SEMrush's (NYSE:SEMR) Posts Q1 Sales In Line With Estimates But Quarterly Guidance Underwhelms

Radek Strnad /
2023/05/08 4:50 pm EDT
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Marketing analytics software Semrush (NYSE:SEMR) reported results in line with analyst expectations in Q1 FY2023 quarter, with revenue up 24.1% year on year to $70.9 million. The company expects that next quarter's revenue would be around $74.3 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. SEMrush made a GAAP loss of $9.86 million, down on its loss of $2.57 million, in the same quarter last year.

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SEMrush (SEMR) Q1 FY2023 Highlights:

  • Revenue: $70.9 million vs analyst estimates of $70.4 million (small beat)
  • EPS: -$0.07 vs analyst expectations of -$0.06 (9.38% miss)
  • Revenue guidance for Q2 2023 is $74.3 million at the midpoint, below analyst estimates of $74.9 million
  • The company reconfirmed revenue guidance for the full year, at $307.5 million at the midpoint
  • Free cash flow was negative $4.93 million, compared to negative free cash flow of $9.85 million in previous quarter
  • Net Revenue Retention Rate: 116%, in line with previous quarter
  • Customers: 100,000, up from 95,000 in previous quarter
  • Gross Margin (GAAP): 82.2%, up from 79.7% 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 very strong over the last two years, growing from quarterly revenue of $40 million in Q1 FY2021, to $70.9 million.

SEMrush Total Revenue

This quarter, SEMrush's quarterly revenue was once again up a very solid 24.1% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $2.09 million in Q1, compared to $2.99 million in Q4 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 18.7% year on year to $74.3 million, slowing down from the 39.1% 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 20.3% over the next twelve months.

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Customer Growth

You can see below that SEMrush reported 100,000 customers at the end of the quarter, an increase of 5,000 on last quarter. That is a fair bit better customer growth than last quarter and quite a bit above the typical customer growth we have seen lately, demonstrating that the business itself has good sales momentum. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is working very well.

SEMrush Customers

Key Takeaways from SEMrush's Q1 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 $1.36 billion and more than $232.3 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by SEMrush’s acceleration in customer growth this quarter. And we were also glad to see good revenue growth. On the other hand, it was unfortunate to see that both revenue and non-GAAP operating profit guidance for the next quarter missed analysts' expectations. Full year guidance was maintained despite that. Zooming out, we think this was a mixed quarter. The company is down 2.33% on the results and currently trades at $9.64 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.

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