SEMR - Earnings call transcript Q2 2022

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Operator

Good morning my name is Rex. And I will be your conference operator today. At this time I would like to welcome everyone to the Semrush Holdings’ Second Quarter 2022 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. you. Thank Instructions] [Operator the call. will of investors.semrush.com available after the prepared transcript be remarks at A time would this Investor At I Relations. VP Bob of Gujavarty, like to introduce

You conference. begin may your

Bob Gujavarty

am quarter XXXX conference Relations, I Good of results Gujavarty, Semrush second to call. Investor morning Holdings and Bob welcome VP

We will CFO, our is Levin. in President, CEO, Shchegolev, our results the Fetisov, our after and issued Eugene call release be on on close the discussing Evgeny our market Wednesday. announced press With me Oleg

to like Sachs are would will our Reform participation Conference I San harbor Goldman begin, we statements week made call highlight in The the Litigation safe Act XX. provisions Communacopia in of which Before to contain forward-looking Today's Technology of XXXX. and pursuant Securities of the Francisco the September Private

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

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

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

Oleg Shchegolev

with the very delivered Thank with you. We And on additions. good XX% second year-over-year and new our solid quarter. everyone strong to revenue growth pleased call. I'm in up the morning execution customer

deal cycles most short you is As and very small. sales our of know, average size typically our are relatively

making, for the video a market haul, We way to growth $XXX campaign and revenue provide is Neilson, I the we the insight more half up annually quarter. like in complicated We plans year. poised saw our alone our of channel marketing we success but in new as see new mix improve to reaching Local to management balance XX% to expect platforms product pleased previous growth number is back and to customer I mid-single a the And expand brand did performer market. the customers and to run selling rates the would the consumption. continue marketing the macroeconomic continue listings SMBs quarter. plan year. good well. to is are results of a challenging third than growth. we our environment mid-market a And enterprise rated not streaming we year We facing from popular the in with more streaming in $XX,XXX for market, And focused to and was According with become our a to brand campaigns be grew, much for we spent affect quarter standout a who I'm to customers to delayed value more believe our it our contributed in second conditions long most service have streaming as quarter, on reality. second than the believe more our million campaigns. of emphasis Listings campaigns to add-on, customers. ago. attach year-to-date. despite from digits. of second but very Europe SMB remain was in it efficient most XX% new listing popular form In on second the to pay expect The than on So customer decision appears adjust between remain the share our reflect more XXXX, and half have from

year-to-date traffic. focus Our been paid has in

ignored not investment have organic well. in we However, as traffic opportunities

is could number Backlinko visited As get the was second Backlinko out recall, rationale And by conversions the you our quarter, most acquiring better acquired training. many of the for SEO one This conversion we of for the in played rates. from as compared to as Backlinko site quarter. traffic monetization year of we improving sites ago. what will our of first the in the doubled we the

the changes to highlight to three want I Finally, organization. key

Chief in role In contribution His and role know, will his Eugene, we Chief Eugene Officer. intimately he of of Vitalii that strategy Officer. Strategy also to reflects and Many with go announcement, promotion that promoted involved far beyond President. is a reality this at of operations conjunction to promoted First you Operating we agree of Levin the Semrush. Obishchenko

than are software and compelling bringing nothing was of Head more to authority will role important make believe product-led product previously have success more is in sure has we company Product execute In on new future to this she our registering We record track roadmap. market. Development Vitalii products there of products. to new a a our and growth great

expense user sales our of Warden, focus now existing Wool, our CMO sales will our licenses. new logical Brian We our executing products of organization. changes have strategy. multiple SVP And and will to land Andrew retention it to be dedicated Each create will customer dedicated sales made different customers. through experience key was Retention and focused customers acquisition. on focus upsell therefore Second, Murgo we on motions of Steve led skillset on teams of our these executives. requires of have finally, new SVP existing and on to additional a teams by

We and Third, opened all in full of offices made across employees. Europe the remarkable time relocated we relocations. have multiple nearly our progress

of people period of immense, relocating of I'm As of today, time a Russia. in the team, and so financial rose the over operations we short change the performance was guidance. to many happen. it our forward turn but have more and and our call proud the over a we to made now complexity I extremely for detailed Semrush recap Evgeny scale no will of

Evgeny Fetisov

more record QX $XX.X per Growth increase hit and XX% higher up tailwind plans paying average business customers again, X% number up than revenue of another of high. driven Oleg. was was percentage customer. as by Mix an was and [indiscernible] revenue customers on and year-over-year the from a million you, Thank sequentially. in the of revenue the

back the XXX% second million at marketing XX% from XX% comparisons retention and margin expected, the represented the all quarter. basis were XX.X% and and exit year-over-year quarter. higher Gross of dollar-based up plus as brand $XX.X is up previous the points marketing second of quarter. COVID campaigns. was operating spend of I XX% down in from for and The increase quarter year-over-year of the As million well well XX% to impacted Sales quarter was from for Sales revenue XXXX. up the minus the in the as $XX a after gross the periods. slightly quarter XXX expenses headcount year-over-year the net full margin was of from costs our [indiscernible] related or quarter half previous year up expect largely and sequentially. ago given up excluding Non-GAAP previous increase marketing XX% by largest and easy

We non-GAAP a should suggests this than $X.X and from would XXXX, development quarter. in quarter. A related offset $X.X that but the Strong in to and $X our one-time year $XXX,XXX to high we I to revenue the of of of high ago, was the up the from increase increase in loss year and in contributed G&A I net half first increase. non-GAAP high and reflects in up full the X% the year-over-year, an million company exit modestly decrease reflects The the expense the increase occurred once of increased our in of losses expenses as than in quarter. benefit high spending second G&A $XX compared net growth public year-over-year represented of previous quarter, down well XX% Research note to loss of quickly. a million second approximately compensation in were continue And of absolute cost expect half a rating also The year-over-year whilst XX% headcount the to non-GAAP costs, more through year. cost margins of more gross income percent spending remains expect non-GAAP geographies. complete that campaigns as quarter. brand a net back sequential [indiscernible] allocations year-over-year revenue. XX% related the the the and terms quarter operating million previous and as quarter. higher was decline loss those net million was contribute in reasonably by that the sequential to to expense

in quarter sheet, $XXX the $XXX million million cash we equivalents the down the balance with into first quarter. from ended of and Turning cash

we of expenditures. negative $X.X cash was million incurred flow and million operations Our approximately from $X.X capital

the guidance, guiding fourth ahead growth quarter, to we're in abounding conditions slower Looking before the and third in persist the economic to current quarter. expect for therefore we

quarter to up expect $XX.X revenue million, $XX.X of year-over-year. We the a million XX% range in

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

XXXX. of of a third quarter million expect for non-GAAP million a loss non-GAAP loss and $XX $XX year the to $XX to million full $XX million We

despite economic deliver the well Operator With that line questions. to We above open good Eugene of I more I take growth we environment. your another XX%. of the have year are for and And any uncertain believe please continue Oleg, to revenue execute questions. happy a visibility to well

Operator

from question Brent Instructions] from of first the line [Operator Your Thill comes Jefferies.

is Your open. line

Unidentified Analyst

And Backlinko it Thank that still you. a is seeing may Brent. around question. you impacted in macro, in first Great. the have the or Hey general, of is pretty impact its customer impact question. of growth, the around first just revenue whether my is there to that guys, quantify Thanks specifically, and my adds are just more and That's taking for second to any today? as quarter. immaterial any way in how is new being driver is My Europe then this much you for on James mentioned

Eugene Levin

Eugene. this Hi, is

some softness say, So seeing terms in more especially Europe, is June. I we still much that around new Demand of strong. like States see don't wouldn't in of I It's macro, of really we're overall would of signs pretty additions. the anything about In United this. it's market. the softness say

quite European, U.S. some Even to be non-Euro strong. markets seems So, very are strong.

As would say compared it’s the with for definitely report not we probably of something Backlinko would of size it's we this definitely quantify companies material but the growth I internally, yes, level to other the can acquisition. or granularity

not we're we transaction, this itself you was ROI believe getting in huge. recall, but really So good transaction as

that you scale. of sense some So, probably gives

Unidentified Analyst

you. Thank Great.

Operator

Parker comes question Stifel. next Your line with of Lane from

Your is open. line

Parker Lane

the Yes taking for question. hi guys. Thanks

demand the you. would could the right Kompyte relevant uncertainty out us on performance competitive be of you the Just are seems particularly environment curious you Thank seeing like markets now. It if the it an give business around with in and update intelligence. there the

Oleg Shchegolev

absolutely And right. Great I Yes. getting think this you question. are

of intelligence impacted with seeing results going because verticals one especially the we're business we is sell. macroeconomic I seeing relatively is to compared And be Semrush. environment. in demand, small the uncertainties that acquired competitive by So We're definitely that to strong cross think the good is

At And scale, hear So, the to in same we of to budget any some talk in huge have customers, of time, for very we cuts. are be we yes, this difference who about base do when demand kind wouldn't their a this people compared already product. significant. plans softness to user new anecdotes good leads

middle the victim – Sometimes we of an the start conversation then and of organization our disappears this inside kind of gets with champion account conversation, layoffs. becomes in that and

and the make kind happens. I in it's impact But opportunity. overall potential of but judgment that Semrush wouldn't thing. of more of an to the reoccurring us can much a say market it's just you than that that scale So, would use anecdote it cross terms smaller say I whole doesn't numbers Kompyte because so environment, was really about sell

Parker Lane

the Yes. on taking quarter. Makes sense. you Appreciate and congrats question the

Oleg Shchegolev

Thanks Parker.

Operator

from Morgan Porter comes of line question with the Stanley. Elizabeth next Your

Your open. line is

Elizabeth Porter

higher much. wallets. year-over-year, impressive Great. about had ads. pressuring overall the strong see and been rates to really It's coupled Thank you new the a XX% plans lot customers with higher business we've so interest hearing about small consumers just inflation up priced and And

is, to shift overall question if there platforms tailwind share if my Semrush you're of be on So any from market business? providing any of And comment kind in cost the a for of higher great? Thank you. seeing sort too that'd sort there's

Oleg Shchegolev

would little I things. results too conversations say such here. any about bit some it's see early tailwind related any to to to of it, talk related to talk that but kind a got earlier We kind about it's of

Evgeny Fetisov

is And thing. just I small this would Evgeny, add

enterprise will subscriptions bigger we annual, cycle the most so space in during for In terms been the usually time be yet. customers are environment through definitely looking haven't renewal of something same of those this economic with at accounts; market share, the

we don't to from expensive pull what So platforms, and this monitoring be we more demand know to extent able optimistic. being definitely would

Elizabeth Porter

it. you. relocation. any But in narrowed seeing it and quick sounds a cost, efficiencies like curious cost Thank that to there's on then the Got one the some business? net you're is just could just lower see guidance from greater cost the have there if other areas And

Evgeny Fetisov

This Elizabeth. Yes, Evgeny. is

expense components there $X by income. outlook updated FX. of for headcount is the you improvement of the good a One is And in QX, have million. combination performance may the allocations better is then better the So on are the rest then which few year, net overall and the the roughly seen our as we've to the improvement outlook favorable Euro for

about number our I what And prepared X.X thing, outlook. this operations the – not X.X, that's I'm remark, its flow net from cash misspoken negative is based that. So sorry during more affects income one my

Elizabeth Porter

Got the so thanks it. for And much clarification.

Operator

JP next question line comes Your Morgan. from Murphy of with Mark

open. Your is line

Mark Murphy

heard congrats. my Thank that you, word have people wasn't offices no you I today? I'll and correctly. no if does mean of no And exactly you that Russia does mean are or Just that say add in operations operations? Could or could clarify if you you that how as so, that sure defining

Evgeny Fetisov

Yes.

is this So Evgeny.

So have we don't in Russia. operations any

So local and we've don't there. we sold operate our subsidiaries

So basically no presence.

population, country. maybe overseas less and We about have and than but the of have otherwise them which the or process most in would we've take some it's have few X% who migration that'll total like people they months, left, exited there they're of reasons, the couple stay for different

Mark Murphy

Okay, understood.

The second was situation Europe. question in macro the on

If there – Can you also any just overall been and it strong was the that overall experienced August I'm little did just is was pretty and have demand think just you because results there put Europe is that what pretty has bit or into solid? there you And I and recently? next July clarify to that might thing two softness, the in an continue look change said those a could then clarify, together. you said is comments you struggling

Evgeny Fetisov

Yes.

great question. So

So I would renew have or previously word [indiscernible] is the softness of XX even by for they payment more account, to negotiating where a Like things, they longer and example, they start what it for number meant favorable previously than or takes negotiate. not then them XX net to terms. maybe want a

already then less. going of minute probably verbally sort say, is last no, we they that deal a buy have you Sometimes agreed. And to

deal you the sure new. you departed and person have have is laid or someone but Sometimes for who the deal, negotiated then been leading with to off process

kind meant of I what softness. that's So by

spend management more say, to there prudent just sometimes budget pressure from under are be Sometimes less the to customers cuts. they're

those would huge. of none something those more and anecdote explains. statistically, And not metrics, are things huge softness, it's said, reasons I in I our what call be that's an like but of aggregate, COVID So in

Mark Murphy

that's stabilizing, And or and for that. is status is did Much appreciated. the kind just it August Yes. helpful. situation Thank July extremely of further? And that into quo degrading you

Oleg Shchegolev

second would say example example, strong say in say for but general I really – quarter, the – for better would started of say year-over-year. July, would guidance the we you So would provided. than that end August I I see I

So I this said, what in seen was quarter. we've far so based on like that so in August, I'm guidance far optimistic. But

Mark Murphy

Yes.

have you Excellent. congrats. I'll Okay. and my Thank

Oleg Shchegolev

Mark. Thanks

Operator

with the Sandler. question from Next Jeffries Clarke comes line of Piper

Your line is open.

Clarke Jeffries

this for year-ago Hello. wondering was sort about wanted period. was question. that of was impact of taking on have reflective really some revenue. the to to that in I lower it out But just anything Thank linearity maybe the not was of through that record performance quarter quarter? that if drove touch you million discussion been the $X.X if early softness the growth better might ARR in than quarter actually the I call And towards maybe that? there's Was sequential an the June.

Evgeny Fetisov

for Yes. the is Evgeny. This question, Thank Clarke. you

absolutely I right. think you're

So it then of software a is ending as has just the a beginning Eugene reflection of mentioned. a quarter and

So would quarter. June the slower versus say was, I like overall

and that's QX dynamics, So the in that's it guide? reflected – our

Clarke Jeffries

any annum then chance quarter? And Perfect. per grew right. comment what you the could XX-K All on in customers

Evgeny Fetisov

I If customers. – for quarter, which mean, the disclose I XX-K growth for number that the above growth the is I for you the above year-over-year XX% think plus XX% – year,

Clarke Jeffries

Okay. as up. I'll squeeze follow in Maybe a more one

terms these curious that on might you it listing here? list, just release these MarTech on share With involved of You thoughts of your higher pure-play most of players? taking which categories you're that product, with, local XX the about segments lay out from move the are the in but category excited

Evgeny Fetisov

favorite who's of right? So kind seeing So it's like hard to this. that's about ask how child, I'm parents their

want of all. we them I are resources more course, children, been we would we other areas well more behaving we where say we strong haven't some is like very be revenue. not there areas to probably though much to children are spending but as other spending great where share market like is terms and previews, have we in things care right. There about stronger, feel are yes even already where where but – Of time, as necessarily

of space, after I especially we I'm acquisition say doing intelligence proud are extremely Kompyte. what So in competitive would of

actually so So now teams. we of a product long teams, was member we leadership and and around Local not but listings, focused that involved good one first of for marketing and also just kind products have have kind really this was companies in sort SMB it in enterprise for have I of this, teams people more self-service larger sales of product think been the launching the have I of of time. the for been one team. mid-market,

think a been optimistic, launch great could development this more we've now, because We have somewhat we I a kind roadmap. – but we lot markets. lot of in a slower features now primarily it's of of I'm global also didn't way we than fixed so

For example, management. to we're list always thinking beyond and how go

PR, from category competitive operate. is is try the some already of – course it's double them product point we direction – not One into of I think that to digital in probably and probably I as it we huge then say things of management. We this that course review And categories many other would we and next a going have go of developing features where down. keep view,

player have So some great there far we signs the our as really we This positive revenue we think year still market. customers trends. we monitoring feedback very as well media from innovative but product, so can early early launched and have be of disrupt

categories those are match, a that on to highlight always now. things areas kind But cannot there we're I probably focus most working the would right. that couple people we trying and of where I So surprise we're right

Clarke Jeffries

very it. Appreciate you Thank much.

Operator

Turits comes Keybanc Markets. Michael Your from with next question Capital of line the

open. is line Your

Michael Vidovic

taking for you near-term? your Hi, guidance just editions? Michael second In more expansion this is in are is half Or on Michael and for question. it factoring customer thanks Turits, lower lower my Vidovic in

Oleg Shchegolev

I Michael, think think, combination. a balanced I it's

at as I QX and can we least the in in both see, So you QX; same say slower are for acceleration would we've guided then then direction. looking at and

Michael Vidovic

change? are Okay. costs, And $X and feeds churn saying in Thanks that relocating the relocation reduction then employees into on or in million you what heightened

Oleg Shchegolev

to this to for unprecedented very to us a, would we'll they'll accurate move I go, had and countries and take. in which Given difficult It much will people say how et very that where cetera. was go was prediction we be spend

so clarify been of So narrow expected savings and that's coming all would to, the like it I where terms of we've this able from. our in down say future expenses,

Operator

Our Berg next from Scott Needham. [Operator comes with Instructions] question

Your line open. is

Scott Berg

Congrats where here that on guidance. and the the good guidance all I taking in Hi, know in expecting in can and everyone. the wanted you relatively understand good year. maybe fourth fourth are comes Obviously to quarter the in with bit you. quarter my the and Can The expecting after you're questions. numbers a to third the we your us I back full into for results help with commentary Thank rebound some was thanks macro quarter. optimism QX? little slowness that start

Oleg Shchegolev

This have with and we positive experiment results such good mentioned obviously now some Oleg. our [indiscernible] could some companies some we Look, what marketing with very is we results. us right with see I give shift, [indiscernible] – we have believe

Scott Berg

at Helpful. your macro that's And versus channel? with from up you it. feedback ask look maybe coming what chance and kind of on very and the partner to Thanks. some the I some a speak quarter platform. product that a reference good getting you wanted sales of to partner have partner you then partners with Got your impact booked slowness, through about how in much own as But and/or end digital traction your to

Eugene Levin

partner tactics. like is not This of Eugene. pressure from Yes. we acquisition not the side seeing of That's view. clarify our employ point on really maybe most wanted We're where new to was I of kind clear. just demand very

seen down demand haven't is slow of So strong. me there, kind meaningful we any

channels there. of our quite I partner seen if about affiliate also arsenal down we in the marketing definitely instruments So one our this we which was well. key speak grew all – would slow say and channel, pretty And year haven't much

Evgeny Fetisov

Like on the dynamics. feels we're say expectations on. QX seasonal the very, the it this a typical in what mean, positive as to, very signs and traction. is it's what our seen add, maybe At QX showing alluded summer terms August for And I QX to we and Eugene see question has that's Evgeny, us. of like versus now time we add building as same to

right for good So this that based QX structure the is mean, again, is like year, we of with and how year. think if ARR exit the the the about we the this and of rest quarter I

Scott Berg

Great. That's all have. Thanks my I taking for questions.

Evgeny Fetisov

you. Thank

Operator

time. call. no are This at further There questions concludes today's this conference

You disconnect. now may

Semrush (SEMR) 11 Aug 222022 Q2 Earnings call transcript