Group 1 - Semrush has launched the AI Visibility Index, which introduces new rules for enterprise brand discovery in AI search [1] - The AI Visibility Index serves as a benchmark that provides marketers with a strategic playbook for success [1]

Core Thesis - Semrush Holdings, Inc. (SEMR) is experiencing mixed results but maintains a bullish outlook due to strong enterprise and AI growth potential, despite near-term challenges [2][3][4]. Financial Performance - SEMR's annual recurring revenue (ARR) reached $435.3 million, reflecting a 15% year-over-year increase, while the number of paying customers slightly decreased to approximately 116,000 [2]. - Negative free cash flow (FCF) was reported at $3.6 million, with GAAP EBIT impacted by high expenses, headcount growth, and foreign exchange headwinds [2]. - The company anticipates FY26-27 ARR growth of around 18% year-over-year, with gradual margin expansion as resources are redirected towards enterprise and AI solutions [3]. Customer Segmentation - The low end of SEMR's customer base, including solopreneurs and freelancers, accounts for roughly 15-20% of ARR and is facing challenges due to macro pressures and rising customer acquisition costs [2]. - Small and medium-sized businesses (SMBs), representing 20-25% of ARR, continue to adopt the platform steadily [2]. Growth Drivers - Enterprise and mid-market customer adoption is accelerating, with customers generating over $10,000 ARR growing by 35% year-over-year and those over $50,000 ARR increasing by 83% year-over-year [3]. - The average revenue per user (ARPU) rose by 15% year-over-year to $3,756, and enterprise net revenue retention (NRR) remains above 120% [3]. Valuation and Price Target - The base-case enterprise value to sales (EV/Sales) ratio is projected at 3.5x for FY26 estimated sales of $525 million, implying a target share price of $13.69, representing a 73% upside in under two years [4]. - The bull case assumes a 20% compound annual growth rate (CAGR) and a 5x EV/Sales for a target price of $20.33, while the bear case reflects a 12.1% CAGR and a 2x EV/Sales for a target price of $6.94 [4]. Capital Allocation - Management has announced a $150 million share repurchase program, indicating a disciplined approach to capital allocation [3].

Company Overview - Semrush is a digital marketing company focused on top-of-funnel digital marketing, which encompasses channels important for generating traffic and brand awareness, ultimately converting that traffic into paying customers [2] Core Focus Areas - The company emphasizes seven core channels, with a significant focus on AI, helping brands and businesses navigate the evolving AI landscape to monitor brand perception and share of voice [2]

Summary of SEMrush Holdings (NYSE: SEMR) 2025 Conference Call Company Overview - **Company**: SEMrush Holdings - **Industry**: Digital Marketing Software - **Annual Recurring Revenue**: $435 million - **2025 Revenue Growth Guidance**: 18% with expanded profitability [5][18] Core Business and Strategy - **Focus**: Top of funnel digital marketing, including AI, traditional search, social media, local marketing, content marketing, and brand marketing [3][4] - **AI Integration**: Emphasis on helping brands navigate the AI landscape and optimize their online presence [4][10] - **Enterprise Opportunity**: Targeting enterprises with a comprehensive digital marketing platform to replace fragmented point solutions [19][24] Financial Performance - **Enterprise Growth**: Enterprise business growing over 30% with strong net revenue retention [20] - **Freelancer Segment**: Noted softness in the freelancer segment due to macro dynamics and a reversion to mean post-pandemic [20][21] - **AI and Enterprise Products**: Expectation to double ARR from AI and enterprise products to $50 million by year-end [30][31] Market Dynamics - **Search Landscape Changes**: AI introduces new use cases for search, leading to increased search interactions [11][12] - **Organic Visibility**: Brands need to build authority organically in AI search as monetization models are not yet established [14][15] Competitive Landscape - **Main Competitors**: Homegrown solutions within enterprises, with SEMrush offering superior data and automation capabilities [34][39] - **Data Advantage**: SEMrush's data collection and processing efficiency provide a competitive edge, reinforcing a flywheel effect [44][45] Product Development - **AI Toolkit**: Rapid growth of AI products, with significant interest from brands to leverage actionable data [30][31] - **Enterprise Product Launches**: New enterprise products launched in June and July 2024, contributing to increased average ARR [47][48] Operational Efficiency - **Operating Margins**: Maintaining 12% operating margins while investing in growth and profitability [49] - **AI Utilization**: Leveraging AI for internal efficiencies, including customer engagement and product development [51] Capital Allocation - **Cash Position**: $260 million in cash allows for flexibility in investments, M&A, and share repurchases [52][53] Future Outlook - **Short-term Focus**: Enabling marketers to succeed in the evolving AI landscape [56] - **Long-term Vision**: Continuing to innovate and expand in the digital marketing space, particularly through AI [55][57]

Summary of SEMrush Conference Call Company Overview - **Company**: SEMrush - **Industry**: Digital Marketing and SEO Tools - **Key Executives**: Eugene Levin (President and Chief Strategy Officer), Brian Mulroy (CFO) [2][7] Core Business and Customer Base - SEMrush addresses the fundamental problem of business visibility across various online platforms, helping companies attract potential customers [3][4] - The customer base includes approximately 40% of Fortune 500 companies and small businesses, indicating a diverse clientele [6] Financial Performance - **Q2 Results**: - Annual recurring revenue (ARR) reached $435 million - Quarterly revenue was $109 million, reflecting a 20% year-over-year increase - Non-GAAP operating margin was 11% - Total paying customers numbered 116,000 [7][8] Enterprise Segment Growth - Out of 116,000 customers, 9,000 are classified as enterprise customers, contributing about 20% to the ARR [10] - The enterprise product portfolio is designed to meet the digital marketing needs of larger businesses, with an average sale exceeding $100,000 in ARR [11] - The enterprise segment is one of the fastest-growing areas, with significant investments in product development and demand generation [11][18] AI and Search Optimization - The rise of AI and generative AI (Gen AI) is transforming how consumers discover products, with AI systems becoming integral to the customer journey [20][21] - SEMrush is focusing on AI optimization, a new discipline aimed at influencing AI systems to recommend products effectively [22][24] - The company has launched several AI-related products, including an AI toolkit that tracks visibility and sentiment across AI search engines [26][29] Competitive Differentiation - SEMrush's data assets are a significant competitive advantage, providing insights into real-life prompts and questions that consumers ask [31][32] - The company emphasizes the importance of controlling the narrative around brand visibility in AI search results [28][29] Capital Allocation and M&A Strategy - SEMrush has authorized a $150 million share repurchase program, supported by a strong cash position of $260 million [35] - The company is open to acquisitions, focusing on enhancing its digital marketing capabilities while maintaining a strong balance sheet [39] Leadership and Strategic Direction - Bill Wagner, the new CEO, aims to accelerate growth, particularly in the AI optimization space [42][44] - The company plans to expand its enterprise product portfolio and invest in go-to-market strategies to drive future growth [46][48] Future Outlook - SEMrush anticipates significant growth in AI and enterprise segments, projecting over $50 million in ARR from its AI portfolio by 2025 [37] - The company believes that the overall market for search, both traditional and AI-driven, is expanding, providing more opportunities for SEMrush [50][51] Key Takeaways - SEMrush is well-positioned to capitalize on the growing importance of AI in digital marketing - The enterprise segment and AI optimization are critical growth drivers for the company moving forward - The company’s strong financial position allows for strategic investments in both organic growth and potential acquisitions [34][40]

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) [Filing Details](index=1&type=section&id=Filing%20Details) This document is a Quarterly Report on Form 10-Q for Semrush Holdings, Inc. for the quarterly period ended June 30, 2025, with the company classified as a large accelerated filer - The report is a Quarterly Report on Form 10-Q for the period ended June 30, 2025[2](index=2&type=chunk) - Semrush Holdings, Inc. is a Delaware corporation with its principal executive offices in Boston, MA[2](index=2&type=chunk)[3](index=3&type=chunk) - The registrant is classified as a '**Large accelerated filer**' and has submitted all required Interactive Data Files[5](index=5&type=chunk)[6](index=6&type=chunk) Outstanding Common Stock as of July 31, 2025 | Class of Stock | Shares Outstanding | | :--------------- | :----------------- | | Class A Common Stock | 127,685,802 | | Class B Common Stock | 21,019,818 | [Table of Contents](index=2&type=section&id=TABLE%20OF%20CONTENTS) [Report Structure](index=2&type=section&id=Report%20Structure) The Table of Contents outlines the structure of the 10-Q report, dividing it into Part I (Financial Information) and Part II (Other Information), covering financial statements, management's discussion, market risk, controls, legal proceedings, risk factors, equity sales, and exhibits - The report is structured into two main parts: Part I. Financial Information and Part II. Other Information[9](index=9&type=chunk) - Part I includes financial statements, management's discussion and analysis, quantitative and qualitative disclosures about market risk, and controls and procedures[9](index=9&type=chunk) - Part II covers legal proceedings, risk factors, unregistered sales of equity securities, other information, and exhibits[9](index=9&type=chunk) [Special Note Regarding Forward-Looking Statements](index=3&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) [Forward-Looking Statements Disclaimer](index=3&type=section&id=Forward-Looking%20Statements%20Disclaimer) This section advises readers that the report contains forward-looking statements subject to substantial risks and uncertainties, based on management's current expectations and assumptions, which may differ materially from actual future results - All statements in the report, other than historical facts, are forward-looking and involve substantial risks and uncertainties[11](index=11&type=chunk) - Forward-looking statements are based on management's current expectations and assumptions about future events, which are inherently difficult to predict[11](index=11&type=chunk) - Readers should not rely on these statements as predictions of future events, as actual results could differ materially due to factors described in the 'Risk Factors' section of the Annual Report on Form 10-K[12](index=12&type=chunk) - The company does not undertake to update any forward-looking statements unless required by law, and they do not reflect the potential impact of future acquisitions, mergers, or investments[13](index=13&type=chunk) [Part I. Financial Information](index=5&type=section&id=PART%201%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Semrush Holdings, Inc., including the balance sheets, statements of operations and comprehensive (loss) income, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining the accounting policies and specific financial items [Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheets show an increase in total assets from **$390.9 million** at December 31, 2024, to **$424.9 million** at June 30, 2025, primarily driven by increases in cash, short-term investments, and accounts receivable Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | As of June 30, 2025 | As of December 31, 2024 | Change | | :--------------------------------- | :------------------ | :---------------------- | :----- | | Total Assets | $424,949 | $390,943 | $34,006 | | Total Liabilities | $136,782 | $124,591 | $12,191 | | Total Stockholders' Equity | $288,167 | $266,352 | $21,815 | | Cash and cash equivalents | $54,322 | $48,875 | $5,447 | | Short-term investments | $204,225 | $186,693 | $17,532 | | Accounts receivable | $14,243 | $8,955 | $5,288 | | Deferred revenue | $81,730 | $71,827 | $9,903 | [Unaudited Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20(Loss)%20Income) For the three and six months ended June 30, 2025, Semrush reported a net loss of **$6.8 million** and **$6.1 million**, respectively, a significant decline from net income in the prior year periods Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change (Amount) | YoY Change (%) | | :------------------------------------ | :--------------------------- | :--------------------------- | :------------------ | :------------- | | Revenue | $108,892 | $90,951 | $17,941 | 19.7% | | Cost of revenue | $21,110 | $14,957 | $6,153 | 41.1% | | Gross profit | $87,782 | $75,994 | $11,788 | 15.5% | | Operating expenses | $92,127 | $72,600 | $19,527 | 26.9% | | (Loss) income from operations | $(4,345) | $3,394 | $(7,739) | -227.9% | | Net (loss) income | $(6,777) | $1,361 | $(8,138) | -597.9% | | Net (loss) income per share—basic | $(0.04) | $0.01 | $(0.05) | -500.0% | | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change (Amount) | YoY Change (%) | | :------------------------------------ | :--------------------------- | :--------------------------- | :------------------ | :------------- | | Revenue | $213,910 | $176,763 | $37,147 | 21.0% | | Cost of revenue | $40,981 | $29,602 | $11,379 | 38.4% | | Gross profit | $172,929 | $147,161 | $25,768 | 17.5% | | Operating expenses | $177,348 | $142,299 | $35,049 | 24.6% | | (Loss) income from operations | $(4,419) | $4,862 | $(9,281) | -190.9% | | Net (loss) income | $(6,122) | $3,364 | $(9,486) | -282.0% | | Net (loss) income per share—basic | $(0.04) | $0.03 | $(0.07) | -233.3% | - Comprehensive (loss) income for the three months ended June 30, 2025, was **$(3,604) thousand**, compared to **$1,058 thousand** in the prior year, primarily due to foreign currency translation adjustments[21](index=21&type=chunk) [Unaudited Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) For the six months ended June 30, 2025, total stockholders' equity attributable to Semrush Holdings, Inc. increased to **$279.0 million** from **$256.6 million** at December 31, 2024, primarily due to stock-based compensation expense and positive foreign currency translation adjustments, despite a net loss Stockholders' Equity Highlights (in thousands) | Metric | As of June 30, 2025 | As of December 31, 2024 | Change | | :------------------------------------------ | :------------------ | :---------------------- | :----- | | Total Stockholders' Equity Attributable to Semrush Holdings, Inc. | $279,047 | $256,604 | $22,443 | | Additional Paid-in Capital | $345,664 | $322,586 | $23,078 | | Accumulated Other Comprehensive Income (Loss) | $2,862 | $(2,221) | $5,083 | | Accumulated Deficit | $(69

Financial Data and Key Metrics Changes - Revenue for the quarter was $108.9 million, representing a 20% year-over-year growth [4][13] - Non-GAAP operating margin was 11%, down approximately 240 basis points year-over-year due to a weaker U.S. Dollar [16][22] - Annual recurring revenue (ARR) grew 15.3% year-over-year to $435.3 million, with average ARR per paying customer increasing to $3,756, marking over 15% growth compared to the same quarter last year [17][18] Business Line Data and Key Metrics Changes - The Enterprise segment is now the largest contributor to overall company growth, with enterprise SEO solutions growing to 260 customers and an average ARR of approximately $60,000 [4][5] - The AI Toolkit, launched at the end of Q1, became the fastest-growing product in the company's history, achieving $3 million in ARR within a few months [6][8] - ARR from enterprise and AI products is expected to approach $50 million by the end of the year [8][19] Market Data and Key Metrics Changes - Approximately 116,000 paying customers were reported, down sequentially from the prior quarter, primarily due to softness among freelancers and less sophisticated customer segments [14] - Dollar-based net revenue retention was 105%, with strong retention in the Enterprise segment consistently above 120% [14][19] Company Strategy and Development Direction - The company is focusing on high-growth areas, specifically enterprise and AI search, reallocating resources away from lower-value customer segments [9][20] - A strategic decision was made to not increase marketing spend in response to rising customer acquisition costs in the lower end of the market, instead prioritizing investments in enterprise and AI products [9][20] - The company announced a $150 million share repurchase program, reflecting confidence in its business and valuation [25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth potential in the enterprise and AI segments, despite experiencing softness in the lower end of the market [10][12] - The company believes that the shift to AI and LLMs (Large Language Models) presents significant opportunities for growth [11][12] - Management anticipates that the current pressures in the lower end of the market are temporary and expects stabilization in the future [36][64] Other Important Information - The company adjusted its full-year 2025 revenue guidance to a range of $443 million to $446 million, reflecting approximately 18% growth at the midpoint [21] - The non-GAAP operating margin guidance remains at 12%, despite the reduced revenue outlook and foreign exchange headwinds [21][24] Q&A Session Summary Question: Pressures in the low-end customer segment - Management indicated that the pressures are fairly contained to freelancers and less sophisticated customers, primarily impacted by rising cost per click [28][29] Question: Liquidity of the stock and buyback program - The share repurchase program is seen as a way to express confidence in the company's future potential and momentum in enterprise and AI [30][32] Question: Down market weakness and macro factors - Management believes the weakness is contained to the low-end segment and not reflective of broader macroeconomic conditions [36][38] Question: Customer acquisition costs and market dynamics - The increase in customer acquisition costs is primarily affecting the low-end segment, while other segments continue to perform well [51][56] Question: Future trajectory of the low-end customer base - Management expects stabilization in the low-end segment, with ongoing strength in the SMB and enterprise segments [62][64]

Group 1 - U.S. stock futures are higher, with Dow futures gaining around 0.1% [1] - Inspire Medical Systems, Inc. shares fell 25% to $98.00 in pre-market trading after reporting second-quarter results and cutting FY25 guidance below estimates [1] - Ichor Holdings, Ltd. declined 24.3% to $15.24 in pre-market trading due to worse-than-expected second-quarter adjusted EPS results and below-estimate third-quarter adjusted EPS guidance [3] Group 2 - Gartner, Inc. shares fell 15% to $287.20 after issuing soft FY25 guidance [3] - Vertex Pharmaceuticals Incorporated declined 14.5% to $403.85 following second-quarter financial results and Vx-993 Phase 2 trial results [3] - Semrush Holdings, Inc. fell 14.1% to $7.91 after reporting a second-quarter EPS miss [3] - Navitas Semiconductor Corporation shares dropped 14.1% to $6.92 after issuing third-quarter sales guidance below estimates [3] - Kyndryl Holdings, Inc. fell 12.2% to $32.21 after reporting a first-quarter revenue miss [3]

Core Viewpoint - SEMrush Holdings, Inc. reported quarterly earnings of $0.05 per share, missing the Zacks Consensus Estimate of $0.08 per share, representing a -37.50% earnings surprise [1][2] Financial Performance - SEMrush posted revenues of $108.89 million for the quarter ended June 2025, in line with the Zacks Consensus Estimate, compared to $90.95 million in the same quarter last year [2] - The company has topped consensus revenue estimates three times over the last four quarters [2] Stock Performance - SEMrush shares have declined approximately 28.5% since the beginning of the year, while the S&P 500 has gained 6.1% [3] - The current Zacks Rank for SEMrush is 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.09 on revenues of $114.98 million, and $0.35 on revenues of $449.65 million for the current fiscal year [7] - The estimate revisions trend for SEMrush was mixed ahead of the earnings release, which could change following the recent report [6] Industry Context - The Internet - Software industry, to which SEMrush belongs, is currently in the top 32% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Financial Performance - Second quarter revenue reached $108.9 million, representing a 20% year-over-year growth[5] - Annual Recurring Revenue (ARR) as of June 30, 2025, was $435.3 million, up 15% year-over-year[6] - Customers paying more than $50,000 annually increased by 83% year-over-year[5] - Non-GAAP income from operations for the second quarter was $12.0 million, with a non-GAAP operating margin of 11.0%[6] - Revenue for Q2 2025 was $108,892,000, a 19.7% increase from $90,951,000 in Q2 2024[29] - Gross profit for Q2 2025 reached $87,782,000, up from $75,994,000 in Q2 2024, reflecting a gross margin of 80.6%[29] - Operating expenses increased to $92,127,000 in Q2 2025, compared to $72,600,000 in Q2 2024, primarily driven by higher sales and marketing costs[29] - Net loss attributable to Semrush Holdings, Inc. was $6,567,000 in Q2 2025, compared to a net income of $1,659,000 in Q2 2024[29] - Non-GAAP income from operations for Q2 2025 was $11,957,000, representing an 11.0% operating margin, down from 13.4% in Q2 2024[30] - Free cash flow for Q2 2025 was negative $3,573,000, compared to positive $7,642,000 in Q2 2024[30] - Semrush Holdings, Inc. reported a net loss of $6,122,000 for the six months ended June 30, 2025, compared to a net income of $3,364,000 in the same period of 2024[33] Future Outlook - For the third quarter, revenue is expected to be in the range of $111.1 million to $112.1 million, indicating approximately 15% year-over-year growth[10] - Full-year revenue outlook is revised to a range of $443.0 million to $446.0 million, reflecting an 18% year-over-year growth at the midpoint[8] - Non-GAAP operating margin for the full year is expected to be approximately 12%[15] Shareholder Value - The company announced a $150 million share repurchase program to enhance shareholder value[2] Cash Flow and Assets - The company generated $22,793,000 in net cash provided by operating activities, a decrease from $26,922,000 in the prior year[33] - Total assets as of June 30, 2025, were $424,949,000, an increase from $390,943,000 as of December 31, 2024[32] - Cash and cash equivalents increased to $54,322,000 as of June 30, 2025, from $48,875,000 at the end of 2024[32] - Cash, cash equivalents, and restricted cash at the end of the period totaled $54,507,000, down from $81,529,000 at the end of the same period in 2024[33] Expenses and Investments - Total depreciation and amortization expense increased to $6,313,000 in 2025 from $4,269,000 in 2024, reflecting a year-over-year increase of approximately 48%[33] - Cash paid for the acquisition of assets and businesses was $1,097,000, down from $10,026,000 in the previous year[33] - The company experienced a net cash used in investing activities of $17,029,000, compared to $6,187,000 in the prior year, indicating a significant increase in cash outflow[33] - Proceeds from sales and maturities of short-term investments amounted to $46,000,000, a decrease from $102,500,000 in the previous year[33] - Stock-based compensation expense rose to $22,548,000 in 2025, compared to $12,281,000 in 2024, marking an increase of approximately 84%[33] Revenue Recognition - Dollar-based net revenue retention stood at 105% as of June 30, 2025[6] - Deferred revenue increased to $9,358,000, up from $7,353,000 in the prior year, indicating growth in future revenue recognition[33] New Products - The company launched several new AI-driven products, including AI Optimization and Toolkits, to enhance its service offerings[9] Other Financial Metrics - The company reported a change in fair value included in other income, net, of $(1,271,000), reflecting a negative adjustment compared to the previous year[33] - The reported weighted-average number of shares used in computing net loss per share was 148,311,000 for Q2 2025, compared to 145,678,000 for Q2 2024[29]