SEMrush (US:SEMR)2022-05-15 16:00Part I. Financial Information Item 1. Financial Statements The company's Q1 2022 revenue grew 43% year-over-year to $57.1 million, but a net loss of $2.6 million was recorded due to acquisitions and subsequent operational changes Condensed Consolidated Statements of Operations (Q1 2022 vs Q1 2021) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Revenue | $57,128 thousand | $39,998 thousand | | Gross Profit | $45,541 thousand | $31,225 thousand | | (Loss) Income from Operations | ($2,590) thousand | $1,506 thousand | | Net (Loss) Income | ($2,571) thousand | $1,471 thousand | | Diluted EPS | ($0.02) | $0.01 | Condensed Consolidated Balance Sheets (As of March 31, 2022 vs Dec 31, 2021) | Metric | As of March 31, 2022 | As of December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $259,824 thousand | $269,665 thousand | | Total Assets | $307,447 thousand | $300,074 thousand | | Deferred Revenue | $47,868 thousand | $40,469 thousand | | Total Liabilities | $82,884 thousand | $74,532 thousand | | Total Stockholders' Equity | $224,563 thousand | $225,542 thousand | Condensed Consolidated Statements of Cash Flows (Q1 2022 vs Q1 2021) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $8,026 thousand | $9,007 thousand | | Net cash used in investing activities | ($16,656) thousand | ($1,139) thousand | | Net cash (used in) provided by financing activities | ($13) thousand | $128,468 thousand | - In Q1 2022, the company completed two acquisitions: the asset acquisition of Backlinko for $4.0 million and the acquisition of Kompyte for $10.0 million, adding $8.4 million to intangible assets and $6.1 million to goodwill106108110 - As a subsequent event, the company is winding down operations in Russia and relocating its workforce, expecting to incur costs of approximately $24.5 million to $28.5 million over the remainder of fiscal year 2022168 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue growth was driven by customer base expansion, though increased operating expenses in sales, marketing, and administration led to an operating loss Key Performance Metrics (As of March 31, 2022 vs 2021) | Metric | As of March 31, 2022 | As of March 31, 2021 | | :--- | :--- | :--- | | Paying Customers | > 87,000 | > 72,000 | | Annual Recurring Revenue (ARR) | $235.7 million | $167.6 million | | Dollar-Based Net Revenue Retention | 127% | N/A (126% as of Dec 31, 2021) | | ARR per Paying Customer | $2,687 | N/A ($2,584 as of Dec 31, 2021) | Revenue by Geography (Q1 2022 vs Q1 2021) | Region | Q1 2022 Revenue (in thousands) | Q1 2021 Revenue (in thousands) | | :--- | :--- | :--- | | United States | $25,822 | $18,130 | | United Kingdom | $5,877 | $4,190 | | Other | $25,429 | $17,670 | | Total | $57,128 | $39,998 | - Sales and marketing expenses increased by $9.4 million (57%) YoY, driven by a 36% increase in headcount and a $4.3 million increase in marketing and advertising expenses to acquire new customers210211 - General and administrative expenses rose by $6.3 million (79%) YoY, primarily due to a 16% increase in headcount, higher stock-based compensation, and increased costs for professional services and insurance associated with being a public company213 - The company is actively winding down operations in Russia and relocating employees, expecting to incur costs of approximately $24.5 million to $28.5 million in fiscal 2022 for relocation and higher labor costs177 Item 3. Quantitative and Qualitative Disclosures about Market Risk The company faces minimal interest rate risk but has exposure to foreign currency fluctuations, particularly from expenses denominated in the Russian ruble - The company does not believe it has material exposure to interest rate risk as its $259.8 million in cash and cash equivalents are held in cash deposits and short-term money market funds234 - The company is exposed to foreign currency risk, particularly from expenses denominated in the Russian ruble, where a 10% change in the U.S. dollar to ruble exchange rate would result in a $1.1 million gain or loss237 - The company has not engaged in hedging foreign currency transactions to date but may consider it in the future as international operations grow238 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of March 31, 2022, due to a previously identified material weakness in financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were not effective as of March 31, 2022239 - The ineffectiveness is due to a material weakness identified in the 2019 audit related to controls over the financial statement close process, specifically the review of complex accounting issues involving significant judgment240 - A remediation plan is underway, which includes implementing new accounting systems, hiring additional qualified staff, and strengthening supervisory reviews to address the material weakness242243 Part II. Other Information Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings - As of the filing date, the company is not involved in any legal proceedings that would materially impact its business, financial condition, or cash flows249 Item 1A. Risk Factors Key risks include reliance on customer renewals, intense competition, geopolitical instability in Russia, and dependence on third-party data sources - A most material risk is the instability in Russia, where more than half of the company's full-time employees have historically been located, with expected relocation costs of $24.5 million to $28.5 million in fiscal 2022261262263 - The business is highly dependent on retaining paying customers and encouraging them to upgrade subscriptions or purchase add-ons, with the majority on monthly plans which increases churn risk252253 - The company operates in a highly competitive market against both all-in-one platforms and specialized point solutions, which may have greater resources or brand recognition256257 - The platform's functionality relies on access to data from third-party sources via APIs and data providers, and loss of access could harm the business265266267 - The dual-class stock structure concentrates 81% of voting power with pre-IPO stockholders, limiting the influence of Class A common stockholders on corporate matters410 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred, and the use of IPO proceeds remains unchanged from previous disclosures - There were no unregistered sales of equity securities in the reported period421 - The use of proceeds from the IPO remains consistent with what was previously disclosed in the company's Form 10-K filed on March 18, 2022423 Item 3. Default Upon Senior Securities The company reports no defaults upon senior securities - None425 Item 4. Mine Safety Disclosure This item is not applicable to the company's operations - Not applicable426 Item 5. Other Information The company reports no other material information for this period - None427 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents and required officer certifications - The exhibits filed include corporate governance documents, an amendment to the revolving credit agreement, and required certifications by the Principal Executive Officer and Principal Financial Officer428429