11488

SEMrush (NYSE:SEMR) Surprises With Q3 Sales


Radek Strnad /
2022/11/15 3:29 am EST
Add to Watchlist

Marketing analytics software Semrush (NYSE:SEMR) reported results ahead of analyst expectations in the Q3 FY2022 quarter, with revenue up 33.5% year on year to $65.7 million. The company expects that next quarter's revenue would be around $67.5 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. SEMrush made a GAAP loss of $9.09 million, down on its loss of $615 thousand, 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) Q3 FY2022 Highlights:

  • Revenue: $65.7 million vs analyst estimates of $63.9 million (2.84% beat)
  • EPS: -$0.06 vs analyst estimates of -$0.09 (34.4% beat)
  • Revenue guidance for Q4 2022 is $67.5 million at the midpoint, below analyst estimates of $68.1 million
  • Free cash flow was negative $2.29 million, compared to negative free cash flow of $9.86 million in previous quarter
  • Net Revenue Retention Rate: 122%, down from 125% previous quarter
  • Customers: 94,000, up from 91,000 in previous quarter
  • Gross Margin (GAAP): 81.1%, up from 76.9% 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 $32.1 million in Q3 FY2020, to $65.7 million.

SEMrush Total Revenue

And unsurprisingly, this was another great quarter for SEMrush with revenue up 33.5% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $3.18 million in Q3, compared to $5.48 million in Q2 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates SEMrush is expecting revenue to grow 25.5% year on year to $67.5 million, slowing down from the 47.4% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 24.5% over the next twelve months.

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 94,000 customers at the end of the quarter, an increase of 3,000 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.

SEMrush Customers

Key Takeaways from SEMrush's Q3 Results

With a market capitalization of $1.62 billion SEMrush is among smaller companies, but its more than $246.5 million in cash and the fact it is operating close to free cash flow break-even put it in a robust financial position to invest in growth.

It was good to see SEMrush deliver strong revenue growth this quarter and maintain robust gross margin. On the other hand, there was a slowdown in customer growth and cash burn increased. Overall, it seems to us that this was a mixed quarter for SEMrush. The company is flat on the results and currently trades at $11.49 per share.

Should you invest in SEMrush 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.