SEMrush (NYSE:SEMR) Surprises With Q3 Sales

Radek Strnad /
2022/11/15 3:29 am EST

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.

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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.

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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.

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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.

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