SEMrush's (NYSE:SEMR) Q1 Sales Top Estimates, Provides Optimistic Full Year Guidance

Adam Hejl /
2022/05/10 6:01 pm EDT
Add to Watchlist

Marketing analytics software Semrush (NYSE:SEMR) reported Q1 FY2022 results beating Wall St's expectations, with revenue up 42.8% year on year to $57.1 million. Guidance for next quarter's revenue was $60 million at the midpoint, which is 1.64% above the analyst consensus. SEMrush made a GAAP loss of $2.57 million, down on its profit of $1.47 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) Q1 FY2022 Highlights:

  • Revenue: $57.1 million vs analyst estimates of $55.9 million (2.04% beat)
  • EPS (GAAP): -$0.02
  • Revenue guidance for Q2 2022 is $60 million at the midpoint, above analyst estimates of $59 million
  • The company lifted revenue guidance for the full year, from $246 million to $250 million at the midpoint, a 1.62% increase
  • Free cash flow of $7.37 million, up 128% from previous quarter
  • Net Revenue Retention Rate: 127%, in line with previous quarter
  • Customers: 87,000, up from 82,000 in previous quarter
  • Gross Margin (GAAP): 79.7%, up from 78% same quarter last year

“The first quarter was a solid start to the year, and I am proud of our team as they navigated through a challenging geopolitical environment to deliver record new customer growth. We added more than 5,000 customers in the quarter and the strong start to the year gives me confidence in our outlook for the remainder of 2022. The customer growth was broad-based, which is very encouraging given that select geographies experienced challenges in the first quarter. I believe the customer growth speaks to the tremendous value we deliver to our customers and the critical role we play in their success,” said Oleg Shchegolev, CEO and Co-Founder of Semrush.

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 exceptional over the last year, growing from quarterly revenue of $39.9 million, to $57.1 million.

SEMrush Total Revenue

And unsurprisingly, this was another great quarter for SEMrush with revenue up 42.8% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $3.38 million in Q1, compared to $4.49 million in Q4 2021. 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 33.3% year on year to $60 million, slowing down from the 58.1% 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 27.1% 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 87,000 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

With a market capitalization of $1.29 billion SEMrush is among smaller companies, but its more than $259.8 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We were very impressed by SEMrush’s very strong acceleration in customer growth this quarter. And we were also excited to see the really strong revenue growth. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is flat on the results and currently trades at $8.96 per share.

SEMrush may have had a good quarter, so should you 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.