SEMR - Earnings call transcript Q3 2024

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Operator

Good morning, and thank you all for attending the Semrush Holdings Third Quarter 2024 Results Conference Call. My name is Brika, and I will be your moderator today. [Operator Instructions]. I would now like to pass the conference over to our host, Brinlea Johnson, Investor Relations at Semrush Holdings, to begin. Thank you.

You may proceed, Brinlea.

Brinlea Johnson

to Third welcome Call. XXXX and morning, Semrush Quarter Holdings Conference Good be in on market announced the Thursday, press X. We'll results after our discussing release issued November close our call Mulroy. Brian CEO, on our is me Levin; and the Oleg With Shchegolev; President, Eugene CFO, our provisions contain of harbor XXXX. the call the will made to Litigation statements, forward-looking Today's Private are Securities which pursuant safe of Act Reform

position, and growth, are expected and products XXXX marketing integration and year include, foreign growth but and not competitive the our and profitability improvement, expected investments, activities, acquisitions, future financial spending revenue sales continued and base market and statements and of opportunities, statements growth existing results our and XXXX our and customer limited of statements operating guidance future future Forward-looking concerning and and regarding and segments, development market performance business quarter and financial condition, margin our industry activity, our fourth expected demand future the adoption existing exchange pricing our including to, of customer incremental specific recent assumptions and of features, about results, for full our rates. and new any the acquisition for products, trends,

duty statements any and today statements. by our not subsequent representing or are will. of statements update be than words statements These at anticipate, any as other and plan, not we identified fact only seek believe, date, Forward-looking our relied do such statements views can, these can be of undertake could, as expect, should reflect and upon to views

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

with could recent as XX-K and reports report risks and filings Form discussion affect the on annual as most please Form filed results, of that well a refer Securities Exchange with on quarterly Commission XX-Q SEC. For our to our our and factors other important actual the the

During we the financial is refer today's after at release available call, which found schedule measures. certain versus yesterday be can showing of results GAAP press There currently to reconciliation issued our close, market the course non-GAAP non-GAAP a investors.semrush.com. in

turn Now to Oleg. call let me over the

Oleg Shchegolev

I and results delivering compared to the $XX.X and with operating growth exceeded third non-GAAP our of quarter. We everyone Non-GAAP ARR XX.X% of on full this up pleased of operating We from am to very operations are quarter, XX% million year our say year million, we $X.X in raising revenue reported X.X% are period. and the to operations our increased I'm guidance, Good call. margin to XXXX. about non-GAAP $XX.X guidance the excited pleased prior margin of growth million of XX% in in year-over-year. income and from income morning XXXX opportunities year-over-year our

leadership expand exciting Day durable very York, with to online generation. in and free Analyst and weeks profitability New in first position We continue are growth which flow us. hosted We our visibility succeeding recently in for was our combining ago few strong cash

could not you in available along our we is the So with attend Relations website. slides of Investor case today the brief. a remarks keep person, my section In will webcast on

discussion our highlights total the market. the from Day around was our of addressable One Analyst

new provides about existing white billion gain an within to that created from We the $XX our to today. this capture it tripled ever-evolving $XX marketing the to more IPO is of market Semrush and than roughly is TAM more TAM opportunity What landscape. space by an have our billion digital at exciting importantly, time fragmented really share

this. more diversity time keeps expensive and events, where available The is of all online complex it we the algorithm This The Our changing, critical platform solves of in amount through out. is come marketers is programs. increasingly spend getting of and we maxed to in. content navigate volume

digital focused and and core, brand optimization, interconnected search it Semrush surrounded is paid utilizes engine data by content hubs marketing marketing. AI-powered marketing, its management, Our on marketing local at intelligence advertising, and platform social media

accounts to upsell continued cross-sell profitability our moat innovate channels. successfully foundation our the believe continue QX that as our to of long marketers new we to for companies efficient early our we Samsung, our strong Square demand for all data platform results to to help runway approach stated experiencing to companies to on LG, XXX from we and we activities Alibaba, We our To TikTok, future. innovative excited ahead. a to the integrated recommendations plan which competition history enterprise platform our SEO of for a elevate SEO our customers. leverage that of SEO date, opportunities our our acceleration, especially over these is the have data growth across to X,XXX invest serve for ideally sized new and numerous in X,XXX product Enterprise of have strong we quarter our With I'm find with the a the migrate employees. competitive to generates term sizes. the testament I'm as Prior deliver And product. customers are we We built and platform, are Semrush and another momentum and differentiated DoorDash, many of launch, to our We edge product. enterprise over revenue and accounts, to to extend solid This more. capabilities. us, products our our products our a give enterprise comes growth about and complete In drive it confident reach is Sony, from our more with enhance quality marketing marketing And new algorithms data was culture sized summary, leveraging we we strengthen and effectiveness HSBC, believe the to enterprise increases. closed Salesforce, enterprise deals our for customers. add strong, digital acquired effect flywheel

to approach discuss sheet forward allocation look the Brian capital call more turn Eugene and balance results our have quarter around of disciplined detail. the progress. We outlook now I opportunities. will keeping M&A our in to strong over I to and updated on you the a and

Eugene Levin

Oleg. quarter solid delivered strong growth. scale another innovate, driving and you, while to continue We and all Thank

marketers very Our all the improve world and powerful platform visibility. is helps over their online

We to Door our Most Third to and teams, reach with continue education. Expo help and and acquisition, Marketing the current at accredited to expand our Search us industry-related whose to MarTech, expand their have believe This this digital which all content of and Land, marketing insights and our over Depot, marketers our product part to marketing Engine we digital like known XXX marketers. strategy, coupled contribution both our we mergers marketing illustrate SMX Digital Marketing commitment generations I'd customer help of successful the digital brands know-how is X future are or wins. search by the to We with will succeed innovative and of To development equip top-of-the-funnel acquisitions. inspire internal universities acquired portfolio presence leveraging landscape. and recent publisher, partnerships include Media, an in recently, competitive highlight for Search increasingly

with their and enterprise now activities. our new team us, conservative across all enterprise SEO a to market onboarding success the and and resource commitment market-leading customer oversee other is first markets. our teams entire of SEO solution access training that drive organization, equip with Semrush's scaling consistency They their actionable are demonstrating insights The working coordination. systems. customer, approach, efficient to unique with Prior cleaning their is metrics using provider ability management user search limiting the of company was to a

digital addition, strategy In Adobe precise leveraging integration the data company data-driven custom better using dashboards for unique is regions. decision-making and across to our align Analytics insights

The second within existing platform ability Semrush's our example expand to highlights customers. enterprise successfully

basket identifies revenue that time, This customer driving solution advanced visibility, this in thousands cannot In risk hinges search repeat This categories world's e-commerce purchases flat And what customer key able to the real both take purchases Using as from boost basket size. to revenue. the is visibility, in apparel, our that attracting to platforms, to the weeks. stagnation insights impacting average led market. repeat For and like toys suggests and such used and immediate they in all actions electronics, solution, understand time, exposure X of and to track immediate struggling enterprise new Leveraging increasing customers. time. just due even size. business success are directly largest Selection, and customer one analytics, priority drive process items and on additions, now driving saving competition our and in AI new a our retailers, are of sales. or enterprise If existing rankings was real is the new significant it's isn't days delivering core. price average hundreds losing all online of customers, they

launch, Looking confidence achieved a call our customer strong examples Samsung, deals and gives availability now Gartner, and discussion detail, DoorDash, at to detailed months our only more of Alibaba, the X our Square LG, of and marketing enterprise us ahead, ability Brian, TikTok, choosing wins, competitors. excited Samsung, product summary, in HSBC, financial we and portfolio displacing will secured In more wins brands provide with our customers with and since continue new upgrades, to Sony, existing Semrush and our by over performance major their Alibaba, minimal many in to customer both offerings, as like continue guidance. The Salesforce, made demand TikTok were new HSBC, I'm Gartner more. reiterated will existing substantial to as DoorDash platform clients significant Brian. while Salesforce, wins. who growth. service Go Square immense enterprise accelerate expand and enterprise who clients and I our turn from and represent Sony, LG, general about we

Brian Mulroy

the a Eugene. solid you, quarter across Thank had third We board.

our upsell growing by of $XX.X an continue to customer and driven expansion was primarily average Our revenue as was execute per million, cross-sell revenue year-over-year. on our XX% we strategy. Growth

Analyst QX key attention home the I want think disclosures to reviewing during it's driving takeaways results them. made greater Before from to our we detail, October some worth your Day in I as new call in

like segmentation we the to highlight would customer I metrics Specifically, provided.

and business. marketing agencies our addition accounts, in We to over XX,XXX strong have X,XXX SMB mid-market enterprise XX,XXX over

agency mid-market XX% enterprise represent and our and contribute accounts a overall healthy users sophisticated Our our recurring annual most revenue. of

really noticeable customers and XXX year. we this paying see more chosen more we've per approximately to than $XX,XXX forward X,XXX paying more over X expanded you paying $XX,XXX. significantly paying that over group. in of also XXXX increase, and during to now $XX,XXX and on $XX,XXX the the more have more than XXXX, we to To a nearly Fast focus And We today, us number as $XX,XXX. there customers than was XXX had uptick demonstrate $XX,XXX can paying than close customers

to enterprise significantly our of increase traction. these both as gains expect new We solution SEO

months few cohort. a since launched added we we to ago, solution for fact, general just the In enterprise customers XX,XXX-plus new have the already availability XX

Our ARR our these to where confidence success strongest. and comes deliver growth are the higher in the rates in ability segments forward our average also retention in part strong from demonstrated going profitability

we is Analyst retention As revenue rate our said our Day, net above in XXX%. this group during

we slightly the ago. building million. out to XXXX. in $XXX our We've quarter came quarter enjoyed nearly revenue ahead recurring very a end year-over-year increasing it the XX% We third of strong base, customer turning Xx for Now and in to few Annual a since results. weeks what grew of loyal released success

X,XXX During we new net approximately the customers. third added quarter, paying

also now ARR and both the relative the this including This due our paying mix upsell customer product we exceeds of activity, calculated to XX% average that was per $X,XXX, strong business agency quarter. saw and up year-over-year. customers enterprise Our

our and the have since is our which the as ARR our cross-sell our well in customer, paying consistently success growing continue SEO a average Xx average sophisticated expect a sales strong as enterprise customer ARR per our percentage This upmarket we in per forward, as marketing. going is new end especially increase up and increased product a investments strategy of of ARR, trend paying customers XXXX. of to result overall We with

go-to-market revenue Our time benefit XXX%. and believe increase net enterprise product third from dollar-based We quarter over net revenue retention retention the was we investments. our at will dollar-based as strong for our

statement. income the down Moving

points third quarter the $XX.X margin basis operating reported Cash We in million. the another surpassed of operations $X.X third we During improvement year-over-year flow positive guidance. income our non-GAAP XX.X%, XXX significant our million. third quarter, and was to which was from in up achieved quarter operating non-GAAP nearly

to from the with Turning ended operations and of cash, acquire million cash cash to $X.X used We from quarter equivalents million million, balance that the investments quarter the cash was as short-term sheet. offset $XXX approximately previous by and $X flow disclosed we quarter we rights. up last the in

guidance. Turning now to

expect we of which represent million, million growth midpoint approximately XXXX, in fourth range the year-over-year. XX% the $XXX.X For of revenue to quarter the of would $XXX.X at

our expect be approximately XX%. non-GAAP margin operating to fourth We quarter

revenue be of million to growth to in we are million, guidance at up our $XXX into midpoint. from of prior range translates XXXX, $XXX raising the For to range which the of million XX% million, $XXX $XXX

As expect we of it now relates we to be cash a continue flow to to full expect and operating year approximately X%. margins, approximately non-GAAP margin XX%, free XXXX

are rate denominated beyond euros. of euro your next revenue with our the our line strategic to closing, near place very in to of top compound of forward year, for are priorities Operator, In the a overachieve in With happy maintain X.XX. expect open strong and to that, we finally, for well XX% expenses exchange phase we questions. a our XX% please assumes of looking executed are growth guidance questions. our term. We current any on Semrush Our over performance. our advance annual And line fiscal we profitability, a growth. growth take and rate position Approximately pleased the

Operator

[Operator Needham Instructions] & We question Company. have Berg the from the line with of first Scott

Robert Morelli

Rob Scott. Morelli the on is Congrats This quarter. on for

check a is received interested which being most sort maybe I customer capabilities positive capabilities are your pricing which to and of spending in more with and customer positively commentary So being and upgrading. is your strategy interest? received recently, that of you how pricing, avenue overall we most AI relating Can here on the guess, that strategy any of received touch conducted

Eugene Levin

This Eugene. is

you plans, course, core of mean clarify, to or AI with you our prices, when features enhanced plan? now say higher want enterprise Just

Robert Morelli

in capabilities. remain more potentially they interested these spending Just, for AI

understand looking just which to whether they just repricing it's upgrades, drive adoption. So avenue strategy, or whether of enterprise it's [indiscernible] SEO

Eugene Levin

of think as of So something tools monetization type monetization want selling. we product on AI the depending to you're the where you available all about use

improves reporting we make features available core how to we conversion from as copilot plans, for we our Number feature have and our AI. feature. course, free those for we is see monetize paid as tools ways of as include retention it overview to main well. AI So grows, And and such our certain And everyone. then it X one improves rates capabilities engagement or

ways to So that's one the monetize AI. of

a will like say, businesses, have specialized good have a those Now XXX% put if your certain for where maybe of audience fit, it target you to is maybe, then not you features. access only something more for that but segment let's to audience, local want SKU on

AI that's their of SKU, when had a And Review So plan stand-alone example plan, AI how monetize local have we with local ContentShake to AI. is also people to that a good tools creation entry-level app another example core and subscription. where And AI buy it. as our content recently, And features tons help this AI is really separately we from product be that such another workflows from use lot all without higher-tier local feature called another to features. enterprise to people we not that's is monetize Reply product certain cases to upgrade way AI we AI. And in traction of much you stand-alone of what And greatly on different benefits audience. that to our we average, SEO roughly is with are Pretty then, product a enterprise large a even sell a of would justifies value $XX,XXX tailored powered really features. extent that use a possible for like of product course, that an is enormous now SKU and from

Robert Morelli

you in SEO dollar great of enterprise potential update is NRR flat compressing. retention. metric, this anticipate see Just driver on to Any inflection a NRR, solution than an net that? remaining when And rather understanding

Eugene Levin

below retention XXX%. the in and we above is agency we have retention Day, been a revenue Analyst of SMB, rate retention level for accounts, enterprise and XXX%. by that business for our we really XXX% and it's we've a our business row So at which revenue that's quarters includes to here. [indiscernible] quarter, What has that a important segment metric. that that's look segment At that a have showed net about that understand a freelancer And it's and our mid-market then to been number have is our net saying

some products the that dynamics continued for But influencing that it that and and X segment occurring we do will selling are happen. increasing and enterprise there's strong there's is number. traction So with One our [indiscernible] number by future, the at It's to business we eventually that, freelancer XXX%. of then, abate, momentum drivers in do us still course, the in expect dynamic will And motion. happen. and that and believe

Operator

JPMorgan. have We now Murphy with Mark

Mark Murphy

across more that you be are so so lengthy congrats. be it of content my you're of to try marketers try page. infused like they at if SEO Eugene, wondering in cannot heels going what Google even I'm Google I'm was need the in into reaching the I the snippets. that those that's are coming out add top they've what to encountering for any on content to snippets there. has produce maybe the AI-generated or search or to produce Search, to interest optimized in they're just just that wondering, done search including sensing recently that used complicated AI to I'll is page, you you're those extra where And wondering --

Eugene Levin

those of part you in there very be those featured, interest We and page. want definitely of top for occupies queries. of click-through are estate there the marketing the of real lot of It people see spots that decent elements. search big a usually, occupy in community. are a X course, can the new at lot of A to lot a And rates

lot a interested are of to So of result, And in very a course, lot it people as actually traffic drives publishers. it. of a

And tools cannot without what course, like ranking of Semrush, the there. question the question. like rules is of answer that Now are you

full tool organic So in our tool. why we've tracking who our of that's overviews of one been and people first research the in support implemented rank AI

So course, running to are not people can correlations to there. can start of answering the and rules, And they featured different get start this need do same on what question exactly for queries. the

you long-form For one content. need query, a

another For need maybe shorter content. you query,

advice. get also would we people can more definitely to tool It's lot large on of they our rank as those So see of getting our of automated industry. search implementing using organic example, the data, research tracking people need the start very But of and, tools elements a kind that volumes to sense one-size-fits-all do start not in course, it writing And run to of to a same type as content on what of depend a content help featured there. in analysis create those we ranks well suggestions fashion. for we ContentShake such

So do. in to of interest tons research

the very new interest to are position excited and get We adoption be marketers in of and proud to helping about front-runner a and there those features.

Mark Murphy

this high to I now and change driver And well major it in the reach a a have business a level, more search creating companies, right at is mean page for fundamental said, out Semrush? that is people maybe very is tailwind? you for a do like with and

Eugene Levin

way. will this it see We definitely

like We to lead time going where is the events greater analysis use run is manual is not there always that new, people analysis, in a and for big will something AI to data good this products results. there something complicates say every that analysis for can to Semrush need

same And us. So past. in extent, feature a were signets for think tailwind the us a to tailwind it's yes, we the for

Mark Murphy

Salesforce, populations et large a Samsung, on as be specialists might seeing it to enterprise across trying they also you LG, teams the up thing the just logos, are it product, might marketers you're enterprise you're pick social to there? as clustering great or What researchers, the One how media I'm for the user be take seeing? or When digital that to mentioning understand market the folks extent marketing Square, expanding which SEO to or cetera. these paying it. TikTok, customers, are follow-up wants whoever quick

Eugene Levin

time, of our demand core enterprise the our deals, we features. right SEO that right sell we now go is them So definitely, our most those now. as to sort At see research expensive into is also which the market there SKU same focus a is product, for

lot attach those but traditionally, large social media also of more had content come seats deals, with one also for a Trans on enterprise of number features. we So client the media, our of a creation or is for rate focus with they which our even who products. a product social SMBs, had lot seats we a for an We of good purchased

more, So But you're driving ball for enterprise now, is opportunity make plans. we opportunity to There But SEO. just momentum and in always not definitely more. it's there the definitely eye absolutely we enterprise we is them want SEO, sell sure to keep for sell an on keep right. to an when sell

Brian Mulroy

just to XXX. on little are are that And for users some give -- of perspective others these There's there approaching you number Arti, that the a are mid-XXs.

So platform. there's a of enterprise subscribers users substantial to and this SEO number

Operator

Stanley have now Elizabeth on with Porter the We Morgan line.

Elizabeth Elliott

account base prepared I that to X,XXX into on you ideally the to leverage enterprise customers wanted referenced the product the currently have. guys In product. the are enterprise you back remarks, that situated penetration these circle

the And already should update just companies think moved base? about I the give if you so? look or in So how path wondering are existing like have over for an on that we year that the and what how next many us was could migration could

Brian Mulroy

May. We're getting. really in been and the pleased with generally that We It the just the momentum did available we've went traction product. launch

the XX that the migrated of we've acquired talking that end third have core and increase customers We they're mentioned we average SEO to had enterprise about of or XX ideally said, been that Analyst solution. accounts up our have paying. enterprise our We at that Day solutions are ARR as using quarter, as the of already to we situated already are X,XXX our that that, upgrade

of already XX. end the October, it's of As above

only and situated them presence also the online where to important getting adoption we're traction adopt this ideally X,XXX, to feel companies, that enhance it's good that platform. for companies their but other some are platform really So really of not larger and also do

army the the population accounts. But is layers competitors. about Analyst Day, talked space are lot there existing in Tommy the need lot solutions So environment out we displacing then we internally a market of where we developed our with a leveraging disparate solutions, of SEO of of companies of to and opportunity. that white that engineers using X,XXX aggregating sort can It's of X believe really together together the It's pull the companies enterprise solution. an biggest displace

Elizabeth Elliott

as And year. then acceleration of like tougher just action you up last than in was growth I the coming some guys ARR per follow-up, there customer on comps, just had it look been a was a it bit does pricing more muted And some are previously. think and

durability So around ARR the we in just given product. about how of customer the growth tailwinds the enterprise you metric should have that some per think

just and So puts of there. the some takes

Brian Mulroy

growth You're new actual asking or ARR about the additions? net

Elizabeth Elliott

On per action they you took year. said, customer per side, the of average the last pricing customer some ARR just given

Brian Mulroy

yes. Just absolutely, year-over-year

different the a quarter existing out third we our price a pretty out increase. is of rolled year about what when accounts. we rolled was to it a cohort remember, significant just increase is And year-over-year, So ago

growth from general ARR an in out third So average third that average we're quarter quarter of the had really that, of in existing That was ARR cohort. independent uptick the there average But and ARR. fourth obviously overall, where ARR a our way in quarter. works strong ARR the increment onetime in and its to in see continuing we in

strong by and you seeing product. the by driven in look segment, mid-market, we're enterprise really enterprise it growth If at SEO

as our though. our start to see do we We in launched number investments products making the continue We in tick go-to-market see start to more you'll are time, and days, get in still enterprise it on SEO we May. early enterprise we're we traction more over believe that that upwards. just And adoption of to that

Operator

Sachs. [Operator the from Instructions] next with have Goldman Hotchkiss question Adam We

Adam Hotchkiss

in the I the the speak differs. often it agencies to hear individual their enterprises often when of visibility your we larger customers, think each many But point and and and start, are value have solutions using unique tools. And seem guess so I in SEO to general, we to market. that

for you goal to take with And the organic your and of think for about all inorganic it the solutions these so, a functionality? is what platform you if customer? ultimately avenues over do enterprise do to the how So ultimately expanding guys

Eugene Levin

in So the connected. solutions when we of patchwork different enterprise, we brands sell indeed to directly, poorly

use to maintain very left nobody will knows have different They some custom do do update that they maybe X hard person time spreadsheets, to slices for data. with wrote manually first all code what it of they a have years of need it. kind of who Sometimes lot XXX is different tabs ago; with report. Then to to this

of it's So an everything a kind code. to need what struggle. And we and custom you get that where alternative don't approach any customizable you offer is integrated, fully

them they And you course, get need anymore. point solutions tech time before usually and get those but are helps and of they that don't don't all lot their a don't save implement extremely money, prone stack. need You And customers they also they as spreadsheets. It's platform. updated automatically. of ever streamline to just couldn't results It's And our versus platform, you got the that approach. manual this also excited

still going that different everything all little point be have their serve it's agencies, of to because particular And would might an to access bit solution story For -- to to a you that solution have customers XXX agency if buy of that an agency customers and will customers, as those customer. point need you some buy. some have

them launched. June really wanted have have in May started, back be we entirely to or to Semrush it's of But platform. who When longer for switch to each this customers see SEO, of a to Bright, which didn't couple a acquired going bit agencies, technical a which we for lot implementation. have we success since brands, we had But we So pretty capability. then, for much adds we when have

our confident fully about ability to SEO feel now consolidate stack for So all we the very needs.

Adam Hotchkiss

generally, And what sizes? using versus for types on you at how revenue the higher that give the what for just us Could then, businesses are those is difference and the Brian, monetization between sense you end customer the of individual agency and non-agency of think a sort for differs opportunity. customers just of

Brian Mulroy

It the marketing that keywords, our amount course, the the that scale need, always to number sites focused technology. number this phrases you you're data depends technology disciplines on marketers and agency. the company the that and access you're of offerings of and that need based on, We and of the and of on on users amount of focused

So ways. scale they multiple in

particular a they're agencies or most disciplines others, full one they're marketing some For and agencies, stack on specialized shop.

But of agencies on company. dynamics. So agency scaling the based pricing companies and it all those on and are both type depends X

Operator

I conclude session. I'd can closing it the that today's hand Q&A back confirm remarks. some And to to for management like does

Oleg Shchegolev

you all positioning us third you XXXX year our guidance. quarter, We today. joining for and us exceeding to all. Thank raise Thank full a guidance our strong delivered

Operator

the now Holdings enjoy Thank Call. Conference your Please confirm rest from conclude you I can for that disconnect all Results the of day, may Quarter joining. and call. does Semrush Third you XXXX the

Semrush (SEMR) 8 Nov 242024 Q3 Earnings call transcript