With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.Analyst’s Disclosure: I/we have no stock, option or similar derivativ ...

Core Insights - SEMrush Holdings (NYSE: SEMR) is expected to see growth accelerate back to the mid-20s percentage range, indicating a positive outlook for the company [1] Group 1: Company Overview - SEMrush Holdings has been previously rated as a buy, reflecting confidence in its growth potential [1] - The company operates in a competitive landscape where various investment strategies, including fundamental, technical, and momentum investing, are utilized to assess its performance [1] Group 2: Investment Strategy - The investment approach taken by the author incorporates elements from different strategies to enhance the investment process [1] - The platform used for sharing insights aims to track investment ideas and connect with like-minded investors [1]

Analyst's Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or ...

Financial Performance - Company achieved $411.6 million in Annual Recurring Revenue (ARR) as of December 31, 2024, up from $337.1 million in 2023, representing a growth of 22%[242] - Revenue for the year ended December 31, 2024, was $376.8 million, an increase of $69.1 million or 22% compared to $307.7 million in 2023[279] - Non-GAAP income from operations for 2024 was $45.8 million, compared to $11.6 million in 2023, showing a significant improvement[256] - Free cash flow increased to $35.3 million in 2024 from $0.3 million in 2023, marking a substantial rise[260] - Gross profit for 2024 was $311.3 million, reflecting a 22% increase from $255.3 million in 2023, maintaining a gross margin of 83%[280] Customer Metrics - The number of paying customers increased to approximately 117,000 in 2024 from 108,000 in 2023, indicating a growth of 8.3%[242] - ARR per paying customer rose to $3,522 in 2024 from $3,125 in 2023, reflecting an increase of 12.7%[247] - Average Annual Recurring Revenue (ARR) per paying customer increased to $3,522 as of December 31, 2024, from $3,125 as of December 31, 2023, driven by strong upsell activity[279] - The number of paying customers grew to approximately 117,000 as of December 31, 2024, up from nearly 108,000 as of December 31, 2023[279] Expenses and Costs - Cost of revenue increased by $13.2 million or 25% to $65.5 million in 2024, primarily due to higher integration and data costs, depreciation, and personnel costs[280] - Sales and marketing expenses rose by $17.5 million or 14% to $144.3 million in 2024, with personnel costs being the primary driver[281] - Research and development expenses increased by $22.6 million or 39% to $80.1 million in 2024, largely due to higher personnel costs and increased headcount[282] - General and administrative expenses increased by $1.2 million or 2% to $78.6 million in 2024, primarily driven by higher professional services costs[283] Cash Flow and Investments - Net cash provided by operating activities for 2024 was $47.0 million, resulting from net income of $7.4 million adjusted for non-cash charges of $51.1 million[290] - Cash and cash equivalents as of December 31, 2024, totaled $48.9 million, with short-term investments at $186.7 million and accounts receivable at $9.0 million[286] - Net cash used in investing activities for 2024 was $58.2 million, primarily due to $151.2 million for short-term investments and $25.9 million for acquisitions[292] - Net cash provided by financing activities for 2024 was $1.9 million, consisting of $4.1 million from stock option exercises, offset by $1.6 million in debt repayment[295] - Cash flows from operations and cash on the balance sheet are expected to meet capital needs for at least the next 12 months[288] Strategic Initiatives - The company launched the general availability of the Enterprise SEO solution in 2024, contributing to its product innovation strategy[239] - The company plans to continue investing in product development to enhance its technological capabilities and expand its product offerings[248] - The company expects to continue investing in research and development to enhance its platform and customer experience[267] - The company anticipates fluctuations in cost of revenue as it expands its customer base and invests in data center operations and customer support[265] Other Financial Metrics - The company’s dollar-based net revenue retention rate slightly decreased from 107% in 2023 to 106% in 2024[246] - Stock-based compensation expense as a percentage of revenue increased to 7.4% in 2024 from 5.0% in 2023[256] - Other income, net decreased by $0.2 million to $12.1 million, representing 3% of total revenue for 2024, down from 4% in 2023[284] - Provision for income taxes increased by $9.3 million to $13.0 million, accounting for 3.5% of total revenue, up from 1.2% in 2023, primarily due to increased profits in foreign subsidiaries[285] - Deferred revenue increased by $8.5 million due to the addition of new customers and business expansion[290] Currency and Investments - The company has not engaged in hedging of foreign currency transactions but may evaluate this as international operations expand[314] - The company’s investments are primarily in short-term investments and money market funds, totaling $235.6 million as of December 31, 2024[312]

Financial Data and Key Metrics Changes - Fourth quarter revenue grew 23% year-over-year, with full year revenue growth of 22% [10][34] - Non-GAAP income from operations for Q4 was $11.8 million, with a non-GAAP operating margin of 11.5%, up approximately 150 basis points year-over-year [10][35] - Full year non-GAAP income from operations was $45.8 million, representing a non-GAAP operating margin of 12.2%, up 840 basis points compared to 2023 [10][35] - Cash flow from operations was $11.9 million in Q4 and $47 million for the full year, with free cash flow of $9.5 million in Q4 and $35.3 million for the full year [35][36] Business Line Data and Key Metrics Changes - Annual recurring revenue (ARR) for Q4 grew 22% year-over-year to $411.6 million, with enterprise-sized customer ARR particularly strong [36] - The number of customers paying over $50,000 increased 82% year-over-year to 336, while customers paying over $10,000 grew 40% year-over-year to over 4,300 [37][39] - The average ARR per paying customer grew to over $3,500, up nearly 13% year-over-year [36][37] Market Data and Key Metrics Changes - The company closed over 40 enterprise SEO deals in December alone, with more deals in Q4 than the rest of the year combined [12][38] - The enterprise customer segment showed strong growth, with 144 enterprise SEO customers by year-end [38] Company Strategy and Development Direction - The company plans to enhance its product portfolio with more enterprise capabilities, focusing on AI-driven offerings [14][41] - The strategy includes increasing paying customers across all segments and expanding average ARR per customer [41][44] - The company aims to lead in AI optimization, launching a new AI optimization solution in closed beta in the first half of 2025 [16][41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's trajectory and ability to execute, highlighting strong positive momentum continuing into 2025 [19][45] - The outlook for Q1 2025 expects revenue in the range of $103.9 million to $104.7 million, representing approximately 22% year-over-year growth [42][44] - For the full year 2025, revenue guidance is set between $448 million and $453 million, translating to approximately 20% growth at the midpoint [44] Other Important Information - The company has appointed Bill Wagner as the new CEO, effective March 10, 2024, with Oleg Shchegolev transitioning to Chief Technology Officer [18][21] - The company is focused on maintaining efficiency and profitability while investing in growth opportunities [41][90] Q&A Session Summary Question: Thoughts on DeepSeq and its impact on the roadmap - Management noted that technology democratization is beneficial for consumers and enhances freemium models, with DeepSeq contributing to lower inferencing costs [48][50] Question: Changes in macro environment and momentum - Management indicated no significant changes in the macro environment, with continued softness in the lower end of the market [53][55] Question: Reason for CEO change and initial priorities - The leadership change is seen as timely to address new opportunities, with a focus on aligning growth among the user base and enterprise opportunities [59][62] Question: Downtick in net revenue retention (NRR) - NRR was reported at 106%, with softness in the lower market impacting the metric, but management expects it to remain strong moving forward [64][66] Question: Details on AIO and its integration - AIO will be tested for pricing and packaging, with an enterprise version expected soon [71][73] Question: Strong month of December for enterprise deals - The strong performance was attributed to ongoing investments and the sales organization ramping up productivity [75][77] Question: Difference in ARPU between existing and new enterprise customers - There was no significant difference in ARPU between existing and new customers, with strong success seen across both segments [93][95] Question: Guidance for fiscal 2025 and macro outlook - The company maintains a prudent outlook for 2025, awaiting more concrete economic indicators before adjusting guidance [99][101] Question: Functionality and pricing of new AIO features - Initial functionality will focus on measuring visibility in AI-powered search, with pricing to be determined based on customer feedback [103][105] Question: Growth in the $10K customer segment - Growth was driven by both enterprise contributions and enhanced sales strategies targeting leadership within organizations [107][109]

分组1 - SEMrush Holdings, Inc. reported quarterly earnings of $0.07 per share, matching the Zacks Consensus Estimate, but down from $0.08 per share a year ago [1] - The company posted revenues of $102.64 million for the quarter ended December 2024, exceeding the Zacks Consensus Estimate by 1.07% and up from $83.39 million year-over-year [2] - SEMrush shares have increased approximately 26.6% since the beginning of the year, significantly outperforming the S&P 500's gain of 1.3% [3] 分组2 - The earnings outlook for SEMrush is favorable, with a current consensus EPS estimate of $0.25 on revenues of $104.57 million for the upcoming quarter and $0.37 on revenues of $452.85 million for the current fiscal year [7] - The Internet - Software industry, to which SEMrush belongs, is currently ranked in the top 30% of over 250 Zacks industries, indicating a positive outlook for stocks in this sector [8]

Revenue Growth - Fourth quarter revenue reached $102.6 million, representing a 23% year-over-year increase[5] - Full year revenue totaled $376.8 million, up 22% year-over-year[5] - Annual Recurring Revenue (ARR) as of December 31, 2024, was $411.6 million, reflecting a 22% year-over-year growth[9] - For Q1 2025, the company expects revenue in the range of $103.9 million to $104.7 million, representing approximately 22% year-over-year growth[16] - The full year 2025 revenue guidance is projected to be between $448 million and $453 million, indicating a growth of approximately 20% year-over-year[16] - Revenue for Q4 2024 was $102,642,000, a 23% increase from $83,394,000 in Q4 2023[35] - Gross profit for the fiscal year 2024 reached $311,338,000, up from $255,348,000 in 2023, representing a 22% growth[35] Profitability Metrics - Non-GAAP income from operations for Q4 was $11.8 million, compared to $8.3 million in the prior year period[9] - Non-GAAP operating margin for Q4 was 11.5%, an increase of 150 basis points year-over-year[12] - Net income attributable to Semrush Holdings, Inc. for Q4 2024 was $3,345,000, compared to $6,874,000 in Q4 2023, indicating a decrease of 51%[35] - Non-GAAP income from operations for Q4 2024 was $11,819,000, a 42% increase from $8,308,000 in Q4 2023[36] - Free cash flow for Q4 2024 was $9,522,000, which is a 7% increase from $8,880,000 in Q4 2023[36] - Net income for the fiscal year ended December 31, 2024, was $7,375 million, a significant increase from $950 million in 2023[40] Customer Growth - Approximately 117,000 paying customers were reported as of December 31, 2024, an 8% increase from the previous year[9] - The company closed over 40 SEO Enterprise deals in December 2024 alone, indicating strong demand for its enterprise solutions[11] Cash Flow and Assets - The company achieved a net cash provided by operating activities of $11.9 million in Q4 and $47.0 million for the full year 2024[5] - The company reported a net cash provided by operating activities of $46,996,000 for the fiscal year 2024, compared to $7,986,000 in 2023, indicating significant operational cash flow improvement[36] - Total current assets increased to $276,184,000 as of December 31, 2024, compared to $265,554,000 in 2023, reflecting a growth of 4%[38] - Total assets rose to $390,943,000 as of December 31, 2024, up from $331,490,000 in 2023, marking a 18% increase[38] Stockholder Equity and Compensation - Total stockholders' equity attributable to Semrush Holdings, Inc. increased to $256,604,000 in 2024 from $219,149,000 in 2023, a growth of 17%[38] - Stock-based compensation for the fiscal year 2024 totaled $27,999,000, compared to $15,337,000 in 2023, representing an increase of 83%[35] - Stock-based compensation expense increased to $27,999 million from $15,337 million year-over-year[40] - Proceeds from the exercise of stock options amounted to $4,118 million, compared to $2,240 million in the previous year[40] Investment Activities - Cash paid for acquisition of assets and businesses was $25,902 million, up from $5,066 million in 2023[40] - Net cash used in investing activities was $58,222 million, compared to $29,068 million in the prior year[40] Other Financial Metrics - Total depreciation and amortization expense increased to $10,068 million from $6,790 million year-over-year[40] - Deferred revenue was $8,479 million, slightly down from $8,755 million in 2023[40] - The company experienced a decrease in cash equivalents and restricted cash of $9,788 million, compared to a decrease of $20,917 million in the prior year[40]

Company Overview - SEMrush Holdings, Inc. (SEMR) shares increased by 10.7% to $14.75 in the last trading session, with a higher-than-average trading volume [1] - The company is experiencing strong growth in annual recurring revenue, effective upselling and cross-selling strategies, and heightened demand for its enterprise Search Engine Optimization (SEO) products [1] Earnings Expectations - SEMrush is projected to report quarterly earnings of $0.07 per share, reflecting a year-over-year decline of 12.5% [2] - Expected revenues for the upcoming quarter are $101.58 million, which represents a 21.8% increase compared to the same quarter last year [2] Stock Performance Insights - The consensus EPS estimate for SEMrush has remained unchanged over the past 30 days, indicating that stock price movements may not sustain without trends in earnings estimate revisions [3] - SEMrush currently holds a Zacks Rank of 2 (Buy), suggesting positive market sentiment [3] Industry Context - SEMrush is part of the Zacks Internet - Software industry, which includes other companies like Riskified (RSKD) [3] - Riskified's consensus EPS estimate for its upcoming report is $0.08, showing a year-over-year increase of 14.3%, and it currently holds a Zacks Rank of 3 (Hold) [4]

I wrote about Semrush Holdings (NYSE: SEMR ) previously (19 Aug 2024) with a hold rating as I wanted to monitor how effective the implemented strategies were. I upgraded my rating from hold to buy as I turned bullish on SEMR'sI am an individual investor that is now fully focus on managing my own capital that I have saved up over the years. My investing background spreads across a wide spectrum as I believe there are merits to each approach, for instance: Fundamental investing [Bottoms-up etc.], Technical in ...

Revenue Growth - Total revenue for the three months ended September 30, 2024, was $53.5 million, up from $45.2 million for the same period in 2023, representing an increase of approximately 18.2%[145] - Annual Recurring Revenue (ARR) as of September 30, 2024, reached $400.7 million, an increase from $322.8 million as of September 30, 2023, reflecting a growth of approximately 24.1%[148] - In Q3 2024, the company reported revenue of $97,410,000, a 23.7% increase from $78,718,000 in Q3 2023[180] - Revenue for the three months ended September 30, 2024, was $97,410,000, representing a 24% increase from $78,718,000 in the same period of 2023[184] Customer Metrics - The number of paying customers increased to over 117,000 as of September 30, 2024, compared to more than 106,000 as of September 30, 2023, indicating a growth of approximately 10.4%[148] - The company served over 117,000 paying customers as of September 30, 2024, with no single customer accounting for more than 10% of total revenue[166] - The number of paying customers increased from over 106,000 as of September 30, 2023, to over 117,000 as of September 30, 2024[184] Financial Performance - Free cash flow for the nine months ended September 30, 2024, was $25.8 million, compared to a negative free cash flow of $(8.5) million for the same period in 2023[159] - Net cash provided by operating activities as a percentage of revenue was 12.8% for the nine months ended September 30, 2024, compared to (1.6)% for the same period in 2023[160] - Non-GAAP income from operations for the nine months ended September 30, 2024, was $33.98 million, significantly up from $3.34 million for the same period in 2023[161] - The net cash provided by operating activities was $35,063,000 in 2024, compared to a net cash used of $(3,567,000) in 2023[163] - Net income for the three months ended September 30, 2024, was 1% of revenue, down from 5% in the same period of 2023[183] - The net income attributable to Semrush Holdings, Inc. for Q3 2024 was $1,094,000, compared to $4,215,000 in Q3 2023[180] Operating Expenses - The cost of revenue for Q3 2024 was $17,063,000, up from $13,032,000 in Q3 2023, representing a 31% increase[180] - Total operating expenses for the three months ended September 30, 2024, were 81% of revenue, compared to 80% in the same period of 2023[183] - Research and development expenses increased to $22,183,000 in Q3 2024 from $14,075,000 in Q3 2023, reflecting a 57.7% rise[180] - Research and development expenses for the three months ended September 30, 2024, increased by $8,108,000, a 58% increase compared to the same period in 2023[192] - Sales and marketing expenses for the three months ended September 30, 2024, were $35,689,000, a 19% increase from $30,094,000 in the same period of 2023[189] - General and administrative expenses for the three months ended September 30, 2024, were $20,770,000, an 11% increase from $18,769,000 in the same period of 2023[194] Cash and Investments - As of September 30, 2024, the company had cash and cash equivalents of $45.1 million and short-term investments of $187.8 million[203] - Net cash used in investing activities for the nine months ended September 30, 2024, was $51.1 million, primarily due to $136.8 million in purchases of short-term investments[211] - Net cash provided by financing activities for the nine months ended September 30, 2024, was $2.0 million, consisting of $3.7 million from the exercise of stock options[213] - The company believes existing cash and short-term investments will be sufficient to meet operating and capital needs for at least the next 12 months[204] Strategic Plans - The company plans to continue investing in product development to enhance its technology and expand its product offerings[153] - The company expects to continue investing in research and development to enhance its platform and customer experience[171] - The company anticipates fluctuations in its cost of revenue as it continues to expand its customer base and invest in infrastructure[168] Other Financial Metrics - The dollar-based net revenue retention rate was approximately 107% as of September 30, 2024, consistent with the rate at the end of 2023[150] - ARR per paying customer increased to $3,414 as of September 30, 2024, up from $3,022 as of September 30, 2023, representing an increase of approximately 13%[152] - Non-GAAP income from operations margin improved to 12.4% in 2024 from 1.5% in 2023[162] - Total stock-based compensation expense for Q3 2024 was $7,575,000, up from $4,203,000 in Q3 2023, indicating an increase of 80.5%[181] - The provision for income taxes for the three months ended September 30, 2024, was $3,899,000, representing a 512% increase from $637,000 in the prior year[200] - The increase in other income for the nine months ended September 30, 2024, was primarily due to an increase in foreign currency exchange gains and interest income[199] Market Presence - The company operates subsidiaries in multiple countries, including the U.S., Spain, and Germany, indicating a broad market presence[144] - The company is exposed to foreign currency exchange risk, with a potential $7.7 million gain or loss from a 10% change in the euro relative to the U.S. dollar[222]