In This Article:
Release Date: May 08, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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SEMrush Holdings Inc (NYSE:SEMR) reported revenues of $105 million in Q1, representing more than 22% year-over-year growth, exceeding the high end of their guidance.
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The company delivered a non-GAAP operating margin of 11.6% and increased free cash flow margin by 360 basis points over the same period last year.
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Strong performance of the enterprise SEO solution, with nearly 200 paying customers at an average ARR per customer of approximately $60,000, almost 20% higher than expectations.
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Encouraging customer reaction to AI products, which have grown to over $4 million in ARR, including the AI toolkit launched in Q1.
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SEMrush Holdings Inc (NYSE:SEMR) ended the quarter with cash and cash equivalents and short-term investments of $261.8 million, up $26.2 million from the previous quarter.
Negative Points
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The company is reiterating its full-year revenue guidance due to the uncertain geopolitical and macroeconomic environment, which could lead to elongated sales cycles and deferred spending by customers.
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Non-GAAP operating margins are impacted by an $8 million expense headwind due to recent movements in exchange rates, with approximately 30% of expenses denominated in euros.
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Dollar-based net revenue retention at the end of the first quarter was 106%, slightly lower than the previous stabilization at 107%.
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The ARR result for the quarter was just under 20%, which was planned due to seasonality and a shift towards higher value customers, but it may indicate a low water mark for net new ARR.
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The company acknowledges the potential for elongated sales cycles and deferred spending by customers due to macroeconomic uncertainties.
Q & A Highlights
Q: With AI-driven search gaining attention, what should SEMrush customers do, and how does this impact the company? A: Bill Wagner, CEO: AI presents a significant opportunity for SEMrush. Brands are exploring how to appear in AI-driven search results, which is new for them. Our enterprise AI product is in high demand, and our AI toolkit is one of our fastest-growing products. We believe AI will expand the market, benefiting SEMrush.
Q: The ARR growth was slightly below 20%. Was this expected, and is it a seasonal trend? A: Brian Mulroy, CFO: Yes, this was planned due to seasonality and a shift towards higher-value customers. We are focusing on attracting quality customers, particularly in the enterprise and AI solutions segments. This shift affects seasonality but aligns with our long-term growth strategy.