SEMrush (NYSE:SEMR) Reports Q4 In Line With Expectations But Stock Drops

Full Report / March 04, 2024

Marketing analytics software Semrush (NYSE:SEMR) reported results in line with analysts' expectations in Q4 FY2023, with revenue up 21.2% year on year to $83.39 million. On the other hand, next quarter's revenue guidance of $85 million was less impressive, coming in 1.3% below analysts' estimates. It made a GAAP profit of $0.05 per share, improving from its loss of $0.10 per share in the same quarter last year.

SEMrush (SEMR) Q4 FY2023 Highlights:

  • Revenue: $83.39 million vs analyst estimates of $83.13 million (small beat)
  • EPS: $0.05 vs analyst estimates of $0.01 ($0.04 beat)
  • Revenue Guidance for Q1 2024 is $85 million at the midpoint, below analyst estimates of $86.09 million
  • Management's revenue guidance for the upcoming financial year 2024 is $366 million at the midpoint, missing analyst estimates by 0.8% and implying 19% growth (vs 21.1% in FY2023)
  • Free Cash Flow of $8.88 million, up 78.9% from the previous quarter
  • Net Revenue Retention Rate: 107%, in line with the previous quarter
  • Customers: 108,000, up from 106,800 in the previous quarter
  • Gross Margin (GAAP): 83.6%, up from 82.6% in the same quarter last year
  • Market Capitalization: $1.80 billion

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.

With all the social media, blogs posts, and audio and video content non stop screaming for our attention, it is becoming increasingly difficult for small and medium sized businesses to compete for the attention of their customers online. p

Semrush offers a suite of tools that help companies to be found online. Users can simply insert their own or their competitor’s web domain name into the platform and immediately start seeing insights around what keywords they rank for in Google, who are the visitors and where is the traffic coming from. The tool automatically provides suggestions on how to optimize the website both from content and technical SEO perspective.

Semrush is constantly monitoring a large part of the internet and its large data set enables it to algorithmically suggest new content strategies based on popular topics and headlines or provides insights on how to optimize your online ads for better performance. The company has expanded from a pure search engine optimization product to a wide range of over 50 tools, covering everything from market research, social media, content marketing to paid online marketing. And even more impressively, Semrush is the leading tool in most of the categories it competes in.

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.

Semrush competes with companies like Hubspot (NYSE:HUBS) and Yext (NYSE:YEXT), although they only offer some of the features.

Sales Growth

As you can see below, SEMrush's revenue growth has been strong over the last two years, growing from $53.75 million in Q4 FY2021 to $83.39 million this quarter.

SEMrush Total Revenue

This quarter, SEMrush's quarterly revenue was once again up a very solid 21.2% year on year. On top of that, its revenue increased $4.68 million quarter on quarter, a solid improvement from the $4.03 million increase in Q3 2023. Thankfully, that's a slight re-acceleration of growth.

Next quarter's guidance suggests that SEMrush is expecting revenue to grow 19.9% year on year to $85 million, slowing down from the 24.1% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $366 million at the midpoint, growing 19% year on year compared to the 21% increase in FY2023.

Customer Growth

SEMrush reported 108,000 customers at the end of the quarter, an increase of 1,200 from the previous quarter. , suggesting that the company's customer acquisition momentum is slowing.

SEMrush Customers

Product Success

One of the best parts about the software-as-a-service business model (and a reason why SaaS companies trade at such high valuation multiples) is that customers typically spend more on a company's products and services over time.

SEMrush Net Revenue Retention Rate

SEMrush's net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 107% in Q4. This means that even if SEMrush didn't win any new customers over the last 12 months, it would've grown its revenue by 7%.

Despite falling over the last year, SEMrush still has a decent net retention rate, showing us that its customers not only tend to stick around but also get increasing value from its software over time.


What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. SEMrush's gross profit margin, an important metric measuring how much money there's left after paying for servers, licenses, technical support, and other necessary running expenses, was 83.6% in Q4.

SEMrush Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.84 left to spend on developing new products, sales and marketing, and general administrative overhead. SEMrush's excellent gross margin allows it to fund large investments in product and sales during periods of rapid growth and achieve profitability when reaching maturity. It's also comforting to see its gross margin remain stable, indicating that SEMrush is controlling its costs and not under pressure from its competitors to lower prices.

Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. SEMrush's free cash flow came in at $8.88 million in Q4, turning positive over the last year.

SEMrush Free Cash Flow

SEMrush broke even from a free cash flow perspective over the last 12 months. This below-average FCF margin stems from SEMrush's need to reinvest in its business to penetrate the market.

Key Takeaways from SEMrush's Q4 Results

It was good to see SEMrush beat analysts' revenue estimates this quarter, but we discount the results as its total number of customers and net revenue retention rate fell short of expectations. Furthermore, its revenue guidance for next quarter and the full year 2024 missed analysts' forecasts. On the bright side, its projected free cash flow margin for 2024 was better than expected.

In the first half of 2024, it expects its new Enterprise Platform to be available to all customers. According to the company, "it has been in a soft launch state since late October 2023 and is currently being used by a select number of large-scale business customers".

Overall, this was a mediocre quarter for SEMrush. The company is down 9.2% on the results and currently trades at $11.81 per share.

Is Now The Time?

When considering an investment in SEMrush, investors should take into account its valuation and business qualities as well as what's happened in the latest quarter.

There are several reasons why we think SEMrush is a great business. While we'd expect growth rates to moderate from here, its historical revenue growth has been strong. And while its low free cash flow margins give it little breathing room, the good news is its impressive gross margins indicate excellent business economics. On top of that, its customers spend noticeably more each year, which is great to see.

The market is certainly expecting long-term growth from SEMrush given its price-to-sales ratio based on the next 12 months is 5.2x. Looking at the tech landscape today, SEMrush's qualities stand out and there's no doubt that it's a bit of a market darling. We'd argue that it's often wise to hold on to quality businesses over the long term.

Wall Street analysts covering the company had a one-year price target of $13.50 per share right before these results (compared to the current share price of $11.81).

To get the best start with StockStory check out our most recent Stock picks, and then sign up to our earnings alerts by adding companies to your watchlist here. We typically have the quarterly earnings results analyzed within seconds of the data being released, and especially for the companies reporting pre-market, this often gives investors the chance to react to the results before the market has fully absorbed the information.