SEMrush (US:SEMR)2022-11-15 17:00Financial Data and Key Metrics Changes - Revenue for Q3 2022 was $65.8 million, representing a 34% year-over-year increase and a 5% increase from the previous quarter [9][21] - The company had approximately 94,000 paying customers at the end of September, with customer growth of over 17% consistent with the previous quarter [9][21] - Non-GAAP gross margin was 81.2%, up over 400 basis points year-over-year and up 160 basis points from the previous quarter [21][22] - Non-GAAP net loss was $7.1 million, compared to a non-GAAP net income of $12,000 a year ago [24] Business Line Data and Key Metrics Changes - The product mix remained largely unchanged, with growth slightly favoring the entry-level pro plan [21] - The dollar-based net revenue retention for Q3 was down to 122%, impacted by lower expansion from existing customers [21] Market Data and Key Metrics Changes - The company noted a more uncertain demand environment compared to the previous year, particularly affecting larger accounts [12][31] - The small business segment showed resilience, with strong performance despite macroeconomic pressures [31] Company Strategy and Development Direction - The company is focused on user growth and plans to introduce new features in late 2023, including enhancements to the App Center [10][11] - The App Center strategy aims to address market fragmentation by offering third-party applications to meet diverse customer needs [16][19] - The company is optimistic about long-term growth, emphasizing efficiency and solid unit economics [12][27] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for Q4, acknowledging potential challenges in the economic environment but highlighting positive demand signals [26][37] - The company expects Q4 revenue in the range of $67.25 million to $67.75 million, representing approximately 26% year-over-year growth at the midpoint [26] Other Important Information - Total non-GAAP operating expenses were $55.8 million, up 48% year-over-year, primarily due to increased investment in sales and marketing [22][24] - The company entered the quarter with $247 million in cash, with cash flow from operations being negative $500,000 [25] Q&A Session Summary Question: Changes in macroeconomic conditions and their impact - Management noted that larger accounts are experiencing scrutiny in spending, but the small business segment remains stable [31] Question: Sales leadership changes and their effects - Management indicated that while changes in sales leadership can cause concerns, they did not see a significant impact on current results [33] Question: Q4 guidance assumptions - Management expressed cautious optimism for Q4, noting that while demand signals are positive, they are being careful due to potential seasonality effects [37] Question: Demand environment comparison between Q3 and Q4 - Management observed that demand was strong in August but showed variability in September and October, leading to a cautious outlook [42] Question: Monetization of free users through the App Center - The company aims to convert free users into paying customers by offering lower-priced apps through the App Center, which could increase overall revenue [53][54] Question: Cost structure and future modeling - Management indicated that Q4 will serve as a proper baseline for modeling next year's costs, as most relocated employees will be settled by then [57]