Marketing analytics software Semrush (NYSE:SEMR) beat analyst expectations in Q4 FY2022 quarter, with revenue up 28% year on year to $68.8 million. The company expects that next quarter's revenue would be around $70.5 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. SEMrush made a GAAP loss of $13.9 million, down on its loss of $3.86 million, in the same quarter last year.
Is now the time to buy SEMrush? Access our full analysis of the earnings results here, it's free.
SEMrush (SEMR) Q4 FY2022 Highlights:
- Revenue: $68.8 million vs analyst estimates of $67.6 million (1.79% beat)
- EPS: -$0.10 vs analyst expectations of -$0.10 (4.92% miss)
- Revenue guidance for Q1 2023 is $70.5 million at the midpoint, roughly in line with what analysts were expecting
- Management's revenue guidance for upcoming financial year 2023 is $307.5 million at the midpoint, missing analyst estimates by 0.11% and predicting 20.9% growth (vs 35.9% in FY2022)
- Free cash flow was negative $10.3 million, compared to negative free cash flow of $1.8 million in previous quarter
- Net Revenue Retention Rate: 118%, down from 122% previous quarter
- Customers: 95,000, up from 94,000 in previous quarter
- Gross Margin (GAAP): 82.6%, up from 78.5% same quarter last year
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.
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
As you can see below, SEMrush's revenue growth has been impressive over the last two years, growing from quarterly revenue of $36.4 million in Q4 FY2020, to $68.8 million.
This quarter, SEMrush's quarterly revenue was once again up a very solid 28% year on year. Quarter on quarter the revenue increased by $2.99 million in Q4, which was in line with Q3 2022. This steady quarter-on-quarter growth shows the company is able to maintain its steady growth trajectory.
Guidance for the next quarter indicates SEMrush is expecting revenue to grow 23.4% year on year to $70.5 million, slowing down from the 42.8% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $307.5 million at the midpoint, growing 20.9% compared to 35.3% increase in FY2022.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
Customer Growth
You can see below that SEMrush reported 95,000 customers at the end of the quarter, an increase of 1,000 on last quarter. That is a little slower customer growth than what we are used to seeing lately, suggesting that the customer acquisition momentum is slowing a little bit.
Key Takeaways from SEMrush's Q4 Results
Since it has still been burning cash over the last twelve months it is worth keeping an eye on SEMrush’s balance sheet, but we note that with a market capitalization of $1.1 billion and more than $237.5 million in cash, the company has the capacity to continue to prioritise growth over profitability.
SEMrush delivered an overall in line quarter. It was good to see SEMrush deliver strong revenue growth this quarter. And we were also glad to see the improvement in gross margin. On the other hand, the revenue guidance for next year indicates a significant slowdown and there was a slowdown in customer growth. Overall, it seems to us that this was a complicated quarter for SEMrush. The company is flat on the results and currently trades at $7.95 per share.
SEMrush may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.
The author has no position in any of the stocks mentioned.