief, at (202) 551-3453
with any other
questions.
Sincerely,
FirstName LastNameOleg Shchegolev
Division of
Corporation Finance
Comapany NameSEMrush Holdings, Inc.
Office of
Technology
December 18, 2020 Page 4
cc: Jared J. Fine, Esq.
FirstName LastName