Marketing analytics software Semrush (NYSE:SEMR) announced better-than-expected revenue in Q4 CY2024, with sales up 23.1% year on year to $102.6 million. The company expects next quarter’s revenue to be around $104.3 million, close to analysts’ estimates. Its GAAP profit of $0.02 per share was in line with analysts’ consensus estimates.
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Semrush (SEMR) Q4 CY2024 Highlights:
- Revenue: $102.6 million vs analyst estimates of $101.5 million (23.1% year-on-year growth, 1.1% beat)
- EPS (GAAP): $0.02 vs analyst estimates of $0.01 (in line)
- Adjusted Operating Income: $11.82 million vs analyst estimates of $11.05 million (11.5% margin, 7% beat)
- Management’s revenue guidance for the upcoming financial year 2025 is $450.5 million at the midpoint, missing analyst estimates by 2.2% and implying 19.6% growth (vs 22.4% in FY2024)
- Operating Margin: 1.7%, down from 3.2% in the same quarter last year
- Free Cash Flow Margin: 9.3%, up from 6.3% in the previous quarter
- Customers: 117,000, similar to the previous quarter
- Net Revenue Retention Rate: 106%, down from 107% in the previous quarter
- Billings: $104.3 million at quarter end, up 20.7% year on year
- Market Capitalization: $2.21 billion
“I am excited to step into the CEO role and partner with Oleg and the team as Semrush continues to bring its fully-integrated, AI-powered digital marketing platform to organizations of all sizes," said Mr. Wagner.
Company Overview
Started by Oleg Shchegolev while still in university, Semrush (NYSE:SEMR) is a software-as-a-service platform that helps companies optimize their search engine and content marketing efforts.
Listing Management Software
As the number of places that keep business listings (such as addresses, opening hours and contact details) increases, the task of keeping all listings up-to-date becomes more difficult and that drives demand for centralized solutions that update all touchpoints.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Semrush’s sales grew at a solid 26.1% compounded annual growth rate over the last three years. Its growth surpassed the average software company and shows its offerings resonate with customers, a great starting point for our analysis.
This quarter, Semrush reported robust year-on-year revenue growth of 23.1%, and its $102.6 million of revenue topped Wall Street estimates by 1.1%. Company management is currently guiding for a 21.5% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 20.2% over the next 12 months, a deceleration versus the last three years. Still, this projection is commendable and implies the market is forecasting success for its products and services.
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Billings
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Semrush’s billings punched in at $104.3 million in Q4, and over the last four quarters, its growth was impressive as it averaged 22.9% year-on-year increases. This performance aligned with its total sales growth, indicating robust customer demand. The high level of cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth. 
Customer Retention
One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.
Semrush’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 107% in Q4. This means Semrush would’ve grown its revenue by 6.8% even if it didn’t win any new customers over the last 12 months.
Semrush has a decent net retention rate, showing us that its customers not only tend to stick around but also get increasing value from its software over time.
Key Takeaways from Semrush’s Q4 Results
We were happy Semrush’s revenue narrowly outperformed Wall Street’s estimates. Profit margin also exceeded expectations, leading to an operating income beat. On the other hand, its full-year revenue guidance missed and its customer growth decelerated. Overall, this was a mixed quarter. The stock traded up 1.3% to $15.30 immediately after reporting.
Should you buy the stock or not? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
