Q4 2023 Semrush Holdings Inc Earnings Call

March 5, 2024

Operator: If you'd like to ask a question at the end of the presentation, you can press star followed by 1 on your telephone keypad. If you'd like to remove your question, you may press start followed by 2.

I'll now hand it over to your host, Brinlea Johnson of Investor Relations. Please go ahead.

Brinlea Johnson: Good morning and welcome to the Semrush Holdings 4th Quarter and Full Year 2023 Conference Call. We'll be discussing the results announced in our press release issued after market close on Monday, March 4th. With me on the call is our CEO, Oleg Shchegolev; our President, Eugene Levin and our CFO, Brian Mulroy.

Today's call will contain forward-looking statements which are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements concerning our expected future business and financial performance and financial conditions, expected growth, adoption and demand for our existing and any new products and features. our App Center expansion, industry and market trends, our competitive position, market opportunities, sales and marketing activities, the sufficiency of our staffing levels, our guidance for the first quarter of 2024 and the full year 2024 and statements about future pricing and operating results, including margin improvement, revenue growth and profitability. Forward-looking statements are statements other than statements of fact and can be identified by words such as expect, can, anticipate, intend, plan, believe, seek or will. These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date and we do not undertake any duty to update these statements. Forward-looking statements address matters that are subject to risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. For discussion of the risks and important factors that could cause their actual results, please refer to our most recent quarterly report on Form 10-Q and our annual report on Form 10-K, filed with the Securities and Exchange Commission, as well as other filings to the SEC.

Forelooking statements include, but are not limited to, statements concerning our expected future business and financial performance and financial conditions, expected growth, adoption, and demand for our existing and any new products and features.

our App Center expansion, Industry and Market Trends,

our competitive position.

Market opportunities, sales and marketing activities, the sufficiency of our staffing levels, our guidance for the first quarter of 2024, and the full year 2024.

And same is about future pricing and operating results, including margin improvement, revenue growth, and profitability.

Forward-looking statements are statements other than statements of fact and can be identified by words such as expect, can, anticipate, intend, plan, believe, seek or will. These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date and we do not undertake any duty to update these statements. Forward-looking statements address matters that are subject to risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. For discussion of the risks and important factors that could cause their actual results, please refer to our most recent quarterly report on Form 10-Q and our annual report on Form 10-K, filed with the Securities and Exchange Commission, as well as other filings to the SEC.

Forelooking statements are statements other than statements of fact and can be identified by words such as expect, can, anticipate, intend, plan, believe, seek, or will.

These statements reflect our views as of today only, and should not be relied upon as representing our views at any subsequent date, and we do not undertake any duty to update these statements.

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

For discussion of the risks and important factors that could cause their actual results, please refer to our most recent quarterly report on Form 10-Q and our annual report on Form 10-K filed with the Securities and Exchange Commission, as well as other filings to the SEC.

During the course of today's call, we refer to certain non-GAAP financial measures. There is a reconciliation schedule showing the GAAP versus non-GAAP results currently available in our press release issued yesterday after market close, which can be found at investors.semrush.com. I also wanted to highlight that starting with our guidance for the first quarter and full year 2024, we are updating our guidance measures and non-GAAP definitions. We will no longer provide guidance for the non-GAAP net income and instead will guide to both non-GAAP operating margin and free cash flow margin. Estimates used for these are presented in our earnings release.

There is a reconciliation schedule showing the GAAP versus non-GAAP results currently available and a press release issued yesterday after market closed, which can be found at investors.semrush.com.

I also wanted to highlight that starting with our guidance for the first quarter and full year 2024, we are updating our guidance measures and non-GAAP definitions. We will no longer provide guidance for the non-GAAP net income and instead will guide to both non-GAAP operating margin and free cash flow margin.

Estimates used for these are presented in our earnings release.

We are also updating our definition of non-GAAP income from operations on which GAAP operating margin is calculated, to exclude amortization of acquired intangible assets, acquisition-related costs, construction costs and other one-time expenses outside the ordinary course of business. For example, our exit costs occurred primarily in 2022, in addition to the current exclusion of stock-based compensation. To be clear, all currently and previously reported historical actuals reflect our prior definition, which only excludes stock-based compensation. The updated definitions will be reflected when we report our first quarter 2024 financials. With our year-end and earnings release, we are also providing a reconciliation from the old definition to the new definition for the period of prevention. In anticipation of this change, we are now providing guidance using this updated definition. We believe this update will allow investors to better understand our financial performance, better align with the measures used internally by management in operating our business and permit a better evaluation of the efficacy of the methodology and information used by management to evaluate and measure our performance.

For example, our exit costs occurred primarily in 2022, in addition to the current exclusion of stock-based compensation. To be clear, all currently and previously reported historical actuals reflect our prior definition, which only excludes stock-based compensation.

The updated definitions will be reflected when we report our first quarter 2024 financials. With our year-end and earnings release, we are also providing a reconciliation from the old definition to the new definition for the period presented. In anticipation of this change, we are now providing guidance using this updated definition. We believe this update will allow investors to better understand our financial performance, better align with the measures used internally by management in operating our business and permit a better evaluation of the efficacy of the methodology and information used by management to evaluate and measure our performance.

The updated definitions will be reflected when we report our first quarter 2024 financials.

With our year-end and earnings release, we are also providing a reconciliation from the old definition to the new definition for the period of prevention. In anticipation of this change, we are now providing guidance using this updated definition.

We believe this update will allow investors to better understand our financial performance, better align with the measures used internally by management in operating our business, and permit a better evaluation of the efficacy of the methodology and information used by management to evaluate and measure our performance.

And with that, let me turn it over to Oleg.

Oleg Shchegolev: Thank you and good morning to everyone on the call. I am pleased with our team's ability to execute in 2023. We succeeded in accelerating IRR growth, increasing our pipeline of new customers, and expanding our platform as we continue to drive towards sustained profitability. In the fourth quarter, we delivered revenue of $83.4 million, up 21% year-over-year, and for the full year, revenue grew 21% to $307.7 million. Importantly, we also generated strong profitability, exceeding our guidance, reporting non-GARP net income of $11.4 million in the fourth quarter, while closing out the full year with $16.3 million in non-GARP net income.

Oleg Shchegolev: Thank you and good morning to everyone on the call.

Oleg Shchegolev: I am pleased with our team's ability to execute in 2023. We succeeded in accelerating ARR growth, increasing our pipeline of new customers and expanding our platform as we continue to drive towards sustained profitability. In the 4th quarter, we delivered revenue of $83.4 million, up 21% year-over-year and for the full year revenue, grew 21% to $307.7 million. Importantly, we also generated strong profitability, exceeding our guidance, reporting non-GAAP net income of $11.4 million in the 4th quarter while closing out the full year with $16.3 million in non-GAAP net income.

We succeeded in accelerating IRR growth, increasing our pipeline of new customers, and expanding our platform as we continue to drive towards sustained profitability.

In the fourth quarter, we delivered revenue of $83.4 million, up 21% year-over-year, and for the full year, revenue grew 21% to $307.7 million.

Importantly, we also generated strong profitability, exceeding our guidance, reporting non-GARP net income of $11.4 million in the fourth quarter, while closing out the full year with $16.3 million in non-GARP net income.

As demonstrated by our 2024 guidance, our business is focused on driving strong sustainable growth, expanding profitability and generating free cash flow. Before handing it over to Eugene and Brian to talk about the quarter in more detail, I would like to touch on a few highlights about our strategies to continue to scale the business and capture our significant market opportunities.

expanding profitability, and generating pre-cash flow. Before handing it over to Eugene and Brian to talk about the quarter in more detail, I would like to touch on a few highlights about our strategies to continue to scale the business and capture our significant market opportunities.

On our last call, I talked about our strong competitive positioning as the platform of choice for businesses to improve their online visibility. I also discussed our differentiation in the market due to our unique data assets and positive industry dynamics. We firmly believe our success and ability to grow is more about factors that are within our control and less about conditions. We have a significant greenfield market opportunity ahead of us and we continue to focus on educating our customers about the value of our unique data assets and diverse portfolio of products.

I also discussed our differentiation in the market due to our unique data assets and positive industry dynamics.

We firmly believe our success and ability to grow is more about factors that are within our control and less about conditions.

We have a significant greenfield market opportunity ahead of us, and we continue to focus on educating our customers about the value of our unique data assets and diverse portfolio of products.

Operator: If you'd like to ask a question at the end of the presentation, you can press Star followed by one on your telephone keypad. If you'd like to remove your question, you may press Star followed by two. I'll now hand it over to your host, Brinlea Johnson of Investor Relations. Please go ahead.

Operator: If you'd like to ask a question at the end of the presentation, you can press star followed by one on your telephone keypad. If you'd like to remove your question, you may press star followed by two. I'll now hand it over to your host, Brinlea Johnson of Investor Relations. Please go ahead.

Our unique data assets and as opposed to just industry dynamics.

To put it simply, businesses need to be seen online and in places where consumers are. We help customers in a number of ways -- we help them organize their website in order to run highly for search engines to find them and to be woven into conversations in social media. We assist them with their keyword strategies to achieve higher rankings. Also, we help businesses optimize their location-specific elements about their site so, that they show up in the local listings. Clients also need to gather intelligence about consumers and competitors and our platform provides them with those capabilities.

We firmly believe our success and our ability to grow is more about the factors what is in our control and less about what kind of pictures.

Brinlea Johnson: Good morning, and welcome to the Semrush Holdings Q4 and Full Year 2023 Conference Call. We'll be discussing results announced in our press release issued after market close on Monday, 4 March. With me on the call is our CEO, Oleg Shchegolev, our President, Eugene Levin, and our CFO, Brian Mulroy. Today's call will contain forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

We help customers in a number of ways. We help them organize their website in order to run highly for search engines to find them and to be woven into conversations in social media.

Significant greenfield market opportunity ahead of us and we continue to focus on educating our customers about the value of our.

We assist them with their keyword strategies to achieve high rankings. Also, we help businesses optimize their location-specific elements about their site, so that they show up in the local listings.

<unk> unique data assets and diverse portfolio of products.

Put a simpler businesses need to be seen online and then places where consumers shop.

Brinlea Johnson: Forward-looking statements include, but are not limited to, statements concerning our expected future business and financial performance and financial conditions, expected growth, adoption and demand for our existing and any new products and features, our App Center expansion, industry and market trends, our competitive position, market opportunities, sales and marketing activities, the sufficiency of our staffing levels, our guidance for Q1 2024 and the full year 2024, and statements about future pricing and operating results, including margin improvements, revenue growth, and profitability. Forward-looking statements are statements other than statements of fact and can be identified by words such as expect, can, anticipate, intend, plan, believe, seek, or will. These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date, and we do not undertake any obligation to update these statements.

Retail customers in a number of ways, we help them organize their websites in order to rank highly for search engines to find them and to be woven into conversations and social media.

Clients also need to gather intelligence about consumers and competitors, and our platform provides them with those capabilities.

To illustrate our solutions, consider how a potential customer's journey might look. A customer would come to Semrush initially seeking to elevate their digital presence with higher rankings on search engines, higher levels of customer engagement and more visibility across several marketing channels. We will start by researching the competitors' ads and selected keywords to figure out which ones have the best ROI potential. We would then use our Ads Launch Assistant to run campaigns using those keywords. As we begin to understand the limitations of relying only on paid media,

It seems to them.

Cumulus tissue just thought you high rankings also we help businesses optimize that location specific elements about within our site. So lets say show up in the local listings.

A customer would come to SEMrush initially seeking to elevate their digital patents with higher rankings on search engines.

higher levels of customer engagement, and more visibility across several marketing channels.

I'll also need to give an intelligence about consumers and competitors and our platform provides to them.

We will start by researching the competitors' ads and selected keywords to figure out which ones have the best ROI potential.

Capabilities.

To illustrate our solutions consider how and potential customers' journey might look like.

Customer what's come December initially seeking to elevate that.

We would then use our ads launch assistant to run campaigns using those cables.

A bit of higher rankings on search engines higher levels of customer engagement and more visibility across several marketing channels we have.

Brinlea Johnson: Forward-looking statements address matters that are subject to risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. For discussion of the risks and important factors that could cause our actual results, please refer to our most recent quarterly report on Form 10-Q and our annual report on Form 10-K filed with the Securities and Exchange Commission, as well as other filings with the SEC. During the course of today's call, we refer to certain non-GAAP financial measures. There is a reconciliation schedule showing the GAAP versus non-GAAP results currently available in our press release issued yesterday after market close, which can be found at investors.semrush.com. I also wanted to highlight that starting with our guidance for Q1 and full year 2024, we are updating our guidance measures and non-GAAP definitions.

As we begin to understand the limitations of relying only on paid media, we would then use our platform to make the physical store more easily discoverable on Google Maps. The subscription to Semrush Local would automate the online listing updates in over 70 directories and then the platform would track the rankings in Maps for keywords. Of course, we would also want to use our social tool and leverage our AI features to respond to reviews quickly, while at the same time generating content with those high-value keywords included. As a result of their engagement with our tools, they could choose to share valuable data with us, which we could then use to further increase the accuracy and predictability of our algorithms.

As we begin to understand the limitations of relying only on paid media,

We would then use our platform to make the physical store more easily discoverable on Google Maps. The subscription to SEMrush Local would automate the online listing updates in over 70 directories, and then the platform would track the rankings in maps for keywords. Of course, we would also want to use our social tool and leverage our AI features to respond to reviews quickly, while at the same time generating content with those high-value keywords included. As a result of their engagement with our tools, we could choose to share valuable data with us, which we could then use to further increase the accuracy and predictability of our algorithms.

Talks about researching.

Peters hips and selected gave us to figure out which ones have the best alright, potentially where it would have been used or its launch assistant to run campaigns using those keyboards.

The subscription to SEMrush Local would automate the online listing updates in over 70 directories, and then the platform would track the rankings in maps for keywords.

Pennsylvania begin to understand the limitations of relying only on paid media.

Of course, we would also want to use our social tool and leverage our AI features to respond to reviews quickly, while at the same time generating content with those high-value keywords included.

We would then use our platform to make the physical store.

Easily discoverable on Google maps.

Subscription so much local wood automates the online leasing updates in over 70, genotypes and the vendor possible would take their rankings in maps for KBR.

As a result of their engagement with our tools, they could choose to share valuable data with us, which we could then use to further increase the accuracy and predictability of our algorithms. To complete this hypothetical example and to demonstrate the breadth of our platform, we would also likely want to use our tools to find niche influencers. which we can collaborate with to better enhance their brand visibility and credibility. With the help of AI Social Content Generator, they could then create reels and videos in seconds for Instagram and TikTok, to capitalize on organic promotion opportunities. This hypothetical customer journey highlights the growing trend of businesses of all sizes investing more time, effort and resources into enhancing their online visibility, which is a trend Semrush will continue to benefit greatly from.

Brinlea Johnson: We will no longer provide guidance for the non-GAAP net income, and instead will guide to both non-GAAP operating margin and free cash flow margin. Definitions for these are presented in our earnings release. We are also updating our definition of non-GAAP income from operations, on which GAAP operating margin is calculated, to exclude amortization of acquired intangible assets, acquisition-related costs, restructuring costs, and other one-time expenses outside the ordinary course of business, for example, our exit costs incurred primarily in 2022, in addition to the current exclusion of stock-based compensation. To be clear, all currently and previously reported historical actuals reflect our prior definition, which only excludes stock-based compensation. The updated definitions will be reflected when we report our Q1 2024 financials. With our year-end and earnings release, we are also providing a reconciliation from the old definition to the new definition for the periods presented.

As a result of their engagement with our tools, we could choose to share valuable data with us, which we could then use to further increase the accuracy and predictability of our algorithms.

Of course, we would also want to use a social tool and leverage our AI teachers to respond to reviews Creek clip.

Bye. To complete this hypothetical example and to demonstrate the breadth of our platform, we would also likely want to use our tools to find niche influencers. which we can collaborate with to better enhance wearer brand visibility and credibility. With the help of AI social content generator, they could then create reels and videos in seconds for Instagram and TikTok to capitalize on organic promotion opportunities. This hypothetical customer journey highlights the growing trend of businesses of all sizes investing more time, effort, and resources into enhancing their online business, which is a trend SEMrush will continue to benefit from.

To complete this hypothetical example and to demonstrate the breadth of our platform, we would also likely want to use our tools to find niche influencers.

While at the same time generating content.

Speaker Change: Hi, Pedro gave us included.

Speaker Change: As a result of our engagement with our tools, we could choose to say available basically loss reached peak with venues to cover increase of it encourage it and predictability of our audiences.

which we can collaborate with to better enhance wearer brand visibility and credibility.

With the help of AI social content generator, they could then create reels and videos in seconds for Instagram and TikTok to capitalize on organic promotion opportunities.

Speaker Change: To complete this hypothetical example, and demonstrates the breadth of our platform. We would also likely want to use our tools to find niche influencers.

This hypothetical customer journey highlights the growing trend of businesses of all sizes investing more time, effort, and resources into enhancing their online business, which is a trend SEMrush will continue to benefit from.

This hypothetical customer journey highlights the growing trend of businesses of all sizes investing more time, effort and resources into enhancing their online visibility, which is a trend Semrush will continue to benefit greatly from. We believe businesses that are best able to analyze, plan and execute their digital marketing activities will have the potential for exceptional results. And as you can see, our platform provides all the tools in one place where they can do this. We have also created a network effect, as we share highly actionable insights with our customers and they in return, share their proprietary data with us. This dynamic makes our algorithms stronger and even more predictive, enabling a flywheel effect.

Speaker Change: I mean, it can collaborate to view to better enhance their brand visibility and credibility chip.

Brinlea Johnson: In anticipation of this change, we are now providing guidance using this updated definition. We believe this update will allow investors to better understand our financial performance, better align with the measures used internally by management in operating our business, and permit a better evaluation of the efficacy of the methodology and information used by management to evaluate and measure our performance. With that, let me turn it over to Oleg.

Speaker Change: With the help of AI social content generator.

Speaker Change: We incurred then create reels and beaches in seconds for Instagram and Tic toc to capitalize on organic promotion opportunities.

We believe businesses that are best able to analyze, plan, and execute their digital marketing activities will have the potential for exceptional results, and as you can see, our platform provides all the tools in one place where they can do this. We have also created a network effect, as we share highly actionable insights with our customers, and they in return share their proprietary data with us. This dynamic makes our algorithms stronger and even more productive, enabling a pliability effect. The stronger and more predictive our algorithms are, the happier our customers are, which fuels new error growth. Looking ahead to 2024, we are focused on continuing to grow our core business, upselling and cross-selling our offerings, expanding our platform, and exploring new acquisition opportunities.

Speaker Change: These hypothetical customer extraordinary highlights.

Speaker Change: Grubbing central businesses of all sizes investing more time effort and resources into enhancing the uhm reaches.

Oleg Shchegolev: Thank you and good morning to everyone on the call. I am pleased with our team's ability to execute in 2023. We succeeded in accelerating ARR growth, increasing our pipeline of new customers, and expanding our platform as we continue to drive towards sustained profitability. In Q4, we delivered revenue of $83.4 million, up 21% year-over-year, and for the full year, revenue grew 21% to $307.7 million. Importantly, we also generated strong profitability exceeding our guidance, reporting non-GAAP net income of $11.4 million in Q4, while closing out the full year with $16.3 million in non-GAAP net income. As demonstrated by our 2024 guidance, our business is focused on driving strong, sustainable growth, expanding profitability, and generating free cash flow.

We have also created a network effect, as we share highly actionable insights with our customers, and they in return share their proprietary data with us. This dynamic makes our algorithms stronger and even more productive, enabling a pliability effect.

We have also created a network effect, as we share highly actionable insights with our customers and they in return, share their proprietary data with us. This dynamic makes our algorithms stronger and even more predictive, enabling a flywheel effect. The stronger and more predictive our algorithms are, the happier our customers are, which fuels new ARR growth. Looking ahead to 2024, we are focused on continuing to grow our core business, upselling and cross-selling our offerings, expanding our platform, and exploring new acquisition opportunities. In conclusion, I am very optimistic about 2024, and I am excited about our strong competitive market position and ability to capitalize on future growth opportunities.

Speaker Change: Chamberlain continues to benefit due to the problem.

Speaker Change: We believe businesses are.

Speaker Change: Best able to analyze and execute very few store marketing activities really have the potential for exceptional results and as you can see our platform provides all the tools in one place where they can do it.

This dynamic makes our algorithms stronger and even more productive, enabling a pliability effect. The stronger and more predictive our algorithms are, the happier our customers are, which fuels new error growth. Looking ahead to 2024, we are focused on continuing to grow our core business, upselling and cross-selling our offerings, expanding our platform, and exploring new acquisition opportunities. In conclusion, I am very optimistic about 2024, and I am excited about our strong competitive market position and ability to capitalize on future growth opportunities.

This dynamic makes our algorithms stronger and even more productive, enabling a pliability effect.

The stronger and more predictive our algorithms are, the happier our customers are, which fuels new error growth.

The stronger and more predictive our algorithms are, the happier our customers are, which fuels new error growth. Looking ahead to 2024, we are focused on continuing to grow our core business, upselling and cross-selling our offerings, expanding our platform, and exploring new acquisition opportunities. In conclusion, I am very optimistic about 2024, and I am excited about our strong competitive market position and ability to capitalize on future growth opportunities.

Speaker Change: We have also created a network effect as we sure highly actionable insights with our customers and debate and near term share their proprietary data have you ever us.

Looking ahead to 2024, we are focused on continuing to grow our core business, upselling and cross-selling our offerings, expanding our platform, and exploring new acquisition opportunities.

Looking ahead to 2024, we are focused on continuing to grow our core business, upselling and cross-selling our offerings, expanding our platform and exploring new acquisition opportunities. In conclusion, I am very optimistic about 2024 and I am excited about our strong, competitive market position and ability to capitalize on future growth opportunities.

Speaker Change: <unk> makes our olive gardens stronger and even more predictive and.

In conclusion, I am very optimistic about 2024, and I am excited about our strong competitive market position and ability to capitalize on future growth opportunities.

Speaker Change: Enabling a flywheel effect.

Speaker Change: With a stronger and more predictive algorithms.

Speaker Change: We have here our customers, which.

Speaker Change: <unk> New era.

Speaker Change: Looking ahead to 2024, we are focused on continuing to grow our core business Upselling and cross selling our offerings expanding our platform and exploring new acquisition about changes in conclusion.

I will now turn the call over to Eugene and Brian to discuss the results of the quarter and our outlook in more detail.

Oleg Shchegolev: Before handing it over to Eugene and Brian to talk about the quarter in more detail, I would like to touch on a few highlights about our strategies to continue to scale the business and capture our significant market opportunities. On our last call, I talked about our strong competitive positioning as the platform of choice for businesses to improve their online visibility. I also discussed our differentiation in the market due to our unique data assets and positive industry dynamics. We firmly believe our success and ability to grow is more about factors that are within our control and less about competitors. We have a significant greenfields market opportunity ahead of us, and we continue to focus on educating our customers about the value of our unique data assets and diverse portfolio of products.

Eugene Levin: Thank you, Oleg. We delivered another solid quarter and continue to focus on our three main growth pillars that set us up for long-term, durable growth and we're making progress in each front. To review, we are focused on: one, increasing new user growth with our existing offerings; two, drive an expansion revenue by delivering higher value to our customers by cross-selling and up-selling within our base; and three, adding new products to our portfolio.

Speaker Change: Are you optimistic about 30 to three o'clock and I am excited about our strong competitive market position and our ability to capitalize on future growth opportunities I will now turn the call over to Eugene and Brian to discuss the results of the quarter.

and we're making progress in each front.

To review, we are focused on.

One, increasing new user growth with our existing offerings.

Speaker Change: Our outlook in more detail.

2. Drive an expansion revenue by delivering higher value to our customers by cross-selling and up-selling within our base.

Speaker Change: Thank you <unk>.

Speaker Change: Delivered another solid quarter and continue to focus on our three main growth pillars.

And three, adding new products to our portfolio.

Speaker Change: Set us up for long term durable growth.

Let me provide updates for this quarter. First, we continued increasing new user groups. We have nearly 108,000 paying customers today baut there are tens of millions of marketers and small business owners that we believe will benefit from our platform and product offerings. In Q4, we achieved solid net new customer additions and registrations with a more efficient sales and marketing engine than we've seen in prior quarters. Looking at this further, organic marketing is one of many channels companies leverage to enhance their online presence.

Speaker Change: And we're making progress in each product.

Speaker Change: To review we are focused on.

First, we continue increasing new user groups.

Speaker Change: One increasing new user growth with our existing offerings.

We have nearly 108,000 theme customers today.

Speaker Change: Two driving expansion revenue by delivering higher value to our customers by cross selling and up selling within our base and.

But there are tens of millions of marketers and small business owners that we believe will benefit from our platform and product offerings.

Oleg Shchegolev: To put it simply, businesses need to be seen online and in places where consumers are. We help customers in a number of ways. We help them organize their websites in order to rank highly for search engines to find them and to be woven in the conversations in social media. We assist them with their keyword strategies to achieve high rankings. Also, we help businesses optimize their location-specific elements about their site so that they show up in the local listings. Clients also need to gather intelligence about consumers and competitors, and our platform provides them with those capabilities. To illustrate our solutions, consider how a potential customer's journey might look. A customer would come to Semrush initially seeking to elevate their digital presence with higher rankings on search engines, higher level of customer engagement, and more visibility across several marketing channels.

Speaker Change: And three adding new products to our portfolio.

In Q4, we achieved solid net new customer additions and registrations with a more efficient sales and marketing engine than we've seen in prior quarters.

Speaker Change: Let me provide updates for this quarter.

Speaker Change: First we continued increasing new user growth.

Speaker Change: We have nearly 108000 paying customers.

Looking at this further, organic marketing is one of many channels companies leverage to enhance their online presence.

Looking at this further, organic marketing is one of many channels companies leverage to enhance their online presence. It has multiple benefits and our tools provide the data and technology that allows customers to fine-tune, analyze and measure the impact of various organic marketing initiatives. Over the past year, we have seen some considerable improvements in optimizing our sales and marketing span, where we pivoted towards our organic efforts to boost our own online presence. Much of our success can be attributed to leveraging our own Semrush tools and following recommendations to deliver very successful results.

Speaker Change: There are tens of millions of marketers and small business owners that we believe will benefit from our platform and product offerings. In Q4, we achieved solid net new customer additions and registrations with a more efficient sales and marketing engine and we've seen in prior quarters.

It has multiple benefits, and our tools provide the data and technology that allows customers to fine-tune, analyze, and measure the impact of various organic marketing initiatives. Over the past year, we have seen some considerable improvements in optimizing our sales and marketing span, where we pivoted towards our organic efforts to boost our own online presence. Much of our success can be attributed to leveraging our own SEMrush tools and following recommendations to deliver very successful results.

Over the past year, we have seen some considerable improvements in optimizing our sales and marketing span, where we pivoted towards our organic efforts to boost our own online presence.

Speaker Change: Looking at the further organic marketing is one of many channels company's leverage to enhance their online presence.

Speaker Change: It has multiple benefits and our tools provide the data and technology that allows customers to fine tune analyze and measure the impact of various organic marketing initiatives.

Much of our success can be attributed to leveraging our own SEMrush tools and following recommendations to deliver very successful results.

Over the past year, we have seen some considerable improvements and optimizing our sales and marketing spend where we pivoted towards our organic efforts to boost our own online presence.

While every marketing channel has its place in the effective marketing strategy, organic marketing can be more cost-effective in the long run, and importantly, it is trustworthy. You are more likely to trust an organic search result for relevance and quality than a paid ad that anyone can place based on your search needs. Organic marketing is like owning a house where you're building equity, whereas paid media can be like renting a house, where you get to live there but when you're done paying, you don't own any real estate.

Oleg Shchegolev: We would start by researching the competitor's ads and selected keywords to figure out which ones have the best ROI potential. We would then use our Ads Launch Assistant to run campaigns using those keywords. As they begin to understand the limitations of relying only on paid media, we would then use our platform to make the physical store more easily discoverable on Google Maps. Their subscription to Semrush Local would automate their online listing updates in over 70 directories, and then the platform would track the rankings in Maps for keywords. Of course, we would also want to use our social tool and leverage our AI features to respond to reviews quickly, while at the same time generating content with those high-value keywords included.

Organic marketing can be more cost effective in the long run, and importantly, it is trustworthy.

You are more likely to trust an organic search result for relevance and quality than a paid ad that anyone can place based on your search needs.

Speaker Change: Much of our success can be attributed to leveraging our own semi tools and phone and recommendations to deliver very successful results.

Speaker Change: While every marketing channel has its place in the effective marketing strategy.

Organic marketing is like owning a house where you're building equity.

Whereas paid media can be like renting a house, where you get to live there, but when you're done paying, you don't own any real estate.

<unk> marketing can be more cost effective in the long run and importantly, it is trustworthy.

Speaker Change: You are more likely to trust in organic search result for relevance and quality than a paid AD that anyone can please based on your assertion.

As Oleg highlighted, Semrush's tools are focused on boosting companies' organic presence, in contrast to the focus that companies like Google and Facebook have on paid advertising. This is one of Semrush's key competitive differentiators and something that we believe provides us with a clear path in the ecosystem. The efficiency with which we generated our results this quarter, demonstrates the power of organic strategy. According to the second growth pillar, we have a strategy to cross-sell and up-sell our customers in an effort to expand our average ARR per customer, which as reported today, is over $3,100.

in contrast to the focus that companies like Google and Facebook have on paid advertising.

Speaker Change: Organic market gains like owning a house, where you're building accuracy.

This is one of SEMrush's key competitive differentiators and something that we believe provides us with a clear path in the ecosystem.

Speaker Change: <unk> media can be like renting a house, where you get to leave their board when Youre done pain, you don't own any real estate.

Oleg Shchegolev: As a result of their engagement with our tools, we could choose to share valuable data with us, which we could then use to further increase the accuracy and predictability of our algorithms. To complete this hypothetical example and to demonstrate the breadth of our platform, we would also likely want to use our tools to find niche influencers which we can collaborate with to better enhance their brand visibility and credibility. With the help of AI Social Content Generator, we could then create reels and videos in seconds for Instagram and TikTok to capitalize on organic promotion opportunities. This hypothetical customer journey highlights the growing trend of businesses of all sizes investing more time, effort, and resources into enhancing their online visibility, which is a trend Semrush will continue to benefit beautifully from.

The efficiency with which we generated our results this quarter demonstrates the power of organic strategy.

Speaker Change: As always highlighted Sam brushes tools are focused on boosting companies organic presence.

According to the second growth pillar, we have a strategy to cross-sell and up-sell our customers in an effort to expand our average ARR per customer, which as reported today is over $3,100.

Speaker Change: In contrast to the focus that companies like Google and Facebook have on feed advertising.

Speaker Change: This is one of <unk> key competitive differentiators and something that we believe provides us with a clear path into ecosystem.

Our cross-sell focus is on search engine optimization, search engine advertising, social media, local marketing, digital PR, content marketing and competitive intelligence. These are our core competencies where we believe Semrush clearly differentiates itself in the marketplace and we saw continued success in Q4. Before we talk about our third growth pillar, which is adding new products to our portfolio, I'd like to take a few moments to discuss a segment of our customer base that we believe represents a significant growth engine for us.

Speaker Change: The efficiency with which we generate in our result, this quarter demonstrate the power of organic strategy.

Speaker Change: Turning to the second growth pillar, we have a strategy to cross sell and upsell our customers in an effort to expand our average <unk> per customer, which as reported to date is over $3100.

These are our core competences where we believe SEMrush clearly differentiates itself in the marketplace.

and we saw continued success in Q4.

Before we talk about our third growth pillar, which is adding new products to our portfolio, I'd like to take a few moments to discuss a segment of our customer base that we believe represents a significant growth engine for us.

Speaker Change: Our cross sell focus is on search engine optimization search engine advertising, social media local market and digital PR content marketing and competitive intelligence.

Oleg Shchegolev: We believe businesses that are best able to analyze, plan, and execute their digital marketing activities will have the potential for exceptional results. As you can see, our platform provides all the tools in one place where they can do this. We have also created a network effect as we share highly actionable insights with our customers, and they in return share their proprietary data with us. This dynamic makes our algorithms stronger and even more predictive, enabling a flywheel effect. The stronger and more predictive our algorithms are, the happier our customers are, which fuels new user growth. Looking ahead to 2024, we are focused on continuing to grow our core business, upselling and cross-selling our offerings, expanding our platform, and exploring new acquisition opportunities.

Speaker Change: These are our core competencies, where we believe San brush clearly differentiates itself in the marketplace and we saw continued success in Q4.

Companies that fall into this broad segment are businesses that tend to have multiple marketing team members, that are each Semrush users and they generally have significantly higher ARPU or average revenue per user, than our average customer. Well, this is a reasonably broad description. The point I'm trying to demonstrate is that, they are different from our solopreneur and small business customers. What's exciting about this more sophisticated account is that they add additional products to their subscriptions at a healthier clip than our average customer.

are businesses that tend to have multiple marketing team members.

that are each SEMrush users, and they generally have significantly higher ARPU, or average revenue per user, than our average customer.

Speaker Change: Before we talk about our third growth pillar, which is adding new products to our portfolio I'd like to take a few moments to discuss the segment of our customer base that we believe represents a significant growth engine for us.

Well, this is a reasonably broad description.

The point I'm trying to demonstrate is that they are different from our solopreneur and small business customers.

Speaker Change: Companies that fall into the broad segment, our businesses that tend to have multiple marketing team members that are each Sam brush users and they generally have significantly higher ARPA or average revenue per user than our average customer.

What's exciting about this more sophisticated account is that they add additional products to their subscriptions at a healthier clip than our average customer.

So, their ARPU grows rapidly as they leverage more Semrush tools to achieve their business goals. And two, their net revenue retention is meaningfully higher than our average. This cohort of accounts already comprises a meaningful double digit percentage of our ARR and we expect that this will grow significantly as time goes on. We believe that this high-level metrics covering ARPU growth and net revenue retention demonstrate that the adoption of our products within this more sophisticated account points to a bright future for this customer segment and will help support strong, sustainable growth for Semrush overall.

Speaker Change: While this is a reasonably broad description.

Speaker Change: The point I'm trying to demonstrate is that.

Speaker Change: They are different from our solar for new work and small business customers.

Oleg Shchegolev: In conclusion, I'm very optimistic about 2024, and I am excited about our strong competitive market position and ability to capitalize on future growth opportunities. I will now turn the call over to Eugene and Brian to discuss the results of the quarter and our outlook in more detail.

This cohort of accounts already comprises a meaningful double digit percentage of our ARR.

Speaker Change: What's exciting about this more sophisticated accounts is that they add additional products to their subscriptions at a healthier clip than our average customer. So there are real.

And we expect that this will grow significantly as time goes on.

We believe that this high-level metrics covering R2 growth and net revenue retention demonstrate that the adoption of our products within this more sophisticated account points to a bright future for this customer segment and will help support strong, sustainable growth for SEMrush overall.

Speaker Change: As rapidly as they leverage more some rush tools to achieve their business goals and to their net revenue retention is meaningfully higher than our average.

Eugene Levin: Thank you, Oleg. We delivered another solid quarter and continue to focus on our three main growth pillars that set us up for long-term durable growth. We're making progress in each front. To review, we are focused on, one, increasing new user growth with our existing offerings. Two, driving expansion revenue by delivering higher value to our customers by cross-selling and upselling within our base. And three, adding new products to our portfolio. Let me provide updates for this quarter. First, we continued increasing new user growth. We have nearly 108,000 paying customers today. But there are tens of millions of marketers and small business owners that we believe will benefit from our platform and product offerings. In Q4, we achieved solid net new customer additions and registrations with a more efficient sales and marketing engine than we've seen in prior quarters.

Speaker Change: This cohort of accounts already comprises a meaningful double digit percentage of our <unk>.

Speaker Change: And we expect that this will grow significantly.

We also believe that the relative strength of this customer set gives us increased confidence that our new enterprise product will be met with a strong adoption, further supporting our goal of driving strong, durable growth on both top line and bottom line. This leads me to our third growth pillar, expanding our product portfolio. During 2023, we launched numerous AI apps and tools and added multiple apps to the App Center. We officially launched an enterprise SEO product into the market. Although we're in early stages, and this will take time to be material contributor to our overall revenue, the early signs we're seeing are very encouraging.

Speaker Change: Time goes on.

Speaker Change: We believe that this high level metrics, covering ARPA growth and net revenue retention demonstrate that the adoption of our products within this more sophisticated accounts points to a bright future for this customer segment and will help support a strong sustainable growth for <unk>.

This leads me to our third growth pillar.

expanding our product portfolio.

Speaker Change: Overall.

During 2023, we launched numerous AI apps and tools and added multiple apps to the App Center.

Speaker Change: We also believe that the relative strength of this customer set gives us increased confidence that our new enterprise product will be met with the strong adoption further supporting our goal of driving strong durable growth on both topline and bottom line.

We officially launched an enterprise SEO product into the market. Although we're in early stages, and this will take time to be material contributor to our overall revenue, the early signs we're seeing are very encouraging.

Speaker Change: This leads me to our third growth pillar, expanding our product portfolio.

Speaker Change: During 2023, we launched numerous AI apps and tools and added multiple apps through the App Center, we officially launched an enterprise SCO product into the market.

Our enterprise offering has the opportunity to create a meaningful inflection of our ARPU as this product carries ARPUs that tend to be 10 to 15 times our client average. We believe our early adopter customers are experiencing significant returns on their investments after migrating to the platform. Features like automated workflows, corporate-level access controls, customizable dashboards and built-in professional services are helping our customers drive meaningful improvements in efficiency while also delivering significant time and cost savings.

Eugene Levin: Looking at this further, organic marketing is one of many channels companies leverage to enhance their online presence. It has multiple benefits, and our tools provide the data and technology that allows customers to fine-tune, analyze, and measure the impact of various organic marketing initiatives. Over the past year, we have seen some considerable improvements in optimizing our sales and marketing spend, where we pivoted towards our organic efforts to boost our own online presence. Much of our success can be attributed to leveraging our own Semrush tools and following recommendations to deliver very successful results. While every marketing channel has its place in the effective marketing strategy, organic marketing can be more cost-effective in the long run, and importantly, it is trustworthy. You are more likely to trust an organic search result for relevance and quality than a paid ad that anyone can place based on your search needs.

Speaker Change: Although we are in early stages and this will take time to be material contributor to our overall revenue. The early signs we're seeing are very encouraging.

We believe our early adopter customers are experiencing significant returns on their investments.

after migrating to the platform.

Features like automated workflows, corporate-level access controls, customizable dashboards, and built-in professional services are helping our customers drive meaningful improvements in efficiency while also delivering significant time and cost savings.

Speaker Change: Our enterprise offering.

Speaker Change: Opportunity to create a meaningful inflection of our RP as this product carries our foods that tend to be down to 15 times our client average.

Speaker Change: We believe our early adopter customers are experiencing significant returns on their investments after migrating to the platform features like automated workflows corporate level access controls customizable dashboards and build in professional services are helping our.

To support this anticipated growth in our enterprise product, we've spent the last several months analyzing our go-to-market infrastructure and sales motion and making the requisite adjustments. As a result of this very detailed exercise, we reallocated the headcount of several SMB-focused sales teams into more enterprise-facing roles. We believe this will result in optimized LTV to CAC ratio as we leverage our product lab, low-touch sales strategy down market, while we shift more of our investment focus to the high-value enterprise area. In summary, I'm very pleased with our success driving new customer growth, our success upselling and cross-selling and our ability to expand our product portfolio and move upmarket.

To support this anticipated growth in our enterprise product, we've spent the last several months analyzing our go-to-market infrastructure and sales motion and making the requisite adjustments.

As a result of this very detailed exercise, we reallocated the headcount of several SMB focus sales teams into more enterprise facing roles.

Speaker Change: <unk> drive meaningful improvements in efficiency, while also delivering significant time and cost savings.

We believe this will result in optimized LTV to CAC ratio as we leverage our product lab, low-touch sales strategy down market, while we shift more of our investment focus to the high-value enterprise area. In summary, I'm very pleased with our success driving new customer growth, our success upselling and cross-selling and our ability to expand our product portfolio and move upmarket.

We believe this will result in optimized LTV2 cap ratio as we leverage our product lab, low touch sales strategy down market, while we shift more of our investment focus to the high value enterprise area.

Speaker Change: To support this anticipated growth in our enterprise product. We spent the last several months analyzing our go to market infrastructure and sales motion and making the requisite adjustments as.

Eugene Levin: Organic marketing is like owning a house where you're building equity, whereas paid media can be like renting a house where you get to live there, but when you're done paying, you don't own any real estate. As Oleg highlighted, Semrush's tools are focused on boosting companies' organic presence in contrast to the focus that companies like Google and Facebook have on paid advertising. This is one of Semrush's key competitive differentiators and something that we believe provides us with a clear path in the ecosystem. The efficiency with which we generated our results this quarter demonstrates the power of organic strategy. Turning to the second growth pillar, we have a strategy to cross-sell and upsell our customers in an effort to expand our average ARR per customer, which as reported to date, is over $3,100.

Speaker Change: As a result of this very detailed exercise we reallocated the head count of several SMB focused sales teams into more enterprise facing goals.

In summary, I'm very pleased with our success driving new customer growth, our success upselling and cross-selling, and our ability to expand our product portfolio and move upmarket.

Speaker Change: We believe this will result in optimized LTV to CAC ratio as we leverage our product lab low touch sales strategy Downmarket while wish.

I will now turn the call over to Brian, who will provide a more detailed discussion of our financial performance and guidance. Go ahead, Brian.

Speaker Change: Keep more of our investment focus to the high value enterprise area in summary, I am very pleased with our success driving new customer growth, our success, Upselling and cross selling and our ability to expand our product portfolio and move upmarket I will now turn the call over to <unk>.

Brian Mulroy: Thanks, Eugene.

Brian Mulroy: Before I discuss our results in more detail, I'd like to remind you what I highlighted last quarter on my plan for the finance organization. As I sit here one quarter later, my confidence has only grown stronger in our ability to drive durable growth over the next several years as we further penetrate our CERB markets. Evidenced by our recent results and guidance, I see an opportunity for us to do this while also making significant improvements to our profitability. To bring this to fruition, our finance team focuses on data and metrics for decision-making throughout the organization. Because SEMrush has such a valuable customer data set, we have the ability to segment our user base to understand their buying patterns, retention dynamics, and interest in new products, among many other things.

Speaker Change: Bryan who will provide a more detailed discussion of our financial performance and guidance.

Evidenced by our recent results and guidance, I see an opportunity for us to do this while also making significant improvements to our profitability.

Speaker Change: Brian.

Bryan: Thank you Jim before I discuss our results in more detail I'd like to remind you what I highlighted last quarter on my plans for the finance organization.

To bring this to fruition, our finance team focuses on data and metrics for decision-making throughout the organization.

To bring this to fruition, our finance team focuses on data and metrics for decision-making throughout the organization. Because Semrush has such a valuable customer data set, we have the ability to segment our user base to understand their buying patterns, retention dynamics and interest in new products, among many other things. You heard Eugene talk about this a moment ago and taking that example of how our corporate accounts have extremely robust characteristics for growth, retention and ARPU, we rigorously analyzed this data and allocate our investments in sales, marketing and product accordingly. We expect the outcome of doing this on a regular basis to result in a disciplined approach that enables us to capitalize on our biggest opportunities, while simultaneously driving operating efficiencies. We expect this ROI framework will apply to our capital allocation decisions, whether that is for internal projects, external M&A or the optimization of our capital structure.

Brian: As I sit here one quarter later, my confidence has only gotten stronger and our ability to drive durable growth over the next several years as we further penetrate our served markets evidenced by our recent results and guidance I see an opportunity for us to do this while also making significant improvements to our profitability.

Because SEMrush has such a valuable customer data set, we have the ability to segment our user base to understand their buying patterns, retention dynamics, and interest in new products, among many other things.

Eugene Levin: Our cross-sell focus is on search engine optimization, search engine advertising, social media, local marketing, digital PR, content marketing, and competitive intelligence. These are our core competencies where we believe Semrush clearly differentiates itself in the marketplace, and we saw continued success in Q4. Before we talk about our third growth pillar, which is adding new products to our portfolio, I'd like to take a few moments to discuss a segment of our customer base that we believe represents a significant growth engine for us. Companies that fall into this broad segment are businesses that tend to have multiple marketing team members that are each Semrush users, and they generally have significantly higher ARPU or average revenue per user than our average customer. While this is a reasonably broad description, the point I'm trying to demonstrate is that they are different from our solopreneur and small business customers.

You heard Eugene talk about this a moment ago, and taking that example of how our corporate accounts have extremely robust characteristics for growth, retention, and ARPU, we rigorously analyze this data and allocate our investments in sales, marketing, and product accordingly. We expect the outcome of doing this on a regular basis to result in a disciplined approach that enables us to capitalize on our biggest opportunities while simultaneously driving operating efficiencies. We expect this ROI framework will apply to our capital allocation decisions, whether that is for internal projects, external M&A or the optimization of our capital structure.

Brian: To bring this to fruition our finance team focuses on data and metrics for decision making throughout the organization.

Brian: <unk> has such a valuable customer dataset, we have the ability to segment, our user base to understand their buying patterns retention dynamics and interest in new products among many other things.

We expect the outcome of doing this on a regular basis to result in a disciplined approach that enables us to capitalize on our biggest opportunities while simultaneously driving operating efficiencies.

We expect the outcome of doing this on a regular basis to result in a disciplined approach that enables us to capitalize on our biggest opportunities, while simultaneously driving operating efficiencies. We expect this ROI framework will apply to our capital allocation decisions, whether that is for internal projects, external M&A or the optimization of our capital structure.

Brian: You heard Eugene and talk about this a moment ago and taken that example of how our corporate accounts have extremely robust characteristics for growth retention and <unk>, we rigorously analyze this data and allocate our investments in sales marketing and product accordingly.

We expect this ROI framework will apply to our capital allocation decisions, whether that is for internal projects,

external M&A or the optimization of our capital structure.

With that, I'd like to turn to our 4th quarter results in more detail. We had a very strong quarter across the board. Our revenue in the 4th quarter was $83.4 million, growing 21% year over year. For the full year, revenue increased 21% to $307.7 million. Growth was driven by new customer additions and expansion of our average revenue per customer as we continue to execute on our cross-sell and up-sell strategy. Our dollar-based net revenue retention for the 4th quarter was 107%. We expect our dollar-based net revenue retention to trough within the next quarter or two as we increase adoption of our full portfolio products, tools and add-ons within our installed base.

Brian: We expect the outcome of doing this on a regular basis. The result, and a disciplined approach that enables us to capitalize on our biggest opportunities while simultaneously driving operating efficiencies. We expect this ROI framework will apply to our capital allocation decisions, whether that is for internal projects external M&A or the optimization.

We had a very strong quarter across the board. Our revenue in the fourth quarter was 83.4 million, growing 21% year over year.

For the full year, revenue increased 21% to $307.7 million.

Growth was driven by new customer additions and expansion of our average revenue per customer as we continue to execute on our cross-sell and up-sell strategy.

Brian: <unk> of our capital structure.

Eugene Levin: What's exciting about this more sophisticated accounts is that they add additional products to their subscriptions at a healthier clip than our average customer. Their ARPU grows rapidly as they leverage more Semrush tools to achieve their business goals, and two, their net revenue retention is meaningfully higher than our average. This cohort of accounts already comprises a meaningful double-digit percentage of our ARR, and we expect that this will grow significantly as time goes on. We believe that this high-level metrics covering ARPU growth and net revenue retention demonstrate that the adoption of our products within this more sophisticated accounts points to a bright future for this customer segment and will help support strong, sustainable growth for Semrush overall.

Brian: With that I'd like to turn to our fourth quarter results in more detail.

Our dollar-based net revenue retention for the fourth quarter was 107 percent.

Brian: We had a very strong quarter across the board our revenue in the fourth quarter was $83 4 million growing 21% year over year.

We expect our dollar-based net revenue retention to trough within the next quarter or two as we increase adoption of our full portfolio products, tools, and add-ons within our installed base. Annual recurring revenue for the quarter grew 23% to $337.1 million compared to a year ago. We reported significant improvements in our operating margin, which is up approximately 2,500 basis points a year. This improvement is a result of a number of factors. First, our gross margin improved 100 basis points year over year to 83.6%.

We expect our dollar-based net revenue retention to trough within the next quarter or two as we increase adoption of our full portfolio products, tools, and add-ons within our installed base.

Brian: For the full year revenue increased 21% to $307 7 million.

Annual recurring revenue for the quarter grew 23% to $337.1 million compared to a year ago.

Brian: Growth was driven by new customer additions and expansion of our average revenue per customer as we continue to execute on our cross sell and up sell strategy.

Annual recurring revenue for the quarter grew 23% to $337.1 million compared to a year ago. We reported significant improvements in our operating margin, which is up approximately 2,500 basis points a year. This improvement is a result of a number of factors. First, our gross margin improved 100 basis points year-over-year to 83.6%. Gross margin benefited from higher revenue and our continued ability to gain scale and leverage from our efficiently engineered platform. We continue to expect strong gross margins above 80% in the near term and view the way in which our stack is engineered as a key competitive differentiator. Our healthy gross margins also provides us the flexibility to invest below the gross profit line, which gives us a structural advantage in the market. Second, we continue to execute on our commitment to drive efficiencies, carefully manage expenses, and further expand our profitability.

We reported significant improvements in our operating margin, which is up approximately 2,500 basis points a year.

Brian: Our dollar based net revenue retention for the fourth quarter was 107%.

This improvement is a result of a number of factors. First, our gross margin improved 100 basis points year over year to 83.6%.

Brian: Our dollar based net revenue retention the trough within the next quarter or two as we increased adoption of our full portfolio of products tools and add ons within our installed base.

Gross margin benefitted from higher revenue and our continued ability to gain scale and leverage from our efficiently engineered platform. We continue to expect strong gross margins above 80% in the near term and view the way in which our stack is engineered as a key competitive differentiator. Our healthy gross margins also provides us the flexibility to invest below the gross profit line, which gives us a structural advantage in the market. Second, we continue to execute on our commitment to drive efficiencies, carefully manage expenses, and further expand our profitability.

Brian: Annual recurring revenue for the quarter grew 23% to $337 1 million compared to a year ago.

We continue to expect strong gross margins above 80% in the near-term and view the way in which our stack is engineered as a key competitive differentiator. Our healthy gross margins also provides us the flexibility to invest below the gross profit line, which gives us a structural advantage in the market. Second, we continue to execute on our commitment to drive efficiencies, carefully manage expenses, and further expand our profitability.

We continue to expect strong gross margins above 80% in the near-term and view the way in which our stack is engineered as a key competitive differentiator.

We continue to expect strong gross margins above 80% in the near term and view the way in which our stack is engineered as a key competitive differentiator. Our healthy gross margins also provides us the flexibility to invest below the gross profit line, which gives us a structural advantage in the market.

Brian: We reported significant improvement in our operating margin, which is up approximately 2500 basis points year over year.

Brian: This improvement is a result of a number of factors first our gross margin improved 100 basis points year over year to 83, 6%.

Eugene Levin: We also believe that the relative strength of this customer set gives us increased confidence that our new enterprise products will be met with a strong adoption, further supporting our goal of driving strong, durable growth on both top line and bottom line. This leads me to our third growth pillar, expanding our product portfolio. During 2023, we launched numerous AI apps and tools and added multiple apps to the App Center. We officially launched an enterprise SEO product into the market. Although we're in early stages, and this will take time to be material contributor to our overall revenue, the early signs we're seeing are very encouraging. Our enterprise offering has the opportunity to create a meaningful inflection of our ARPU, as this product carries ARPUs that tend to be 10 to 15 times our client average.

Our healthy gross margins also provides us the flexibility to invest below the gross profit line, which gives us a structural advantage in the market. Second, we continue to execute on our commitment to drive efficiencies, carefully manage expenses and further expand our profitability. In the short time I've been here, I have implemented policies and programs to objectively examine spending initiatives and I believe there are additional opportunities to drive durable growth while also expanding our profit margins through focus and discipline. During 2023, across the company, we carefully managed expenses and maintained our headcount.

Brian: Gross margin benefited from higher revenue and our continued ability to gain scale and leverage from our efficiently engineered platform.

Second, we continue to execute on our commitment to drive efficiencies, carefully manage expenses, and further expand our profitability.

Brian: We continue to expect strong gross margins above 80% in the near term and view the way in which our stack is engineered as a key competitive differentiator. Our healthy gross margins also provides us the flexibility to invest below the gross profit line, which gives us a structural advantage in the market.

In the short time I've been here, I have implemented policies and programs to objectively examine spending initiatives, and I believe there are additional opportunities to drive durable growth while also expanding our profit margins through focus and discipline. During 2023, across the company, we carefully managed expenses and maintained our headcount.

During 2023, across the company, we carefully managed expenses and maintained our headcount.

Brian: Second we continue to execute on our commitment to drive efficiencies carefully manage expenses and further expand our profitability.

Moving down the income statement, during the 4th quarter, we had positive non-GAAP net income of $11.4 million and $16.3 million for the full year, both surpassing the high end of our guidance range. The strong non-GAAP net income relative third guidance was a result of the flow through of our operating performance and the accounting treatment for gains on investments we made in 2021 and 2022.

Speaker Change: In the short time I've been here I have implemented policies and programs to objectively examined spending initiatives and I believe there are additional opportunities to drive durable growth, while also expanding our profit margins through focus and discipline.

The strong non-gap net income relative third guidance was a result of the flow through of our operating performance and the accounting treatment for gains on investments we made in 2021 and 2022.

Speaker Change: During 2023 across the company, we carefully managed expenses and maintained our head count.

Turning to the balance sheet, we ended the quarter with cash and cash equivalents and short-term investments of $238.6 million, up from $230.1 million in the previous quarter. Our cash flow from operations in the 4th quarter was $11.6 million. Turning to guidance, I'm very confident in the underlying trends in the business and the capabilities of our team that continue on the path to deliver strong growth and profitability. Our business is very strong and we are encouraged not only by what we've accomplished so far, but we are optimistic about what we see as the opportunities in front of us.

Moving down the income statement during the fourth quarter, we had positive non-GAAP net income of $11 4 million and $16 3 million for the full year, both surpassing the high end of our guidance range with strong non-GAAP net income relative to our guidance was a result of the flow through of our operating performance and the accounting treatment for gains on <unk>.

Eugene Levin: We believe our early adopter customers are experiencing significant returns on their investments after migrating to the platform. Features like automated workflows, corporate-level access controls, customizable dashboards, and built-in professional services are helping our customers drive meaningful improvements in efficiency while also delivering significant time and cost savings. To support this anticipated growth in our enterprise product, we spent the last several months analyzing our go-to-market infrastructure and sales motion and making the requisite adjustments. As a result of this very detailed exercise, we reallocated the headcount of several SMB-focused sales teams into more enterprise-facing roles. We believe this will result in optimized LTV to CAC ratio as we leverage our product-led low-touch sales strategy down market while we shift more of our investment focus to the high-value enterprise areas.

Turning to guidance, I'm very confident in the underlying trends in the business.

Speaker Change: <unk>, we made in 2021 and 2022.

capabilities of our team that continue on the path and deliver strong growth and profitability. Our business is very strong and we are encouraged not only by what we've accomplished so far, but we are optimistic about what we see as the opportunities in front of us.

Speaker Change: Turning to the balance sheet, we ended the quarter with cash and cash equivalents and short term investments of $238 6 million up from $2 $30 1 million in the previous quarter.

Looking at the 1st quarter, we are off to a strong start with respect to net customer additions, as we're seeing a similar seasonal pattern to previous years where customers that paused their subscriptions in the 4th quarter return to the platform in Q1, a trend we attribute to the holidays. As mentioned in the forward-looking statements, we are now guiding to revenue, non-GAAP operating margin and free cash flow margin. For the 1st quarter of 2024, we expect revenue in the range of $84.7 to $85.3 million, which translates into a growth of approximately 20%. Because we are already two months into the 1st quarter, this range is a bit narrower than what we expect to normally provide during the remainder of the year. We expect a 1st quarter non-GAAP operating margin to be approximately 8%. For the full year 2024, we expect revenue in the range of $364 to $368 million, which translates into growth of 18% to 20%. We expect full year 2024 non-GAAP operating margins to be between 10% and 11% and full year free cash flow margins to be in the range of 7% to 8%. To help you with your modeling, the difference between our non-GAAP operating margin and our free cash flow margin is a result of interest income, offset by capital expenditures and cash taxes. Finally, our guidance assumes a Euro exchange rate of EUR 1.08. As a reminder, approximately 30% of our expenses are denominated in Euros.

Speaker Change: Our cash flow from operations in the fourth quarter was $11 6 million.

Speaker Change: Turning to guidance, we're very confident in the underlying trend in the business and the capabilities of our team to continue on the path to deliver strong growth and profitability. Our business is very strong and we are encouraged not only by what we've accomplished so far but we are optimistic about what we see as the opportunities in front of us.

As mentioned in the forward-looking statements, we are now guiding to revenue, non-GAAP operating margin, and free cash flow margin.

For the first quarter of 2024, we expect revenue in the range of $84.7 to $85.3 million, which translates into a growth of approximately 20%. Because we are already two months into the first quarter, this range is a bit narrower than what we expect to normally provide during the remainder of the year. We expect a first quarter non-GAAP operating margin to be approximately 8 percent.

Speaker Change: Looking at the first quarter, we're off to a strong start with respect to net customer additions as we are seeing a similar seasonal pattern to previous years, where customers that pause their subscriptions in the fourth quarter returned to the platform in Q1, a trend we attribute to the holidays.

Eugene Levin: In summary, I'm very pleased with our success driving new customer growth, our success upselling and cross-selling, and our ability to expand our product portfolio and move upmarket. I will now turn the call over to Brian, who will provide a more detailed discussion of our financial performance and guidance. Go ahead, Brian.

Because we are already two months into the 1st quarter, this range is a bit narrower than what we expect to normally provide during the remainder of the year. We expect a 1st quarter non-GAAP operating margin to be approximately 8%. For the full year 2024, we expect revenue in the range of $364 to $368 million, which translates into growth of 18% to 20%. We expect full year 2024 non-GAAP operating margins to be between 10% and 11% and full year free cash flow margins to be in the range of 7% to 8%. To help you with your modeling, the difference between our non-GAAP operating margin and our free cash flow margin is a result of interest income, offset by capital expenditures and cash taxes. Finally, our guidance assumes a Euro exchange rate of EUR 1.08. As a reminder, approximately 30% of our expenses are denominated in Euros.

Because we are already two months into the first quarter, this range is a bit narrower than what we expect to normally provide during the remainder of the year.

Speaker Change: As mentioned in the forward looking statements. We are now guiding to revenue non-GAAP operating margin and free cash flow margin for.

We expect a first quarter non-GAAP operating margin to be approximately 8 percent.

Speaker Change: For the first quarter of 2024, we expect revenue in the range of $84, 7% to $85 $3 million, which translates into a growth of approximately 20%.

For the full year 2024, we expect revenue in the range of $364 to $368 million, which translates into growth of 18 to 20 percent. We expect full year 2024 non-gap operating margins to be between 10% and 11% and full year free cash flow margins to be in the range of 7% to 8%. To help you with your modeling, the difference between our non-GAAP operating margin and our free cash flow margin is a result of interest income offset by capital expenditures and cash taxes. Finally, our guidance assumes a Euro exchange rate of 1.08. As a reminder, approximately 30% of our expenses are denominated in Euros.

Brian Mulroy: Thanks, Eugene. Before I discuss our results in more detail, I'd like to remind you what I highlighted last quarter on my plan for the finance organization. As I sit here one quarter later, my confidence has only grown stronger in our ability to drive durable growth over the next several years as we further penetrate our served markets. Evidenced by our recent results and guidance, I see it as an opportunity for us to do this while also making significant improvements to our profitability. To bring this to fruition, our finance team focuses on data and metrics for decision-making throughout the organization. Because Semrush has such a valuable customer data set, we have the ability to segment our user base to understand their buying patterns, retention dynamics, and interest in new products, among many other things. You heard Eugene talk about this a moment ago.

Speaker Change: Because we are already two months into the first quarter. This range is a bit narrower than what we expect to normally provide during the remainder of the year.

We expect full year 2024 non-gap operating margins to be between 10% and 11% and full year free cash flow margins to be in the range of 7% to 8%.

Speaker Change: We expect a first quarter non-GAAP operating margin to be approximately 8%.

To help you with your modeling, the difference between our non-GAAP operating margin and our free cash flow margin is a result of interest income, offset by capital expenditures and cash taxes. Finally, our guidance assumes a Euro exchange rate of EUR 1.08. As a reminder, approximately 30% of our expenses are denominated in Euros.

To help you with your modeling, the difference between our non-GAAP operating margin and our free cash flow margin is a result of interest income offset by capital expenditures and cash taxes.

Speaker Change: For the full year 2024, we expect revenue in the range of $364 million to $368 million, which.

Speaker Change: Which translates into growth of 18% to 20%.

Finally, our guidance assumes a Euro exchange rate of 1.08. As a reminder, approximately 30% of our expenses are denominated in Euros.

Speaker Change: We expect full year 2024, non-GAAP operating margins to be between 10% 11%.

Speaker Change: And full year free cash flow margins to be in the range of 7% to 8% to.

In closing, we are confident in our ability to grow and scale our business and remain committed to a disciplined and a balanced approach to spending in 2024. We are focused on driving improved efficiency and profitability, even while we invest in future growth opportunities that we expect will deliver long-term value to our shareholders.

Speaker Change: To help you with your modeling the difference between our non-GAAP operating margin and our free cash flow margin is a result of interest income offset by capital expenditures and cash taxes.

Brian Mulroy: In taking that example of how our corporate accounts have extremely robust characteristics for growth, retention, and ARPU, we rigorously analyze this data and allocate our investments in sales, marketing, and product accordingly. We expect the outcome of doing this on a regular basis to result in a disciplined approach that enables us to capitalize on our biggest opportunities while simultaneously driving operating efficiencies. We expect this ROI framework will apply to our capital allocation decisions, whether that is for internal projects, external M&A, or the optimization of our capital structure. With that, I'd like to turn to our Q4 results in more detail. We had a very strong quarter across the board. Our revenue in the Q4 was $83.4 million, growing 21% year over year. For the full year, revenue increased 21% to $307.7 million.

Speaker Change: Finally, our guidance assumes a euro exchange rate of one that always as a reminder, approximately 30% of our expenses are denominated in euros.

With that, we are happy to take any of your questions. Operator, please open the line for questions.

In closing we are confident in our ability to grow and scale, our business and remain committed to a disciplined and balanced approach to spending in 2024, we're focused on driving improved efficiency and profitability, even while we invest in future growth opportunities that we expect will deliver long term value to our shareholders.

Operator: Thank you. As a reminder, if you'd like to ask a question, you can press star followed by 1 on your telephone keypad. Please ensure you're unmuted locally when asking your question.

Our first question for today comes from Surinder Thind of Jefferies. Your line is now open, please go ahead.

Speaker Change: With that we're happy to take any of your questions.

Surinder Thind: Thank you. So, Brian, just starting with the margin part of the story here. Can you maybe walk us through the thought process of how you're balancing the growth of the profitability? It looks like the margin trajectory appears to be well ahead of expectations of, I think, where everybody was. Just any color or commentary there.

So, Brian, just starting with the margin part of the story here, can you maybe walk us through the thought process of how you're balancing the growth of the profitability? It looks like the margin trajectory appears to be well ahead of expectations of, I think, where everybody was. Yeah. Yeah. Yeah. Yeah. Yeah.

Speaker Change: Operator, please open the line for questions.

Speaker Change: When Keith as a reminder, if you'd like to ask a question decompress slipped by one on your telephone keypad.

Speaker Change: Please ensure your unlimited locally when asking your question.

Speaker Change: Our first question for today comes from Simon <unk> of Jefferies. Your line is now open. Please go ahead.

Just any comment or commentary there.

Yeah, good morning. Thanks for the question. Look, there's trade-off between growth and profitability. is something that we think about every day, and it's a really extremely important question. It's something we need to get right. So our goal at SEMrush is to achieve what we call an efficient frontier. So essentially we're going to continue to invest in the business so long as that investment drives results and growth. But we don't want to spend past that where the incremental return doesn't justify that incremental investment. And for 23, 24, and for the foreseeable future, we do see opportunities to invest in the business and drive durable growth. Oleg and Eugene mentioned this in the prepared remarks, where we have an extensive market opportunity, and we've been able to deliver a really good durable growth over the last few quarters. We're uniquely positioned to capitalize on that opportunity. We have 108,000 paying customers, over a million for users. We're expanding our portfolio and it's creating a really good, compelling, cross-sell and up-sell growth sector for us. So, as we said, our business is very strong. We're encouraged by what we've seen, and we're really optimistic about what the business has in store for us going forward.

Brian Mulroy: Yeah, good morning. Thanks for the question. Look, there's trade-off between growth and profitability, it's something that we think about every day and it's a really extremely important question -- it's something we need to get right. So, our goal at Semrush is to achieve what we call an efficient frontier. Essentially, we're going to continue to invest in the business so long as that investment drives results and growth. But we don't want to spend past that where the incremental return doesn't justify that incremental investment.

Brian Mulroy: Growth was driven by new customer additions and expansion of our average revenue per customer as we continue to execute on our cross-sell and upsell strategy. Our dollar-based net revenue retention for Q4 was 107%. We expect our dollar-based net revenue retention to trough within the next quarter or two as we increase adoption of our full portfolio of products, tools, and add-ons within our installed base. Annual recurring revenue for the quarter grew 23% to $337.1 million compared to a year ago. We reported significant improvements in our operating margin, which is up approximately 2,500 basis points year over year. This improvement is a result of a number of factors. First, our gross margin improved 100 basis points year over year to 83.6%.

Speaker Change: Yeah.

Simon: Thank you.

Simon: So Brian just just starting with the margin part of the story here can you maybe walk us through the thought process of how you are balancing the growth of the utility.

is something that we think about every day, and it's a really extremely important question. It's something we need to get right.

So our goal at SEMrush is to achieve what we call an efficient frontier. So essentially we're going to continue to invest in the business so long as that investment drives results and growth. But we don't want to spend past that where the incremental return doesn't justify that incremental investment. And for 23, 24, and for the foreseeable future, we do see opportunities to invest in the business and drive durable growth. Oleg and Eugene mentioned this in the prepared remarks, where we have an extensive market opportunity, and we've been able to deliver a really good durable growth over the last few quarters.

Simon: It looks like the margin trajectory Christy well ahead of expectations of I think where everybody was.

Speaker Change: Just any color commentary there.

Yes. Good morning, Thanks for the question.

Brian: Look thats tradeoff between growth and profitability is something that we think about every day and it's a really extremely important question and it's something we need to get right.

And for 23, 24, and for the foreseeable future, we do see opportunities to invest in the business and drive durable growth. Oleg and Eugene mentioned this in the prepared remarks, where we have an extensive market opportunity, and we've been able to deliver a really good durable growth over the last few quarters. We're uniquely positioned to capitalize on that opportunity. We have 108,000 paying customers, over a million for users. We're expanding our portfolio and it's creating a really good, compelling, cross-sell and up-sell growth sector for us. So, as we said, our business is very strong. We're encouraged by what we've seen, and we're really optimistic about what the business has in store for us going forward.

And for '23, '24, and for the foreseeable future, we do see opportunities to invest in the business and drive durable growth. Oleg and Eugene mentioned this in the prepared remarks, where we have an extensive market opportunity and we've been able to deliver really good durable growth for the last few quarters. We're uniquely positioned to capitalize on that opportunity, we have 108,000 paying customers, over a million free users. We're expanding our portfolio and it's creating a really good, compelling cross-sell and up-sell growth sector for us.

Speaker Change: So our goal at certain rushes to achieve what we call. It efficient frontier. So essentially we're going to continue to invest in the business. So long as that investment drives results and growth, but we don't want to spend past that where the incremental return doesn't justify that incremental investment and for 'twenty three 'twenty four and for the foreseeable.

Brian Mulroy: Gross margin benefited from higher revenue and our continued ability to gain scale and leverage from our efficiently engineered platform. We continue to expect strong gross margins above 80% in the near term and view the way in which our stack is engineered as a key competitive differentiator. Our healthy gross margins also provides us the flexibility to invest below the gross profit line, which gives us a structural advantage in the market. Second, we continue to execute on our commitment to drive efficiencies, carefully manage expenses, and further expand our profitability. In the short time I've been here, I have implemented policies and programs to objectively examine spending initiatives, and I believe there are additional opportunities to drive durable growth while also expanding our profit margins through focus and discipline. During 2023, across the company, we carefully managed expenses and maintained our headcount.

We're uniquely positioned to capitalize on that opportunity. We have 108,000 paying customers, over a million for users. We're expanding our portfolio and it's creating a really good, compelling, cross-sell and up-sell growth sector for us.

Speaker Change: <unk> future, we do see opportunities to invest in the business and drive durable growth leg and Eugene mentioned this in the prepared remarks, where we have an extensive market opportunity and we've been able to deliver really good durable growth over the last few quarters.

So, as we said, our business is very strong. We're encouraged by what we've seen, and we're really optimistic about what the business has in store for us going forward. So I say this to say, look, growth is our priority. We're going to be investing in a business. and efficiency and profitability is really important to us. This framework we outlined in 23 and we're continuing to operate with that framework in 24, we're after efficient growth. So we committed to sustain profitability the last year. We originally guided 0 to 3 million on non-gap net income and ended up landing the year at 16.3, which was a 40 plus million increase in net income. So we're really pleased to see the results. We're going to continue with that framework in mind, being disciplined and balanced and making sure that we have the appropriate trade-off between investing in the business, driving growth, but also doing that in an efficient way.

So, as we said, our business is very strong. We're encouraged by what we've seen and we're really optimistic about what the business has in store for us going forward. So, I say this to say, look, growth is our priority. We're going to be investing in a business and efficiency and profitability is really important to us. This framework, we outlined in '23 and we're continuing to operate with that framework in '24. We're after efficient growth so, we committed to sustain profitability the last year. We originally guided $0 to $3 million on non-GAAP net income and ended up landing the year at $16.3, which was a $40 plus million increase in net income. We're really pleased to see the results, we're going to continue with that framework in mind, being disciplined and balanced and making sure that we have the appropriate trade-off between investing in the business, driving growth but also doing that in an efficient way.

So, as we said, our business is very strong. We're encouraged by what we've seen, and we're really optimistic about what the business has in store for us going forward.

So I say this to say, look, growth is our priority. We're going to be investing in a business.

We're uniquely positioned to capitalize on that opportunity, we have 108000 paying customers over $1 million for users, we're expanding our portfolio and thats, creating a really good compelling cross sell and upsell growth vector for us. So as we said our business is very strong we're encouraged by what we've seen and we're really optimistic about what the <unk>.

and efficiency and profitability is really important to us.

This framework we outlined in 23 and we're continuing to operate with that framework in 24, we're after efficient growth. So we committed to sustain profitability the last year. We originally guided 0 to 3 million on non-gap net income and ended up landing the year at 16.3, which was a 40 plus million increase in net income. So we're really pleased to see the results. We're going to continue with that framework in mind, being disciplined and balanced and making sure that we have the appropriate trade-off between investing in the business, driving growth, but also doing that in an efficient way.

So we committed to sustain profitability the last year. We originally guided 0 to 3 million on non-gap net income and ended up landing the year at 16.3, which was a 40 plus million increase in net income. So we're really pleased to see the results. We're going to continue with that framework in mind, being disciplined and balanced and making sure that we have the appropriate trade-off between investing in the business, driving growth, but also doing that in an efficient way.

We originally guided $0 to $3 million on non-GAAP net income and ended up landing the year at $16.3, which was a $40 plus million increase in net income. We're really pleased to see the results; we're going to continue with that framework in mind, being disciplined and balanced and making sure that we have the appropriate trade-off between investing in the business, driving growth but also doing that in an efficient way.

Speaker Change: This has in store for us going forward. So I say this to say look growth is our priority, we're going to be investing in the business and efficiency and profitability is really important to us.

Brian Mulroy: Moving down the income statement, during Q4, we had non-GAAP net income of +$11.4 million and +$16.3 million for the full year, both surpassing the high end of our guidance range. The strong non-GAAP net income relative to our guidance was a result of the flow-through of our operating performance and the accounting treatment for gains on investments we made in 2021 and 2022. Turning to the balance sheet, we ended the quarter with cash and cash equivalents and short-term investments of $238.6 million, up from $230.1 million in the previous quarter. Our cash flow from operations in Q4 was $11.6 million. Turning to guidance.

Speaker Change: This framework, we outlined in 'twenty, three and we're continuing to operate with that framework in 'twenty four we're after efficient growth. So we committed to sustained profitability. The last year, we originally guided zero to $3 million and non-GAAP net income and ended up landing the year at $16, three which was a 40 plus million increase in net.

Surinder Thind: That's helpful. And then, in terms of just the new enterprise platform, getting it to general availability -- any insights at this point from the initial set of users? And then, how are you thinking about -- given it's an enterprise sale -- customer acquisition, cost and maybe payback period for something like that?

That's helpful. And then in terms of just the new enterprise platform, getting it to general availability, any insights at this point from the initial set of users?

Speaker Change: Income so we're really pleased to see the results we're going to continue with that framework in mind being disciplined and balanced and making sure that we have the appropriate trade off between investing in the business driving growth, but also doing that in an efficient way.

And then, how are you thinking about, um...

given it's an enterprise-scale customer acquisition cost and maybe payback period for something like that.

Speaker Change: That's helpful and then in terms of just the new enterprise platform.

Thank you for the question. Early traction is very good, we're really working hard every day to scale our ability to onboard customers and delight them. But first batch of customers that we brought into the product, they're all very happy. A lot of them see great ROI, especially some of the early customers who use our link recommender workflows so, they're already seeing good results in terms of traffic improvements. We expect general availability in the first half of this year, working really hard, a lot of very positive traction. In terms of sales motion, really, we just trained several sales reps, we made a couple new hires, people who have experience selling upmarket. But also, when you go to, let's say, $50,000 per year range -- you don't need an entirely new sales team so, we already had a lot of A players and we just reallocated resources effectively from our SMB selling team to our enterprise selling team. We've built several new workflows in our CRM systems, like adding a lot of CPQ components and other standard components for enterprise selling. But it's really just a normal course of business. Everything's relatively straightforward and we're seeing very good ROI. If anything, we're actually seeing much better ROI when we use enterprise sales reps versus what we've seen historically with SMB sales reps. And even in SMB segment, we're making tons of money through our sales teams and then enterprise, we think efficiency's even much better.

Eugene Levin: Thank you for the question. Early traction is very good, we're really working hard every day to scale our ability to onboard customers and delight them. But first batch of customers that we brought into the product, they're all very happy. A lot of them see great ROI, especially some of the early customers who use our link recommender workflows so, they're already seeing good results in terms of traffic improvements. We expect general availability in the first half of this year, working really hard, a lot of very positive traction.

Brian Mulroy: I'm very confident in the underlying trends in the business and the capabilities of our team to continue on the path to deliver strong growth and profitability. Our business is very strong, and we are encouraged not only by what we've accomplished so far, but we are optimistic about what we see as the opportunities in front of us. Looking at Q1, we are off to a strong start with respect to net customer additions, as we're seeing a similar seasonal pattern to previous years, where customers that pause their subscriptions in Q4 return to the platform in Q1, a trend we attribute to the holidays. As mentioned in the forward-looking statements, we are now guiding to revenue, non-GAAP operating margin, and free cash flow margin.

Speaker Change: Getting it to general availability.

Speaker Change: Insights at this point from the initial set of users.

Speaker Change: And then how are you thinking about.

Given it's an enterprise sale customer acquisition costs.

Speaker Change: And maybe the payback period for something like that.

Speaker Change: Alright.

Speaker Change: For the question. So early traction is very good.

Speaker Change: We are really well.

Speaker Change: Working hard everyday to scale.

Um... So, yeah, we expect general availability in the first half of this year, working really hard, a lot of very positive traction in terms of sales motion.

So, yeah, we expect general availability in the first half of this year, working really hard, a lot of very positive traction in terms of sales motion.

Speaker Change: Our ability to onboard customers and delight them.

Speaker Change: But first batch of customers that we brought into the product. They are all very happy a lot of them see great ROI.

In terms of sales motion, really, we just trained several sales reps, we made a couple new hires, people who have experience selling upmarket. But also, when you go to, let's say, $50,000 per year range -- you don't need an entirely new sales team so, we already had a lot of A players and we just reallocated resources effectively from our SMB selling team to our enterprise selling team. We've built several new workflows in our CRM systems, like adding a lot of CPQ components and other standard components for enterprise selling. But it's really just a normal course of business. Everything's relatively straightforward and we're seeing very good ROI. If anything, we're actually seeing much better ROI when we use enterprise sales reps versus what we've seen historically with SMB sales reps. And even in SMB segment, we're making tons of money through our sales teams and then enterprise, we think efficiency's even much better.

Brian Mulroy: For Q1 2024, we expect revenue in the range of $84.7 to $85.3 million, which translates into a growth of approximately 20%. Because we are already two months into Q1, this range is a bit narrower than what we expect to normally provide during the remainder of the year. We expect Q1 non-GAAP operating margin to be approximately 8%. For the full year 2024, we expect revenue in the range of $364 to $368 million, which translates into growth of 18% to 20%. We expect full year 2024 non-GAAP operating margins to be between 10% and 11% and full year free cash flow margins to be in the range of 7% to 8%.

Bye. Thank you.

Speaker Change: Especially some of the early customers can use our linked correct Amanda workflows. So <unk> already seen good results in terms of traffic improvements.

Thank you.

really we just

We've trained several sales reps, we made a couple new hires, people who have experience selling upmarket. But also, when you go to, let's say, $50,000 per year range, you don't need an entirely new sales team. So we already had a lot of A players and we just reallocated resources effectively from our SMB selling team to our enterprise selling team. We've built several new... workflows, you know, in our CRM systems, like, you know, adding a lot of CPQ components and other standard components for enterprise selling. But, you know, it's really just a normal course of business.

Speaker Change: So yes, we expect general availability in the first half of this year.

Speaker Change: Working really hard a lot of very positive traction in terms of sales motion.

Speaker Change:

Speaker Change: Really we just.

Speaker Change: Train several sales reps, we made a couple of new hires people who have experience selling upmarket.

We've built several new workflows in our CRM systems, like adding a lot of CPQ components and other standard components for enterprise selling. But it's really just a normal course of business. Everything's relatively straightforward and we're seeing very good ROI. If anything, we're actually seeing much better ROI when we use enterprise sales reps versus what we've seen historically with SMB sales reps. And even in SMB segment, we're making tons of money through our sales teams and then enterprise, we think efficiency's even much better.

workflows, you know, in our CRM systems, like, you know, adding a lot of CPQ components and other standard components for enterprise selling. But, you know, it's really just a normal course of business.

Speaker Change: But also when you when you go to let's say $50000 per year range, you don't need entirely used sales team. So we already had a lot of the players and we just reallocated resources effects from all of our SMB selling team to all of our enterprise selling team we've built.

Brian Mulroy: To help you with your modeling, the difference between our non-GAAP operating margin and our free cash flow margin is a result of interest income offset by capital expenditures and cash taxes. Finally, our guidance assumes a euro exchange rate of 1.08. As a reminder, approximately 30% of our expenses are denominated in euros. In closing, we are confident in our ability to grow and scale our business and remain committed to a disciplined and a balanced approach to spending in 2024. We are focused on driving improved efficiency and profitability even while we invest in future growth opportunities that we expect will deliver long-term value to our shareholders. With that, we are happy to take any of your questions. Operator, please open the line for questions.

It's, everything's relatively straightforward and we're seeing very good ROI. If anything, we're actually seeing much better ROI when we use enterprise sales reps versus what you've seen historically with SMB sales reps. And, you know, even in SMB segment, we're making tons of money. through our sales teams and then enterprise within efficiencies even by each other.

Speaker Change: New workflows.

Speaker Change: CRM systems like.

Speaker Change: And a lot of CPU components and other standard components for enterprise selling.

through our sales teams and then enterprise within efficiencies even by each other.

Speaker Change: But it's really just normal course of business.

Speaker Change: Everything is relatively straightforward and we're seeing very good alright, if anything we actually seen much better ROI.

Brian Mulroy: A few things just to add on the financial side. We're really excited about the opportunities that enterprise provides for us, that Eugene and Oleg have mentioned. That it presents an ARPU inflection for us, where the price of one is about 10 to 15 times what our average ARR is per paying customer. And of course, the customer acquisition costs are going to be higher but we're preparing for that. And I'd say two things. One is we're not going to see a significant change to our expense to revenue ratio on sales. As Eugene mentioned, we're driving efficiencies in our SMB selling motion and able to reinvest that back into enterprise and we've already started making investments and building a foundation for enterprise focused on three main things. First is bringing people and talent into the organization that are able to build relationships with senior level executives and move on from a transaction to more of a partnership with the customers we serve. We're building out a deal desk and have a deal desk that's already started, to be able to navigate through the negotiation and procurement dynamics that come with an enterprise deal. And, of course, we're building out an enterprise selling motion and process within our CRM system that facilitates the process from demand generation through the negotiation and close to the deal. So, yes, enterprise is different. The cost structure is different but we have the foundation in place and we're now starting to scale it up to be able to prepare for future growth.

But just a few things to add on the financial side, we're really excited about the opportunities that Enterprise provides for us that Eugene and Oleg have mentioned.

Speaker Change: When we use the enterprise.

Speaker Change: Sales reps versus.

Speaker Change: What you've seen historically with SMB sales reps, even F&B segment, where we're making tons of money.

that it presents an ARPU inflection for us, where the price one is about 10 to 15 times what our average ARR is per paying customer. And of course, the customer acquisition costs are going to be higher, but we're preparing for that. And I'd say two things. One is we're not going to see a significant change to our expense to revenue ratio on sales.

Speaker Change: Sure.

Speaker Change: Through our sales teams and in enterprise, we think efficiencies even further.

Operator: Thank you. As a reminder, if you'd like to ask a question, you can press star followed by one on your telephone keypad. Please ensure you're unmuted locally when asking your question. Our first question for today comes from Surinder Thind of Jefferies. Your line is now open. Please go ahead.

Speaker Change: Thank you.

Speaker Change: On the financial side.

Speaker Change: But just a few things to add on the financial side, we're really excited about the opportunity to enterprise provides for us at Eugene in OLED I mentioned that it presents and <unk> inflection for us where the price point is about 10 to 15 times, what our average <unk> per paying customer and of course, the customer acquisition costs are going to be high.

Brian Mulroy: As Eugene mentioned, we're driving efficiencies in our SMB selling motion and able to reinvest that back into enterprise and we've already started making investments and building a foundation for enterprise focused on three main things. First is bringing people and talent into the organization that are able to build relationships with senior level executives and move on from a transaction to more of a partnership with the customers we serve. We're building out a deal desk and we have a deal desk that's already started, to be able to navigate through the negotiation and procurement dynamics that come with an enterprise deal. And, of course, we're building out an enterprise selling motion and process within our CRM system that facilitates the process from demand generation through the negotiation and close to the deal. So, yes, enterprise is different. The cost structure is different but we have the foundation in place and we're now starting to scale it up to be able to prepare for future growth.

As Eugene mentioned, we're driving efficiencies in our SMB selling motion and able to reinvest that back into enterprise and we've already started making investments and building a foundation for enterprise focused on three main things. First is bringing people and talent into the organization that are able to build relationships with senior level executives and move on from a transaction to more of a partnership with the customers we serve. We're building out a deal desk and we have a deal desk that's already started, to be able to navigate through the negotiation and procurement dynamics that come with an enterprise deal.

As Eugene mentioned, we're driving efficiencies in our S&B selling motion and able to reinvest that back into enterprise. And we've already started making investments and building a foundation for enterprise. focus on three main things. First is bringing people and talent into the organization that are able to build relationships with senior level executives and move on from a transaction to more of a partnership with the customers we serve.

Surinder Thind: Thank you. So Brian, just starting with the margin part of the story here, can you maybe walk us through the thought process of how you're balancing the growth of the profitability? It looks like the margin trajectory appears to be, you know, well ahead of expectations of, I think, where everybody was. Just any color or commentary there.

focus on three main things. First is bringing people and talent into the organization that are able to build relationships with senior level executives and move on from a transaction to more of a partnership with the customers we serve.

Speaker Change: Here.

But we're preparing for that and I would say two things. One is we're not going to see a significant change to our expense to revenue ratio on sales.

Speaker Change: As Eugene mentioned, we're driving efficiencies in our SMB, selling motion and able to reinvest that back into enterprise and.

Brian Mulroy: Yeah, good morning. Thanks for the question. Look, the trade-off between growth and profitability is something that we think about every day, and it's a really extremely important question. It's something we need to get right. Our goal at Semrush is to achieve what we call an efficient frontier. Essentially, we're going to continue to invest in the business so long as that investment drives results and growth. We don't want to spend past that, where the incremental return doesn't justify that incremental investment. For 2023, 2024, and for the foreseeable future, we do see opportunities to invest in the business and drive durable growth. Now, Oleg and Eugene mentioned this in the prepared remarks, where we have an extensive market opportunity, and we've been able to deliver really good durable growth over the last few quarters.

We're building out a deal desk and have a deal that's already started to be able to navigate through the negotiation and procurement dynamics that come with an enterprise deal. And, of course, we're building out an enterprise selling motion and process within our CRM system that facilitates the process from demand generation through the negotiation and close to the deal. So, yes, enterprise is different. The cost structure is different, but we have the foundation in place and we're now starting to scale it up to be able to prepare for future growth.

Speaker Change: And we've already started making investments and building a foundation for enterprise focus on three main things first is bringing people and talent into the organization that are able to build relationships with senior level executives and move on from a transaction to more of a partnership with the customers. We serve we are building out a deal basket.

And, of course, we're building out an enterprise selling motion and process within our CRM system that facilitates the process from demand generation through the negotiation and close to the deal. So, yes, enterprise is different. The cost structure is different but we have the foundation in place and we're now starting to scale it up to be able to prepare for future growth.

Speaker Change: <unk> already started to be able to navigate through the negotiation and procurement dynamics that come with an enterprise deal and of course, we are building out an enterprise selling motion and process within our CRM system.

Surinder Thind: Thank you. I appreciate the additional color.

Oh, thank you. I appreciate the additional call here.

Bye.

Operator: Thank you. Our next question comes from Scott Berg of Needham & Company. Your line is now open, please go ahead.

Speaker Change: Philippe the process from demand generation through the negotiation and close of the deal. So yes enterprises different the cost structure is different but we have the foundation in place and we're now starting to scale that up to be able to prepare for future growth.

Robert Morelli: Hi, everyone. Congrats on the quarter. This is Rob Morelli, on for Scott. So, customer additions were lighter than expected but net new ARR added in the quarter versus that customer account was quite high. Is this a result of signing larger customers this quarter or are you seeing better cross-sell activity to existing customers to drive that net new ARR added? Thank you.

Brian Mulroy: We're uniquely positioned to capitalize on that opportunity. We have 108,000 paying customers, over 1 million free users. We're expanding our portfolio, and it's creating a really good compelling cross-sell and upsell growth sector for us. As we said, our business is very strong. We're encouraged by what we've seen, and we're really optimistic about what the business has in store for us going forward. I say this to say, look, growth is our priority. We're going to be investing in the business, and efficiency and profitability is really important to us. This framework we outlined in 2023, and we're continuing to operate with that framework in 2024. We're after efficient growth. We committed to sustained profitability the last year.

Speaker Change: Hello, Thank you I appreciate the additional color.

Thank you. Our next question comes from Scott Berg of Needham and company.

to drive that new ARR added. Thank you.

Hey, Rob. Thanks for the question. Really good question. So, I think we should step back and just talk about our growth vectors and then I'll simply get to the 4th quarter. We've been very focused on three main growth vectors. One is to continue to expand our net new ads. We're at nearly 108,000 paying customers and we believe we're in the early innings of adoption, there's millions of marketers and business owners out there who will gain value from our platform. And we're gonna continue on that path in executing that strategy and extending out the number of net new ads. In 2023, we did add 12,000 net new paying customers so, we're really pleased with that progress. The second growth factor is around cross-selling and up-selling. We do have a very extensive platform and portfolio of products and we continue to invest in that. And to your point, yes, that is creating an inflection point in ARPU. We were able to increase our cross-sell and expansion and then drive ARR up. And then finally, we have very strong gross profitability. Our gross margins hit 83.6% in the 4th quarter and it's up 100 basis points. And it creates a structural advantage for us to be able to reinvest back into the business, to enable strong partnerships and develop products that continue on that trajectory. For the 4th quarter specifically, I'll note one thing. It is a seasonally low quarter for us. So, because we have so many customers, nearly 108,000 paying and we extend from solopreneurs all the way up to Fortune 500, there is a cohort of smaller customers that tend to pause their subscriptions during the holidays and then they return in the 1st quarter. We're actually seeing very good traction in January and February and seeing that trend play out. It's one quarter and something we just attribute to a seasonality dynamic.

Brian Mulroy: Hey, Rob. Thanks for the question. Really good question. So, I think we should step back and just talk about our growth vectors and then I'll simply get to the 4th quarter. We've been very focused on three main growth vectors. One is to continue to expand our net new ads. We're at nearly 108,000 paying customers and we believe we're in the early innings of adoption, there's millions of marketers and business owners out there who will gain value from our platform. And we're gonna continue on that path in executing that strategy and extending out the number of net new ads.

Scott Randolph Berg: Your line open. Please go ahead.

You got it. Hey, Rob, thanks for the question. Really good question. So I think we should step back and just talk.

Scott Randolph Berg: Hi, everyone. Congrats on the quarter. This is Ron <unk> on for Scott, So customer additions were lighter than expected, but net new IRR added in the quarter versus that customer count was quite high.

about our growth vectors, and then I'll simply get to the fourth quarter. So we've been very focused on three main growth vectors. One is to continue to expand our net new ads.

Ron: Result of signing larger customers this quarter or machines that are cross sell activity to existing customers to drive that net new.

We're at nearly 108,000 paying customers.

Speaker Change: Thank you.

And we believe we're in the early innings of adoption. There's millions of marketers and business owners out there who will gain value from our platform. And we're gonna continue on that path in executing that strategy and extending out of the number of net new ads. In 2023, we did add 12,000 net new paying customers. So we're really pleased with that progress.

Brian Mulroy: We originally guided $0 to 3 million on non-GAAP net income and ended up landing the year at $16.3 million, which is a $40+ million increase in net income. We're really pleased to see the results. We're gonna continue with that framework in mind, being disciplined and balanced and making sure that we have the appropriate trade-off between investing in the business, driving growth, but also doing that in an efficient way.

Speaker Change: Hey, Rob Thanks.

Thanks for the question really good question. So I think we should step back and just talk about our growth factors and then I'll specifically get to the fourth quarter. So we've been very focused on three main growth vectors. One is to continue to expand our net new adds.

In 2023, we did add 12,000 net new paying customers so, we're really pleased with that progress. The second growth factor is around cross-selling and up-selling. We do have a very extensive platform and portfolio of products and we continue to invest in that. And to your point, yes, that is creating an inflection point in ARPU. We were able to increase our cross-sell and expansion and then drive ARR up. And then finally, we have very strong gross profitability. Our gross margins hit 83.6% in the 4th quarter and it's up 100 basis points. And it creates a structural advantage for us to be able to reinvest back into the business, to enable strong partnerships and develop products that continue on that trajectory. For the 4th quarter specifically, I'll note one thing. It is a seasonally low quarter for us. So, because we have so many customers, nearly 108,000 paying and we extend from solopreneurs all the way up to Fortune 500, there is a cohort of smaller customers that tend to pause their subscriptions during the holidays and then they return in the 1st quarter. We're actually seeing very good traction in January and February and seeing that trend play out. It's one quarter and something we just attribute to a seasonality dynamic.

The second growth factor is around cross-selling and up-selling. We do have a very extensive platform and portfolio of products, and we continue to invest in that. And to your point, yes, that is creating an inflection point in ARPU. We're able to increase.

Speaker Change: At nearly 108000 paying customers and we believe we're in the early innings of adoption.

Surinder Thind: That's helpful. Then in terms of just the new enterprise platform, getting it to general availability, any insights at this point from the initial set of users? Then how are you thinking about, given it's an enterprise sale, customer acquisition costs, and maybe the payback period for something like that?

Speaker Change: <unk> of marketers and business owners out there who will gain value from our platform and we're going to continue on that path and executing that strategy and extending out of the number of net new adds in 2023, we did add 12000 net new paying customers.

our cross-sell and expansion, and then drive ARR up. And then finally, we have very strong gross profitability. Our gross margins hit 83.6 in the fourth quarter, and it's up 100 basis points.

And then finally, we have very strong gross profitability. Our gross margins hit 83.6% in the 4th quarter and it's up 100 basis points. And it creates a structural advantage for us to be able to reinvest back into the business, to enable strong partnerships and develop products that continue on that trajectory. For the 4th quarter specifically, I'll note one thing. It is a seasonally low quarter for us. So, because we have so many customers, nearly 108,000 paying and we extend from solopreneurs all the way up to Fortune 500, there is a cohort of smaller customers that tend to pause their subscriptions during the holidays and then they return in the 1st quarter. We're actually seeing very good traction in January and February and seeing that trend play out. It's one quarter and something we just attribute to a seasonality dynamic.

Speaker Change: So we're really pleased with that progress the second growth factor is around cross selling and up selling we do have a very extensive platform and portfolio of products and we continue to invest in that.

And it creates a structural advantage for us to be able to reinvest back into the business.

Eugene Levin: All right. Thank you for the question. Early traction is very good. We're really working hard every day to scale our ability to onboard customers and delight them. First batch of customers that we brought into the product, they're all very happy. A lot of them see great ROI, especially some of the early customers who use our Link Recommender workflows. They're already seeing good results in terms of traffic improvements. Yeah, we expect general availability in H1 this year, working really hard, a lot of very positive traction. In terms of sales motion, really, we just trained several sales reps. We made a couple new hires, you know, people who have experience selling upmarket.

to enable strong partnerships and develop products that continue on that trajectory.

Speaker Change: And to your point, yes that is creating an inflection point in <unk> were able to increase.

For the fourth quarter specifically, I'll note one thing, it is a seasonally low quarter for us.

Speaker Change: Our cross sell and expansion and then drive up and it finally, we have very strong gross profitability or gross margins at $83 six in the fourth quarter and Thats up 100 basis points and it creates a structural advantage for us to be able to reinvest back into the business.

So, because we have so many customers, nearly 108,000 paying and we extend from solopreneurs all the way up to Fortune 500, there is a cohort of smaller customers that tend to pause their subscriptions during the holidays and then they return in the 1st quarter. We're actually seeing very good traction in January and February and seeing that trend play out. It's one quarter and something we just attribute to a seasonality dynamic.

So, because we have so many customers, nearly 108,000 paying, and we extend from solopreneurs all the way up to Fortune 500, there is a cohort of smaller customers that tend to pause.

their subscriptions during the holidays, and then they return in the first quarter. We're actually seeing very good traction in January and February, and seeing that trend play out. So it's one quarter and something we just attribute to a seasonality dynamic.

Speaker Change: To enable strong partnerships and develop products that continue on that trajectory for the fourth quarter, specifically no. One thing it is a seasonally low quarter for us. So because we have so many customers nearly 108000 paying and we extend from solar printers, all the way up to Fortune 500, there is a cohort of.

Thank you.

Robert Morelli: Got it, that's helpful. Thanks for the color. And then, Oleg, you mentioned acquisitions in 2024. How should we think about that opportunity here? Small tuck-ins or are you looking to execute on something more strategic? Thanks.

Yeah, that's helpful. Thanks for the color. And then, Oleg, you mentioned acquisitions in 2024. How should we think about that opportunity here? Small tuck-ins or are you looking to execute on something more strategic? Thanks.

Speaker Change: Smaller customers that tend to pause their subscriptions during the holidays and then they returned in the first quarter.

Speaker Change: We're actually seeing very good traction in January and February and seeing that trend play out. So it's one quarter and something we just attribute to a seasonality dynamic.

Bye.

All the time, we give a lot of attention to strategic decisions. I would say, we will be focused more on channels related to digital PR and content marketing. Of course, we'll give more attention to all these ARR opportunities that we have in front of us. And financially, we're well-positioned to engage in M&A, so we have nearly $250 on the balance sheet. We're projecting 7% to 8% free cash flow margin in 2024 and starting to see private valuations get much more in line. So our appetite for M&A is something that we'll keep everybody updated, but for sure something we'll look at in 2024.

Oleg Shchegolev: All the time, we give a lot of attention to strategic decisions. I would say, we will be focused more on channels related to digital PR and content marketing. Of course, we'll give more attention to all these ARR opportunities that we have in front of us.

Eugene Levin: Also, you know, when you go to, let's say, $50,000 per year range, you don't need entirely new sales team. We already had a lot of A players, and we just reallocated resources effectively from our SMB selling team to our enterprise selling team. We've built several new workflows, you know, in our CRM systems, like, you know, adding a lot of CPQ components and other standard components for enterprise selling. You know, it's really just a normal course of business. Everything's relatively straightforward, and we're seeing very good ROI. If anything, we're actually seeing much better ROI when we use enterprise sales reps versus what we've seen historically with SMB sales reps. You know, even in SMB segment, we're making tons of money through our sales teams.

I would say we will be focused more on

Speaker Change: Got it that's helpful. Thanks for color and then OLED you mentioned acquisitions in 2024, how should we think about that opportunity here small tuck ins or youre looking to execute on something more strategic.

Bye.

Channels related to

Digital PR and content marketing, of course, will give more attention to all these opportunities that we have in front of us.

Speaker Change: Alright.

Brian Mulroy: And financially, we're well-positioned to engage in M&A. So, we have nearly $250 million on the balance sheet. We're projecting 7% to 8% free cash flow margin in '24 and starting to see private valuations get much more in line. Our appetite for M&A is something that we'll keep everybody updated but, for sure, something we'll look at in 2024.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Pension to strategic visions.

And financially, we're well-positioned to engage in M&A, so we have nearly $250 on the balance sheet.

Speaker Change: <unk>.

Speaker Change: I would say.

Speaker Change: We will be focused more on.

Speaker Change: Yeah.

We're projecting 7% to 8% free cash flow margin in 2024 and starting to see private valuations get much more in line. So our appetite for M&A is something that we'll keep everybody updated, but for sure something we'll look at in 2024.

Speaker Change: Channel related to.

Speaker Change: Sure.

Speaker Change: Our digital.

Speaker Change: They are in.

Speaker Change: In contrast, mortgaging of course are really good.

Speaker Change: More attention to all of you.

Speaker Change: But just would be helpful.

Speaker Change: Ross.

Speaker Change: And financially we are well positioned to engage in.

Eugene Levin: In enterprise, we're seeing efficiencies even much better.

Robert Morelli: Got it. Appreciate the color. Congrats again.

Speaker Change: And M&A side.

Speaker Change: 250, nearly 250 on the balance sheet.

Bye.

Operator: Thank you. Our next question comes from Adam Hotchkiss of Goldman Sachs. Your line is now open, please go ahead.

Surinder Thind: Thank you.

Brian Mulroy: Just a few things to add on the financial side. We're really excited about the opportunities that enterprise provides for us. As Eugene and Oleg have mentioned, it presents an ARPU inflection for us, where the pricing is about 10 to 15 times what our average ARR is per paying customer. Of course, the customer acquisition costs are going to be higher, but we're preparing for that. I'd say two things. One is we're not going to see a significant change to our expense to revenue ratio on sales. As Eugene mentioned, we're driving efficiencies in our SMB selling motion and able to reinvest that back into enterprise. We've already started making the investments in building a foundation for enterprise focused on three main things.

Speaker Change: We're projecting 7% to 8% free cash flow margin in 'twenty four.

Your line is now open, please go ahead.

Speaker Change: Starting to see private valuations get much more in line. So our appetite for M&A is something that we're we'll keep everybody updated but for sure something we'll look at in 2024.

Adam Hotchkiss: Great, thanks for taking the questions. How would you characterize what the competitive environment looks like for you in the enterprise? For those businesses that aren't using Semrush today in the multi-user category, what are they typically doing in online visibility? And then, how does your view on that inform the enterprise sales motion that you're going after?

Speaker Change: Got it appreciate the color congrats again.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Adam Hotchkiss of Goldman Sachs. Your.

Adam R. Hotchkiss: Your line is now open. Please go ahead.

Thank you. Thank you.

Adam R. Hotchkiss: Great. Thanks for taking the questions how would you characterize the competitive environment looks for you it looks like for you in the enterprise.

Thank you.

Oleg Shchegolev: Thank you. If we talk about competitive environment, look, in our core business, we don't see any kind of significant activities from our competitors. And at the same time, enterprise, we are very, very optimistic about the product that we launch. We see a very good reaction and we see very positive feedback from our customers. And it is a little bit hard to talk about, our competitors here. We can talk about it just from point of view of our customers. And once again, we receive very positive feedback and we don't see any kind of significant activity from our customers. We see it like a greenfield opportunity and we built a very different interface solution, if you compare it to other players what we have around.

Adam R. Hotchkiss: For those businesses that arent using some rush today in the multiuser category what are they typically doing it online visibility and then how does your view on that inform the enterprise sales motion that youre going after.

Brian Mulroy: First is bringing people and talent into the organization that are able to build relationships with senior level executives and move on from a transaction to more of a partnership with the customers we serve. We're building out a deal desk and have a deal desk already started to be able to navigate through the negotiation and procurement dynamics that come with an enterprise deal. Of course, we're building out an enterprise selling motion and process within our CRM system that facilitates the process from demand generation through the negotiation and close to the deal. Yes, enterprise is different, the cost structure is different, but we have the foundation in place, and we're now starting to scale it up to be able to prepare for future growth.

Enterprise, we are very, very optimistic about the product launch. We see a very good reaction and we see very positive feedback from our customers. And it is a little bit hard to talk about.

Speaker Change: Thank you if you talk about.

Speaker Change: If you talk about competitive environment.

our competitors here. We can talk about it just from point of view of our customers. And once again, we receive very positive feedback.

Speaker Change: Look.

In our core business, we don't see any kind of significant opportunities just from our competitors.

Speaker Change: And at the same time.

Speaker Change: Enterprise.

and we don't see any kind of significant activity from our customers. We see it like a greenfield opportunity and...

Speaker Change: Good.

Optimistic about further quicker launch I wish you a very good direction and received very positive feedback from our customer spend.

We built a very different interface solution if you compare it to other players what we have around.

Speaker Change: It's a little bit hard to talk about.

Surinder Thind: Oh, thank you. I appreciate the additional color.

Speaker Change: Our competitors.

Speaker Change: We just think about it John just.

Thank you.

Operator: Thank you. Our next question comes from Scott Berg of Needham & Company. Your line is now open. Please go ahead.

Speaker Change: From our point of view of our customers.

Eugene Levin: Just to add a couple of points, we already have 5,000 clients who are large corporations and they are perfect targets for us to sell our upmarket products. And those customers don't really use anything else, usually even some of them do but most of those deals, like Oleg said, they are greenfield deals where you're not really competing with anyone. In general, even when deals are competitive, we see very good win rates. I think that's market dynamics that is very favorable for leading a brand like Semrush. where our product is so much better than -- there is a lot of greenfield opportunity for us in existing user base but also even when we have go head-to-head with other, let's say, enterprise SEO players, our product portfolio is very, very strong.

Speaker Change: Once again received very positive feedback.

Speaker Change: We don't see any kind of significant activity from our customers reshape Lake.

And they are perfect targets for us to sell our upmarket products.

Rob Morelli: Hi, everyone. Thanks for the quarter. This is Rob Morelli on for Scott. Customer additions were lighter than expected, but net new ARR added in the quarter versus that customer count was quite high. Is this a result of signing larger customers this quarter, or are you seeing better cross-sell activity to existing customers to drive that net new ARR added? Thank you.

Speaker Change: It feels about your age.

Speaker Change: <unk>.

and

Speaker Change: Rebuilds.

Those customers don't really use anything else usually even some of them do but most of those deals like Oleg said there are greenfield deals where you're not really competing with anyone.

Speaker Change: Sure.

Speaker Change: But any different.

Integrated solution.

Speaker Change: Compared to other players with global scale.

Speaker Change: Just to add a couple of points.

In general, even when deals are competitive, we see very good win rates.

Speaker Change: We already have 5000 clients who are large corporations.

Brian Mulroy: You got it. Hey, Rob. Thanks for the question. Really good question. I think we should step back and just talk about our growth vectors, and then I'll specifically get to the Q4. We've been very focused on three main growth vectors. One is to continue to expand our net new adds. We're at nearly 108,000 paying customers, and we believe we're in the early innings of adoption. There's millions of marketers and business owners out there who will gain value from our platform, and we're gonna continue on that path in executing that strategy and extending out of the number of net new adds. In 2023, we did add 12,000 net new paying customers, so we're really pleased with that progress. The second growth vector is around cross-selling and upselling.

I think that's market dynamics that...

Speaker Change: They are perfect targets for us to sell our upmarket products and.

is very favorable for leading brand like SEMrush.

Speaker Change: Those customers don't really use anything else, usually even some of them do but most of those deals like all et cetera, Greenfield deals, where youre not really competing with anyone.

where our product is so much better than

there is a lot of greenfield opportunity for us in existing user base, but also even when we have go head to head with other, let's say, enterprise SEO players, our product portfolio is very, very strong.

Speaker Change: And in general even when deals are competitive we see very good win rates. So.

In terms of adoption rates for other products, there's definitely going to be a big factor in product portfolio that we bring up market. So, the first candidates for enterprise-level products would be those categories where we already have a strong traction, which is -- for example, competitive intelligence or our local marketing products or our digital PR products. There are, again, there's quite a lot of traction already across the board and those will be good products for us to add to the portfolio of enterprise products.

Speaker Change: I think that as market dynamics.

adoption rates for other products, there's definitely going to be a big factor in product portfolio that we bring up market. So the first candidates for enterprise level products would be those categories where we already have a strong traction, which is, you know, for example, competitive intelligence or our local marketing products, or our digital PR products, so.

Speaker Change: Debt.

Speaker Change: It's very favorable for leading brands like some rush.

Speaker Change: Where our product is so much better that.

There is a lot of greenfield opportunity for us in existing user base, but also.

Speaker Change: Even when we have go head to head with other let's say Andrew Reprised SCO players our product portfolio is very very strong.

Brian Mulroy: We do have a very extensive platform and portfolio of products, and we continue to invest in that. To your point, yes, that is creating an inflection point in ARPU. We're able to increase our cross-sell and expansion and then drive ARR up. Then finally, we have very strong gross profitability. Our gross margins hit 83.6 in Q4, and that's up 100 basis points. It creates a structural advantage for us to be able to reinvest back into the business to enable strong partnerships and develop products that continue on that trajectory. For Q4 specifically, I'll note one thing. It is a seasonally low quarter for us.

Speaker Change: In terms of.

Speaker Change: Adoption rates for other products, there's definitely going to be a big factor in product portfolio that we bring up market. So the first candidates for enterprise level products would be those categories, where we already have a strong traction which is.

There are, again, there's quite a lot of traction already across the board and those will be good products for us to add to the portfolio of enterprise products.

Adam Hotchkiss: Okay, great. That's really helpful. And then what are your updated thoughts on free to paid conversion? Any changes in the way you're approaching free customers, either through the product additions that you're making or in-platform marketing, that's given you a little bit more visibility into what the opportunity there looks like?

Speaker Change: For example, competitive intelligence or our local marketing products, where our digital PCR products. So.

Speaker Change:

Speaker Change: Rob.

Speaker Change: There's quite a lot of traction already across the board and those will be good.

Speaker Change: For us to add to the portfolio of enterprise products.

Brian Mulroy: Because we have so many customers, nearly 108,000 paying, and we extend from solopreneurs all the way up to Fortune 500, there is a cohort of smaller customers that tend to pause their subscriptions during the holidays, and then they return in Q1. We're actually seeing very good traction in January and February and seeing that trend play out. It's one quarter and something we just attribute to a seasonality dynamic.

Brian Mulroy: Adam, I can take that. The way we think about free users -- and we're really pleased to see it grew 30% so, we're now over a million -- we think about free users in three ways. First is we're training the next generation of marketers. So, we're in over 60 universities as a core part of the curriculum and investing in that next generation and ensure that we can sustain durable growth when that next generation comes into the workforce and looks to SEMrush to be able to facilitate and add value to the work they're doing every day.

Rob: Okay, Great. That's really helpful. And then what are your updated thoughts on free to paid conversion and any changes in the way you're approaching free customers either through the product additions that you're making are in platform marketing, that's giving you a little bit more visibility into what the opportunity there looks like.

We think about free users in three ways. First is we're training the next generation of marketers. So we're in over 60 universities as a core part of the curriculum. And investing in that next generation and ensure that we can sustain durable growth when that next generation comes into the workforce.

Speaker Change: Adam I can take that.

Adam R. Hotchkiss: Do we think about free users and we're really pleased to see it grew 30% for now over a $1 million.

looks to SEMrush to be able to facilitate and add value to the work they're doing every day.

Rob Morelli: Got it. That's helpful. Thanks for the color. Oleg, you mentioned acquisitions in 2024. How should we think about that opportunity here? Small tuck-ins or are you looking to execute on something more strategic? Thanks.

We also use it to test products. So, we often put free products into the marketplace and we get a lot of free user adoption and then, over time as we get traction and we get feedback and we fine-tune that technology, we monetize it. And we did that with the social media platform that we launched a while ago and then monetized it in the 3rd quarter. You'll often see products being pushed in and expansion of our free user base and then them coming back out when we convert them to paid.

Speaker Change: We think about free users in three ways first is we're training the next generation of marketers. So we're in over 60 universities as a core part of the curriculum and investing in that next generation and assure that we can sustain durable growth when that next generation comes into the workforce.

free products into the marketplace and we get a lot of free user adoption and then over time as we get traction and we get feedback and we fine-tune that technology we monetize it and we did that with the social media platform that we launched

Oleg Shchegolev: Oleg here. We give a lot of attention to strategic acquisitions. I would say we'll be focused more on channels related to digital PR and content marketing. Of course, we'll give more attention to all these opportunities that we have in front of us.

Speaker Change: And look the same rush to be able to facilitate and add value to the work they're doing every day.

a while ago and then monetized it in the third quarter.

So you'll often see products being pushed in and expansion of our free user base.

Speaker Change: We also use it to test products, so we often put.

Speaker Change: Free products into.

and then them coming back out when we convert them to paid.

Speaker Change: The marketplace and we get a lot of free user adoption.

And then finally, there are a cohort of users who are small customers, who are very early in their journey and can leverage the free version to start training their marketing capabilities and ultimately converting into a paying customer in the future. So, we don't look at free users as a near-term metric to convert directly into a paying customer. It's more of a longer-term source of developing a foundation and building our business in the long run.

Speaker Change: And then over time as we get traction and we get feedback and we fine tune that technology, we monetize it and we did that with the social media platform that we launched.

Brian Mulroy: Financially, we're well-positioned to engage in M&A. You know, we have nearly $250 million on the balance sheet. We're projecting 7% to 8% free cash flow margin in 2024, and starting to see private valuations get much more in line. Our appetite for M&A is something that we'll keep everybody updated, but for sure something we'll look at in 2024.

Speaker Change: A while ago and then monetize it in the third quarter, So youll, often see products being pushed in an expansion of our free user base.

Speaker Change: And then coming back out when we convert them to paid and then finally, there are cohort of users who.

Speaker Change: Who are small customers, who are very early in their journey and can leverage the free version to start Trey.

Adam Hotchkiss: Okay, really helpful color. Thanks a lot, Brian.

Operator: Thank you. Our next question comes from Clarke Jeffries of Piper Sadler. Your line is now open, please go ahead.

Speaker Change: Training their marketing marketing capabilities, and ultimately converting into a paying customer in the future. So we don't look at free users as a near term metric to convert directly into paid and customer it's more of a longer term source of developing the foundation and building our business in the long run.

Rob Morelli: Got it. Appreciate the color. Congrats again.

Our next question comes from Clark Jeffries of Piper Sadler. Your line is now open, please go ahead.

Operator: Thank you. Our next question comes from Adam Hotchkiss of Goldman Sachs. Your line is now open. Please go ahead.

Wayne Trinh: Hi. This is Wayne Trinh, on for Clarke. Thanks for the question. I want to go back to the pricing you announced back in Q3, I believe it's 8% to new customers. Have you tested this on existing and how much of it is factored into guidance?

Adam Hotchkiss: Great. Thanks for taking the questions. How would you characterize what the competitive environment looks like for you in the enterprise? For those businesses that aren't using Semrush today in the multi-user category, what are they typically doing in online visibility? You know, how does your view on that inform the enterprise sales motion that you're going after?

I believe it's 8% to new customers.

Speaker Change: Okay really helpful color. Thanks, a lot Ryan.

Have you tested this on existing and how much of it is factored into guidance?

Speaker Change: Thank you.

Speaker Change: Our next question comes from Jefferies of Piper Sandler.

Brian Mulroy: I can start with the guidance and then Eugene can add some color on pricing in general. But yes, we did do about an 8% price increase in the 3rd quarter. So, we've got about a half a year of the revenue. We did mention at that time that it was about $3 to $4 million of incremental ARR so, half of that in '23 and the other half coming through in '24. We're really pleased with the results we saw there. And Eugene, you should talk through more on our pricing. We have a very strong pricing asset and something that we're looking at all the time. But for now, in our guidance suite, we've of course baked in the impacts and the pricing changes that we made in 2023.

Jefferies: Your line is now open. Please go ahead.

Speaker Change: Hi, This is <unk> on for Clark. Thanks for the question I want to go back to the pricing you announced back in Q3, I believe it's 8% of new customers have you tested the final existing and how much of it is factored into guidance.

Oleg Shchegolev: If you talk about competitive environments, thank you. Look, in our core business, we don't see any kind of significant activities from our competitors. At the same time, with enterprise, we are very optimistic about product we launch. We see a very good traction, and we see very positive feedback from our customers. It is a little bit hard to talk about our competitors here. We can talk about it just from point of view of our customers. Once again, very positive feedback, and we don't see any kind of significant activity from our customers.

So we've got about a half a year of the revenue. We did mention at that time that it was about three to four million of incremental ARR. So half of that in 23, and the other half coming through in 24.

We're really pleased with the results we saw there. And Eugene, you should talk through more on our pricing. We have a very strong pricing asset and something that we're looking at all the time. But for now, in our guidance suite, we've of course baked in the impacts and the pricing changes that we made in 2023.

Speaker Change: I can start with the guidance in any gene can add some color on pricing in general.

Speaker Change: Yes, we did do an eight.

Speaker Change: For about an 8% price increase in the third quarter.

Speaker Change: So we had about a half a year of the revenue. We did mentioned at that time that it was about $3 million to $4 million of incremental <unk>.

Speaker Change: So half of that in 2003, and the other half coming through in 2004.

Eugene Levin: Yeah. So, there was part of the question about increasing prices for existing customers. We did that as well but for a very, very small cohort of existing customers. And, you know, when you do those kind of pricing changes, you do like different scenarios and reality was much better than we expected. I think it's a really good proof that our product provides so much value that people are willing to buy it at higher prices. And, of course, we use this information as we think about the future. I think the real question is when exactly we do more changes but even right now, we are already optimizing monetization in several of our add-on products. For example, social media product prices have changed recently and we will keep doing those changes when it makes sense. We're also doing big pricing research for core plans to kind of finalize our thoughts about price elasticity and willingness to pay. And again, when time is right, we'll do more. Unfortunately, there's nothing to report right now but we're very, very optimistic about our ability to improve monetization.

Speaker Change: We're really pleased with the results we saw there.

Speaker Change: And Eugene you should talk through more on our pricing, we have a very strong pricing asset and something that we're looking at all the time, but for now.

And, you know, when you do those kind of pricing changes, you do...

Oleg Shchegolev: We see it like a greenfield opportunity, and we built a very different integrated solution, if you compare it to other players what we have around.

like different scenarios and reality was much better than we expected. So.

Speaker Change: In our guidance we've of course baked in the impact from the pricing changes that we made in 2023.

I think it's a really good proof that our product provides so much value that people are willing to buy it at higher prices. And of course, we use this information as we think about the future. I think the real question is when exactly. We do, you know.

Eugene: Yes. So there was part of the question about.

Eugene: Increase in prices for existing customers. So we did that as well, but for a very very small pull forward of existing customers.

Eugene Levin: Just to add a couple points. You know, we already have 5,000 clients who are large corporations, and they are perfect targets for us to sell our upmarket products. Those customers don't really use anything else. Usually, even some of them do, but most of those deals, like Oleg said, they are greenfield deals where you're not really competing with anyone. In general, even when deals are competitive, we see very good win rates. I think that's market dynamics that is very favorable for leading brand like Semrush, where our product is so much better than you know, there is a lot of greenfield opportunity for us in existing user base, but also, even when we have to go head-to-head with other, let's say, enterprise SEO players, our product portfolio is very, very strong.

Eugene: <unk>.

Eugene: When you do those kind of pricing changes you do.

Eugene Levin: I think the real question is when exactly we do more changes but even right now, we are already optimizing monetization in several of our add-on products. For example, social media product prices have changed recently and we will keep doing those changes when it makes sense. We're also doing big pricing research for core plans to kind of finalize our thoughts about price elasticity and willingness to pay. And again, when time is right, we'll do more. Unfortunately, there's nothing to report right now but we're very, very optimistic about our ability to improve monetization.

more changes. But even right now we are already optimizing monetization in several of our add-on products. For example, social media product prices have changed recently and we will keep doing those changes when you know when it makes sense. We're also doing big pricing research for core plans to kind of finalize our thoughts about price elasticity and willingness to pay. And again, when time is right we'll do more.

Eugene: Many different scenarios and Realogy was much better than we expected. So I think it's a really good proof that our product provides so much value that people are willing to buy it at higher prices and of course, we use this information out as we think about the future.

Eugene: I think the real question is when exactly.

Speaker Change: We do.

Speaker Change: More changes.

Speaker Change: But even right now we already optimizing monetization and several of our add on products. For example, social media product prices have changed recently and we will keep doing.

There's, you know, unfortunately nothing to report right now, but we're very very optimistic about our ability to improve monetization.

Speaker Change: Those changes when when it makes sense, we'll also doing big pricing research for core plants.

Wayne Trinh: Great, thank you. And I guess I saw net retention dip down a bit more this quarter, is the pricing the main factor in that? And I guess two months into Q1, what are you seeing so far and what are you looking for in terms of a sign of a trough and recovery? Thank you.

Speaker Change: To kind of finalize our thoughts about price down with CCG and willingness to pay.

Eugene Levin: In terms of adoption rates for other products, this is definitely going to be a big factor in product portfolio that we bring up market. The first candidates for enterprise-level products would be those categories where we already have a strong traction, which is, you know, for example, competitive intelligence or our local marketing products or our digital PR products. There are, you know, again, there's quite a lot of traction already across the board, and those will be good products for us to add to the portfolio of enterprise products.

Speaker Change: And again when the time is right we will do more.

Thank you.

Speaker Change: But there is.

Speaker Change: Unfortunately, nothing to report right now, but we're very very optimistic about our ability to improve monetization.

That's a great question. Our NRR, our net retention rate, is very strong and we're really pleased to see the traction we're making on retaining customers, renewing them and of course, expanding them as they adopt more and more of our expanding portfolio. The net retention rate metric is actually a bit of a lagging indicator so, we have seen ARR and revenue reaccelerate. We did deliver 23% growth on ARR and then 20% and 21% growth respectively, in Q3 and Q4 for revenue growth. NRR lags behind about two to three quarters just because it's measuring over a 24-month period. So, we'll see that trough in the next quarter or so. And then, as we continue to execute on our strategy to cross-sell and up-sell, which is a very important and successful growth sector for us, and then move up market and start to see the advantage of our 10 to 15X average ARPU on enterprise, we'll start to see that flow through that metric.

Brian Mulroy: That's a great question. Our NRR, our net retention rate, is very strong and we're really pleased to see the traction we're making on retaining customers, renewing them and of course, expanding them as they adopt more and more of our expanding portfolio. The net retention rate metric is actually a bit of a lagging indicator so, we have seen ARR and revenue reaccelerate. We did deliver 23% growth on ARR and then 20% and 21% growth respectively, in Q3 and Q4 for revenue growth. NRR lags behind about two to three quarters just because it's measuring over a 24-month period.

Speaker Change: Great. Thank you and I guess I saw that retention dipped down a bit more this quarter is the pricing the main factor in that and I guess two months into Q1.

more and more of our expanding portfolio.

The net retention rate metric is actually a bit of a lagging indicator, so we have seen ARR and revenue reaccelerate. We did deliver 23% growth.

Speaker Change: What are you seeing so far and what are you looking for in terms of a sign of a trough in recovery. Thank you.

Speaker Change: That's great question.

on ARR and then 20 and 21% growth.

Speaker Change: <unk> net retention rate is very strong and we're really pleased to see the traction we're making on retaining customers are renewing them and of course expanding them as they adopt more and more of our expanding portfolio.

perspectively in Q3 and Q4 for revenue growth. NRR lags behind about two to three quarters just because.

Adam Hotchkiss: Okay, great. That's really helpful. What are your updated thoughts on free to paid conversion? Any changes in the way you're approaching free customers, either through the product, additions that you're making or in-platform marketing, that's given you a little bit more visibility into what the opportunity there looks like?

it's measuring over a 24-month period. So we'll see that trough in the next quarter or so. And then as we continue to execute on our strategy to cross-sell and up-sell, which is a very important and successful growth sector for us, and then move up market and start to see the advantage of our 10 to 15X average ARPU on enterprise, we'll start to see that flow through that metric.

So, we'll see that trough in the next quarter or so. And then, as we continue to execute on our strategy to cross-sell and up-sell, which is a very important and successful growth sector for us, and then move up market and start to see the advantage of our 10 to 15X average ARPU on enterprise, we'll start to see that flow through that metric.

Speaker Change: The net retention rate metric is actually a bit of a lagging indicator. So we have seen <unk> in revenue Reaccelerate, we did deliver 23% growth on <unk> and in 2020, 1% growth, respectively. In Q3, and Q4 for revenue growth and our lags behind about two to three quarters, just because it's measured.

Brian Mulroy: Adam, I can take that. The way we think about free users, and we're really pleased to see it grew 30%, so we're now over 1 million. We think about free users in three ways. You know, first is we're training the next generation of marketers. So we're in over 60 universities as a core part of the curriculum and investing in that next generation and ensure that we can sustain durable growth when that next generation comes into the workforce, and looks to Semrush to be able to facilitate and add value to the work they're doing every day. We also use it to test products. So we often put free products into the marketplace, and we get a lot of free user adoption.

Speaker Change: Over a 24 month period, so we'll see that trough in the next quarter or so and then as we continue to execute on our strategy to cross sell and upsell with is a very important and successful growth sector for us and then move upmarket and start to see the advantage of our 10 to 15 <unk> average <unk>.

Wayne Trinh: Okay, great. Appreciate it.

Thank you.

Operator: Thank you. Our next question comes from Elizabeth Porter of Morgan Stanley. Your line is now open, please go ahead.

Elizabeth Porter: Great, thank you very much. I wanted to hit on a macro quickly. Any sort of changes -- did you see any changes in Q4 as it relates to Q3 and any initial observations as we head into 2024? And also, if there's any differences you're seeing between smaller or larger customers? I know you're kind of moving up market with that opportunity but just if there was any sort of differences to call out between those two customer cohorts, that'd be very helpful. Thank you.

Speaker Change: On enterprise, we will start to see that flow through that metric.

Speaker Change: Okay, Great I appreciate it.

Speaker Change: Thanks Keith.

Speaker Change: Next question comes from Elizabeth <unk> of Morgan Stanley. Your line is now open. Please go ahead.

Brian Mulroy: Over time, as we get traction and we get feedback and we fine-tune that technology, we monetize it. We did that with the social media platform that we launched a while ago and then monetized it in Q3. You'll often see products being pushed in, an expansion of our free user base, and then them coming back out when we convert them to paid. Finally, there are a cohort of users who are small customers who are very early in their journey and can leverage the free version to start training their marketing capabilities and ultimately converting into a paying customer in the future. We don't look at free users as a near-term metric to convert directly into paying customer.

but just if there was any sort of differences to call out between those two customer cohorts, that'd be very helpful. Thank you.

Elizabeth: Great. Thank you very much our data on a macro quickly any sort of changes do you see any changes in Q4 as it relates to Q3 in and any initial observations as we head into 2024 and also if theres any.

Oleg Shchegolev: Thank you for your question. We already mentioned seasonality things with what we see every year and probably this year, it was a little bit stronger. At the same time, our 1st quarter looks very strong. And if you think about environments, it's very stable, it's good demand for all our products, for our core products and for new things that we launched last year and even for things like local listings and AI features and content marketing and so on. It's good demand, I would say environment is very stable.

Well, you mentioned things with what we see every year and probably this year it was a little bit stronger. At the same time, our first quarter looks very strong and if you think about environments, it's very stable, it's good demand for all our products, for our core products and for new things we launched last year and even for things like local listings and AI features and content marketing and so on. It's good demand, I would say the environment is very stable.

Elizabeth: Differences, you're seeing between smaller and larger customers.

Elizabeth: Kind of moving up market with that opportunity, but just if there was any sort of differences to call out between those two customer cohorts that'd be very helpful. Thank you.

Speaker Change: Thank you for my question.

Speaker Change: I realize you mentioned seasonality.

Speaker Change: Thanks.

Speaker Change: What we shoot for.

Speaker Change: <unk> initiated.

Speaker Change: A bit stronger at the same time.

Brian Mulroy: It's more of a longer-term source of developing a foundation and building our business in the long run.

Speaker Change: First quarter looks very strong and if you think about <unk>.

Bye.

Brian Mulroy: And welcome back, Elizabeth. Just on the question on the segmentation, Eugene mentioned earlier that we do have a cohort of more sophisticated enterprise accounts that are growing faster. They do adopt our expanding portfolio at a faster clip, the retention rate and expansion rates are higher. We are going to share a bit more about that and the stability it provides to the business and the ability to upsell with our enterprise platform. We'll talk more about that in the next couple of quarters.

Speaker Change: They're stable.

Adam Hotchkiss: Okay. Really helpful color. Thanks a lot, Brian.

Speaker Change: Good demand for all our products.

Speaker Change: Our core products since when you finish, which we launched last year.

Operator: Thank you. Our next question comes from Clarke Jeffries of Piper Sandler. Your line is now open. Please go ahead.

Speaker Change: Even for us.

Speaker Change: So things like a.

Speaker Change: Local issue scenario features and content market share. So it's it's.

our expanding portfolio at a faster clip, the retention rate and expansion rates are higher. We are going to share a bit more about that and this ability it provides to the business and the ability to upsell with our enterprise platform. We'll talk more about that in the next couple of quarters.

Speaker Change: Good demand.

Speaker Change: I would say environment.

Wayne Trinh: Hi, this is Wayne Trinh for Clarke. Thanks for the question. I want to go back to the pricing you announced back in Q3. I believe it was 8% to new customers. Have you tested this on existing, and how much of it is factored into guidance?

Speaker Change: Stable.

Speaker Change: And welcome back Elizabeth just on the question on the segmentation.

Elizabeth: Yes, Eugene mentioned earlier that we do have a cohort of more sophisticated enterprise accounts.

Thank you.

Elizabeth Porter: Great, thank you. And then, just as a follow-up, your tools are able to drive a lot of efficiency for customers and their sales and marketing spend. You mentioned also using some of your tools internally so, I was just hoping to double-click to hear about how you are integrating kind of your own tools -- particularly some of the AI initiatives -- into your business and what types of improvement you're seeing kind of within sales and marketing and where that could go. Thank you.

Elizabeth: That are growing faster they do adopt our expanding portfolio at a faster clip the retention rate and expansion rates are higher we are going to share a bit more about that.

Brian Mulroy: I can start with the guidance, and then Eugene can add some color on pricing in general. Yes, we did do about an 8% price increase in Q3. We've got about a half a year of the revenue. We did mention at that time that it was about $3 to 4 million of incremental ARR, so half of that in 2023 and the other half coming through in 2024. We're really pleased with the results we saw there. Eugene, you should talk through more on our pricing. We have a very strong pricing asset and something that we're looking at all the time. For now, in our guidance, we've of course baked in the impact from the pricing changes that we made in 2023.

And the stability it provides to the business and the ability to upsell with our enterprise platform will talk more about that in the next couple of quarters.

Speaker Change: Great. Thank you and then just as a follow up.

Speaker Change: Tools, we are able to drive a lot of efficiency for customers and their sales and marketing spend.

Thank you. So, using a lot of our own products -- it's really, for us, almost a benchmark. Our products need to be so good that our own teams would use it and our teams are very, very picky and they can buy anything and most of the time, they choose Semrush for almost everything they do. But to sort of like, double click on this particular question, once AI improved in terms of content creation, we very, very quickly decided to scale up our content production operation. And we're not just producing more content now but we are also making content of a higher quality, both in terms of how it ranks and in terms of how people read it and engage with it. So, really just different volumes of content production, different quality. And the tools that we use, of course, we use -- for example, our organic and keyword research to understand topics that are relevant for our audience but maybe not covered yet through our content. And then, of course, we use our content writing tools such as Writing Assistant and ContentShake to really put our content production on steroids and just ship a lot of great content very efficiently.

Eugene Levin: Thank you. So, using a lot of our own products -- it's really, for us, almost a benchmark. Our products need to be so good that our own teams would use it and our teams are very, very picky and they can buy anything and most of the time, they choose Semrush for almost everything they do. But to sort of like, double click on this particular question, once AI improved in terms of content creation, we very, very quickly decided to scale up our content production operation.

using a lot of our own products you know

Speaker Change: You mentioned now that you think demeanor towards internally, so just hoping to double click to hear about how you are.

It's really for us almost a benchmark, you know, our products need to be so good that our own teams would use it, but our teams are very, very picky and they can buy anything and most of the time they choose SEMrush for almost everything they do.

Speaker Change: Integrating <unk>.

Speaker Change: And tools, particularly with some of the AI initiatives into your business and what types of improvement Youre seeing kind of within sales and marketing and where that could go. Thank you.

Eugene Levin: Yeah. There was part of the question about increasing prices for existing customers. We did that as well, but for a very small cohort of existing customers. You know, when you do those kind of pricing changes, you do like different scenarios, and reality was much better than we expected. I think it's a really good proof that our product provides so much value that people are willing to buy it at higher prices. Of course, we use this information as we think about the future. I think the real question is when exactly we do more changes. Even right now, we are already optimizing monetization in several of our add-on products. For example, social media product prices have changed recently.

But to sort of like double click on this particular question, once AI improved in terms of content creation, we very, very quickly decided to scale up our content production operation. And we're not just producing more content now, but we are also making content of a higher quality, both in terms of how it ranks and in terms of how people read it and engage with it.

Speaker Change: Thank you.

Speaker Change: <unk>.

Speaker Change: Using a lot of.

Speaker Change: Our own products.

Yes.

Speaker Change: It's really for us almost the benchmark.

Speaker Change: Our products need to be so good that our own teams would use had been our teams are very very picky and they can buy anything and most of the time they they choose <unk> almost everything they do.

And we're not just producing more content now but we are also making content of a higher quality, both in terms of how it ranks and in terms of how people read it and engage with it. So, really just different volumes of content production, different quality. And the tools that we use, of course, we use -- for example, our organic and keyword research to understand topics that are relevant for our audience but maybe not covered yet through our content. And then, of course, we use our content writing tools such as Writing Assistant and ContentShake to really put our content production on steroids and just ship a lot of great content very efficiently.

Speaker Change: But to sort of double click on this particular question.

Speaker Change: Once AI improved in terms of content creation.

So really just different volumes of content production, different quality.

Speaker Change: Very very quickly decided to scale up our content production operation and.

And the tools that we use, of course, we use, for example, our organic and keyword research to understand topics that are, you know, relevant for our audience, but maybe not covered yet through our content.

Speaker Change: We're not just producing more content now, but we are also making content of a higher quality.

Eugene Levin: We will keep doing those changes when, you know, when it makes sense. We're also doing big pricing research for core plans to kind of finalize our thoughts about price elasticity and willingness to pay. Again, when time is right, we'll do more. There's, you know, unfortunately nothing to report right now, but we're very, very optimistic about our ability to improve monetization.

Speaker Change: Both in terms of how it trends, but in terms of how people read it engage with it.

And then of course we use our content writing tools such as Writing Assistant and Content Shake to really put our content production on steroids and just ship a lot of great content very efficiently.

And then, of course, we use our content writing tools such as Writing Assistant and ContentShake to really put our content production on steroids and just ship a lot of great content very efficiently. We also, of course, use our products and especially, competitive intelligence to find audience overlaps to improve our affiliate marketing partnerships. We use the same tools to identify good digital asset acquisitions so, sometimes we buy content instead of just building it all ourselves.

Speaker Change: So really just different volumes of content production different quality.

Speaker Change: And the tools that we use of course, we use for example, our organic and keyword research to understand topics that are.

We also, of course, use our products and especially competitive intelligence to find audience overlaps to improve our affiliate marketing partnerships.

Speaker Change: Relevant for our audience, but maybe not covered yet through all content.

Wayne Trinh: Great. Thank you. I guess I saw net retention dip down a bit more this quarter. Is the pricing the main factor in that? I guess two months into Q1, what are you seeing so far, and what are you looking for in terms of a sign of a trough and recovery? Thank you.

Speaker Change: And then of course, we use our content pricing tools, such as Reits and assistant content shake.

We use the same tools to identify good digital asset acquisitions, so sometimes we buy content instead of just building it all ourself.

Speaker Change: To really.

Speaker Change: <unk> put our content production on steroids and just ship a lot of.

Brian Mulroy: That's a great question. You know, our NRR, net retention rate, is very strong, and we're really pleased to see the traction we're making on retaining customers, renewing them, and of course, expanding them as they adopt more and more of our expanding portfolio. The net retention rate metric is actually a bit of a lagging indicator. We have seen ARR and revenue reaccelerate. We did deliver 23% growth on ARR, and then 20% and 21% growth respectively in Q3 and Q4 for revenue growth. NRR lags behind about 2 to 3 quarters just because it's measuring over a 24-month period. We'll see that trough in the next quarter or so.

So, tons and tons of applications. Of course, our social media teams use our social media posts. Of course, our influencer marketing team uses our influencer marketing tools. Our PR team is using our PR tools. But that's, like I said, that's pretty much given, right? Because, like I said, one of the success criteria for us in products. in terms of how we measure quality of all products, is that our own teams use it.

Speaker Change: Great content very efficiently.

Tons and tons of applications. Of course, our social media teams use our social media posts. Of course, our influencer marketing team uses our influencer marketing tools. Our PR team is using our PR tools. Like I said, that's pretty much given, right? One of the success criteria for us in products.

Speaker Change: We also of course yeah.

Speaker Change: Use our products and especially competitive intelligence defined audience overlaps.

Speaker Change: To improve our affiliate marketing partnerships.

Speaker Change: We use the same tools to identify good digital asset acquisition, so sometimes we buy content instead of just building it ourselves so.

in terms of how we measure quality of all products is that our own teams use it.

Speaker Change: Tons and tons of applications of course, our social media teams use our social media posts or of course, our influencer marketing team uses our influencer marketing tools, our PR using humans, using our PR tools, but thats.

Thank you.

Elizabeth Porter: Great, thank you.

Thank you.

Operator: Thank you. Our next question -- our final question for today comes from Mark Murphy of JP Morgan. Your line is now open, please go ahead.

Speaker Change: Like I said, that's pretty much given right.

Speaker Change: Because like I said, one of the success criteria for us in product.

Brian Mulroy: as we continue to execute on our strategy to cross-sell and up-sell, which is a very important and successful growth sector for us, and then move upmarket and start to see the advantage of our 10 to 15x average ARPU on enterprise, we'll start to see that flow through that metric.

Thank you.

Unknown: Thanks for taking the question. This is [inaudible], on for Mark Murphy. You guys talked about this kind of shift of resources from the SMB to upmarket and I think that makes a lot of sense. But do you guys expect any headwinds as you guys are kind of shifting those resources away from the SMB and as you kind of get those fires going in the upmarket? Thanks.

Speaker Change: In terms of how we measure quality of our products is that our own teams use it.

Speaker Change: Great. Thank you.

Speaker Change: Thank you next question. Our final question for today comes from Mark Murphy of JP Morgan.

Wayne Trinh: Okay, great. Appreciate it.

Mark Ronald Murphy: Now open. Please go ahead.

Operator: Thank you. Our next question comes from Elizabeth Porter of Morgan Stanley. Your line is now open. Please go ahead.

Thank you for the question. So, now, we actually see both sides of the market being great. It's more of a -- just number of customers that we already have that are large enterprises, reached a certain point where we just couldn't ignore that. When you have thousands of customers who come to you on a regular basis and they say, listen, I'm willing to pay more money but you have to build this and this and this for me. As volume of those conversations increases, we started to realize how big is the opportunity there. It doesn't mean we're unhappy with what we see on SMB front. And on SMB front, we're adding a lot of great products, especially with our recent focus on AI capabilities, we're seeing a lot of traction in all those products. We've recently launched monetization of our social media tools that is doing great. We have very good connection with our local marketing products with a lot of SMBs using it on a regular basis, pretty much daily. So, yeah, I don't think there is any kind of headwinds. We're very excited about both sides of the market. At the end of the day, small companies need more traffic and big companies need more traffic and we're there to help.

Eugene Levin: Thank you for the question. So, now, we actually see both sides of the market being great. It's more of a -- just number of customers that we already have that are large enterprises, reached a certain point where we just couldn't ignore that. When you have thousands of customers who come to you on a regular basis and they say, listen, I'm willing to pay more money but you have to build this and this and this for me. As volume of those conversations increases, we started to realize how big is the opportunity there. It doesn't mean we're unhappy with what we see on SMB front.

Mark Ronald Murphy: Hey, Thanks for taking the question. This is already on for Mark Murphy.

Mark Ronald Murphy: You guys talked about this kind of set their resources from the SMB.

Elizabeth Porter: Great. Thank you very much. I wanted to hit on, macro quickly. Any sort of changes, did you see any changes in Q4 as it relates to Q3 and any initial observations as we head into 2024? Also if there's any differences you're seeing between smaller or larger customers. I know you're kind of moving up market with that opportunity, but just if there was any sort of differences to call out between those two customer cohorts, that'd be, very helpful. Thank you.

you know, just number of customers that we already have that are large enterprises reached a certain point where we just couldn't ignore that. You know, when you have thousands of customers who come to you on a regular basis, and they say, listen, I'm willing to pay more money, but you have to build this and this and this for me. As volume of those conversations increases, you know, we started to realize how big is the opportunity there. It doesn't mean we're.

Mark Ronald Murphy: Market and I think that makes a lot of sense, but do you guys expect any headwinds that you guys are kind of shifting those resources away from the SMB and then as you kind of get those prior to going into the aftermarket.

Speaker Change: Thank you for the question so no we actually see both sides of the market being great.

Speaker Change: More of them.

Speaker Change: Just number of customers that we already have that are large enterprises reached a certain point, where we just couldnt ignore that.

Oleg Shchegolev: Thank you for your question. We already mentioned seasonality, things with what we see every year, and probably this year it was a little bit stronger. At the same time, Q1 looks very strong. If you think about environments, it's very stable. It's good demand for all our products, for our core products and for new things what we launched last year, and even for things like local listings, AI features, and content marketing and so on. It's good demand. I would say environment is very stable.

you know, unhappy with what we see on SMB front. And on SMB front, we're adding a lot of great products, especially with our recent focus on AI capabilities, we're seeing a lot of traction in all those products.

And on SMB front, we're adding a lot of great products, especially with our recent focus on AI capabilities, we're seeing a lot of traction in all those products. We've recently launched monetization of our social media tools that is doing great. We have very good connection with our local marketing products with a lot of SMBs using it on a regular basis, pretty much daily. So, yeah, I don't think there is any kind of headwinds. We're very excited about both sides of the market. At the end of the day, small companies need more traffic and big companies need more traffic and we're there to help.

Speaker Change: When you have thousands of customers who come to you on a regular basis and they say listen I'm willing to pay more money, but you have to build this and this and this for me.

We've recently launched monetization of our social media tools that is doing great. We have very good connection with our local marketing products with a lot of, you know, SMBs using it on a regular basis, you know, pretty much daily.

Speaker Change: As volume of those conversations increases.

Speaker Change: We started to realize how big is the opportunity there doesn't mean we're.

Speaker Change: Unhappy with what we see on SMB front on the SMB front, we're adding a lot of great products, especially with our recent focus on AI capabilities, we're seeing a lot of traction in all of those products.

So, Yeah, I don't think there is any kind of headwinds. We're very excited about both sides of the market at the end of the day. Small companies need more traffic and big companies need more traffic and we're there to help.

Yeah, I don't think there is any kind of headwinds. We're very excited about both sides of the market at the end of the day.

Brian Mulroy: Welcome back, Elizabeth. Just on the question on the segmentation. As Eugene mentioned earlier, that we do have a cohort of more sophisticated enterprise accounts that are growing faster. They do adopt our expanding portfolio at a faster clip. Their retention rate and expansion rates are higher. We are going to share a bit more about that and the stability it provides to the business and the ability to upsell with our enterprise platform. We'll talk more about that in the next couple of quarters.

Speaker Change: We've recently launched monetization of our social media tools that is doing great.

Small companies need more traffic and big companies need more traffic and we're there to help.

Speaker Change: Very good traction with our local marketing products with a lot of smbs using it on a regular basis pretty much daily.

Brian Mulroy: And one thing I'd add, just building on Elizabeth's question is, Elizabeth was asking about our use of AI. That's a big contributor to the efficiencies we're seeing in the business. So, we're now automating over 40% of the customer interactions and the use and continued expansion of that is giving us a lot more efficiency on the SMB side and giving us the capability to be able to reinvest that into enterprise. Which is why we're saying our [inaudible] for sales won't expand overall despite the investment.

Speaker Change: So.

Speaker Change: Yes, I don't I don't think there is any.

Speaker Change: Any kind of headwind, we're very excited about both sides of the market at the end of the day small companies need more tracking in big companies need more traffic and we're there to help.

Speaker Change: And one thing I'd add just building on Elizabeth question is Elizabeth was asking about our use of AI.

Elizabeth Porter: Great. Thank you. just as a follow-up, your tools are able to drive a lot of efficiency for customers and their sales and marketing spend. you mentioned also using some of your tools internally. I'm just hoping to double-click to hear about how you are integrating kind of your own tools, particularly some of the AI initiatives, into your business and what types of improvement you're seeing kind of within sales and marketing and where that could go. Thank you.

Speaker Change: It's a big contributor to the efficiencies we're seeing in the business. So we're now automating over 40% of the customer interactions.

Unknown: Great. That's very helpful, thank you.

Speaker Change: And the use and continued expansion of that.

Thank you.

Operator: Thank you. At this time we currently have no further questions so, I'll hand back to Oleg for any further remarks.

Speaker Change: Is giving us a lot more efficiency on the SMB side.

Speaker Change: And giving us the capability to be able to reinvest that into enterprise, which is why we're saying our edr for sales won't expand overall despite the investment.

Bye.

Oleg Shchegolev: Thank you for your support. We are very pleased with our results and our execution in 2023 and we are very optimistic about our future. Once again, I thank you all for your support and look forward to keep you updated on our progress.

Eugene Levin: Thank you. Using a lot of our own products, you know, it's really for us almost a benchmark. You know, our products need to be so good that our own teams would use it, and our teams are very, very picky, and they can buy anything. Most of the time they choose Semrush for almost everything they do. To sort of like say double-click on this particular question, once AI improved in terms of content creation, we, you know, very, very quickly decided to scale up our content production operation. We're not just producing more content now, but we are also making content of a higher quality, both in terms of, you know, how it ranks, and in terms of how people read it and engage with it.

Speaker Change: Great. That's very helpful. Thank you.

Speaker Change: Thank you at this time with current F&I further questions. So I'll come back to life.

Speaker Change: Any further remarks.

Bye-bye.

Thank you.

Operator: Thank you for joining today's call. You may now disconnect your line.

Speaker Change: Thank you for your support.

Speaker Change: We are very pleased.

Speaker Change: Results in.

Great.

Speaker Change: And we are very optimistic about our future once again I. Thank you all for your support and Kipp.

Speaker Change: Bob.

Speaker Change: I look forward to keep you updated on our progress.

Speaker Change: Yeah.

Speaker Change: Thank you for joining today's call you may now disconnect your lines.

Speaker Change: [music].

Eugene Levin: Really just different volumes of content production, different quality. The tools that we use, of course, for example, our organic and keyword research to understand topics that are, you know, relevant for our audience, but maybe not covered yet, through all content. Then, of course, we use our content creation tools such as Writing Assistant, ContentShake AI, to really, you know, put our content production on steroids and just ship a lot of, you know, great content very efficiently. We also of course use our product, you know, especially competitive intelligence to find audience overlaps, to improve our affiliate marketing partnerships. We use the same tools to identify good digital asset acquisition, so sometimes we buy content instead of just building it ourselves. Tons of applications.

Speaker Change: Okay.

Eugene Levin: Of course, our social media teams use our social media posts, or of course, our influencer marketing team uses our influencer marketing tools. Our PR team is using our PR tools. But that's, you know, like I said, that's pretty much given, right? Because like I said, one of the success criteria for us in product, you know, in terms of how we measure quality of our products is that our own teams use it. Great. Thank you.

Elizabeth Porter: Great. Thank you.

Operator: Thank you. Our next question. Our final question for today comes from Mark Murphy of JPMorgan. Your line is now open. Please go ahead.

Arturo Leon: Hey, thanks for taking the question. This is Arturo Leon for Mark Murphy. You know, you guys talked about this kind of shift of resources from the SMB up to, you know, upmarket, and I think that makes a lot of sense. Do you guys expect any headwinds as you guys are kind of shifting those resources away from the SMB, and as you kind of get those fires going in the upmarket? Thanks.

Eugene Levin: Oh, thank you for the question. Now we actually see both sides of the market being great. It's more of a, you know, just number of customers that we already have that are large enterprises reached a certain point where we just couldn't ignore that. You know, when you have thousands of customers who come to you on a regular basis and they say, "Listen, I'm willing to pay more money, but you have to build this and this and this for me." As volume of those conversations increases, you know, we started to realize how big is the opportunity there. Doesn't mean we're, you know, unhappy with what we see on SMB front. On SMB front, we're adding a lot of great products, especially with our recent focus on AI capabilities.

Eugene Levin: We're seeing a lot of traction in all those products. We've recently launched monetization of our social media tools. That is doing great. We have very good traction with our local marketing products, with a lot of, you know, SMBs using it on a regular basis, you know, pretty much daily. Yeah, I don't think there is any kind of headwind. We're very excited about both sides of the market. At the end of the day, small companies need more traffic and big companies need more traffic, and we're there to help.

Brian Mulroy: One thing that I'd add, just building on Elizabeth's question, is, you know, Elizabeth was asking about our use of AI. That's a big contributor to the efficiencies we're seeing in the business. We're now automating over 40% of the customer interactions, and the use and continued expansion of that is giving us a lot more efficiency on the SMB side, and giving us the capability to be able to reinvest that into enterprise, which is why, you know, we're saying our S&M to R for sales won't expand overall, despite the investment.

Arturo Leon: Great. That's very helpful. Thank you.

Operator: Thank you. At this time, we currently have no further questions, so I'll hand back to Oleg for any further remarks.

Oleg Shchegolev: Thank you for your support. We are very pleased with our results and our execution in 2023, and we are very optimistic about our future. Once again, I thank you all for your support and look forward to keep you updated on our progress.

Operator: Thank you for joining today's call. You may now disconnect your line.

Q4 2023 Semrush Holdings Inc Earnings Call

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