Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• SEMrush Holdings Inc (NYSE:SEMR) reported a 23% year-over-year revenue growth in Q4 2024, exceeding their guidance.
• The company achieved a non-GAAP operating income of $11.8 million in Q4, with a non-GAAP operating margin of 11.5%.
• SEMrush Holdings Inc (NYSE:SEMR) successfully expanded its enterprise customer base, closing over 40 enterprise deals in December alone.
• The company introduced new AI features and expanded its product offerings, enhancing its social media capabilities.
• SEMrush Holdings Inc (NYSE:SEMR) ended the year with strong cash reserves, holding $235.6 million in cash, cash equivalents, and short-term investments.

Negative Points

• There is softness in the lower end of the market, impacting the company's overall net revenue retention rate.
• Operating expenses are expected to accelerate in 2025, which may impact short-term profitability.
• The company's dollar-based net revenue retention rate decreased slightly to 106% from 107%, indicating some challenges in customer retention.
• The macroeconomic environment remains uncertain, with no significant changes observed in the trends affecting SEMrush Holdings Inc (NYSE:SEMR).
• The company is still in the testing phase for pricing and packaging of its new AI optimization products, which could affect revenue projections.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Sign with SEMR.

Q: Can you discuss the impact of DeepSeek on your roadmap and potential for lower influencing costs? A: Unidentified_5: We believe technology will become more democratized, making premium models viable. DeepSeek's breakthrough was in reducing training costs, which is beneficial for consumer internet as AI becomes more accessible. We see this as a positive development for the industry.

Q: What are you seeing in the macro environment and its impact on your business segments? A: Brian Holroy, CFO: We haven't observed any significant changes in the macro environment affecting our business segments. We continue to see strong momentum in our business and agency cohorts, with some softness in the lower end of the market.

Q: Why is now the right time for a CEO change, and what are your initial priorities as the new CEO? A: Oleg Schlegelov, CEO: The business is performing well, and the leadership team is strong. It's an opportune time to address new opportunities. A: Phil Wagner, Incoming CEO: My priority is to listen and understand the business. I plan to align growth with our user base and focus on the enterprise opportunity.

Q: What drove the downtick in net revenue retention (NRR) to 106%, and what's the outlook for 2025? A: Brian Holroy, CFO: The downtick was due to macro-related challenges impacting the lower end of the market. However, our enterprise customers have a higher NRR, and we expect overall NRR to remain strong and potentially increase as we focus on cross-sell and upsell opportunities.

Q: Can you elaborate on the AIO (AI Optimization) initiative and its pricing strategy? A: Unidentified_5: We are testing packaging and pricing for our AIO products. Currently, one product is available for $99 a month. We plan to launch an enterprise version soon and will adjust pricing based on user adoption and feedback.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.