Q4 2023 Similarweb Ltd Earnings Call
[music].
Operator: Greetings and welcome to SimilarWeb's Q4 Fiscal 2023 Earnings Call. At this time, all participants are in a listen-only mode.
Greetings and welcome to similar with Q4 fiscal 2023 earnings call.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
Operator: A question and answer session will follow the formal presentation if anyone should require operator assistance during the conference. Facebook page, and Twitter.com. As a reminder, this conference is being recorded. Recorded. I would now like to turn the conference over to your host, R.J. Jones, Vice-President, Industry Leadership. Go to Beadaholique.com for all of your beading supply needs!
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
Now I'd like to turn the conference over to your highest Oh.
Oh, Jay Chang Vice President Investor Relations. Please go ahead.
Thank you operator, welcome everyone to our fourth quarter and fiscal year 2023 earnings Conference call.
R.J. Jones: Thank you, Operator. Welcome, everyone, to our fourth quarter and fiscal year 2023 Earnings Conference Call. During this call, we will make forward-looking statements related to our business. These statements may include the expected performance of our business and our future financial results, our strategy, the potential impacts of rising interest rates, rising global inflation, and current macroeconomic and geopolitical conditions, including the current war in Israel, challenges in our business and in the markets in which we operate, our anticipated long-term growth, and our overall future prospects. These statements are subject to known and unknown risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected or implied during the call. Further, reported results should not be considered as an indication of future performance.
During this call we will make forward looking statements related to our business. These statements may include the expected performance of our business and our future financial results our strategy the potential impacts of rising interest rates rising global inflation, and Kurt macroeconomic and geopolitical conditions, including the current war Israel challenges in our business and in the mall.
That's in which we operate our anticipated long term growth and overall future prospects. These statements are subject to known and unknown risks uncertainties and assumptions that could cause actual results to differ materially from those projected or implied during the call for.
Reported results should not be considered as an indication of future performance. Please review the forward looking statements discussion in our shareholder letter along with our form 20-F filed with the SEC on March 'twenty, three 'twenty 23, and in particular the sections entitled cautionary statement regarding forward looking statements and risk factors they're in.
R.J. Jones: Please review the forward-looking statements discussion in our shareholder letter along with our Form 20-F filed with the SEC on March 23, 2023, and in particular, the sections entitled Cautionary Statement Regarding Forward-Looking Statements and Risk Factors Therein. For a discussion of factors that could cause our actual results to differ from the forward-looking statements, please refer to the forward-looking statements section of our shareholder letter. Please note that any forward-looking statements made on this call are based on available information as of today's date, February 14, 2024. We undertake no obligation to update any forward-looking statements we make today, except as required by law. As a reminder, certain financial measures we use in presentations of results and on our call today are expressed on a non-GAAP basis. In particular, we reference non-GAAP operating profit or loss, which represents GAAP operating profit or loss, less share-based compensation, adjustments of payments related to business combinations, amortization of intangible assets, and certain other non-recurring items.
For a discussion of factors that could cause our actual results to differ from the forward looking statements.
Also note that any forward looking statements made on this call are based on available information as of today's date February 14 2024.
We undertake no obligation to update any forward looking statements, we make today, except as required by law.
As a reminder, certain financial measures, we use in presentations of results and on our call. Today are expressed on a non-GAAP basis in particular, we reference non-GAAP operating profit or loss, which represents GAAP operating profit or loss less share based compensation adjustments of payments related to business combinations amortization.
Of intangible assets and certain other nonrecurring items we.
R.J. Jones: We use this and other non-GAAP financial measures internally to facilitate analysis of our financial and business trends and for internal planning and forecasting purposes. We believe these non-GAAP financial measures, when taken collectively, may be helpful to investors because they provide consistency and comparability with past financial performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. However, non-GAAP financial measures have limitations as an analytical tool and are presented for supplemental informational purposes only.
We used this and other non-GAAP financial measures internally to facilitate analysis of our financial and business trends and for internal planning and forecasting purposes. We believe these non-GAAP financial measures when taken collectively may be helpful to investors, because they provide consistency and comparability with past financial performance by excluding certain items.
That may not be indicative of our business results of operations or outlook.
non-GAAP financial measures have limitations as analytical tools and are presented for supplemental informational purposes only.
Should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP a.
Or Offer: They should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. A reconciliation between these GAAP and non-GAAP financial measures is included in our earnings press release, which can be found on our investor relations website at ir.similarweb.com. Today, we will begin with brief prepared remarks from our CEO, Or Offer, and our CFO, Jason Schwartz. Then we will open up the call to questions from cell site analysts in attendance. Please note that we publish a detailed discussion of our fourth quarter and fiscal year 2023 results in a letter to shareholders for investors to reference, as well as an updated investor presentation with a strategic overview of the business, both of which are available on our investor relations website. With that, I will turn the call over to Or Offer, CEO of SimilarWeb. Thank you, RJ, and welcome everyone joining the call today.
A reconciliation between these GAAP and non-GAAP financial measures is included in our earnings press release, which can be found on our Investor Relations website at IR Dot similar web dot com.
Today, we will begin with brief prepared remarks from our CEO or offer and our CFO. Jason Schwartz then we will open up the call to questions from sell side analysts independence. Please note that we published a detailed discussion of our fourth quarter and fiscal year 2023 results in a letter to shareholders for investors reference as well.
An updated investor presentation with a strategic overview of the business both of which are available on our Investor Relations website.
With that I will turn the call over to or offer CEO of similar web.
Thank you Jay and welcome everyone joining the call today.
In Q4, we reported another quarter of growth in operating improvements and grow our revenue by 11% over Q4 last year to $56 8 million.
Mobile customer base grew 16% year over year to a whole Sofia than 700 customers now as this customer will spend around 50000 Boe along with us annually.
Or Offer: In Q4, we reported another quarter of growth and operating improvement. We grew our revenue by 11% over Q4 last year to $56.8 million. Our global customer base grew 16% year over year to over 4,700 customers. And our average customer spends around $50,000 with us annually. The thought of our funnel continues to stay strong.
The scope of our funnel continues to stay strong.
Around 13 million visitors to our free tools that similar web com in Q4, and we did 120 million visits to our tools in 2020 free.
As a result, our pipeline remains robust and we are adding new customers and expanding our penetration into a market.
The changes we made to packaging inside their navigation and the launch of similar web three Oh in Q3 are bringing in new customers.
Upsides from bigger average Aldo.
Or Offer: We had around 13 million visitors to our free tools at SimilarWeb.com in Q4, and we expect 120 million visits to our tool in 2023. As a result, our pipeline remains robust, and we are adding new customers and expanding our penetration into our market. The changes we made to packaging, insight, and navigation in the launch of SimilarWeb 3.0 and Q3 are bringing in new customers, creating upside from bigger average orders at renewal. We are excited to see all the new customers at our entry-level price points, especially in our monthly packages, which are no-touch with low-acquisition costs.
We are excited to see all the new customers at our entry level price points, especially in our monthly packages, which are no touch with low acquisition costs.
I think in alignment with our customer would green Dot O us.
Greatly enhance our go to market and improve the offering so enterprise customer.
It is even better with our strategic customers, who are reaching new heights with us they can.
The record number of seven figure deals during the fourth quarter alone because some of the largest companies in the world are recognizing the value of actionable insights they can pick stocks Omar that that's great.
We're rapidly becoming a go to source for our two power of competitive advantage for the largest companies.
Who are investing massive resource into journey.
Or Offer: Pricing alignment with our customers with 3.0 has greatly enhanced our go-to-market mode and improved our offering to our enterprise customers. It is even better with our strategic customers, who are reaching new heights with us. We closed a record number of seven-figure deals during the fourth quarter because some of the largest companies in the world are recognizing the value of actionable insight that can be extracted from our data at scale. We are rapidly becoming a go-to source to power up competitive advantage for the largest companies who are investing massive resources into Gen AI. We believe that we are just getting started with what is possible with generative AI and only beginning to see its tremendous growth potential for us.
We believe that we are just getting stuff that we do at these possible regenerative AI and only beginning to see its tremendous growth potential for us.
I'm very proud of our team as we achieved an important milestone.
We want to reach to Seattle, we were profitable on a non-GAAP basis in the fourth quarter and our Q4 non-GAAP operating margins show a strong improvement of 30% points compared to last year, which led to us achieving our first positive free cash flow quarter since our IPO.
A great achievement for us and reflects a lot of small to work and discipline from our team.
We want to continue to build on this performance in the coming year in terms of growth profitability and free cash flow to do this we are focused on it.
Or Offer: I'm very proud of our team as we achieve an important milestone that we want to reach this year. We were profitable on a non-gap basis in the fourth quarter, and our Q4 non-gap operating margin showed a strong improvement of 30% points compared to last year, which led to us achieving our first positive free cash flow quarter since our IPO. This is a great achievement for us and reflects a lot of smart work and discipline from our team. We want to continue to build on this performance in the coming year in terms of growth, opportunities, and free cash flow. To do this, we are focused on execution in four areas.
Execution in full areas.
First we intend to build on the positive momentum with our strategic account, we want to land and expand in those large global customer.
Second we are focused on increasing the net retention of our enterprise and SMB customers.
I think our customers to take advantage of everything and stay with my web prebuilt, though is our customer success priority for us.
Third we will enhance and innovate in our product line, one area, where we have a great deal for them to drive market penetration is.
By the Doctor and that intelligence as well as by unleashing our own journey is similar S capabilities with our dot com.
Leslie.
We will continue to operate efficiently.
Carefully invest where needed to support growth and create operating leverage. Thank you everyone for your continued support and look forward updating everyone on our progress with that Jason I will turn the call over to you.
Or Offer: First, we intend to build on the positive momentum with our strategic accounts. We want to land and expand with those large global customers. Second, we're focused on increasing the net retention of our enterprise and SMB customers. Helping our customers to take advantage of everything in SimilarWeb 3.0 is a customer success priority for us and Andrew Weiss.
Thank you ward and thank you to everyone joining us on the call today to discuss our fourth quarter results I will briefly address our financial performance and then we will open up the call to questions.
Our performance in the fourth quarter reflects our focus on disciplined execution revenue was $56 $8 million for the quarter and exceeded the high end of our guidance range for 100000 dollar AOR customer segment, MLR was 107% as compared to 120% in Q.
Or Offer: We will continue to operate efficiently. We will carefully invest where needed to support growth and create an operating level. Thank you, everyone, for your continuous support. We look forward to updating everyone on our progress. With that, Jason, I will turn the call over to you.
<unk> Board last late last year, and now represents 57% of our total AOR.
Jason Schwartz: Thank you, War, and thank you to everyone joining us on the call today to discuss our fourth quarter results. I will briefly address our financial performance, and then we will open up the call to questions. Our performance in the fourth quarter reflects our focus on disciplined execution. Revenue was $56.8 million for the quarter, and it exceeded the high end of our guidance range.
Closing out the longer sales cycles, we have seen in 2023 customer acquisition and logo retention were steady in the fourth quarter and as Warren mentioned an area of strength for US was in our strategic accounts, where we closed 10 seven digit contracts during the quarter and outstanding Reserve.
All that is fueling our positive momentum.
Jason Schwartz: For our $100,000 ARR customer segment, NRR was 107% as compared to 120% in Q4 last year and now represents 57% of our total ARR. Closing out the longer sales cycles we have seen in 2023, customer acquisition and logo retention were steady in the fourth quarter. And as Orr mentioned, an area of strength for us was in our strategic accounts, where we closed 10 seven-digit contracts during the quarter, an outstanding result that is fueling our positive momentum. As we conclude 2023, 42% of our ARR is contracted under multi-year commitments, demonstrating the strength and longevity of our customer relationships. And our remaining performance obligations also reached a new record of $195 million, a positive indicator of our performance durability going forward. Additionally, while our results on the top line were better than planned, we also exceeded expectations on our bottom line. Our non-GAAP gross margin reached 81% in the fourth quarter. Our fourth quarter GAAP operating loss was $1.1 million, while our non-GAAP operating profit was $4.7 million.
As we concluded 2023, 42% of our AOR is contracted under multi year commitments, demonstrating the strength and longevity of our customer relationships and our remaining performance obligations also reached a new record of $195 million a positive indicator.
Or of our performance durability going forward.
While our results on the top line were better than planned we also exceeded expectations on our bottom line, our non-GAAP gross margin.
Reached 81% in the fourth quarter, our fourth quarter GAAP operating loss was $1 $1 million, while our non-GAAP operating profit was $4 $7 million. This resulted in a record non-GAAP operating margin of 8% and represented an improvement.
Of 29 percentage points versus the prior year, our focus on operating efficiency throughout 2023 drove excellent results, culminating in us generating three and a half million dollars in positive free cash flow in the fourth quarter, a 6% free cash flow margin.
We achieved our stated goal of becoming free cash flow positive as we enter 2024, which is a momentous result for our team.
Turning now to Q1 'twenty 'twenty four we expect total revenue in the range of 58, and a half million to $59 million for the full year of 2024, we now expect total revenue in the range of 242 million to $246 million, representing approximately 12% growth year over year.
Jason Schwartz: This resulted in a record non-GAAP operating margin of 8% and represented an improvement of 29 percentage points versus the prior year. Our focus on operating efficiency throughout 2023 drove excellent results, culminating in us generating $3.5 million in positive free cash flow in the fourth quarter, a 6% free cash flow margin. We achieved our stated goal of becoming free cash flow positive as we entered 2024, which is a momentous result for our team. Turning now to Q1 2024, we expect total revenue in the range of $58.5 million to $59 million. For the full year of 2024, we now expect total revenue in the range of $242 million to $246 million, representing approximately 12% growth year-over-year at the midpoint of the range. Non-GAAP operating profit for the first quarter is expected to be in the range of $1 to $1.5 million.
At the midpoint of the range non-GAAP operating profit for the first quarter is expected to be in the range of one to one and a half million dollars for the full year, we expect that our operating profit to be between six and $8 million.
In 2024, we are focused on achieving profitable growth and making progress towards the rule of 40, we anticipate being profitable on a non-GAAP basis and generating positive free cash flow in all four quarters of 2024.
As we navigate the current macro environment, we are building momentum and increasingly optimistic we believe we are well positioned to take advantage of the mass adoption of generative AI by the world's largest business days, which is just beginning we believe that companies that leverage our data and insights.
We'll achieve lasting data driven competitive advantage is ones that will be sustained with our unique and powerful offering in the near and long term.
Jason Schwartz: For the full year, we expect our operating profit to be between $6 and $8 million. In 2024, we are focused on achieving profitable growth and making progress towards the Rule of 40. We anticipate being profitable on a non-gap basis and generating positive free cash flow in all four quarters of 2024. As we navigate the current macro environment, we are building momentum and increasingly optimistic. We believe we are well-positioned to take advantage of the mass adoption of generative AI by the world's largest businesses, which is just beginning. We believe that companies that leverage our data and insights will achieve lasting, data-driven competitive advantages, ones that will be sustained with our unique and powerful offering in the near and long term. With that said, Orin and I are ready to answer your questions.
With that or and I are ready to answer your questions.
Yeah.
Thank you.
At this time, we will be conducting a question and answer session.
Is it like to ask a question. Please press Star then one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to move to question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the stocking.
One moment, please pull for questions.
Okay.
Yeah.
The first question rehab at home I shouldn't Vitale all suddenly please go ahead.
Hey, guys, it's Rachel.
Again, thanks for taking my question and congrats on the quarter.
All right.
Ask about linearity in the quarter and then into.
Q1, so far it looks like some of the underlying metrics like CRP al and not new customers outpace revenue guide itself.
Any color on linearity would be helpful. Thanks.
Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star and then 1 on your telephone keypad. A confirmation turn will indicate your line is busy. You may press star, link to, if you would like to remove the question from the... For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key.
Hey, Rich I'll, Jason Thanks for the thanks for the question Yeah, We we did see some.
With some more backend of the AR on the linearity, particularly with some of the bigger deals that were closed in.
In the latter half of the quarter. So you do see.
Some linearity and some different linearity over there.
But we're really excited with the with.
With the results that we had and I think this is a good indication of what we should see going forward.
Operator: One moment, please, while we pull for questions. The first question we have is from Arjun Bhatia of Fulham Blay. Please go ahead. Hey guys, it's Rachel on for Arjun.
Yeah.
Awesome. Thanks, and then just one more maybe and some of those bigger deals where those.
Deals that got pushed out from earlier quarters, and then anything specific you would attribute that momentum to it.
Arjun Bhatia: Thanks for taking my question and congrats on the quarter. I wanted to ask about linearity in the quarter and then into Q1. It looks like some of the underlying metrics like CRPO and then net new customers outpaced revenue growth. So any color on linearity would be helpful.
Our strategic customers.
Yeah. So it's things that a lot of those deals happened in Q4 and close in Q4, I think that our strategic motion get better and better.
We did all of improvement in the past year.
Near owns pricing packaging, introducing an innovation a lot of our solutions and all of them goes our scope who named food that we're very excited they suddenly if he has something to add.
Jason Schwartz: Hey Rachel, it's Jason. Thanks for the question. We did see some more back-end on the linearity, particularly with some of the bigger deals that were closed in the latter half of the quarter, so you do see some difference in linearity over there. But we're really excited with the results that we had, and I think this is a good indication of what we should see going forward.
Yeah, and then get them, we've been saying for the last couple of quarters, how the sales cycles, where were elongated some of these deals.
Been in the pipeline for a while and just took them a long time to close.
We're very excited to see that that that data ultimately that those deals did ultimately convert and are providing us good momentum as we enter 2024.
Or Offer: And then maybe just one more on some of those bigger deals were those deals that got pushed out from earlier quarters, and then anything specific you would attribute that momentum to with those strategic customers. Yeah, so I think that a lot of those deals happened in Q4, in closing Q4. I think that our strategic motion is getting better and better. We did a lot of improvement in the past year on pricing, packaging, introducing and innovation, a lot of solutions, and all of those are starting to yield fruit that we are very excited about. Okay, so maybe you have something to add.
Okay.
Yeah makes sense.
Thanks for taking my question and congrats again.
The next question we have is for them.
Sure.
Jefferies. Please go ahead.
Thank you.
I'd like to touch base on her and more specifically those customers that are averaging below $100000 in contract value.
Can you talk a little bit about the the churn level. There is continuing to decline at this point.
Any color that you can provide there where we think it should stabilize it seems like it's stabilizing but I just want to kind of understand that cadence.
Jason Schwartz: Yeah, and then, you know, we've been saying for a little the last couple of quarters, how the sales cycles are elongated. Some of these deals have been in the pipeline for a while, and just took a long time to close. We're very excited to see that that did ultimately come true, that those deals did ultimately convert, and are providing us, you know, good momentum as we enter 2020. Yep, makes sense. Thanks for taking my question and congratulations again. The next question we have is from Serena Finn of Jefferies. Please go ahead.
Oh and it can stabilize.
We see it stabilize and we've seen a little bit increase if you look on the logo retention.
I think it's the best indication to say that there is.
She used women and so in the logo retention do you even see it.
The improvement that retention rate.
We're seeing vis a vis indications are positive now.
Thank you.
And then in terms of just as you think about the multi year contracts.
Serena Finn: Thank you. I'd like to touch base on NRR and more specifically those customers that are averaging below $100,000 in contract value. Can you talk a little bit about the churn level there? It's continuing to decline at this point. Any color that you can provide on where we think it should stabilize?
How do you anticipate that impacts the cadence of the recovery at this point, obviously there'll be some clients that are coming up.
Or renewal that maybe haven't renewed them at the lower desired levels that they would have just because of you know.
Being involved in the longer contracts.
Or Offer: It seems like it's stabilizing, but I just want to kind of understand that cadence. Hey, it's O. It is stabilized. We see it stabilize, and we see a little bit of an increase if you look at the log retention. I think it's the best indication to see that there is a shift momentum. So in log retention, you can see an improvement in the retention rate. So we're seeing this indication positive now. Thank you. And then in terms of just... as you think about the multi-year contract, how do you anticipate that impacts the cadence of the recovery at this point?
I don't see any good impact those.
Those customers that are multi year.
Usually companies that really love, our solution and decided to engage with us for the long term and because they feel that we've got a great price and go with a wife won't be paid.
Well I think they will come and we would be able to close them to even more with you down the road when even offer them more products those all our best stuff.
Yeah.
Got it and then I guess the final question here as you think about.
I'm going to walk through you know the rollout the initial uptake how.
How do you anticipate it impacts the payback period.
Yeah.
Or Offer: Obviously, there'll be some clients that are coming up, or renewals that maybe haven't renewed, you know, at the lower desired levels that they would have just because of, you know, being involved in the longer contract. But I don't see any good impact. Those customers that are multi-year are usually companies that really love our solution and decided to engage with us for the long term because they feel they've got a great price and great ROI for what they paid.
Great question and thanks for the.
We start seeing the but it'll start happening I'm a payback period. It is is more and more.
Hum.
To close the deal in other words, the speed at which we're able to get that and those deals starting to close faster.
Drive that yield will drive a better ROI of our recovery on the classified side.
We see that starting to impact and.
Or Offer: So I think they will come, and we will be able to keep them for even more years down the road and even offer them more products. Those are our best customers.
We should see some more of that.
Towards the middle or latter part of 'twenty 'twenty four.
Yeah.
Jason Schwartz: And then I guess the final question here is what you think about SimilarWeb 3.0, the rollout, the initial uptake. How do you anticipate it impacts the payback? Yeah, great question.
Got it and then the final related question just there would be.
Think about the initial uptake obviously claims coming in small packages size.
What is the path for the upgrade there to get them to more normalized.
Jason Schwartz: Thanks. Then, you know, we actually start seeing the, What will start happening during the payback period is more and more time to close the deal. In other words, the speed at which we're able to get that, and those deals starting to close faster, will drive that yield, or better ROI or recovery on the cash side. So we see that starting to impact, and we should see some more of that towards the middle or latter part of 2020. I got it.
Or what you would what I would call target accountable.
Hum.
How much of that is macro driven and how much of it does it provide deep user engagement point.
Any initial color there disappointed if how those conversations are going.
Yeah. We're we're very encouraged by what we're seeing with the three that are pricing you know when we look at the.
360, some odd customers that are over 100000.
The overwhelming majority of those customers historically started well below.
Jason Schwartz: And then the final related question just there would be, as you think about the initial uptake, obviously, clients coming in at smaller package sizes. What is the path for the upgrade there to get them to a more normalized or what you would call the target, is that? How much of that is macro-driven? How much of it does it provide you as an engagement point?
And what we've done over the years is take customers through that journey, starting with one solution.
Good you're going to better going to burst and then going from one solution to a second solution third solution and that's how you take somebody from being a 10000 dollar customer to tens of thousands to hundreds of thousands.
And either multimillion I think what we did though was really institutionalize that into best practices with with scalable neither measures that that makes it easy and more more seamless for customers to start up at an entry level price, which is easy for them to transact that and grow over time and we.
Jason Schwartz: Just any initial color there at this point on how those conversations are going? Yeah, we're very encouraged by what we're seeing with the 3.0 pricing. You know, when we look at the, you know, 360 odd customers that are over $100,000, the overwhelming majority of those customers historically started well below $100,000. And what we've done over the years is take customers through that journey, starting with one solution, good, going to better, going to best, and then going from one solution to a second solution, or third solution. And that's how you take somebody from being a $10,000 customer to getting tens of thousands, hundreds of thousands, and even multi-million. I think what 3.0 institutionalized that into best practices with scalable meter measures that make it easy and more seamless for customers to start at an entry-level price, which is easy for them to transact at, and grow over time. And we're starting to see that play out.
We're starting to see that play out we feel very encouraged that this is the right way to engage with our customers and think that it will impact not only the speed that we're able to onboard customers like the 16% local increase that we saw this year, but also the improvement of MLR over time.
Thank you that's it for my questions.
Thank you.
The next question we have is from Ryan Macwilliams of Barclays. Please go ahead.
Hey, guys. This is Damon Kaufman on for Rob and thanks for taking the question and congrats on the results are great momentum.
Customers, we noticed a common shareholder letter that poor performance from both logo retention and upsells should affect at all positively in the future periods should we take that as for keeping the pedal trough and some stability in for Q4.
Yeah, I I, where we think that we have just hit that.
Jason Schwartz: We feel very encouraged that this is the right way to engage with our customers and think that it will impact not only the speed that we're able to onboard customers, like the 16% logo increase that we saw this year, but also the improvement of NRR over time. Thank you. That's it for my question. The next question we have is from Ryan McWilliams of Barclays. Please go ahead. Hey guys, this is Damien Cobb. I'm on for Ryan.
Are they the trough on where its all looking forward to seeing that metric continues to expand and grow our over the air. It's it's as we also mentioned water. It's a focus area for us to drive that improvement as well.
Excellent.
And also great to see momentum and improvement in overall net new customers.
Do you view that says maybe a budget plus at year end or just essentially a sign for.
For positive trends in customer buying behavior.
I don't think that was a bunch of class I think that it was more about buying patterns I think again the sum of the simplicity that we've.
Ryan McWilliams: Thanks for the question and congratulations on the results. We noticed a comment in the shareholder letter that 4Q's performance from both logo retention and upsells should affect NRR positively in future periods. Should we take that as 4Q being the potential trough, and with some stability in 4Q, in 2024? Yes, we think that we have hit the trough, and we're looking forward to seeing that metric continue to expand and grow over the years. As we also mentioned, it's a focus area for us to drive that improvement as well.
Introduced with.
With three dot O and the packaging that we have it makes it easier for people to get started and you see that that's impacting the number of logos that we're able to onboard and we're very excited about that.
Perfect. Thanks, guys.
The next question, we have is from Jason Holstein of Oppenheimer. Please go ahead.
Hi, This is Steve on for Jason I'm, sorry, I have two questions number. One is you added 341 accounts quarter over quarter. The highest in your time as a public company was the strength solely driven by customers signing up for and utilizing similar three dot O. It lower.
Jason Schwartz: And also great to see momentum and improvement in overall net new customers. Do you view this as maybe a budget plus at year end or, more importantly, a sign for positive trends in customer buying behavior? I don't think that was a budget flush.
Pricing or was there something else at play and then secondly, where do you see the most upside within your products E Commerce, App store or competitive benchmarking. Thanks.
Yeah springboard strong momentum, but it's just really good execution from our team also we have the self serve offering that's a lot of customers choose to buy a yearly what's also nice boost.
Or Offer: I think that it was more about buying patterns. I think, again, some of the simplicity that we've introduced with Version 3.0 and the packaging that we have, it makes it easier for people to get started, and you see that that's impacting the number of logos that we're able to onboard, and we're very excited about that. Perfect. Thanks, guys. The next question we have is from Jason Hofstein of Oppenheimer. Please go ahead. Hi, this is Steve on...
And going into this year I do see a good momentum personal in the core offering to competitive intelligence UK is very strong, but luckily movement.
I think the short film that is e-commerce, what we called a buy online solution. It's also doing very well.
I think all of them have great momentum right now as we're going into 'twenty to 'twenty four.
The next question, we have for some color I kick off.
Please go ahead.
Yeah. Thanks for taking the question.
Morning, So wanted to go back to the large seven figure deals that you.
You saw in the quarter sounded pretty encouraging on that front can you just talk about what industries. You saw those and was this was this kind of more within the investor intelligence space or more b to C. B to B and then.
Jason Hofstein: So I have two questions. Strengths solely driven by customers signing up for and utilizing SimilarWeb 3.0 at lower prices, or was there something else? Secondly, where do you see the most upside within your product? Commerce, and the App Store.
I'm just curious like if you compare and contrast over the last 90 days and you look at your segments across you know SMB mid market enterprise. If you could just provide some color on which ones are you know getting better or worse or staying the same just just so we can kind of think about the moving pieces on the demand side. Thank you.
Or Offer: Yeah, I think the strong momentum is that it's really good, good execution from our team. Also, we have the self- offering that a lot of customers choose to buy yearly. So it's also nice boots.
Or Offer: And going into this year, I do see good momentum. First of all, the core of the competitive intelligence use cases is very strong. There's a lot of improvement there. I think the shopper, which is the e-commerce or people buy online solution, is also doing very well. I think all of them have great momentum right now as we go into 2024. The next question we have is from Tyler Radke of Citi. Please go ahead.
Hum.
I think the momentum with some of them are struck with town.
A lot of cross sell.
Totally fair in the sectors that we serve and to start to come but most of the CPG Big CPG is of the world Telco and financial services and Big Tech.
Tyler Maverick Radke: Yeah, thanks for taking the question. Good morning. So I wanted to go back to the large seven-figure deals that you saw in the quarter. It sounded pretty encouraging on that front. Can you just talk about what industries you saw those in?
So all of them and we're doing well we need the level they changed with the way we operate our strat emotion focus been working closer with the big accounts all of the all across the board we're seeing good momentum there.
And what was the second question.
Yeah. If you if you just looked across your kind of three key segments. Your enterprise in Strat, Midmarket and SMB, which one from a demand perspective got better or worse relative to the third quarter did you see further stabilization across everything or maybe F N b.
Or Offer: Was this kind of more within the investor intelligence space or more B2C, B2B? And then I'm just curious, like, if you compare and contrast over the last 90 days, and you look at your segments across, you know, SMB, mid-market, and enterprise, if you could just provide some color on which ones are, you know, getting better or worse or staying the same, just so we can kind of think about the moving pieces on the demand side. Thank you, and Hany Taylor.
He was still challenged but enterprise got stronger just curious how kind of the demand pattern compared across those relative to 90 days ago.
Yeah. So I think we saw in Q4, a little bit of acceleration in the strap everything started was doing really great and also in the in the low part of the marketing desk and B, we saw a strong momentum. So those two really reflects elevation.
Or Offer: And I think the momentum we've seen in our Strat account is a lot of cross-sector across the sectors they serve. The sectors we serve in the Strat account are mostly CPGs, the big CPGs of the world, telecom, financial services, and big tech. So all of them, we're doing well. We did a lot of great changes with the way we operate our start motion, focus on them, and work closer with a bigger account. So all across the board, we're seeing good momentum there. Hey,
Great and then maybe a question for you Jason on the expense side, Yeah, obviously.
Pretty impressive.
Impressive margin expansion this year and you know I think operating expenses were down.
Or Offer: And what was the second question? Yeah, if you just looked across your kind of three key segments, your enterprise and strat, mid market, and SMB, which ones, from a demand perspective, got better or worse relative to the third quarter? Did you see further stabilization across everything? Or maybe SMB was still challenged, but enterprise got stronger?
14%, which which is you know pretty pretty significant how are you thinking about just given that you are starting to you are profitable.
The non-GAAP basis Youre, starting to see some positive momentum in the business what how are you thinking about the <unk>.
The spending.
Forecast for next year, what are the areas, you're you're comfortable deploying.
Or Offer: Just curious how the demand patterns compared across those relative to 90 days ago. Yeah, so I think we saw in Q4 a little bit of acceleration in the strata, we're saying strata was doing really great. And also in the low part of the market, in S&B, we saw strong momentum. So those two really saw acceleration.
Deploying incremental investments in in and where you're still you.
You know being cautious thank you.
Yeah.
Thanks for the question we are.
Our book, but we're really using as the rule of 40 as a guide we think and as we've said before in and want to reiterate that now that we've got to profitability. We intend to stay there, but we still think that there is that we're just at the beginning of the penetrating.
Or Offer: And then maybe a question for you, Jason, on the expense side, obviously, pretty impressive margin expansion this year, and, you know, I think operating expenses were down 14%, which is, you know, pretty significant. How are you thinking about just, given that you are starting to – you are profitable on a non-gap basis, you're starting to see some positive momentum in the business, what are your thoughts about the spending forecast for next year? What are the areas you're comfortable, you know, deploying incremental investments in, and where are you still, you know, being cautious? Thank you. Yeah, thanks for the question, and what we're really using is the rule of 40 as a guide.
Tam that we see in front of us. So we will continue to be a profitable business.
Both on the cash flow on a like on an operating basis, but.
We if we see the opportunities to continue to invest back in the business that will drive more topline growth, we will continue to do that.
On the sales and marketing side and on the R&D side.
Thank you.
Ladies and gentlemen, just mine.
Okay I'll ask a question you are welcome space.
And then one.
The next question is from Patrick we're raising all citizens JMP. Please go ahead.
Oh, great. Thank you and happy Valentine's day guys.
Two questions. The first one is I was talking to a partner and a big venture funds you said a year ago. It was all about cutting costs and.
Jason Schwartz: We think, and as we've said before, and want to reiterate that now that we've got to profitability, we intend to stay there, but we still think that there's that we're just at the beginning of the penetrating exam that we see in front of us. So we will continue to be a profitable business, www.SimilarWeb.com. Thank you.
Now, we're starting to think about growth again.
Is that part of what's going on with you guys.
Yeah, Yeah, I think we've been into a process of cutting cost around the company to profitable.
Now then when we're done with that we'll we back all hands on driving growth profitable growth as Jason said.
No.
Not accelerating growth again with maintaining the possibility.
Operator: Ladies and gentlemen, just another reminder to ask a question. You're welcome to start. And then. The next question we have is from Pat Walravens of... Please go ahead. Oh, great.
As we said in the opening call we expect to have a free cash flow every producing free cash flow every quarter.
2024.
And but I'm wondering are your customers starting to shift from cutting costs, they're thinking about growing and investing again.
Pat Walravens: Thank you. And happy Valentine's Day, guys. I have two questions.
Or Offer: The first one is, I was talking to a partner at a big venture fund who said a year ago, it was all about cutting costs, and now we're starting to think about growth. Is that part of what's going on with you guys? Yeah, yeah, I think we've been through a process of cutting costs and making the company profitable. And now, when we're done with that, we all join hands on driving growth, but possible growth, as Jason said. Thank you very much. But I'm wondering if your customers are starting to shift? Cutting the Cod
Okay.
I wouldn't say that you're probably right.
It's been a lot of the market.
It's probably going through the same conditions within food. So most of them to calculate the finishing with the cost optimization and now all eyes on growth like how we can go left and responsible way.
Yeah, Yeah, and then or can you just give US an example on the.
The Ginnie eyesight and how.
How your data fit then.
I think that the AI is really in the labs and they need the unique data.
Or Offer: Thank you for thinking about growing. I would say that you're probably right, and you would say that a lot of the market is probably going through the same conditions we've been through. So most of the corporations, they're finishing with cost optimization, and now all eyes are on growth, like how we can grow but in a responsible way. Yeah, yeah. And then, Orr, can you just give us an example on the Gen AI side and how your data fits in. I think that the AI, every LLM, they need the unique data that you need to train them on. First of all, some companies use our underlying data to train their LLMs to be smarter, to understand the internet better. So this is one big angle, the second angle, you know, that consumer behavior change.
You will need to train them on.
Oh.
First of all some companies use our underlying DARPA to train their elements to be small town to understand the insulin data. So this is one big angle.
The second thing then you know that consumer behavior change because the journey icon and people behave differently they search differently.
A lot of companies implement copilots anyway, so there's a lot of demand from the big corporates around consumer behavior change.
Consumers behave differently than before and then they need market visibility and this is where similar where the best in the world to give you visibility how what have you.
Anything change on those two angles, but they are you driving it really gave us a nice tailwind.
Or Offer: So, generally, I come, and people behave differently, they search differently, they use a lot of companies, and implement copilots and AI. So there's a lot of demand from the big corporations around consumer behavior change. So are my consumers behaving differently than before? And then they need market visibility. And this is where SimilarWeb is best in the world to give you visibility into how consumer behavior changes. But those two angles that the AI is driving really give us a nice tailwind.
Awesome. Thank you.
Okay.
Yeah.
Susan.
We have reached the end of the question and answer session and this complete today's conference.
Thank you for joining US you may now disconnect your lines.
Thank you everyone.
[music].
Okay.
Yeah.
[music].
Okay.
[music].
Or Offer: Thank you, and others. Thank you. Bye. We have reached the end of the question and answer session. And this concludes the day. Thank you for joining us. You may now. Thank you, everyone. Don't forget to SUBSCRIBE!