SEMR - Earnings call transcript Q4 2021

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Operator

Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Semrush Holdings Fourth Quarter 2021 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. the investors.semrush.com the after note be remarks Please at available the Instructions] transcript prepared of will [Operator call. Thank you. Bob Relations. Gujavarty, Investor VP of

may You begin.

Bob Gujavarty

Evgeny welcome Shchegolev; press conference me is call. and Bob Investor Eugene be Monday. discussing Fetisov; quarter Good With VP announced We’ll our after full to on our Levin. market results And on our and results I’m call fourth issued CSO, Semrush CEO, on XXXX morning. year CFO, this the Oleg Holdings’ release Gujavarty, our Relations. of closed

Before we like to held participation our conferences highlight March. investor to begin, I in would in several be

statements the attend are the to harbor on will and Xth. XXXX. made the provisions Conference Emerging safe Private Securities of Morgan of We forward-looking on Act March March call Xth Litigation which Stanley TMT today’s Reform Today pursuant Conference Technology -- the Keybanc contain will

date by identified upon as views representing intend, These such statements we should be update relied full as not and and not these demand subsequent and and do our features, for the financial expected industry duty can quarter Forward-looking market growth, to future first reflect of seek our business anticipated position, their trends, statements and and and or year our and opportunities XXXX, and at be as anticipate, our strategies, the our concerning believe, of undertake expected benefits, market include our expect, financial condition, words statements. plan, will. our XXXX investments today and any for competitive performance any market products only, statements adoption guidance expected and views

that from to actual statements. subject these could cause materially to Forward-looking statements results address matters are risks forward-looking differ and that uncertainties

reports schedule of of the me filings well final Form prospectus GAAP which financial quarterly the that to SEC. non-GAAP press the and over Exchange with currently For Form our our with we the results, actual reconciliation affect results at could other XX-Q can with certain please as a during Commission, XX-K, the turn filed the our showing Oleg. close, IPO as refer on today’s and a and to factors Securities after our to important Also discussion our found is let be call, versus And non-GAAP investors.semrush.com. market issued in that, course call refer release measures. There available risks

Oleg Shchegolev

to you everyone on call. and morning good the Thank

act on discuss all history represents I I This in results, like the commentary Russia’s moment We a our provide on of Before for would invasion planet. anywhere in of terrible war oppose any us. to strongly Ukraine.

are families top of make Our safe. community our our Ukraine hearts with and priority are and from handful contractors their to sure is our the

As we are a U.S.-based business resilient. Software-as-a-Service

our We our Georgia, Virginia and the we platform held have virtually mitigation centers in states investment that data is remain risk and place strong core community the for and to strategies of I in cloud. growth. want positioned based are the in entire reassure

to year-over-year $XX.X Now results. Fourth more solid up to XX% a of year. We revenue quarter up X% than finish an million and the outstanding had was sequentially.

acquisitions in X% XXX% more XXXX strong recent the to as see little the of new early, was It up more believe announced and $XXX quarter. pay a of of delivered ARR a year, to December our growth. who investment continue monthly at March fourth about I of outstanding performance early over The more the XX% fourth Prowly however I strong but XXXX, positive XXXX. August to year-over-year well of first the part in is of Prowly the channel our marketing high result of programs growth Kompyte, eclipsing remains in as I quarter. up quarter. We in as strong revenue search strong increased November, than $XX,XXX again and and Semrush of was our XXst. success in our which for point year additions, million slightly results, the XXXX record optimistic small team of year marketing am Semrush bodes sales the was to the in than XXXX, number I Prowly year-over-year were both customers I from Prowly. from another as highlight acquired than revenue relatively paid quarter the than our also very In Backlinko full among still demand the our For annually for The customers. growth was in in XX% up revenue some larger first brand aided would and year-over-year. previous more new results for products set Prowly expect wanted customer

marketing when I results first brand report kick-off in campaign some the March with you we forward look Our first campaign sharing will and from quarter results May. to in our

to XXXX. and opportunity in Semrush growth Center side, .Trends accelerate product the On for App see an I

intelligence we to a believe products our Kompyte our adoption app number is has see would and Our small, number but customers. process App plenty of I one of to customers To as are intelligence potential Ad and the it of skew of the user available. Center solution, become I app. the for available and grows Semrush enablement. us more competitive widest with to short-term success for for increase average Center Clarity strong to will $XXX,XXX growth. believe who focus was sales further It the automating In Kompyte the $XX existing will apps opportunity the Their on will increase attractive through third-party .Trends. App ARR sales. our and believe offers months of within growth strong of approval launch. accelerate reached help Center cross-selling of apps of Kompyte I app to leading the I still the scale App three developers large, .Trends third-party gross apps relatively thousand. destination an growth revenue want it see approximately .Trends, the point first we I accelerate audience. continues of the reach platform must competitive possible that

much higher Given and ARR term small core attach but Last, success significant least, continue that product Longer rates to organizations see leverage on ARR. we a managers innovate SEO has in would Kompyte with .Trends, even an yield .Trends the Kompyte’s uptick a audience. platform. we wider opportunity growth than in sales a to extend to not to

the Looking feature part Magic it as at leading Google’s traffic. is clear customers search still with relevant that search We in provides results tool. rolled channel year-over-year, our to and intent to up Keyword month, XX% drive still of very a is many best out cases search our last

searches specialists, over view Magic Keyword commercial, intent, product market, Brand related helps strategy dramatically XX grown are to are our converts keyword attractive billion increasingly keyword to traffic. looking their with largest keywords is at tool years. Our a reach drives customers the database an have last informational seed Thinking as boosting improve about it Content, video the PPC can and navigational, SEO, With their and keyword Video search and to managers, future customers. transactional, the the customers of the which platforms few areas, campaigns. effectiveness potential and channel and create content in over that

billion the Netflix billion well than over monthly Facebook services perspective, Youtube, Youtube users has over users. in Roku. X Over very X is alone this all use across slightly such popular even XX% exceeds top and demographics. more popular put of as which monthly streaming has viewers To and

drive In visibility Management. expect deliver XXXX. leverage results margins. our of we Media expect Social conclusion, and to with customers’ record year existing revenue our growth out traffic. This App new strong outstanding our financial revenue to enhancing in XXXX leveraging better functionality like tools to I improve video delivered Center We roll and online in fully to will include help and another

will XXXX, for across We always, return and Evgeny will will to and expect call product a our turn as investment. in focused the development be recap be these of to financial accelerating to the maximize sales investments performance. but I over on investments we marketing,

Evgeny Fetisov

on Guru was per again revenue an our total tailwind Despite strength concerns see we again growth, XX% balanced X% revenue you, of for an virtually higher to with the the the Mix to similar revenue, from in coming slightly Thank increase XXXX. increase once once customers million pleased year-over-year and XX% was revenue exited customer. plans, in Business. and of our paying priced quarter more with by I almost a two markets. up full XXXX, driven the about in and average United all note Omicron and of Oleg. represented XX% QX sequentially. across customers the up was that variant, States was contribution year the Growth would I $XX.X

fixed, of but as retention should were comfortably sequentially ago in I the easy Gross XXX of XXX September relatively net from as impact XX.X% based of to points million higher the Non-GAAP the quarter. and the substantially. quarter I these stay XX% are XXXX. up of flat revenue year expenses previous approximately from ago operating and XXX% dollar up as revenue it largely expect margins Our hosting to XXst, XXX%. sustain a while from as gross XXX% December begin costs up basis $XX.X was above to margin comparisons in grew basis continue XX% was points retention moderate to fade, levels XXXX expect of from year remain and through revenue XXth.

But in investments saw as in development marketing not spending up fourth As the the as as we XX% spending been sequentially the you product would developments marketing, and and than sales up approximately costs come of sales to up and X% for greater from XX% quarter previous well fruition I quarter. XX% XX% quarter. more make from but that previous I if November, was Research in to headcount, up in the capitalized more quarter. mentioned would year-over-year -- only expected was have note

The offset and and was systems headcount growth contributed our than teams R&D of more to expenses. expenses non-GAAP to to company net new million, to higher was a Strong net revenue year non-GAAP of compared $X.X including loss from the loss in in teams Western third increase year-over-year to growth operating XX% period. the public net margins continue and the the $X.X XX% and higher to support million spending up quarter in the ago of quarter. add related $XX,XXX largely by We of income gross G&A continued previous approximately and business Europe. investments is in and

cash from in proceeds balance million, operations, up of we the The at November offset capitalized increase year development. with our $XXX from follow-on approximately Turning million to the $XX quarter. third the of product of in million $X million end million by $XXX.X the cash cash $X in approximately ended and sheet, offering and driven by from equivalents was

expect the don’t free year, flow XX%, up but cash flow I our in For from the margin product higher be strong brand free be in above was with X.X% XXXX, cash year. we will and positive I flow even for investments cash development, generation to near across sharply marketing XXXX. expect as

Looking expect up ahead quarter to guidance, in $XX.X I range a million of XX% to year-over-year. $XX.X million, revenue first

to range the a in year year-over-year. which I more of XX% of revenue $XXX represent full than For growth expect million million, would $XXX

We expect million in results, more I to of flow. the second resulted expect strongly grew for our quarter loss to the of XXXX, year of marketing $XX.X experienced In conclusion, higher and and loss maintain and third fourth spending bulk the the million in XXXX, with non-GAAP we scale growth a quarter free year-over-year million the as and in $XX margins million and revenue cash record non-GAAP levels XX% a to our quarter, a $X.X first as $X.X full higher than investments. of quarter in rebounded as losses

support marketing. Oleg, efficient that, and open to growth fund questions. investments beyond, to approach and take XXXX are any Eugene the I Operator, our to questions. our line driven investments go-to-market cash focused strategy, productive making are data product can your and happy from very that highly in of given we We flow please development for With

Operator

from question KeyBanc. Thank you. Our first is Turits with Michael [Operator Instructions]

open. is line Your

Michael Turits

bit of year. the did after single-digit revenue guide from about Turits segue as utilization on said, can bit OpEx, cash is next net of Sequentially a Michael guys in to strong, Thanks performance. year net I more Congrats flow a good loss growth. year a and And into very free net into ads strong high [ph] continue -- just you a this much. Thanks. KeyBanc. ask the you loss

investments? So about intend you can those specific we be make where to

Evgeny Fetisov

the for you Evgeny. thank is Michael, Sure. question. This

with more more spend as we place QX, in alluded QX. escalation throughout and year, marketing less have to plan investments QX QX and revenue So, in and is we’ll taking of about X percentage -- the then in in be marketing more first before, the of that the the spending we most points place of and in

the profile. expected that’s So

to more which also first will start of a play end last productivity. the sales headcount. We like as at on year, throughout, hiring up plan started their the spend sales ramp We out year, half probably of more to will they

we budgeting First, spent are for R&D. more

the So expectation. that’s

-- again, will we are be of We some getting the out as year. go throughout we leverage probably G&A

Michael Turits

out devaluation? of before of the on level ruble or What the based some ruble that just that the and the the level do of terms is you there. And the Okay. Is devaluation of assumptions curiosity, expenses are given lower based your in guidance? the newer have on

Evgeny Fetisov

Before…

Michael Turits

Could from we see some benefit DBLP valuation? that

Evgeny Fetisov

Yes.

the on average rates So of is from ruble year, pre-devaluation. the beginning guidance the this it’s so based

our of -- XX% sense there on base so a you that. ruble, to assumptions of expenses your make XX% give to and we So can you about

Michael Turits

quarter. Thanks on Great. very Congrats the much.

Evgeny Fetisov

Thank you.

Operator

is Parker with Our Lane Stifel. from question next

Your open. is line

Parker Lane

guys. the puts Hi, and levers the question congrats There taking that year. was for quarter. pricing takes last and Yeah. the in Thanks you on implemented some

Just of Notably, you how that wondering context expect we this back revenue comps? can these a in some of we Thanks. guidance, lap the seasonal trend to the a half you if from when of us to standpoint? give start year sense growth of look

Evgeny Fetisov

like, days. revenue less typically So to you of will So when -- about that first number of the the a think days quarter, think have growth, quarter in about we be number the right? -- will less have

starts period we slow where it with of going by days a it’s So out -- go only plus Christmas. XX

the accelerate then towards as it then and slowest and So QX typically, be XX has -- we like QX. overall be one. would obvious QX will better, days Q equally will QX

the and more think normal to see year, typically probably the And this our year. half we’ll that’s do with versus, I expectation I of we year acceleration how towards first has comms of think year-on-year customer is half would say, the back that for XXXX. about a the of growth would that

Parker Lane

follow have question you Thank or Got given operational or any up side to on disruption of a it. Got employee it. you. Russia, the business? in could sizable footprint just hiring of the just issue are any differently, that anticipating sanctions there then And little any overall bit operations Michael’s Thanks. on

Oleg Shchegolev

Barcelona. we related U.K., any opening some significant what’s We It hiring. on could since impact things business. risk continue. to be time, Amsterdam, have any Europe, same for see and now significant offices difficulties long-term Cyprus in We We Oleg. sort any the is But of frustration of any at don’t in expect business. our are Look, impact offices someplace don’t This don’t [inaudible] on. with don’t business expect we expect we our going for Berlin

Parker Lane

Got it. Thanks, Oleg.

Operator

is from question Berg with next Needham. The Scott

open. is line Your

Scott Berg

versus And or We of based. I it’s any we been more of expected. talk fourth Thank I by must in demand revenue Congrats has has based this I’m Oleg. at guess accelerated and kind growth good would area year. trends it’s let’s say noises would Thank thanks outside for everyone. nicely very I the quarter kind surprises some broad the demand, here. about with kind It’s my some do moment. taking since year. When Hi, broad strong geographical this this changed performance? signs of you on Are hotel any any didn’t was, be you. How events seeing background good quarter all region? I in you. questions. library at signs quarter in a for But my face -- say, just apologize opportunities see your good

Scott Berg

very and their in so think thinking, a in existing is targeted should to that’s than and expanding -- Are landing they customers? much historical landing, follow-up are SEMrush more or implementations XX,XXXK higher of those perspective, segment that usage up retention continues How XX%. XX,XXXK excuse threshold? growth segment then levels. net the revenue Are I’m to customers, it of we say, that you your me, about kind customers And prospect trend that let’s or your from in those

Eugene Levin

the you Thank So for question. this is Eugene.

we installation this we big from and have seats, limits. accounts grow will adding more if now see relatively existing we company, would a adding even more organization, then right within definitely expansion it’s initial accounts. Usually, of of So coming more small

the some a say, product, largely it, and in with start they understand test to would would to I trial buy So, bigger first will usually it’s subscription expansion but would to customers free if have then even the plea, case, learn a they product, value more. that or

this So effort. majority of expansion is

Scott Berg

again taking your on for and Congrats Excellent. questions. my thanks quarter

Operator

Clarke with next [Operator Sandler. from Piper Instructions] Jeffries The is question

open. is line Your

Clarke Jeffries

second in you XXXX, have quarter this exiting the you Evgeny, Thank and growth half on rebound the factors look for embedding XXXX the broader taking terms when year? that in million trends specific this for Hi. you’re crossing business of any next threshold, in in model Nice today you change macro improve ARR $XXX in translated there in being the new any or considerations Are the today the or may that touched of or year. question. might net headwinds customer guidance at and expectations that the are the your that

Evgeny Fetisov

Right.

So the thank we for you Clarke. question, --

exit new customer of beginning expectations to similar would the for Our year growth seen the I say, is the customer of we’ve what the XXXX. growth, at or the total for

So I’d say par growth with our normal on rate.

that that changes mean, might think, say early year the our of we’ve effects. beginning I on slightly is made Otherwise, However, I some indications the with I better.

that probably changes in into from that terms mean, will then I year-to-date, QX. the were, is like rate, the, trade in like, expenses. expectations the there change as go favorably Apart like major of for every we’ve no of like, but the adjusted to initial moderate Our the I ruble it effects more quarter, which terms we would anticipated. we’ve say,

Clarke Jeffries

And over up, Great. a to see very maybe value have departmental Kompyte in the presence contract XX,XXX, as average then interesting sales. follow as well a

is about could into is think expansion, -- of department other could -- departments expansion your departmental an sales the primary basis? you how much organic from an one and we the investment inorganic As you how the or focus is sale near-term marketing come imagine beyond

Evgeny Fetisov

I result Thank cross-sell was release, we deal. read something bigger can one M&A am just customer our around years base happy thesis this existing used for not focuses kind press have by of groups that We be Not going just across product check, out key of you that different the you. a that it’s research to every we would of to done. for personas. of the actually, buyer And new wanted across And have that organizations. because many

we Currently, In So rates. be open departments, team, leadership feel other product it obviously, stakeholders of would we demand benefit definitely to who Down want organizations. higher expanding road teams used work part, transactions when example, win intelligence pursue Kompyte, desire marketing acquisition. to by is want areas. marketing think be general, into there this be used sales in general to sales And with market within comfortable, cards market have are and by value I use to we we I use all to to the bring sales with it. people and more can from competitive can can organizations data, work we for people can with team, myself, gen and battle more

Clarke Jeffries

to forward it. Look Thanks. Okay.

Operator

will call. conference at fourth disconnect. this you this questions and further SEMrush you no Thank and results participating the for may quarter are now XXXX time conclude There Holdings’

Semrush (SEMR) 1 Mar 222021 Q4 Earnings call transcript