Q3 2024 Semrush Holdings Inc Earnings Call
Good morning, and thank you all for attending.
and I will be your moderator today.
All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end.
Speaker Change: I would now like to pass the conference over to our host Brinlea Johnson, Investor Relations at Semrush Holdings. To begin, thank you, you may proceed Brinlea.
Speaker Change: Good morning, and welcome to StemMash Holdings' third quarter, 2024 conference call. We'll be discussing the results announced in our press release issued after market close on Thursday, November 7th. With me on the call is our CEO, Oleg Shchegolev, our President, Eugene Levin, and our CFO, Brian Mulroy.
Speaker Change: Today's call will contain four looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Speaker Change: Adoption and Existing and Future Demand for our Existing and Any New Products and Features.
Speaker Change: our expected growth of our customer base and specific customer segments.
The continued development of our product.
Industry and Market Trends, Our Competitive Position, Market Opportunities,
Sales and Marketing Activities.
Acquisition Activity, Integration and Results of Recent Acquisitions.
Speaker Change: Future spending and incremental investment are guidance for the fourth quarter of 2024 and the full year 2024 and statements about future pricing and operating results, including margin improvement, revenue growth and profitability, and assumptions regarding foreign exchange rates.
Speaker Change: For those whose statements are statements other than statements of fact, and can be identified by words such as expect, can, anticipate, could, plan, believe, seek, or will.
Speaker Change: These statements reflect our views as of today only and should not be replied upon representing our views at any subsequent date, and we do not undertake any duty to update these statements.
Speaker Change: 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.
Speaker Change: For discussion of the risks and important factors that could affect our actual results, please refer to our most recent quarterly reports 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.
Speaker Change: During the course of today's call, we referred to certain non-GAAP financial measures. There's 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.zemrush.com. Now, let me turn the call over to Oleg.
Oleg Shchegolev: Good morning to everyone on the call. I am pleased with our results this quarter, delivering revenue of $97.4 million, up 24% year-over-year, and our growth of 24% year-over-year.
Oleg Shchegolev: We reported income from operations of $1.7 million and non-GAAP income from operations of $12.1 million in the third quarter.
Oleg Shchegolev: Non-GAAP operating margin increased to 12.4% compared to non-GAAP operating margin of 9.5% in the prior year period.
Oleg Shchegolev: We exceeded our guidance and I am pleased to say we are raising our full year 2024 guidance and are very excited about our growth opportunities in 2025.
Oleg Shchegolev: We continue to expand our leadership position in online visibility and are succeeding in combining strong, durable growth with profitability and quicker flow generation.
Oleg Shchegolev: We recently hosted our first Analyst Day in New York, which was very exciting for us. So we will keep my remarks today brief.
Oleg Shchegolev: In case you could not attend in person, a webcast along with the slides is available on the investor relations section of our website.
Oleg Shchegolev: One of the highlights from our analysis was the discussion around our total addressable markets.
Oleg Shchegolev: We have more than tripled our stamp from $13 billion at the time of our IPO to roughly $40 billion today.
Oleg Shchegolev: What is really exciting about this fund is that it provides SEMrush an opportunity to gain share within an existing fragmented market, and more importantly, to capture new white space created by the ever-evolving digital marketing landscape.
Our platform solves marketers' increasingly complex and critical problems.
Oleg Shchegolev: The volume of diversity of available content is immense. The amount of time we spend online is maxed out. The algorithm keeps changing, and it is getting more expensive to navigate through all this. This is where we come in.
Oleg Shchegolev: Our CMRS digital marketing platform utilizes data and intelligence at its core, and it is surrounded by AI-powered interconnected hubs.
Oleg Shchegolev: focus on search engine optimization, paid advertising, social media management, local marketing, brand marketing, and content marketing.
Oleg Shchegolev: We continue to innovate on our platform to help marketers to find opportunities to deliver efficient results across numerous marketing channels.
Oleg Shchegolev: I'm especially excited about early momentum we are experiencing from our new enterprise product.
prior to the Enterprise SEO product launch.
We successfully acquired 8,000 enterprise-sized accounts.
Oleg Shchegolev: Our charm for companies with over 500 employees. And we believe these 8,000 enterprise-sized accounts are ideally suited to migrate to our enterprise-issue products.
Oleg Shchegolev: Today we close new deals with Salesforce, HLVC, LG, Samsung, Alibaba, Sony, Doordash, TikTok, Square, and many more.
Oleg Shchegolev: We believe the demand for our innovative enterprise HEO product is strong, and we have a long runway for growth ahead.
Oleg Shchegolev: Simrach's age of competition comes from our strong culture and history of leveraging our differentiated data to elevate the digital marketing activities of our customers.
Oleg Shchegolev: As we add more customers and data to our platform, our competitive mode increases. This data generates a pliable effect that strengthens the quality of our algorithms and enhances the effectiveness of our recommendations we give to our customers.
Oleg Shchegolev: In summary, Q3 was another solid quarter class, which is a testament to our integrated and complete platform approach to serve companies of all sizes.
Oleg Shchegolev: With our continuing growth acceleration, I am confident that we have built a strong foundation for the future.
Oleg Shchegolev: We plan to leverage our profitability to invest in new products that extend our reach and drive cross-sell and upsell capabilities.
Oleg Shchegolev: We have a strong balance sheet and disciplined capital allocation approach around M&A opportunities.
Speaker Change: I look forward to keeping you updated on our progress. I will now turn the call over to Eugene and Brian to discuss the results of the quarter and our outlook in more detail.
Speaker Change: Thank you Oleg. We delivered another solid quarter and continue to scale and innovate, all while driving strong growth.
Speaker Change: Our platform is very powerful and helps marketers all over the world improve their online visibility. We continue to expand our product portfolio by leveraging our innovative internal development teams, partnerships, and mergers and acquisitions.
Speaker Change: Most recently, we acquired the digital marketing publisher, Third Door Media, whose brands include Search Engine Land, MarTech, Search Marketing Expo, or SMX, and Digital Marketing Depot, which are all known for their contribution to search and digital marketing education.
Speaker Change: We believe this will help us expand our reach of industry-related content and insights to marketers.
Speaker Change: This acquisition, coupled with the presence we have at over 200 accredited universities, is part of our commitment to inspire and equip both current and future generations of digital marketers with the know-how to succeed in an increasingly competitive landscape.
Speaker Change: To help illustrate our successful top-of-the-funnel marketing strategy, I'd like to highlight two recent customer wins.
Speaker Change: The first is a new enterprise customer, a market-leading provider of efficient, resource-conserving cleaning systems.
Speaker Change: Prior to working with us, the company was using search metrics with a unique user and access management approach limiting their ability to oversee other market activities.
Speaker Change: They are now scaling our enterprise SEO solution across all of their markets.
Speaker Change: SEMrush's customer success team is onboarding and training the entire organization, demonstrating our commitment to equip their teams with actionable SEO insights that drive consistency and coordination.
Speaker Change: In addition, the company is leveraging our Adobe Analytics integration and unique data insights to better align digital strategy using custom dashboards for precise data-driven decision-making across regions.
Speaker Change: The second example highlights SemRef's ability to successfully expand our platform within existing enterprise customers.
Speaker Change: For one of the world's largest online retailers, like all e-commerce platforms, success hinges on search visibility, attracting new customers, driving repeat purchases, and increasing average basket size.
Speaker Change: Selection, price, and exposure are core. If they cannot understand all three in real time, they risk losing sales.
Speaker Change: In priority categories, such as electronics, toys, and apparel, our customer was struggling due to significant competition in the market. This led to stagnation in new customer additions, repeat purchases, and flat average basket size.
Speaker Change: Leveraging our enterprise solution, they are now able to track hundreds of thousands of key items in real time.
Speaker Change: This is a process that used to take days or even weeks. Using AI and advanced analytics, our enterprise solution identifies what is impacting rankings and suggests immediate actions to boost visibility.
driving revenue from both new and existing customers.
Speaker Change: And this isn't just saving the customer time, it's delivering immediate business insights that directly drive revenue.
Speaker Change: Looking at our enterprise product and customer wins in more detail.
Speaker Change: In only five months since our general availability launch, we secured major deals with brands like Salesforce, HSBC, LG, Samsung, Alibaba, Sony, DoorDash, TikTok, Gartner, Square, and many more.
Speaker Change: Salesforce, Samsung, Sony, Alibaba, DoorDash, and Gartner were existing clients, who made substantial upgrades, while HSBC, LG, TikTok, and Square represent significant new wins.
Speaker Change: choosing SEMrush as their enterprise platform and displacing competitors. The strong demand from both existing and new clients, achieved with minimal marketing, gives us immense confidence as we continue to accelerate growth.
Speaker Change: In summary, I'm excited about our ability to service enterprise customers and continue to expand our portfolio of offerings, reiterated by our customer examples and wins.
Brian Mulroy: 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.
Brian Mulroy: Thank you, Eugene. We had a solid third quarter across the board. Our revenue was $97.4 million, growing 24% year-over-year.
Brian Mulroy: Growth was driven primarily by an expansion of our average revenue per customer as we continue to execute on our cross-sell and up-sell strategy.
Brian Mulroy: Before reviewing Q3 results in greater detail, I want to call your attention to the new disclosures we made during our Analyst Day in October, as I think it's worth driving home some key takeaways from them.
Brian Mulroy: Specifically, I would like to highlight the customer segmentation metrics we provided.
Brian Mulroy: We have 8,000 enterprise accounts, over 17,000 mid-market, and over 21,000 marketing agencies in addition to our strong SMB business.
Brian Mulroy: Our mid-market agency and enterprise accounts represent our most sophisticated users and contribute a healthy 55% of our overall annual recurring revenue.
Brian Mulroy: We also significantly expanded the number of customers paying more than $10,000 and $50,000 per year. And you can see that there was a noticeable uptick in 2024 as we've really chosen to focus more on this group.
to demonstrate the increase.
Brian Mulroy: During 2018, we had approximately 200 customers paying more than $10,000 and close to zero paying more than $50,000.
Brian Mulroy: Fast forward to today, we now have more than 4,000 customers paying us over $10,000 and nearly 300 paying over $50,000. We expect both of these to increase significantly as our new enterprise SEO solution gains traction.
Brian Mulroy: In fact, since we launched the Enterprise Solution for General Availability just a few months ago, we have already added 50 new customers to the 50,000 plus cohort.
Brian Mulroy: Our confidence and our ability to deliver strong growth and profitability going forward comes in part from the demonstrated success in these higher average AR segments.
Brian Mulroy: where our retention rates are also the strongest. As we said during our analyst day, our net revenue retention rate in this group is above 120.
Now turning to our third quarter results.
Brian Mulroy: We came in slightly ahead of what we released a few weeks ago.
Brian Mulroy: Annual recurring revenue for the quarter grew 24% year-over-year to $401 million.
Brian Mulroy: We've enjoyed success in building out a very strong and loyal customer base, increasing it nearly three times since the end of 2018. During the third quarter, we added approximately 1,300 net new paying customers.
Brian Mulroy: Our calculated average ARR per paying customer now exceeds 3,400, up 13% year-over-year.
Brian Mulroy: This was due to both the relative mix of business and agency customers and also the strong upsell activity Including our enterprise product that we saw this quarter
Brian Mulroy: We have consistently increased the average ARR for pain customer, which is up two times since the end of 2018.
Brian Mulroy: The strong average ARR per paying customer increase is a result of our success in our cross-sell strategy, as well as our sophisticated customers growing as a percentage of our overall ARR.
Brian Mulroy: A trend we expect to continue going forward, especially with our new Enterprise SEO product and upmarket investments in sales and marketing.
Brian Mulroy: Our dollar-based net revenue retention for the third quarter was strong at 107%. We believe our dollar-based net revenue retention will increase over time as we benefit from our enterprise go-to-market and product investments.
Brian Mulroy: Moving down the income statement, during the third quarter, we achieved a positive non-GAAP operating income of $12.1 million.
Brian Mulroy: We reported another significant improvement in our non-gap operating margin to 12.4%, which was up nearly 300 basis points year-over-year and surpassed our third quarter guidance.
Brian Mulroy: Cash flow from operations in the third quarter was $8.1 million.
Brian Mulroy: Turning to the balance sheet, we ended the quarter with cash and cash equivalents and short-term investments of $233 million, up $1.3 million from the previous quarter, as cash flow from operations was offset by the approximately $9 million in cash we disclosed last quarter that we used to acquire rights.
Brian Mulroy: Turning now to guidance, for the fourth quarter of 2024, we expect revenue in the range of $100.8 to $101.8 million, which at the midpoint would represent growth of approximately 21% year-over-year.
Brian Mulroy: We expect our fourth quarter non-gap operating margin to be approximately 11%.
Brian Mulroy: For 2024, we are raising revenue guidance to be in the range of $375 million to $376 million, up from our prior range of $373 million to $375 million, which translates into growth of 22% of the midpoint.
Brian Mulroy: As it relates to full year 2024 non-gap operating margins, we now expect to be approximately 12%, and we continue to expect a free cash flow margin of approximately 8%. Our guidance assumes a EUR exchange rate of 1.08.
Brian Mulroy: approximately 30% of our expenses are denominated in euros. And finally, looking beyond the current fiscal year, we expect to maintain a 20% compound annual revenue growth rate over the near term.
Brian Mulroy: In closing, we are very pleased with our performance. We executed well to overachieve on our top-line growth and profitability, advanced solar to our strategic priorities, and placed SEMrush in a strong position for our next phase of growth. With that, we are happy to take any of your questions. Operator, please open the line for questions.
Thank you very much. Thank you.
Speaker Change: Thank you Brian. We will now begin the question and answer session. If you would like to ask a question please press star followed by one on your telephone keypad.
Speaker Change: If for any reason you would like to remove that question please press star followed by two and again it is star one to ask a question.
Speaker Change: And just as a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question.
We have the last question.
Speaker Change: from the line of Scott Berg with Needham and Company. Please go ahead.
Speaker Change: Hey, everyone. This is Rob Morelli on for Scott. Thanks for taking the question. Congrats on the quarter. So we conducted a customer check recently, which, you know, received positive commentary relating to your AI capabilities, you know, with that customer interested in spending more and upgrading. Can you maybe touch on how your pricing strategy is being received and, you know, which avenue of the pricing?
Speaker Change: I guess, you know, strategy overall is being, you know, received, you know, I guess, most positively in any sort of capabilities that are, you know, of most interest. Thanks.
Thank you. Thank you.
Thank you very much.
Speaker Change: Hi, so just, this is Eugene, just want to clarify when you say higher prices you mean our core plans of course enhanced now with a features or enterprise plan?
Speaker Change: Well, just they relate interest in potentially spending more, you know, for these capabilities. So just look and understand, you know, which avenue of your pricing strategy, you know, whether it's upgrades, whether it's enterprise SEO or, you know, just strive, you know, adoption. Yeah.
Right, okay, so we think about AI monetization as...
something we're
Speaker Change: You want to use all the available tools of monetization depending on the type of product you're selling.
For our core plans, we have three main...
ways to monetize.
AI, number one is...
So that's one of the ways to monetize AI.
Speaker Change: Now, if you have something more specialized that is good fit, maybe not for 100% of your audience, but maybe, let's say, for a certain segment, like local businesses.
Speaker Change: Then you want to put it on a skew where only target audience.
Speaker Change: will have access to those features. So local is a good example where we use AI feature called reply to review to help people upgrade from entry-level local plan to higher tier local plan. And that's another example of how we monetize it. And also recently we had tons of traction with
our AI concentration tools such as
Speaker Change: Content Shake AI and this is a standalone SKU standalone app.
Speaker Change: that people buy separately from their course subscription. And that's another way to monetize AI features when you have an enormous value that really justifies a standalone SKU and product is tailored to a large audience.
Speaker Change: And then, of course, Enterprise product that we now sell for an average $50,000, roughly, is another.
Speaker Change: product that benefits greatly from different AI features are pretty much
Speaker Change: All of our workflows and enterprise SEO products are powered to a certain extent with AI features.
Speaker Change: What we would really like is that a lot of use cases would not be even possible without AI. So hope those four examples help, but I can keep going pretty much for hours about this.
Speaker Change: No, that is helpful. Thank you. And, you know, great to see NRR, you know, remaining flat, you know, rather than compressing. You know, any update on where you anticipate, you know, an inflection in this metric? You know, understanding, you know, the enterprise SEO solution, you know, is, you know, potential driver of that?
For more information, visit www.fema.gov
Speaker Change: Hey, Rob, we didn't pick up the actual metric you referenced. It was a little bit cloudy.
Oh, sorry, just, uh, Adderall, MedDollar Retention.
Speaker Change: Net revenue retention is 107% for the quarter and it's been about that level for a number of quarters in a row here. What we've been saying is it's important to look at our business by segment to really understand that metric.
Speaker Change: At our Analyst Day, we showed that we have a solopreneur and freelancer segment that has a retention rate that's below 100%. And then we have our business and agency accounts, which includes SMB, mid-market, and enterprise.
Speaker Change: that have a net revenue retention that's above 120%. So there's some dynamics occurring in the business by segments.
that are influencing that number. It's still strong at 107%.
Speaker Change: But there's two drivers for us increasing that number in the future. And we do believe that it will happen. One is this solo-panel and freelancer dynamic to abate. And we do expect that that will eventually happen. And then, of course, continued traction and momentum with our enterprise products and selling motions.
Thank you.
Thank you very much.
Speaker Change: Got it, helpful. Thanks for taking my questions in, congrats on the quarter.
Now have Mark Murphy with J.P. Morgan.
Mark Murphy: Thank you very much, Oleg. My congrats. I was wondering, Eugene, are you sensing any extra interest in SEO recently?
Mark Murphy: on the heels of what Google has done in Google search, where they've infused AI into the search page. They're including those AI-generated snippets at the top of the search page.
Mark Murphy: I'm just wondering if you, if you're coming across more marketers that need to, like are they reaching out to you to try to produce content that's going to be optimized?
Mark Murphy: for that, or even trying to produce content that maybe is so complicated or so lengthy that it cannot be used in those snippets. I'm just wondering what you're encountering there.
Thank you.
Speaker Change: Yeah, that's a fantastic question and we definitely see a lot of interest.
Speaker Change: In a marketing community, a lot of people want to be featured, of course, in those new search elements. It occupies a big part of real estate at the very top of the page, and usually there are three spots that you can occupy, and there are decent click-through rates for a lot of those queries, so it actually drives a lot of traffic to publishers.
Speaker Change: and as a result of course a lot of people are very interested in it.
Speaker Change: Now, the question is like, what are the rules of ranking there, and...
Speaker Change: You know, of course, without tools like SEMrush, you cannot answer that question. So that's why
Speaker Change: We've been one of the first people who implemented full support of AI overviews in our Rank Tracking Tool and in our Organic Research Tool, so people can start answering this question and can start writing correlations on it.
Speaker Change: what exactly they need to do to get featured there. And the rules, of course, are not the same for different queries. For one query, you need a long-form content. For another query, you need maybe shorter content.
Speaker Change: So it would depend on the industry. It's not one-size-fits-all type of advice, but we definitely see a lot of people using our rent-cracking organic research tool to start getting a sense of what they need to do to get featured there.
Speaker Change: And, of course, as we also run the same analysis on very large volumes of data, we can start implementing those suggestions in, for example, content writing tools such as ContentShade to help people create content that ranks well in those search elements in a more automated fashion.
Speaker Change: So tons of interesting research to do. We're very proud to be in a front-runner position and helping marketers to get there. I'm excited about the interest and adoption of those new features.
Speaker Change: This is very well said. At a high level, is it creating a tailwind? You have a fundamental change in the search page, in the major search page for most companies. Is that a driver right now for people to reach out and maybe do more business with SEMrush?
We would definitely see this way.
Speaker Change: We always say every time there is something new, something that complicates analysis, there is a greater need for products like SEMrush that can use big data and AI to run this analysis for people in the events where manual analysis is not going to lead to good results. So, yeah, we think it's a...
Speaker Change: It's a tailwind for us and, you know, to the same extent future simpots were a tailwind for us in the past.
Speaker Change: Yeah, yeah, okay. And one thing as a quick follow-up for whoever wants to take it.
Speaker Change: When you're mentioning these enterprise customers, Salesforce, LG, you know, Samsung, TikTok, Square, you know, the great logos, how large are the pay and user populations that you're seeing? I'm just trying to understand the extent to which...
It might be clustering on SEO specialists, or...
Speaker Change: As they pick up the enterprise product, it might also be expanding into across the marketing teams to digital marketers or social media folks or market researchers, etc. What are you seeing there?
sort of expensive skew right now.
Speaker Change: that there is a demand for our market research features. So a lot of those deals, they also come with a large number of seats for dot trans product or for our content creation products.
Speaker Change: We even had one with a good attach rate of social media, which is traditionally, you know, we focus more on SMBs, but we had an enterprise client who also purchased a lot of seats for our social media features.
Speaker Change: So, you're absolutely right, there is definitely opportunity to sell them, not just Enterprise SEO, and it's definitely in plans, but for now, we want to make sure we keep an eye on the ball and keep driving momentum for Enterprise SEO. But when there is an opportunity to sell more, we always sell more.
Speaker Change: And Artie, just to give you a little perspective on a number of users for these, there are some that are approaching 100, there's others that are mid-50s, so there's a substantial number of users and subscribers to this enterprise SEO platform.
Thank you. I'll let Artie know about that.
Thank you.
Speaker Change: We now have Elizabeth Porter with Morgan Stanley on the line.
Please go ahead when you're ready.
Speaker Change: Great. Thank you so much. I wanted to circle back on the enterprise product penetration into the 8K enterprise account base that you guys currently have.
Speaker Change: and the prepared remarks you referenced that these customers are just ideally situated to leverage the product. So I was wondering if you could give us an update on how many have moved and what that could look like over the next year or so and just how we should think about the migration path for companies that are already in the existing base.
Thank you.
Speaker Change: Yeah, thanks for the question, Elizabeth. We're really pleased with the traction.
Speaker Change: and the momentum that we've been getting. We did just launch the product, it went generally available in May.
We have been talking about the 8,000...
Speaker Change: enterprise customers that we already have that are using our core solutions that, as we've said, are ideally situated to upgrade and increase the average ARR that they're paying.
Speaker Change: We mentioned at Analysts Day that as of the end of our third quarter...
Speaker Change: We had already acquired 70 or migrated 70 of our accounts up to that Enterprise SEO solution.
Speaker Change: As of the end of October, it's already above 90, so we're getting some really good traction and adoption of that platform and do feel that not only the 8,000, but also other companies, larger companies.
Speaker Change: where it's really important for them to enhance their online presence.
Speaker Change: are also ideally situated to adopt this platform. So in analyst day, Tommy talked about...
Speaker Change: The three layers of our market opportunity, it's the 8,000 existing accounts, it's displacing competitors.
Speaker Change: But the biggest population of companies out there is really white space.
Speaker Change: where a lot of companies are using internally developed solutions, aggregating together a lot of disparate solutions, and then leveraging an army of engineers to pull together the environment that we need, that we believe we can displace with the enterprise SEO solution.
Speaker Change: Got it. And then this is a follow-up. The acceleration and growth of ARR per customer was just a bit more muted than it had been previously, and it does look like you guys are coming up on some tougher comps, and I think there was some pricing action last year. So just how should we think about the durability in that ARR per customer growth metric, given you have some of the tailwinds around the Enterprise products? So just some of the puts and takes there.
Speaker Change: Sure, yeah, you're asking about ARR growth or the actual net new additions?
[inaudible]
on the per-customer side. This is an average per-customer.
Speaker Change: Just given you took some of the pricing action last year? Yeah, so just year over year.
Speaker Change: Absolutely, yeah, so year-over-year just remember our third quarter is when we rolled out a pretty significant price increase.
Speaker Change: And what was different about the increase a year ago is we rolled it out to a cohort of existing accounts, so there was an uptick.
Speaker Change: in average AR and AR in general in the third quarter. That obviously works its way out in the fourth quarter, where we had a one-time increment in average AR and AR in the third quarter from that existing cohort. But overall, independent of that, we're continuing to see really strong
growth of our average ARR.
Speaker Change: If you look at it by segment, we're seeing really strong growth in enterprise and mid-market driven by
Speaker Change: the Enterprise SEO product. We are still in early days though. We just launched it.
Speaker Change: in May, and we do believe that over time, as we start to see more adoption of our enterprise SEO products, and we start to get more traction on the investments we're making in our enterprise bit of market, that you'll continue to see that number tick upwards.
Thank you.
Speaker Change: Thank you. Just as a reminder, if you do have any further questions, please press star followed by 1 on your telephone keypads now.
Speaker Change: We have the next question from Adam Hotchkiss with Goldman Sachs. Please go ahead.
Great, thanks so much for taking the questions.
Speaker Change: I guess to start, so when we speak to your customers, we often hear that the larger agencies and enterprises are using many SEO and visibility tools. And I guess I think it often differs, but in general, each of the point solutions seem to have their individual and unique value in the market. So is this a goal for you guys with the enterprise platform to ultimately take over what all of these solutions ultimately do for our customer? And if so, how do you think about the organic and inorganic avenues to expanding your functionality? Thanks so much.
Thank you for watching. See you next time.
That's a great question. So, in enterprise...
When we sell to brands directly, we indeed...
Speaker Change: see the sort of patchwork of different solutions poorly connected. Sometimes they will use.
Speaker Change: some kind of custom code that it's very hard to maintain. Person who wrote it, you know, first time have left five years ago. Nobody knows what to do with it.
Speaker Change: you don't need any kind of custom code, you don't need spreadsheets, it's all updated automatically, it's ever prone versus the manual approach and customers are extremely excited and they don't just save time and money but they also get results that they couldn't get before they got our platform. And of course as you implement this platform you usually don't need a lot of those point solutions anymore.
Speaker Change: and that also helped them to streamline their tech stack. For agencies, it's going to be a little bit different story because agencies will have to buy everything that all of their customers buy and if you have a hundred customers,
Speaker Change: You know, some of those customers might have some point solution, and you would still, as an agency, need an access to that point solution to serve that particular customer.
So for agencies, it's going to be...
Speaker Change: a bit longer to kind of really switch them entirely to SEMRA platform. But for brands, we see a lot of success pretty much for each implementation.
Speaker Change: When we started, we had a couple of customers who wanted to have technical SEO, which we didn't have back in May, June, when we have launched.
Speaker Change: But since then we have acquired Wright, which adds this capability, so now we feel very confident about our ability to fully consolidate the stack for all SEO needs.
Speaker Change: Okay, that's helpful, Eugene. Thank you. And then, Brian, just on the
Thank you. Thank you.
Speaker Change: sort of the monetization and revenue opportunity. Can you just give us a sense for how you think that differs for agency versus non-agency customers and generally what the difference is between what those individual types of businesses are using for at the higher end of customer sizes?
Speaker Change: Sure, yeah, I mean it always depends on the company and the agency.
Speaker Change: We scale our offerings based on the amount of technology and marketing disciplines that you're focused on, the amount of data that you need, the number of keywords, phrases.
Speaker Change: and Sites that you're focused on and of course the number of users and marketers that need access to this technology So they scale in multiple ways
Speaker Change: for most agencies, or some agencies, they're specialized on one particular marketing disciplines. In others, they're a full stack shop. So it all depends on the type of agency and company, but both agencies and companies are scaling based on those four pricing dynamics.
Okay. Super helpful. Thank you.
Speaker Change: Thank you. I can confirm that this concludes today's Q&A session and I'd like to hand it back to the management for some closing remarks.
Speaker Change: Thank you all for joining us today. We delivered a strong third quarter, exceeding our guidance and positioning us to rise our full year 2024 budgets. Thank you all.
Speaker Change: Thank you all for joining. I can confirm that does conclude the SEMrush Holdings third quarter 2024 results conference call. Please enjoy the rest of your day and you may now disconnect from the call.