SEMrush (NYSE:SEMR) Misses Q3 Revenue Estimates

Kayode Omotosho /
2023/11/01 4:57 pm EDT

Marketing analytics software Semrush (NYSE:SEMR) fell short of analysts' expectations in Q3 FY2023, with revenue up 19.6% year on year to $78.7 million. However, next quarter's revenue guidance of $83.2 million was less impressive, coming in 0.65% below analysts' estimates. Turning to EPS, SEMrush made a GAAP profit of $0.03 per share, improving from its loss of $0.06 per share in the same quarter last year.

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SEMrush (SEMR) Q3 FY2023 Highlights:

  • Revenue: $78.7 million vs analyst estimates of $78.7 million (small miss)
  • EPS: $0.03 vs analyst estimates of $0.01 ($0.02 beat)
  • Revenue Guidance for Q4 2023 is $83.2 million at the midpoint, below analyst estimates of $83.7 million
  • Free Cash Flow of $4.97 million is up from -$7 million in the previous quarter
  • Net Revenue Retention Rate: 109%, down from 112% in the previous quarter
  • Customers: 106,800, up from 104,000 in the previous quarter (slight beat)
  • Gross Margin (GAAP): 83.4%, up from 81.1% in the 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.

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

As you can see below, SEMrush's revenue growth has been very strong over the last two years, growing from $49.3 million in Q3 FY2021 to $78.7 million this quarter.

SEMrush Total Revenue

Even though SEMrush fell short of analysts' revenue estimates, its quarterly revenue growth was still up 19.6% year on year. We can see that SEMrush's revenue increased by $4.03 million in Q3, up from $3.82 million in Q2 2023. While we've no doubt some investors were looking for higher growth, it's good to see that quarterly revenue is re-accelerating.

Next quarter's guidance suggests that SEMrush is expecting revenue to grow 21% year on year to $83.2 million, slowing down from the 28% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 20.5% over the next 12 months before the earnings results announcement.

The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. See it here.

Customer Growth

SEMrush reported 106,800 customers at the end of the quarter, an increase of 2,800 from the previous quarter. That's a little slower customer growth than what we've observed in past quarters, suggesting that the company's customer acquisition momentum is slowing.

SEMrush Customers

Key Takeaways from SEMrush's Q3 Results

With a market capitalization of $1.15 billion, SEMrush is among smaller companies, but its more than $41.2 million in cash on hand and near break-even free cash flow margins puts it in a stable financial position.

Revenue missed by a bit but alternate topline metric ARR beat. Profitability was also better. With regards to guidance, revenue guidance for next quarter and next year were slightly below, but the company raised its net income forecast for the year, which is a positive. Overall, this was a mixed quarter for SEMrush. The stock is up 1.97% after reporting and currently trades at $7.76 per share.

SEMrush may have had a tough quarter, but does that actually create an opportunity to invest right now? 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.

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The author has no position in any of the stocks mentioned in this report.