Q4 2024 Semrush Holdings Inc Earnings Call

February 27, 2025

For today's call.

Bernie: All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end I would now like to pass the conference over to your highest friendly Johnson Investor Relations <unk> Holdings. Thank you you May proceed Bernie.

Speaker Change: Good morning, and welcome to stomach holdings fourth quarter and full year 2024 conference call will.

Speaker Change: We will be discussing the results announced in our press release issued after market close on Wednesday February 26.

Eugene 11: With me on the call is our current CEO like slug, along our new CEO Bill Wagner, our President Eugene 11, and our CFO Brian Boy.

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 forward. Looking statements include but are not limited to statements concerning our expected future business and financial performance and financial condition expected changes to our executive management team expected growth.

Yeah.

Okay.

Adoption in existing future demand for our existing and any new products and features our expected growth of our customer base and specific customer segments.

Speaker Change: Good morning, and thank you all for attending the <unk> holdings fourth quarter and full year 'twenty four because that was country its coal mine.

Eugene 11: <unk> development of our products industry and market trends, our competitive position market opportunities and growth strategies sales and marketing activities and strategies future spending and incremental investments our guidance for the first quarter of 2025, and the full year 2025, and statements about future pricing and operating adult.

Speaker Change: My name is pretty clear and I will be your motivate caf for today's call.

Speaker Change: All lines will be muted during the presentation portion of the call with an opportunity for questions and answers.

Speaker Change: Yes.

I would now like to pass the conference over to your highest friendly Johnson Investor Relations send much holdings. Thank you you May proceed.

Eugene 11: Margin improvement revenue growth and profitability and assumptions regarding foreign exchange rates.

Speaker Change: Good morning, and welcome to stomach holdings fourth quarter and full year 2024 conference call.

Eugene 11: Forward looking statements are statements other than statements of fact and can be identified by words such as expect.

Speaker Change: We will be discussing their adult announced in our press release issued after market close on Wednesday February 26 with.

Eugene 11: <unk> anticipate could 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, we do not undertake any duty to update these statements forward.

Oh: With me on the call is our current CEO Oh like slag law.

Bill Wagner: Are you CEO Bill Wagner, President Aegean 11, and our CFO Brian Boy.

Eugene 11: 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 a discussion of the risks and important factors that could affect 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.

Bill Wagner: 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 forward. Looking statements include but are not limited to statements concerning our expected future business and financial performance and financial condition expected changes to our executive management team expected growth.

Eugene 11: As long as other filings with the SEC.

Bill Wagner: Adoption in existing future demand for our existing and any new products and features.

Eugene 11: And finally 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 got some rush dot com.

Bill Wagner: The growth of our customer base and specific customer segments.

Bill Wagner: Development of our products industry and market trends, our competitive position market opportunities and growth strategy sales and marketing activities and strategies future spending and incremental investments our guidance for the first quarter of 2025, and the full year 2025, and statements about future pricing and operating adult.

OLED: Now, let me turn the call over to OLED.

Eugene 11: Thank you and good morning.

OLED: Most of the outstanding.

Eugene 11: Sure.

Eugene 11: We have begun a clear super bowls, and they're focused agenda.

Bill Wagner: Margin improvement revenue growth and profitability and assumptions regarding foreign exchange rates.

Eugene 11: Pleased to report.

Bill Wagner: Forward looking statements are statements other than statements of fact and can be identified by words, such as expect anticipate could 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, we do not undertake any duty to update you state.

Eugene 11: We delivered on both.

Eugene 11: Our initial commitments.

Eugene 11: Using our strategic objectives, including expanding our customer base ingredient.

Eugene 11: As a customer.

Eugene 11: Our product portfolio.

Eugene 11: We ended the year.

Eugene 11: I think what is it coming from excuse me.

Bill Wagner: Yes.

Eugene 11: Corporate guidance and Clos.

Bill Wagner: 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.

Eugene 11: Okay.

Eugene 11: Yes.

Eugene 11: All the numbers on this call.

Eugene 11: Fourth quarter revenue grew 23% year over year.

Bill Wagner: Question on the risks and important factors that could affect 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.

Eugene 11: Our growth exceeding three 2% year over year.

Eugene 11: We reported income from operations for $1 7 billion non-GAAP income from operations of $11 8 million.

Bill Wagner: And finally 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 got some rush dot com.

Eugene 11: non-GAAP operating margin.

Eugene 11: Okay 11, 5%.

Eugene 11: For the full year pretty predictable.

Or whatever.

Eugene 11: 2%.

Eugene 11: Excluding the income from operations.

Eugene 11: <unk> and.

Eugene 11: non-GAAP income from operations for the product.

Speaker Change: Now, let me turn the call over to OLED.

Bill Wagner: Thank you and good morning.

Eugene 11: Sure.

Eugene 11: For the full year for your three or four we reported non-GAAP operating margin.

Speaker Change: Outstanding.

Speaker Change: Sure.

Speaker Change: We have begun preclinical work.

Eugene 11: One 2%.

Speaker Change: A clear set of growth and a focused agenda.

Eugene 11: Net cash from <unk> of 47.0 million.

Speaker Change: The report.

Speaker Change: We delivered on both achieving our financial commitments execute.

Eugene 11: And with.

Eugene 11: Cash cash equivalents and short term investments.

Speaker Change: All of our strategic objectives, including expanding our customer base, increasing our average customer.

Eugene 11: $235 6 million.

Eugene 11: We have solidified our leadership position in online visibility across all business segments.

Speaker Change: Our product portfolio.

We ended the year, considering taking place if momentum excuse me in our corporate guidance and closing.

Eugene 11: Extended reach in new enterprise focused solutions.

Eugene 11: Number of world's largest businesses importantly, we are successfully combining strong durable growth profitability and free cash flow generation.

Speaker Change: Thank you.

Speaker Change: All the numbers on this call.

Speaker Change: Sure.

Speaker Change: Fourth quarter revenue grew 23% year over year.

In April we also continued our strong track record of success on the product development and integration front.

Speaker Change: Growth exceeding three 2% year over year.

Speaker Change: We reported income from operations for $1 7 million.

Speaker Change: non-GAAP income from operations of $11 8 million.

Eugene 11: We innovated and expanded.

Eugene 11: Operating to help companies could bring the orders are very strong.

Speaker Change: non-GAAP operating margin of 11, 5%.

Eugene 11: And ultimately because they are perfect serving customers. While we also successfully integrated Brazil conditions relates broadly yet.

Speaker Change: For the full year of 30 to 34, we agree with you.

Speaker Change: 32% delivery.

Speaker Change: We delivered full year income from Acacia and scope.

Eugene 11: We also expanded the capabilities of our social media audience building.

Speaker Change: And non-GAAP income from operations for the product.

Speaker Change: If needed.

Eugene 11: <unk> features that we have started to monetize.

Speaker Change: Full year figure 34, we reported non-GAAP operating margin of 12, 2%.

Eugene 11: I'm, particularly pleased with our enterprise sales either for corporate reach by any measure.

Speaker Change: Net cash from <unk> of 47.0 million.

Eugene 11: Embraces and saw momentum build each quarter, although their abilities.

Speaker Change: Cash cash equivalents and short term investments.

Eugene 11: Because over 40 deals in December alone and the modules in Q4.

Speaker Change: 235 6 million.

Speaker Change: We have solidified our leadership position in online visibility across all business segments and extended our reach with the new enterprise focused solution.

Eugene 11: The rest of the year combined.

Eugene 11: The rest assure customers no.

Eugene 11: All of them.

Eugene 11: Berkley stock quoted.

Eugene 11: Sporting goods business and Ticketmaster and many more in Q4 when available.

Speaker Change: But it was largest businesses importantly real success.

Speaker Change: Successfully combining strong durable growth.

Eugene 11: Considering enterprises on the low to mid year.

Speaker Change: Visibility and free cash flow generation.

Eugene 11: And we now have one for the core enterprise to show customers.

Speaker Change: In April.

Eugene 11: I couldn't be prouder of our team for what we have accomplished an important.

Speaker Change: We also continued our strong track record of success on the product development and integration front.

Eugene 11: What was the hubs.

Speaker Change: We innovated and expanded our product offering to help companies create Brenda orders.

Eugene 11: Looking into 2025, we plan to further evolve our platform and they're focused on is in product depth across our search engine optimization.

Speaker Change: And ultimately convert traffic to the customers, while we also successfully integrated with.

Eugene 11: Social media local marketing brand marketing content marketing and data and intelligence services.

Speaker Change: The conditions right for what we get.

Speaker Change: We also extended the capabilities of our social media offerings.

Eugene 11: Realizing the benefits of carefully investing in enterprise grade features for sophisticated marketers.

Speaker Change: The new features that we have.

Speaker Change: Have started to monetize.

Speaker Change: I am, particularly pleased with our enterprise sales force.

Eugene 11: And by leading with Reed.

Eugene 11: We can bring together the best of what else has to offer to ensure our customers have asked us to be more successful.

Speaker Change: Corporate which by any measure we've got embraces and saw momentum build each quarter, although the abilities.

Eugene 11: <unk> digital marketing platform.

Speaker Change: Because over 40 deals in December alone and.

Eugene 11: Our enterprise futures not just tissue.

Speaker Change: In Q4.

Eugene 11: Our ultimate plan and the vision is to extend our reach even further.

Speaker Change: Rest of the year combined with the <unk>.

Speaker Change: Zero customers.

Eugene 11: On enhancing our product portfolio is more enterprise capabilities getting sophisticated since the first quarter across all channels, including E optimization, which will be referred to as <unk>.

Speaker Change: Muslims Mercury stock quoted Dick's sporting goods business, and Ticketmaster and many more in Q4.

Speaker Change: Really cool.

Speaker Change: Enterprise.

Speaker Change: Mid year.

Eugene 11: Going forward.

Speaker Change: And we now have one for the important their prices to your customers.

Eugene 11: Looking ahead to the first half of 235, we plan to launch our new optimization solution and growth.

Speaker Change: I couldn't be prouder of our team for what we have accomplished an important.

Eugene 11: She russias protein and at the same time Rishi unique opportunities for EBIT advancements.

Speaker Change: For what lies ahead.

Speaker Change: Looking into 2025, we plan to further evolve our platform and are focused on aging product depth across our search engine optimization Retargeting, social media local marketing brand marketing content marketing and data and intelligence solutions.

Eugene 11: Era is shaping to be a link skip simulators are uniquely positioned to lead in the path ahead demands relentless focus.

Eugene 11: <unk> has always been at the intersection of product innovation and emerging technologies and as I think about driving some of our next phase of technology breakthroughs.

Speaker Change: We are realizing the benefits of careful investing.

Speaker Change: Enterprise grade features for sophisticated marketers.

Eugene 11: I have decided to shift tomorrow.

Speaker Change: By leading with.

Eugene 11: Effective March 10, I will step into the position of Chief Technology Officer, dedicating 100%.

Speaker Change: We believe we can bring together the best or whatever it is to offer to ensure our customers have asked us to be more successful and executable digital marketing platform.

Eugene 11: And then two product development, while continuing to serve wholesale loan book.

Speaker Change: Our enterprise future is not just issue.

Eugene 11: So sure as seamless transition and sustain our market leadership.

Speaker Change: Ultimate plans in the region is to extend our reach even further.

But for the night after careful consideration chemical into the build out there.

Speaker Change: We plan on enhancing our product portfolio is more enterprise capabilities.

Eugene 11: An experienced leader and currency Board member.

Speaker Change: Sophisticated enterprise across all channels.

Sheila: Withheld as Sheila.

Speaker Change: <unk> optimization.

Sheila: Real strict records vision and deep understanding of our culture.

Speaker Change: We refer to as <unk>.

Speaker Change: Going forward.

Speaker Change: Looking ahead to the first half of <unk> 35, we plan to launch our new optimization solution and gross bedroom.

Perfect fit to lead us into our next phase of growth.

Sheila: I have absolute confidence in similar so executive leadership and ability to execute really remain committed to delivering world class tools that empower businesses to maximize their own language religion Rio.

Speaker Change: She russias privee and at the same time, we see unique opportunities for rapid advancements with shaping their links keep szymborska is uniquely positioned to lead the pack.

Sheila: We're seeing strong positive momentum continues into 2025.

Speaker Change: It has been.

Speaker Change: Relentless focus my.

Speaker Change: <unk> has always been at the intersection of product innovation and emerging technologies and as I think about driving next.

Sheila: We strengthened our customer relationships.

Sheila: The extent, our enterprise capabilities grow and invest in enterprise go to market and launch new products.

Speaker Change: Oh technology breakthroughs.

Speaker Change: I have decided to choose tomorrow.

Sheila: I look forward to continuing to drive similar productivity from all of the citizens and I am excited with the best is yet to come.

Effective March 10, I will step into the position of Chief Technology Officer, dedicating 100%.

Sheila: With that please join me in welcoming.

Speaker Change: And then two product development, while continuing to serve consumer outlook.

Sheila: Soon to be sure Bill Wagner.

Sheila: Thank you all and Hello, everyone.

Speaker Change: Sure, it's seamless transition and system.

Bill Wagner: I'm thrilled to have the opportunity to step into the CEO role at same rush and work side by side with one leg and the leadership team as we execute on the company's ambitious strategy.

Speaker Change: Our market leadership.

Kevin: After careful consideration, Kevin pointing to the build out here and experienced leader and currency Board member.

Bill Wagner: First I'd like to thank all like in the rest of the board for their support as I prepare to take the reins.

Speaker Change: Withheld as Sheila.

Speaker Change: Known and worked with many founders over the years and having worked with elevated over the past several years on the board I can say he is indeed special.

Speaker Change: Real strict records vision and deep understanding of our culture make him the perfect fit to lead us into our next phase of growth.

Speaker Change: Building, a startup from scratch to become a thriving public company is an amazing success story.

Speaker Change: I have absolute confidence in similar so executive leadership and ability to execute we remain committed to delivering world class tools.

Speaker Change: It is rare still when our founder remain hungry and sustains his passion for innovation after all the success.

Speaker Change: I'm honored to step into as soon as the CEO I look forward to continuing to collaborate with him to fully realize <unk> potential.

Speaker Change: Our business is to maximize the online distributors.

Speaker Change: We are seeing strong positive momentum continues into 2025.

Speaker Change: As I approach my start date as CEO I do so with great confidence in the strategy that was outlined in the company's recent investor day.

Speaker Change: As we strengthen our customer relationships further extend our enterprise capabilities grow and invest in enterprise go to market and launch new products.

Speaker Change: As a former CMO I understand the complexity of digital marketing and the need for a platform to unify fragmented point solutions simplify execution and seamlessly integrate across multiple digital marketing channels.

Speaker Change: I look forward to continuing to drive similar product and technology strategy and I am excited but the best is yet to come.

Speaker Change: With that please join me in welcoming.

Speaker Change: I am excited about sandbox as product portfolio and our ability to bring our fully integrated AI powered digital marketing platform to organizations of all sizes.

Speaker Change: Soon to be CEO Bill Wagner.

Bill Wagner: Thank you all and Hello, everyone.

Bill Wagner: Thrilled to have the opportunity to step into the CEO role at San brush and work side by side with one leg and the leadership team as we execute on the company's ambitious strategy.

Speaker Change: I believe <unk> is just scratching the surface of the market opportunity and is poised for sustainable and profitable growth over the long term.

Bill Wagner: First I'd like to thank all lake and the rest of the board for their support as I prepare to take the reins.

Speaker Change: I'm excited to bring my CEO experience to work with.

Speaker Change: Known and worked with many founders over the years and having worked with all over the past several years on the board I can say he is indeed special.

Speaker Change: With the OLED and the rest of the management team to execute on our strategy to accelerate innovation and drive greater scale.

Speaker Change: Building, a startup from scratch to become a thriving public company is an amazing success story.

Speaker Change: I look forward to having more time to speak with each of you in the coming weeks.

With that I'll turn the call over to Eugene and Brian to walk through the results of the quarter and the full year.

Speaker Change: It is rare still when a founder remain hungry and sustains his passion for innovation and factor all of this success.

Speaker Change: I'm honored to step into as soon as the CEO I look forward to continuing to collaborate with him and fully realize <unk> potential.

Speaker Change: Thank you Bill and on behalf of the entire management team. We're excited to have you on board.

Speaker Change: Let me now provide a bit more color on our enterprise offerings and product portfolio there.

Speaker Change: As I approach my start date as CEO I do so with great confidence in the strategy that was outlined in the company's recent investor day.

Speaker Change: The ability for brands to consolidate annualized visualize and monetize data is a game changer combined with an exciting 2025 roadmap, including through our integrated website user experience intelligence AI optimization and competitive intelligence offering customers can.

Speaker Change: As a former CMO I understand the complexity of digital marketing and the need for a platform unified fragmented point solutions simplify execution and seamlessly integrate across multiple digital marketing channels.

Speaker Change: I am excited about <unk> product portfolio, and our ability to bring our fully integrated AI powered digital marketing platform to organizations of all sizes.

Speaker Change: Move away from Siloed single point solutions to an unified end to end online visibility management platform <unk>.

Speaker Change: Let me share two brief customer stories that show further validation of our enterprise product strategy.

Speaker Change: I believe <unk> is just scratching the surface of the market opportunity and is poised for sustainable and profitable growth over the long term.

Speaker Change: Square has experienced remarkable success since adopting our enterprise Azure solution the.

Speaker Change: I'm excited to bring my CEO experience to work with.

With the OLED and the rest of the management team to execute on our strategy to accelerate innovation and drive greater scale.

Speaker Change: The platform has empowered square to outperform competitors in both traffic and content improved search rankings across nearly every market and significantly boost productivity.

Speaker Change: I look forward to having more time to speak with each of you in the coming weeks.

Speaker Change: With real time insights from tools like share of voice and what has happened square can rapidly recover from traffic losses, while the content optimization tool drives continuous improvement in service performance in just a few months square has seen 30% increase in organic search traffic at 25 person.

Speaker Change: With that I'll turn the call over to Eugene and Brian to walk through the results of the quarter and the full year.

Speaker Change: Thank you Bill and on behalf of the entire management team. We are excited to have you on board.

Speaker Change: Let me now provide a bit more color on our enterprise offering and product portfolio there.

Speaker Change: Sent enhancements and global keyword rankings, and save 12 hours per week, making some rough enterprise. The most advanced solution available in the market for their digital marketing team.

Speaker Change: Another one of our customers fix are the world's largest digital creative platform was among the first to adopt Sam rushes enterprise SCO pepper.

Speaker Change: Move away from Siloed single point solutions to an unified end to end online visibility management platform.

Speaker Change: And it has completely transformed their approach to search visibility traffic growth and <unk> operations confronted with the challenge of manually optimizing internal links across hundreds of pages Pixar turned to some roche's AI driven link recommend.

Speaker Change: Let me share two brief customer stories that show further validation of our enterprise product strategy.

Speaker Change: Square has experienced remarkable success since adopting our enterprise Azure solution the.

Speaker Change: Which automated what would have otherwise taken several months by seamlessly integrating over 50000 contextual links across 300 pages in just one week. They saw a 20% increase in organic traffic for the linked pages and mm 124%.

Speaker Change: The platform has empowered square to outperform competitors in both traffic and content improved search rankings across nearly every market and significantly boost productivity.

Speaker Change: With real time insights from tools like share of voice and what has happened square can rapidly recover from traffic losses, while the content optimization tool drives continuous improvement in service performance in just a few months square has seen a 30% increase in organic search traffic at 25 person.

Speaker Change: Bruce in their visibility the ease of use and comprehensive solution provided by some rush enterprise have revolutionized the SCO workflow and set a new benchmark for digital marketing efficiency.

<unk> enhancement and global keyword rankings and saved 12 hours per week, making some rush enterprise. The most advanced solution available in the market for their digital marketing team.

Speaker Change: Turning to the topic of AI I wanted to provide a bit more detail on what OLED referred to as a <unk>, which is about AI optimization. The online visibility industry is moving at a rapid pace and AI is playing an ever increasing role.

Speaker Change: Another one of our customers Pixar the worlds largest digital creative platform was among the first to adopt <unk> enterprise SCO platform.

Speaker Change: Because of all of our key position in this ecosystem, we are uniquely positioned to not only understand how this AI search to gather their data and generate the responses to users, but we are also uniquely positioned to benefit from this by helping our customers optimize their online presence to properly rank within.

Speaker Change: These AI tools results.

Speaker Change: We see numerous opportunities to develop new products and monetize our capabilities here as AI based search becomes more prevalent we're seeing increasing demand in the marketplace for new tools to help our customers capitalize on this new marketing channels and we look forward to updating you on.

Speaker Change: <unk> automated what would have otherwise taken several months by seamlessly integrating over 50000 contextual links across 300 pages in just one week they saw a 20% increase in <unk>.

Speaker Change: Gannett traffic for the linked pages and mm, 124% boost in their visibility the ease of use and comprehensive solution provided by some rush enterprises have revolutionized the SCO workflow and set a new benchmark for digital marketing efficiency.

Speaker Change: Our.

Speaker Change: Initiative and the opportunity it presents to summarize in the future.

Brian: With that I will turn it over to Brian.

Brian: Thank you Eugene we had a solid fourth quarter across the board further demonstrating our ability to consistently grow revenue, while also increasing our profitability.

Speaker Change: Turning to the topic of AI I wanted to provide a bit more detail on what Oleg referred to as <unk>, which is about AI optimization. The online visibility industry is moving at a rapid pace and AI is playing an ever increasing role.

Brian: Our fourth quarter revenue was $102 6 million exceeding the high end of our guidance and growing 23% year over year.

Brian: 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. In particular, we saw very strong adoption of our enterprise video solution during the quarter.

Because of all of our key position in this ecosystem, we are uniquely positioned to not only understand how this AI search to gather their data and generate the responses to users, but we are also uniquely positioned to benefit from this by helping our customers optimize their online presence to properly rank.

Brian: Full year revenue grew 22% from the prior year period to $376 8 million.

Brian: We achieved positive non-GAAP operating income of $11 8 million in the fourth quarter also exceeding our guidance and resulting in a non-GAAP operating margin of 11, 5% up approximately 150 basis points year over year and up nearly 2700 basis points since the fourth quarter of 2022.

Speaker Change: These AI tools results.

Speaker Change: We see numerous opportunities to develop new products and monetize our capabilities here.

Speaker Change: I based search becomes more prevalent we're seeing increasing demand in the marketplace for new tools to help our customers capitalize on this new marketing channels and we look forward to updating you on our <unk> initiative and the opportunity It presents December us in the future.

Brian: For the full year non-GAAP operating income finished at $45 8 million, representing a non-GAAP operating margin of 12, 2% up 840 basis points compared to 2023.

Brian: Cash flow from operations was $11 9 million in the fourth quarter and $47 million for the full year we.

Brian: I will turn it over to Brian.

Brian: Thank you Eugene we had a solid fourth quarter across the board further demonstrating our ability to consistently grow revenue, while also increasing our profitability our fourth quarter revenue was $102 6 million exceeding the high end of our guidance and growing 23% year over year.

Brian: We generated $9 5 million of free cash flow in the fourth quarter, leading to a free cash flow margin of nine 3%.

Brian: For the full year, we achieved $35 3 million of free cash flow and free cash flow margin of nine 4% up 930 basis points compared to 2023.

Brian: We ended the quarter with cash and cash equivalents and short term investments of $235 6 million up $2 7 million from the previous quarter as cash flow from operations was offset in part by the approximately $3 7 million in cash we used to acquire third door media.

Brian: Full year revenue grew 22% from the prior year period to $376 8 million we.

Brian: Annual recurring revenue for the quarter grew 22% year over year to $411 6 million.

Brian: AAR from enterprise sized customers was particularly strong during the fourth quarter as we saw continued momentum in adoption across our new and expanding enterprise product suite.

Brian: For the full year non-GAAP operating income finished at $45 8 million, representing a non-GAAP operating margin of 12, 2% up 840 basis points compared to 2023.

Brian: Our calculated average IRR per paying customer grew to over 3500 up nearly 13% year over year versus the same quarter last year.

Brian: As part of our continued momentum in our enterprise segment, the number of customers paying over 50000 increased 82% year over year to 336. In addition, we now have over 4300 customers paying over 10000, which grew 40% year over year as strong growth is a direct result of.

Brian: Cash flow from operations was $11 9 million in the fourth quarter and $47 million for the full year we.

Brian: We generated $9 5 million of free cash flow in the fourth quarter, leading to a free cash flow margin of nine 3%.

Brian: For the full year, we achieved $35 3 million of free cash flow and free cash flow margin of nine 4% up 930 basis points compared to 2023.

Brian: Our investments in our enterprise selling motion and launch of our enterprise solution.

Brian: As already mentioned, we closed over 40 enterprise SCO deals in December alone and more deals in Q4 than the rest of the year combined ending 2024 with 144 enterprise SCO customers with an average <unk> per customer exceeding 60000, we ended the year with $9 million of IRR from our new.

Brian: Rise SCO solution.

Brian: Annual recurring revenue for the quarter grew 22% year over year to $411 6 million.

Brian: As of December 31, 2024, we had approximately 117000 paying customers.

Brian: AAR from enterprise sized customers was particularly strong during the fourth quarter as we saw continued momentum in adoption across our new and expanding enterprise product suite.

Brian: While we are seeing strong growth and retention in our enterprise customer segment, we continue to expand softness and the lower end of our market.

Brian: Our dollar based net revenue retention at the end of the fourth quarter was 106%. We continue to believe our dollar based net revenue retention will remain strong and increase as our more sophisticated accounts increase as a percentage of our mix. Since these customers have higher net retention than our company average.

Brian: Our calculated average IRR per paying customer grew to over 3500 up nearly 13% year over year versus the same quarter last year.

As part of our continued momentum in our enterprise segment, the number of customers paying over 50000 increased 82% year over year to 336.

Brian: Looking at 2025, we plan to continue to prioritize our four key growth strategies outlined in prior quarters, we plan to maintain our sharp focus on increasing paying customers across all segments, expanding our average <unk> per customer with a somewhat digital marketing platform.

Brian: In addition, we now have over 4300 customers paying over 10000, which grew 40% year over year. This strong growth is a direct result of our investments in our enterprise selling motion and launch of our enterprise solution.

Brian: Extending our reach with our enterprise products and enhancing our product portfolio with more enterprise capabilities with an emphasis on our AI driven offerings.

Brian: CNC and profitability remain important strategic priorities.

Brian: I will now provide our outlook for the first quarter and the full year 2025.

Brian: For the first quarter of 2025, we expect revenue in the range of $103 9 million to $104 7 million, which at the midpoint would represent growth of approximately 22% year over year.

Brian: SCO solutions.

As of December 31, 2024, we had approximately 117000 paying customers.

Brian: While we are seeing strong growth and retention in our enterprise customer segment, we continue to expand softness and the lower end of our market.

Brian: We expect our first quarter non-GAAP operating margin to be approximately 11%.

Brian: For 2025, we are guiding revenue to be in the range of $448 million to $453 million, which translates into growth of approximately 20% at the midpoint.

Brian: As it relates to full year, 2025% non-GAAP operating margins, we expect approximately 12%.

Brian: We also expect our free cash flow margin to be approximately 12% up 260 basis points compared to 2024.

Brian: Our free cash flow benefits from expanded profitability as well as continued growth in our enterprise segment and in particular, our enterprise SCO solutions deals that we structure with a minimum annual commitments with annual billings.

Brian: Stemming our SCO reach with our enterprise product and enhancing our product portfolio with more enterprise capabilities with an emphasis on our AI driven offerings efficiency and profitability remain important strategic priorities.

Brian: Our guidance assumes a euro exchange rate of 105.

Brian: Approximately 30% of our expenses are denominated in euros.

Brian: In closing we are very pleased with our performance, we executed well to overachieve on our top line growth and profitability and advance forward our strategic priorities in place some rush in a strong position for our next phase of growth.

Brian: I will now provide our outlook for the first quarter and the full year 2025.

Brian: For the first quarter of 2025, we expect revenue in the range of $103 9 million to $104 7 million, which at the midpoint would represent growth of approximately 22% year over year.

Brian: I'd like to thank our entire team for their efforts this past year.

Brian: We remain incredibly optimistic about the future of <unk> in 2025 and beyond with that we're happy to take your questions. Operator. Please open the line for questions.

Brian: We expect our first quarter non-GAAP operating margin to be approximately 11%.

Brian: For 2025, we are guiding revenue to be in the range of 448 million to $453 million, which translates into growth of approximately 20% at the midpoint.

Brian: Thank you we will now begin the question and answer session.

Speaker Change: He would like to ask a question you can do side by pressing star one by one on your telephone keypad.

Brian: As it relates to full year 2025, non-GAAP operating margins, we expect approximately 12%.

Brian: If you change your mind anytime you can press star team to meet that request and.

Again to ask a question. Please press star followed by one.

Brian: We also expect our free cash flow margin to be approximately 12% up 260 basis points compared to 2024.

Brian: And as a quick reminder, if you are using a speakerphone. Please remember to pick up your handset before asking a question.

Brian: You report briefing last question.

Speaker Change: We have the first question from Mark Murphy with Jpmorgan. Please go ahead.

Brian: Our guidance assumes a euro exchange rate of 105.

Mark Murphy: Hey, guys. Thanks for taking my question. This is already on for Mark Murphy.

Brian: Approximately 30% of our expenses are denominated in euros and.

Mark Murphy: Just wanted to get your thoughts on deep sea and if that's having any impact on kind of your roadmap from your perspective.

Brian: In closing we are very pleased with our performance, we executed well to overachieve on our topline growth and profitability in advance forward, our strategic priorities in place <unk> in a strong position for our next phase of growth.

Mark Murphy: The potential for lower costs, and whether you've tested this technology out. Thank you.

Mark Murphy: Okay.

Mark Murphy: Alright. Thank you great question so.

Mark Murphy: We always felt that technology is going to be democratized from cost point of view and what it means is that it.

Brian: I'd like to thank our entire team for their efforts this past year.

Brian: We remain incredibly optimistic about the future of <unk> in 2025 and beyond with that we're happy to take your questions. Operator. Please open the line for questions.

It will be increasingly available for consumers and it makes a freemium model as viable as well and you're already seeing this.

Brian: Thank you we will now begin the question and answer session.

Mark Murphy: In terms of mass adoption of Google.

Mark Murphy: Google AI overviews, which is one of the ways to calculate.

Speaker Change: You would like to ask a question you can do side by pressing star one on your telephone keypad.

Mark Murphy: Outside but let's say run AI cheaper they do this at massive scale with fairly low cost and of course recently <unk> launched a free version that is available without registration. So again, it's one step toward more mass adoption of Internet of course freemium model.

Speaker Change: If you change your mind anytime you can press star T to meet that request.

Speaker Change: Again to ask a question. Please press star followed by one.

Speaker Change: And as a quick reminder, if you are using a speakerphone. Please remember to pick up your handset before asking a question.

Speaker Change: <unk> questions.

Mark Murphy: And deep Sea was one of the other new versions of the direction that showed how to run our models cheaper I think their biggest breakthrough was more about.

Speaker Change: We have the first question from Mark Murphy with Jpmorgan. Please go ahead.

Speaker Change: Hey, guys. Thanks for taking my question. This is already on for Mark Murphy.

Mark Murphy: Cost of training so they achieved fairly good reasoning.

Speaker Change: Just wanted to get your thoughts on deep sea and if that's having any impact on kind of your roadmap from your perspective.

Speaker Change: Without massive.

Speaker Change: Trading caused that said nobody really knows how much they have actually spend and there of course.

Speaker Change: Potential for lower costs, and whether you've tested the technology out. Thank you.

Speaker Change: Concerns not concerns, but do some people, saying the brand a lot of distillation, which is of course survival technique, but.

Speaker Change: Okay.

Speaker Change: Alright. Thank you great question so are we.

Speaker Change: Question will from ethical point of view.

Speaker Change: Always felt that technology is going to be democratized from cost point of view and what it means is that.

Speaker Change: I don't want to throw stones at anyone I think in general is great the technologies get into democratized, and more and more people will get access to it and thats fantastic for consumer Internet.

Speaker Change: It will be increasingly available for consumers and it makes a freemium model as viable as well and you're already seeing this.

Speaker Change: AI is getting democratized.

Speaker Change: In terms of mass adoption of Google.

Speaker Change: Yeah.

Speaker Change: Perfect very helpful. And then just I think I.

Speaker Change: Google AI overviews, which is one of the ways to calculate.

Speaker Change: Briefly touched on this I apologize if I missed it but could you talk about what youre seeing in the macro if there's any been any change in kind of.

Speaker Change: Calculate but let's say run AI cheaper they do this at massive scale with fairly low cost and of course recently <unk> launched a free version that is available without registration. So again, it's one step toward more mass adoption of of course freemium model.

Speaker Change: The momentum coming into this year, and maybe maybe how that breaks down across the market segments as well. Thank you.

Speaker Change: Okay.

Speaker Change: They already thanks, Yeah. This is Brian at this point, we're not really seeing any change to.

Speaker Change: The macro environmental worthy impact that it has on the various <unk> cohorts.

Speaker Change: And deep sea was one of the <unk>.

Speaker Change: Other movers in this direction that showed how to run.

Speaker Change: We talked at length at Analyst day about us building momentum and really getting some strong success across our business and agency cohort and.

Speaker Change: Our models Cheever I think there are biggest breakthrough was more about.

Speaker Change: Cost of training so the cheap fairly good reasoning.

Speaker Change: And seeing some softness in the lower end of the market, we continue to see that in the fourth quarter.

Speaker Change: Without massive trading caused that said nobody really knows how much they have actually span and there of course.

Speaker Change: And as of now.

Speaker Change: Through the trends just not seeing any signs of change as we are advancing through 2024.

Speaker Change: Concerns I mean, not concerns, but do some people, saying they ran a lot of distillation, which is of course survival technique, but.

Speaker Change: Awesome, congrats on the quarter and I'll step back in the queue.

Speaker Change: Question will from ethical point of view.

Speaker Change: I don't want to throw stones at anyone.

Speaker Change: I'm sorry.

Speaker Change: Yes.

Speaker Change: In general is great the technologies get into democratized, and more and more people will get access to it and Thats fantastic for consumer Internet as AI is getting democratized.

Elizabeth: We now have Elizabeth <unk> with Morgan Stanley Your line is open.

Speaker Change: Great. Thank you so much.

Speaker Change: It's been great working with you and bill Congrats on the new role I just wanted to better understand kind of why is now the right time for a CEO change and bill you've been on the board for a few years. So could you share initial observations of what you might like to prioritize as you take on the CEO role.

Speaker Change: Perfect very helpful. And then just I think you guys made.

Speaker Change: Briefly touched on that I apologize if I missed it but could you talk about what youre seeing in the macro if there's any been any change in kind of.

Speaker Change: The momentum coming into this year, and maybe maybe how that breaks out across the market segments as well. Thank you.

Speaker Change: Thank you for your question.

Speaker Change: Okay.

Speaker Change: I'll start your first part.

Speaker Change: They already thanks, Yeah. This is Brian at this point, we're not really seeing any change to the.

Bill will continue to be a certain books.

Speaker Change: Look.

Speaker Change: The business is performing.

Speaker Change: The business is performing very well.

Speaker Change: The macro environment or the impact that it has on the various <unk> cohorts.

Speaker Change: I see.

Speaker Change: And the current situation.

Speaker Change: Leadership tumors strong results are a strong business performing very well.

Speaker Change: We talked at length at Analyst day about us building momentum and really getting some strong success across our business and agency cohort and.

We have a lot of opportunities in front of us related to August neutrophil interests and so on.

Speaker Change: And seeing some softness in the lower end of the market, we continue to see that in the fourth quarter.

Speaker Change: So it's a very important move for our company to address owners a bunch of interest.

Speaker Change: Once again I believe.

Speaker Change: And as of now.

Speaker Change: Through the trends just not seeing any signs of change as we are advancing through 2024.

Speaker Change: These are performing very well and we should just.

Speaker Change: So to finish on devote.

Speaker Change: Yes, Elizabeth Thank you for the for the welcome and Yeah I mean.

Speaker Change: Awesome, congrats on the quarter and I'll step back in the queue.

Speaker Change: I'm sorry.

I think my priorities are first month as CEO of kind of you listen and make sure I understand the business.

Speaker Change: Yes.

Speaker Change: We now have Elisabeth <unk> with Morgan Stanley Your line is open.

Speaker Change: The great thing about the business is performing well and I am very familiar with it having been on the board.

Speaker Change: Great. Thank you so much.

Speaker Change: But for me I think it's really aligns with the strategy that you've already her in that you know, so well, which is really aligning growth among our our user base and and prosecuting the enterprise opportunity that we're really is in early stages. So I think it's continuation of what the company has already been doing.

Speaker Change: Thank you for your question.

Speaker Change: I'll start your first part.

Speaker Change: And we'll look to scale that up that's really the plan.

Bill Wagner: Bill will continue if you're talking about.

Speaker Change: Look the.

Bill Wagner: The business is performing.

Speaker Change: Great and then Brian maybe one for you I wanted to unpack what drove the downtick at RR <unk>. It feels like that metric has been stabilizing and windows seven and previously the end quarter IRR had been improving.

Bill Wagner: Business is performing very well.

Bill Wagner: I think.

Bill Wagner: And the current situation.

Bill Wagner: Leadership tumors strong results strong business performing very well.

Bill Wagner: We have a lot of opportunities in front of us related to August neutrophil <unk> and so on.

Speaker Change: What are you seeing in kind of in quarter NRI in Q4, and what's the outlook as we go into 2025.

Speaker Change: It's a very important move for our company to address Oldish Europe, what's your interest.

Bill Wagner: Once again I believe.

Brian: Sure, Yes, we did report 106% so a very strong number and a number that represents our ability to continue to cross sell and up sell in our base and of course maintain favorable gross retention rates.

Bill Wagner: It is performing very well and we should just add.

Bill Wagner: So a little finish on top of it.

Bill Wagner: Yes.

Speaker Change: Thank you for the for the welcome and Yeah, I mean I.

Speaker Change: I think my priorities as first month as CEO, it kind of be listen and make sure I understand the business and.

Speaker Change: We talked at analyst day about.

Speaker Change: The net revenue retention rates by segments and in particular that are enterprise and more sophisticated customers have a net revenue retention rate, that's greater than a 120% and growing.

Speaker Change: The great thing about the business is performing well and I'm very familiar with it having been on the board.

Speaker Change: But for me I think it's really aligned with the strategy that you've you've already heard that you know, so well, which is really aligning growth among our our user base and and prosecuting the enterprise opportunity that we're really is in early stages. So I think it's continuation of what the company has already been doing.

Speaker Change: And then we had some softness in the lower end of the market.

Speaker Change: Were just because of some macro related challenges throughout 2024 had been impacting that particular cohort of the business that dynamic continued in.

And we'll look to scale that up that's really the plan.

Speaker Change: To the fourth quarter. So there was a little bit of an impact on our net revenue retention, having said that it was only a couple of basis points, we were at 107%.

Speaker Change: Great and then Brian maybe one for you I wanted to unpack kind of what drove the downtick to an IRR to <unk>. It feels like the metric has been stabilizing and windows seven it previously the end quarter IRR had been improving.

Speaker Change: I'm, a rounding perspective, it ticked down a couple of basis points and rounded down to 106.

Speaker Change: We do continue we've said it a number of times, we expect that will remain strong. We believe it has trough and we believe we have a lot of opportunity with cross sell and up sell through every segments with our ability to retain our base and of course with the increasing mix in enterprise that over the long term, we believe that number will increase.

Speaker Change: What are you seeing kind of in quarter NRI in Q4, and what's the outlook as we go into 2025.

Brian: Sure, Yes, we did report 106% so still a very strong number and a number that represents our ability to continue to cross sell and up sell on our base and of course maintain a favorable gross retention rates.

Speaker Change: There is one caveat one really interesting success, we're seeing with our go to market function. We are seeing good success in semis and landing bigger, though so as our sales organization ramps up and really focuses on selling our enterprise portfolio.

Speaker Change: We talked at analyst day about.

Speaker Change: We're seeing that initial deal and that initial contract include more <unk> than we've seen previously so that first check our first contract is larger so one caveat is that may have an impact on our net revenue retention rate, but it is positive we will take it just means the <unk> earlier.

Speaker Change: And then we had some softness in the lower end of the market.

Speaker Change: Were just because of some macro related challenges throughout 2024 had been impacting that particular cohort of the business that dynamic continued in.

Speaker Change: Got it thank you.

Speaker Change: To the fourth quarter. So there was a little bit of an impact on our net revenue retention, having said that it was only a couple of basis points, we were at 107%.

Speaker Change: Thank you.

Speaker Change: I have a question from Luke Wooten with northern capital market on the line.

Luke Wooten: Hey, guys. Thanks for taking the question.

Speaker Change: From a rounding perspective, it ticked down a couple of basis points and rounded down to 106.

Speaker Change: That's on the nice quarter.

Speaker Change: Just wanted to touch on the Aio AI optimization.

Speaker Change: We do continue we've said it a number of times, we expect that we will remain strong we believe it has trough and we.

Speaker Change: Oregon, Eugene you guys were talking about.

Speaker Change: Just wondering is this going to be some sort of add on.

Speaker Change: We believe we have a lot of opportunity with cross sell and up sell through every segments with our ability to retain our base and of course with the increasing mix in enterprise that over the long term, we believe that number will increase.

Speaker Change: Two existing product solutions or to the enterprise solution and then how do you kind of think about the pricing and potential price increases as you launch these AI capabilities.

Speaker Change: Thank you great question.

Speaker Change: So of course.

As with every new portfolio of products that will be a lot of testing around packaging and pricing.

As of today.

<unk>.

Speaker Change: Seeing that initial deal and that initial contract include more of sand brush than we've seen previously so that first check our first contract is larger so one caveat is that may have an impact on our net revenue retention rate, but it's positive we will take it just means the <unk> earlier.

Speaker Change: <unk> product life, and our product led growth platform.

Speaker Change: It's available for $99, a month, which I cannot tell you does that going to be a long term price.

Speaker Change: But it is price we're comfortable with for now and for testing period and of course, we will keep you posted when there are more.

Speaker Change: Got it thank you.

Speaker Change: More news and we expect to launch enterprise version as well.

Speaker Change: Thank you.

Speaker Change: Fairly soon in the first half of the year so.

Speaker Change: We have a question from Luke Wooten with northern capital market on the line.

Speaker Change: So it's a great opportunity and we will keep you posted but like with every new launch you don't necessarily know the final pricing and packaging when you launch it and you focus more on user adoption and feedback.

Luke Wooten: Hey, guys. Thanks for taking the question and congrats on the nice quarter.

Luke Wooten: I just wanted to touch on the Aio AIA optimization that Oregon, Eugene you guys were talking about.

Luke Wooten: Just wondering is this going to be some sort of add on.

Speaker Change: Got it yeah that makes sense and then.

Speaker Change: Just with the 40, new enterprise deals in the month of December alone.

Luke Wooten: Two existing product solutions or to the enterprise solution and then how do you kind of think about the pricing and potential price increases as you launch these AI capabilities.

Speaker Change: Wondering what kind of contributed to such a strong month of December.

Speaker Change: This kind of momentum has continued here in January and February.

Luke Wooten: Thank you great question.

Speaker Change: Yes, honestly its a continuation of the investments and the initiatives that we've been building for a number of years, we've talked a number of times about.

Luke Wooten: So of course.

Luke Wooten: With every new portfolio of products that will be a lot of testing around packaging and pricing.

Luke Wooten: As of today.

Speaker Change: <unk> Foundation is strong tracker at a record of success with a product led growth motion over the last few years, we've recognized incremental opportunity in the enterprise not just with ramping up our selling organization, but also adding sophistication and more advanced capabilities to our product we've been at that for a while in the fourth quarter.

Luke Wooten: One product life, and our product led growth platform.

Luke Wooten: It's available for $99, a month, which I cannot tell you does that going to be a long term price.

Luke Wooten: But it is price we're comfortable with for now and for test in period and of course, we will keep you posted when there are.

Speaker Change: <unk>.

Luke Wooten: More than us and we expect to launch enterprise version as well.

Speaker Change: It was essentially a really strong momentum building quarter, where the products have been launched and out for a couple of quarters and our selling organization was starting to get up to full productivity.

Luke Wooten: Fairly soon in the first half of the year so.

Luke Wooten: So it's a great opportunity and we will keep you posted but like with every new launch.

Speaker Change: Some of those early investments that we've made in our enterprise go to market. So we're really pleased to see what we saw in the fourth quarter, we're seeing good mix of both new and existing customer upgrades and.

Don't necessarily know the final pricing and packaging when you launch it and you focus more on user adoption and feedback.

Speaker Change: And really optimistic about what the future holds for that product and overall go to market motion.

Luke Wooten: Got it yeah that makes sense and then.

Luke Wooten: Just with the 40, new enterprise deals in the month of December alone.

Speaker Change: Got it yeah and that was actually going to be my my last follow up was just about the percentage of.

Wondering what kind of contributed to such a strong month of December.

Enterprise customers that are new to some rush versus customers that have used.

Luke Wooten: This kind of momentum has continued here in January and February.

Speaker Change: Prior products or solutions.

Luke Wooten: Yes, honestly its a continuation of the investments and the initiatives that we've been building for a number of years.

Speaker Change: Been up sold to the Center prize solution.

Speaker Change: Sure so out of the 144 that will lag and I mentioned.

Luke Wooten: A number of times about.

Speaker Change: It's 60, 40, so 60% existing where they were using at least one <unk> products and we've upgraded them.

Luke Wooten: Sam rushes foundation, a strong track record of success with a product led growth motion over the last few years, we recognized incremental opportunity in the enterprise not just with ramping up our selling organization, but also adding sophistication and more advanced capabilities to our products.

Speaker Change: And then the other 40% of brand new competitive displacements or a shift from an internal proprietary solution.

Speaker Change: Two assembly enterprise SCO solution.

Speaker Change: Other key thing to note while we're on that topic is on average that cohort of 144 customers was paying about 10000.

Luke Wooten: Been at that for a while in the fourth quarter.

Luke Wooten: <unk> was essentially a really strong.

Luke Wooten: Mentum building quarter, where the product has been launched and out for a couple of quarters and our selling organization was starting to get up to full productivity from.

Speaker Change: And now with their upgrade to the enterprise SCR solution are up to a little bit over 62000, so a pretty significant multiplier.

Luke Wooten: Some of those early investments that we've made in our enterprise go to market. So we're really pleased to see what we saw in the fourth quarter, we're seeing good mix of both new and existing customer upgrades.

Speaker Change: With that new solution.

Speaker Change: Awesome, Thanks, Brian and thanks.

Speaker Change: Thanks, guys for answering all the questions Thats It for me and congrats again on a on a really nice quarter.

Luke Wooten: Really optimistic about what the future holds for that product and overall go to market motion.

Speaker Change: Got it and welcome to our call.

Speaker Change: Thank you just as a reminder, it still Philip I Wonder if you do wish to ask a question and we now have Jackson ader with Keybanc capital markets.

Speaker Change: Got it yeah and that was actually going to be my my last follow up was just about the percentage of <unk>.

Speaker Change: Enterprise customers that are new to some rush versus customers that have used.

Jackson Ader: Alright, thanks for taking our questions guys. Good morning.

Speaker Change: Prior products or solutions that.

Jackson Ader: It looks like operating expenses are expected to.

Speaker Change: They're not sold to the center price solution.

Jackson Ader: Accelerate their growth here in 2025, and the scoring to kind of the implied guidance and so I'm curious.

Speaker Change: Sure so out of the 144 that will lag and I mentioned.

Speaker Change: It's 60, 40, so 60% existing where they were using at least one <unk> products and we've upgraded them.

Jackson Ader: Whether there is any kind of timeline or expectation on maybe when revenue organic revenue acceleration might follow suit from those investments.

Speaker Change: And then the other 40% of brand new competitive displacements or a shift from an internal proprietary solution.

Speaker Change: Yeah, Hey, Jackson that we've been at this.

Speaker Change: Two assemblies entered.

Speaker Change: <unk> <unk> solution.

Jackson Ader: Overall strategy for a bit here.

Speaker Change: The other key thing to note while we're on that topic is on average that cohort of 144 customers was paying about 10000.

Jackson Ader: Just to touch on margins and then I'll touch on your revenue question since the fourth quarter of 2022, our non-GAAP operating margin has been up.

Speaker Change: And now with their upgrade to the enterprise SCR solution are up to a little bit over 62000, so a pretty significant multiplier.

Jackson Ader: 2700 basis points, and our free cash flow margin about 2500 basis points over an eight quarter period. So we've been busy.

Speaker Change: With that new solution.

Bill Wagner: Awesome. Thanks, Brian.

Jackson Ader: We've been really focusing on efficiency and productivity throughout the organization and in particular, making sure. We have our investments focus on areas, where we have a track record of success, a really strong market position and conviction about our ability to win and scale of the company's growth leveraging those investments all fee.

Speaker Change: Thanks, guys for answering all the questions Thats It from me and congrats again on a on a really nice quarter.

Speaker Change: You got it and welcome to our call.

Speaker Change: Thank you.

Speaker Change: So Philip I Wonder if you do wish to ask a question and we now have Jackson ader with Keybanc capital markets.

Jackson Ader: Focus on making sure we're driving long term shareholder value.

Jackson Ader: Alright, thanks for taking our questions guys. Good morning.

Jackson Ader: So we did a lot of work we were able to capture those improvements to operating margin.

Speaker Change: It looks like operating expenses are expected to.

Speaker Change: Accelerate their growth here in 2025, and the scoring to Canada.

Jackson Ader: Did note that analyst day that we're committed to continued improvements.

Jackson Ader: And in the long term model noted that we get the 22% non-GAAP operating margin and 25% free cash flow margin our guidance for 2025, as we still have a number of months ago. So it's early in the year, but we're essentially guiding flat non-GAAP operating margin and a 260 basis increase.

The implied guidance and so I'm curious.

Whether there is any kind of timeline or expectations on maybe when revenue organic revenue acceleration might follow suit from those investments.

Jackson Ader: Yeah Jackson that we've been at this.

Jackson Ader: And free cash flow margins. So we're continuing on our journey, what we see 25 as is a year to sort of take a breath to celebrate all the success, we've had with all of those margin expansions.

Speaker Change: Overall strategy for a bit here.

Speaker Change: Just to touch on margins and then I'll touch on your revenue question since the fourth quarter of 2022, our non-GAAP operating margin has been up by 2700 basis points and our free cash flow margin about 2500 basis points over an eight quarter period. So we've been busy.

Jackson Ader: And start to build initiatives for the next leg of margin expansion, but it is also a year of investment we see a lot of opportunity as already mentioned about expanding enterprise capabilities beyond just SCO, we have another a number of interconnected hubs.

Speaker Change: Been really focusing on efficiency and productivity throughout the organization.

Jackson Ader: With paid advertising social local marketing brand marketing content marketing and of course, a number of AI initiatives that we believe.

Speaker Change: And in particular, making sure we have our investments focus on areas, where we have a track record of success, a really strong market position and conviction about our ability to win and scale of the company's growth.

Jackson Ader: A significant opportunity in store for Russia, and we want to be investing in those we're also really pleased with what we're seeing with the sales organization.

Speaker Change: Leveraging those investments all focused on making sure we're driving long term shareholder value. So we did a lot of work we're able to capture those improvements to operating margin. We did note that analyst day that we're committed to continued improvements and.

Jackson Ader: Under Tom's leadership, we're gaining traction and momentum and want to make sure that we're fueling that success and supporting the growth and success, we're seeing in the enterprise. So we're going to make this an investment year maintain that margin.

Speaker Change: And in the long term model noted that we get the 22% non-GAAP operating margin and 25% free cash flow margin our guidance for 2025, as we still have a number of months ago. So it's early in the year, but we're essentially guiding flat non-GAAP operating margin and a 260 basis increase.

Jackson Ader: But of course free cash flow margin will expand by 260 basis points. So we're continuing to push that forward.

Jackson Ader: All of these efforts all of these initiatives and investments our course.

Jackson Ader: <unk> put in place that make sure that we continue to drive durable growth and ultimately accelerated in certain segments with certain products. So we're absolutely keeping that in mind.

Speaker Change: And free cash flow margins. So we're continuing on our journey, what we see 25 as is a year to sort of take a breath to celebrate all the success, we've had with all of those margin expansions.

Jackson Ader: Churn that we have that focus with these investments.

Jackson Ader: Okay Alright, great.

Speaker Change: Start to build initiatives for the next leg of margin expansion, but it is also a year of investment we see a lot of opportunity as already mentioned about expanding enterprise capabilities beyond just SCO, we have another a number of interconnected hubs with.

Jackson Ader: And then a follow up question so the.

Speaker Change: The 60 40 split on the enterprise customers curious weather.

Speaker Change: Existing or net new customers to some rush house.

Speaker Change: With paid advertising social local marketing brand marketing content marketing and of course, a number of AI initiatives that we believe.

Speaker Change: Is there any kind of a difference in terms of their average are too at around that 60000.

Speaker Change: New customers are they have they actually landing a little higher than your existing customers because they don't have they're not anchored to maybe what they were paying.

Speaker Change: A significant opportunity in store for some rush and we want to be investing in those we're also really pleased with what we're seeing with the sales organization.

Speaker Change: Under Tom's leadership, we're gaining traction and momentum and want to make sure that we're fueling that success and supporting the growth and success. We're seeing in enterprise. So we're going to we're going to make this an investment year maintained net margin, but of course free cash flow margin will expand by 260 basis points. So we're continuing that.

Speaker Change: Much less in their in their old contract to their old products.

Speaker Change: That's a great question, we're not actually seeing that I think in fact, our biggest customer and the biggest multiple expansion.

Speaker Change: As an existing customer.

Speaker Change: We're seeing really strong success in proving out that the product has the capabilities. The enhanced sophistication I think most importantly, the incremental value that allows companies to save time and generate incremental revenue in a much more rapid pace than our competitors that are not using that platform. So we're not seeing any particular.

Speaker Change: Push that forward.

Speaker Change: All of these efforts all of these initiatives and investments our course.

Speaker Change: <unk> put in place that make sure that we continue to drive durable growth and ultimately accelerated in certain segments and with certain products. So we're absolutely keeping that in mind.

Speaker Change: Existing versus new customer dynamics that.

Speaker Change: Churn that we have that focus with these investments.

Speaker Change: And the anchoring dynamic that you saw.

Speaker Change: Okay Alright, great.

Speaker Change: And then a follow up question so the.

Speaker Change: Youre asking about.

Speaker Change: Alright cool thank you.

Speaker Change: The 60 40 split on the enterprise.

Tom: Thank you you guys have all final question on the line from Scott Berg with me Tom.

Speaker Change: <unk> curious weather.

Speaker Change: Sure.

Speaker Change: Existing or net new customers to some rush house.

Scott Berg: Hi, everyone really nice quarter I guess.

Speaker Change: Is there any kind of a difference in terms of their average are too at around that 60000 to brand new customers are they they actually landing a little higher than your existing customers because they don't have they're not anchored to maybe what they were paying.

Bill Wagner: Welcome Bill looking forward to working with you.

Speaker Change: Couple of questions here.

Speaker Change: And maybe Brian how youre thinking about the guidance here for fiscal 'twenty five.

Speaker Change: Around the macro we've seen SMB business since being a little bit more optimistic over the last two or three months I know your net adds were a little on the laser side here in the quarter, but.

Speaker Change: Much less in their in their old contract to their old products.

Speaker Change: That's a great question, we're not actually seeing that I think in fact, our biggest customer and the biggest multiple expansion was an existing customer.

Speaker Change: There's always some seasonality around your business in the fourth quarter settles a bit surprising, but how are you thinking about the macro with regards to your initial 25 outlook is improving with some of that sentiment are you still taking a more prudent cautious.

Speaker Change: So we're seeing really strong success in proving out that the product has the capabilities. The enhanced sophistication I think most importantly, the incremental value that allows companies to save time.

Scott Berg: Hey, Scott I think you nailed it the approach we're taking.

Speaker Change: And generate incremental revenue in a much more rapid pace than their competitors that are not using that platform. So we're not seeing any particular.

Scott Berg: For 2025 is consistent with how we've guided in the past we're going to continue to maintain a prudent outlook that represents the near term trends.

Speaker Change: Existing versus new customer dynamics that.

Scott Berg: Our experience in the second half of the fourth quarter is while we're seeing certainly soft factors related to the macro and to SMB optimum start to improve.

Speaker Change: And the anchoring dynamic that you saw.

Speaker Change: You are asking about right.

Speaker Change: Alright cool thank you.

Scott Berg: We're going to want to see actual hard evidence of that.

Speaker Change: Thank you you guys have all final question on the line from Scott back with me Tom.

Scott Berg: In economic indicators before we really leaned into our guidance. So for now our guidance assumes a continuation of the same trends.

Speaker Change: Okay.

Speaker Change: Hi, everyone really nice quarter I.

Scott Berg: Theres a long year ahead of us and we want to make sure we're continuing to maintain a prudent outlook.

Speaker Change: Yes, welcome Bill looking forward to working with you.

Scott Berg: And set up <unk> for success and ensure that we can continue to deliver on our commitments.

Speaker Change: Couple of questions here.

Brian: And maybe Brian how youre thinking about the guidance here for fiscal 'twenty five.

Brian: Around the macro we've seen SMB business seems to be a little bit more optimistic over the last two or three months.

Scott Berg: Excellent.

Scott Berg: I know you touched on new enterprise version come in the first half of the.

Scott Berg: The Io solutions here I guess, how do we think about that kind of feature function in pricing relative to what you currently have in the market.

Brian: Your net adds were a little on the later side here in the quarter, but.

Brian: There is always some seasonality around your business in the fourth quarter. So I don't think surprising, but how are you thinking about the macro with regards to your initial 25 outlook.

Scott Berg: I assume it's not going to have the same 10% to 15.

Scott Berg: Lift is your core enterprise.

Scott Berg: Solution that you released last year is but how do we think about the incremental functionality and that uplift that might actually.

Brian: With some of that sentiment are you still taking a more prudent and cautious.

Speaker Change: Hey, Scott I think you nailed it.

Scott Berg: Drive.

Scott Berg: Yes.

Brian: <unk>, we're taking.

Scott Berg: Yes, so functionality.

Brian: 2025 is consistent with how we've guided in the past we're going to continue to maintain a prudent outlook that represents the near term trends.

Scott Berg: First we will be primarily focused on just measuring overall visibility in different <unk> as well as AI power surge therefore.

Brian: Our experience in the second half.

Scott Berg: That will be the primary focus.

Brian: Our quarter is while we're seeing certainly soft factors related to the macro and to SMB optimism start to improve.

Scott Berg: I think the biggest new thing is that when it comes to AI. It's not just about clicks and traffic is also about the tone of voice and digital.

Brian: Going to want to see actual hard evidence of that.

Scott Berg: But those things actually say in understanding the mean and we're working a lot on extracting those additional kind of layers of insights from the output of large language models. So those are those this is going to be the key functionality.

Brian: Economic indicators before we really leaned into our guidance. So for now our guidance assumes a continuation of the same trends.

Brian: Theres a long year ahead of us and we want to make sure we're continuing to maintain a prudent outlook and.

Brian: And set up <unk> for success and ensure that we can continue to deliver on our commitments.

Scott Berg: At first.

Scott Berg: And then like I said in terms of fresh infections a bit too early.

Brian: Yeah.

Scott Berg: We'll see we'll see what is the.

Brian: Excellent and I know I know you touched on new enterprise version come in the first half of the.

Scott Berg: Demand in what is.

Scott Berg: Let's say price cell efficiency, there and then we will make pricing decisions accordingly.

Brian: The iOS solutions here I guess, how do we think about that kind of feature function in pricing relative to what you currently have in the market.

Speaker Change: In my experience at launch you just don't focus on that we focus on customer feedback you want happy customers. Then you decide what is the right price and package.

Brian: I assume it's not going to have the same 10% to 15 top left is your core enterprise.

Brian: Solution that you released last year is but how do we think about the incremental functionality and what that uplift that might actually.

Speaker Change: Excellent and I apologize if I can slide one last one in here your growth in your 10-K customer segments was really good up 40%.

Right.

Brian: Hi.

Speaker Change: Yes, so functionality as first will be primarily focused on just measuring overall visibility in different LLS as well as AI power surge and.

Speaker Change: In the quarter here year over year.

Speaker Change: What's driving that I guess, how much of thats being driven by your enterprise New solution. Obviously, you have a 144 customers on that or is there a cohort there. That's just maybe more of your core customers.

Brian: That will be the primary focus.

Brian: I think the biggest new thing is that when it comes to AI. It's not just about the clicks and traffic is also about the tone of voice and digital.

Speaker Change: More purchasing more just trying to understand what the key drivers.

Speaker Change: Okay.

Brian: But those things actually say in understanding the mean and we're working a lot on extracting those additional kind of layers of insights from the output of large language model. So those are those this is going to be the key functionality at.

Speaker Change: Yes, it's definitely more than enterprise and enterprise contributed in the year.

Speaker Change: Two 144 of those and of course, a 42% increase that gets us to 4300 represents that plus quite a few more.

Brian: At first.

Brian: And then like I said in terms of pricing packaging, it's a bit too early.

Speaker Change: So in addition to enterprise.

Jackson Ader: And what we talked about a little bit earlier with Jackson's question. We're.

Brian: We will see we will see what is the.

Brian: Demand in what is.

Jackson Ader: We're continuing to invest in our sales organization and we're getting really really strong success from pivoting from approaching the users and the experts that are leveraging our technology to focusing a little bit more on leadership.

Brian: Let's say price elasticity, there and then we will make pricing decisions accordingly.

Brian: In my experience at launch you just don't focus on that we focus on customer feedback we want happy customers. Then you decide what is the right price and package.

Jackson Ader: And ensuring that they're getting the full value of our platform across our entire digital marketing team and pivoting the conversation from a transaction to a trusted advisor status, where we're partnering with these organizations to enhance their online visibility so overall buyer.

Speaker Change: Excellent and I apologize if I can slide one last one in here your growth in your 10-K customer segments was really good up 40%.

Speaker Change: In the quarter here year over year.

Jackson Ader: Is being enhanced overall go to market and lead demand generation function is being enhanced and of course, we continue to invest in our portfolio not just in enterprise, but making sure that we have a fully integrated and comprehensive digital marketing platform across those six channels with a really strong data and intelligence.

Speaker Change: More.

Speaker Change: Purchasing more just trying to understand what the key drivers.

Jackson Ader: Here and we're just seeing strong success in companies adopting more of our platform and enabling a strong cross sell and upsell that's driving that number up in addition to the enterprise capabilities that we're launching.

Speaker Change: Okay.

Speaker Change: Yes, it's definitely more than enterprise and enterprise contributed in the year.

Speaker Change: Two 144 of those and of course, a 42% increase that gets us to 4300 represents that plus quite a few more.

Jackson Ader: Yeah.

Speaker Change: Thanks, a lot nice quarter, thanks for taking my questions.

Scott Berg: Alright, Thanks Scott.

Speaker Change: In addition to enterprise.

Speaker Change: Thank you I would like to conclude the question and answer session and hand back to the management team for some final closing comments.

Jackson Ader: And what we talked about a little bit earlier with Jackson's question, where we are.

Jackson Ader: Continuing to invest in our sales organization and we're getting really really strong success from pivoting.

Speaker Change: Thank you all for joining us today.

Speaker Change: <unk> delivered a strong fourth quarter closing out a record year and the positive momentum continues.

I'm approaching the users and the experts that are leveraging our technology to focusing a little bit more on leadership and.

Speaker Change: Im very excited to welcome built our team and we remain focused on consistently.

Speaker Change: Delivering strong growth profitability and free cash flow. Thank you.

Speaker Change: Thank you for joining our times on that does that does conclude today's conference call. We'll have much holdings. Please enjoy the rest of your day and you may now disconnect from Nicole.

Jackson Ader: It is being enhanced overall go to market and lead demand generation function is being enhanced and of course, we continue to invest in our portfolio not just in enterprise, but making sure that we have a fully integrated and comprehensive digital marketing platform across those six channels with a really strong data and intelligence.

Jackson Ader: Layer and we're just seeing strong success in companies adopting more of our platform and enabling a strong cross sell upsell that's driving that number up in addition to the enterprise capabilities that we're launching.

Jackson Ader: Yeah.

Speaker Change: Thanks, a lot nice quarter, thanks for taking my questions.

Speaker Change: Alright, Thanks Scott.

Speaker Change: Thank you I would like to conclude the question and answer session and hand back to the management team for some final closing comments.

Speaker Change: Thank you all for joining us today.

Speaker Change: <unk> delivered a strong fourth quarter closing out a record year and the positive momentum continues.

Speaker Change: I am very excited to welcome built our team and we remain focused on consistently.

Speaker Change: Delivering strong growth profitability and figure so thank you all.

Speaker Change: Thank you for joining good times on that does that does conclude today's conference call with so much holdings. Please enjoy the rest of your day and you may now disconnect from Nicole.

Speaker Change: [music].

Speaker Change: Yeah.

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