Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Semrush Holdings Fourth Quarter 2021 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Please note the transcript of the prepared remarks will be available at investors.semrush.com after the call. Thank you. Bob Gujavarty, VP of Investor Relations. You may begin.

Good morning. I’m Bob Gujavarty, VP of Investor Relations. And welcome to Semrush Holdings’ fourth quarter and full year 2021 results conference call. We’ll be discussing the results announced on our press release issued after the market closed on Monday. With me on this call is our CEO, Oleg Shchegolev; our CFO, Evgeny Fetisov; and our CSO, Eugene Levin. Before we begin, I would like to highlight our participation in several investor conferences to be held in March. We will attend the Morgan Stanley TMT Conference on March 8th and the Keybanc Emerging Technology Conference on March 9th. Today’s call will contain forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning our expected future business and financial performance and financial condition, expected growth, adoption and demand for our products and features, expected investments and their anticipated benefits, industry and market trends, our competitive position, our market strategies, market opportunities and our guidance for the first quarter of 2022 and the full year 2022, and can be identified by words such as expect, anticipate, intend, plan, believe, seek or will. These statements reflect our views as of today only, and should not be relied upon as representing our views at any subsequent date and we do not undertake any duty to update these statements. Forward-looking statements address matters that are subject to risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. For a discussion of the risks and important factors that could affect our actual results, please refer to our final IPO prospectus filed with the Securities and Exchange Commission, our quarterly reports on Form 10-Q and Form 10-K, as well as our other filings with the SEC. Also during the course of today’s call, we refer to certain non-GAAP financial measures. There is a reconciliation schedule showing the GAAP versus non-GAAP results currently available in our press release issued after the market close, which can be found at investors.semrush.com. And with that, let me turn the call over to Oleg.

Thank you and good morning to everyone on the call. Before I discuss our results, I would like to provide commentary on Russia’s invasion of Ukraine. This represents a terrible moment in history for all of us. We strongly oppose any act of war anywhere on the planet. Our hearts are with our community and our top priority is to make sure the handful of our contractors from Ukraine and their families are safe. As a U.S.-based Software-as-a-Service business, we are resilient. We have risk mitigation strategies in place and our core data centers are based in the states of Virginia and Georgia, and virtually our entire platform is held in the cloud. I want to reassure the investment community that we remain positioned for strong growth. Now to the results. We had a solid finish to an outstanding year. Fourth quarter revenue of $53.7 million was up 47% year-over-year and up more than 9% sequentially. For the full year 2021, revenue of $188 million was up over 50% year-over-year. The growth in the quarter was again aided by strong growth among our larger customers. The number of customers who pay Semrush more than $10,000 annually was up more than 75% year-over-year in the fourth quarter. I also wanted to highlight the strong performance of Prowly. We acquired Prowly in August of 2020 and in the first year, as part of Semrush, the Prowly team delivered outstanding results, as ARR was up more than 100% year-over-year as of December 31st. Prowly remains relatively small at slightly more than 1% of revenue in 2021; however, I believe the early success of Prowly bodes well for our recent acquisitions Backlinko and Kompyte, which were both announced in the first quarter. I am very optimistic about 2022, as I continue to see strong demand for our products and expect our increased investment in brand marketing and sales to result in another year of strong revenue growth. It is still a little early, but I would point to some positive results from our marketing programs in the fourth quarter. In November, our paid search channel set a new monthly record for new customer additions, eclipsing the previous high from March 2021. Our first brand marketing campaign will kick off in March and I look forward to sharing some results from the campaign with you when we report our first quarter results in May. On the product side, I see an opportunity to accelerate growth for Semrush Trends and App Center in 2022. Our App Center is still relatively small, but I see plenty of opportunity for strong growth. I would point to the success of the Ad Clarity app. It was one of the first apps available through the App Center and it reached $100,000 of gross revenue within three months of launch. To accelerate App Center growth we must increase the number of third-party apps that are available. I believe automating the app approval process will help us scale the number of third-party apps and increase sales. I believe as our platform grows it will become a more attractive destination for app developers who want to reach the widest possible audience. Semrush Trends, our competitive intelligence solution, continues to see strong user adoption and I believe Kompyte has the potential to further accelerate the growth of Trends. Kompyte offers leading products for competitive intelligence and sales enablement. Their customers skew large, with an average ARR of approximately $20,000. In the short term, we will focus on cross-selling Kompyte to our existing Trends customers. Given that Kompyte has a much higher ARR than Trends, even a small uptick in attach rates would yield significant growth in ARR. Longer term, we see an opportunity to leverage Kompyte’s success with product managers and sales organizations to extend Trends to a wider audience. Last, but not least, we continue to innovate on the core SEO platform. Looking at Google’s results last month, with search up 36% year-over-year, it is clear that search is still very relevant to our customers and in many cases still provides the best channel to drive traffic. We rolled out a search intent feature as part of our leading Keyword Magic tool. Our Keyword Magic tool is the largest keyword database in the market, with over 20 billion keywords and it helps SEO, content, PPC specialists, and brand managers to improve their keyword strategy and create the content that drives and converts traffic. With search intent, customers can view which searches related to a seed keyword are transactional, commercial, informational, and navigational, boosting the effectiveness of their campaigns. Thinking about future product areas, our customers are increasingly looking at video as an attractive channel to reach potential customers. Video platforms have grown dramatically over the last few years. YouTube alone has well over 2 billion monthly users and is very popular across all demographics. To put this in perspective, Facebook has slightly more than 3 billion monthly users. Over 95% of over-the-top viewers use YouTube, which exceeds even popular streaming services such as Netflix and Roku. We expect to roll out new functionality to help our customers better leverage video to improve online visibility and drive traffic. This will include leveraging our App Center and enhancing our existing tools like Social Media Management. In conclusion, we delivered outstanding financial results in 2021 with record revenue and margins. I fully expect to deliver another year of strong revenue growth in 2022. We will be accelerating investments across marketing, sales, and product development in 2022, but as always, we will expect these investments to be focused and to maximize the return on investment. I will turn the call over to Evgeny for a recap of our financial performance.

Thank you, Oleg. Q4 revenue of $53.7 million was up 47% year-over-year and up 9% sequentially. Growth was once again driven by an increase in paying customers and an increase in the average revenue per customer. Mix was once again a tailwind and we exited the quarter with almost 66% of revenue coming from customers on our two higher-priced plans, Guru and Business. Despite concerns about the Omicron variant, I was pleased to see balanced growth, with strength across virtually all our markets. I would note that for the full year 2021, the United States represented slightly more than 45% of total revenue, similar to the contribution in 2020. Our dollar-based net revenue retention was 126% as of December 31st, up from 124% as of September 30th. I continue to expect revenue retention to moderate in 2022 as the impact of easy comparisons begin to fade, but it should remain comfortably above 110%. Gross margin of 78.5% was up 160 basis points sequentially and approximately 190 basis points from the year-ago as hosting costs are largely fixed, while revenue grew substantially. I expect gross margins to stay relatively flat and sustain these higher levels through 2022. Non-GAAP operating expenses of $44.9 million in the quarter were up 53% from a year ago and 20% from the previous quarter. As I mentioned in November, we expected to make greater investments in marketing, as well as sales headcount, and you saw that come to fruition in the fourth quarter as sales and marketing were up 25% from the previous quarter. Research and development spending was up 24% year-over-year but up only 10% from the previous quarter. But I would note spending would have been up more than 20% sequentially if not for approximately 1% of capitalized product development costs in the quarter. We continue to add to our R&D teams, including new teams in Western Europe. G&A spending was up approximately 44% year-over-year and 15% from the previous quarter. The increase is largely related to continued investments in headcount and systems to support the growth of the business and public company expenses. Strong revenue growth and higher gross margins were more than offset by higher operating expenses and contributed to a non-GAAP net loss of $2.9 million, compared to a non-GAAP net income of $12,000 in the third quarter and a net loss of $1.5 million in the year-ago period. Turning to the balance sheet, we ended the year with cash and cash equivalents of $270 million, up from $188.5 million at the end of the third quarter. The increase was driven by approximately $79 million in proceeds from our follow-on offering in November and approximately $4 million in cash from operations, offset by $1 million of capitalized product development. For the year, our free cash flow margin was above 10%, up sharply from 3.6% in 2020. I don’t expect cash flow generation to be as strong in 2022, but even with higher investments across brand marketing and product development, I expect we will be near free cash flow positive for the year. Looking ahead to guidance, I expect first quarter revenue in a range of $55.8 million to $56.2 million, up 40% year-over-year. For the full year, I expect revenue in a range of $245 million to $247 million, which would represent growth of more than 30% year-over-year. We expect to maintain the higher levels of spending experienced in the fourth quarter, and as a result, I expect a first quarter non-GAAP loss of $4.7 million to $4.5 million and a non-GAAP loss of $22 million to $21.5 million for full year 2022, with the bulk of the losses in the second quarter and third quarter as we scale our marketing investments. In conclusion, our growth rebounded strongly in 2021, as revenue grew more than 50% year-over-year and resulted in higher margins and record free cash flow. We are making focused investments to support our growth in 2022 and beyond, investments that we can fund from cash flow given our very efficient go-to-market strategy, highly productive product development, and data-driven approach to marketing. With that, Oleg, Eugene, and I are happy to take any of your questions. Operator, please open the line for questions.

Thank you. Our first question is from Michael Turits with KeyBanc. Your line is open.

Thanks. Michael Turits from KeyBanc. Thanks very much. Congrats guys on the utilization being strong, high single-digit revenue growth. Sequentially in the net adds just continue good performance. And can I ask a bit about OpEx, and as you said, you did guide to a bit of a net loss into -- more of a net loss into next year after a strong year of free cash flow this year. So can we be specific about where you intend to make those investments?

Sure. Michael, thank you for the question. This is Evgeny. So, as we have alluded to before, we plan to spend more on marketing in the first place and the escalation is that we’ll be spending about 5 percentage points of revenue more in marketing throughout the year, with most of the investments taking place in Q2 and Q3, and then less in Q1 and Q4. So that’s the expected profile. We will plan also to spend more on sales headcount. We started hiring more sales at the end of last year, which will probably start to play out throughout the first half of the year as they ramp up their productivity. First, we are budgeting for more spent on R&D. So that’s the expectation. We are -- again, we will probably be getting some leverage out of G&A as we go throughout the year.

Okay. And just out of curiosity, given the devaluation of the ruble and you do have some expenses there. What are your assumptions in terms of the guidance? Is that based on the newer lower level of the ruble or is that based on the level before the devaluation?

Before... Could we see some benefit from that ruble valuation? Yes. So the guidance is based on the average ruble rates from the beginning of this year, so it’s pre-devaluation. So to give you a sense, we have about 16% to 17% of our expenses in rubles, so you can make your assumptions there based on that.

Great. Thanks very much. Congrats on the quarter.

Thank you.

Our next question is from Parker Lane with Stifel. Your line is open.

Yeah. Hi, guys. Thanks for taking the question and congrats on the quarter. There were some puts and takes in the pricing levers that you implemented last year. Just wondering if we look in the context of this guidance, can you give us a sense of how you expect revenue growth to trend from a seasonal standpoint? Notably, that back half of the year when we start to lap some of these comps? Thanks.

So when we think about revenue growth, you typically have to think about the number of days in the quarter, right? So the first quarter will have less -- like, fewer days. So it’s 90 days only plus it starts with a slow period where we go -- by going out of Christmas. So typically, Q1 overall would be the slowest one. Q2 will be better, as it has 91 days and then Q3 obviously and then we will accelerate towards Q4. I think that’s how we would typically think about the year. And for this year, our expectation is that we will probably see a year-on-year acceleration of customer growth towards the back half of the year versus, I would say, a more normal first half and that has to do with the comparisons of 2021.

Got it. Got it. Thank you. And then just to follow up on Michael’s question a little bit differently, given the sizable employee footprint in Russia, are you anticipating any operational disruption there or could sanctions have any issue on hiring or any just overall operations of that side of the business? Thanks.

This is Oleg. We don’t expect any significant impact on our business. Look, we have offices in Europe, U.K., and now we are opening offices in Amsterdam, Berlin, and Barcelona. We don’t expect any significant difficulties with hiring. It could be some sort of frustration related to things what’s going on, but at the same time, we don’t expect any long-term impact for our business. We don’t see any risk for business continuation.

Got it. Thanks, Oleg.

The next question is from Scott Berg with Needham. Your line is open.

Hi, everyone. Congrats on the good quarter and thanks for taking my questions. I do apologize for any background noises since I’m in my hotel library at the moment. When -- I guess let’s talk about demand, your revenue has accelerated nicely this year. How have demand trends changed at all by region? Are you seeing any outside kind of growth opportunities in geographical areas or it’s just kind of been more broad-based strong performance? Thank you. It’s Oleg. I would say with events in the fourth quarter were, I would say, must be expected. We didn’t face any kind of surprises here. And we see some good signs this quarter versus some good signs this year. But it’s a very broad-based. And then from a follow-up perspective, your net revenue retention continues to trend very much higher than your historical and kind of targeted levels. How should we think about the growth in those segments or those customers? Are they landing, excuse me, I’m thinking, so let’s say, customers over 10,000, that’s up 75%. Are you landing more in that segment or is it customers that are expanding their existing implementations and usage of SEMrush to prospect the 10,000K threshold?

So this is Eugene. Thank you for the question. So right now we definitely see more of this coming from expansion of existing accounts. Usually, even if it’s a big company, we would have a relatively small initial installation and then we will grow accounts within the organization, adding more seats and adding more limits. So, I would say it’s largely expansion play; some customers would start with a bigger product, but in that case, they would usually have a trial or free subscription first to test the product, to learn it, to understand the value and then they will buy more. So the majority of this is expansion effort.

Excellent. Congrats on your quarter and thanks again for taking my questions.

[Operator Instructions] The next question is from Clarke Jeffries with Piper Sandler. Your line is open.

Hi. Thank you for taking the question. Nice rebound in net new ARR this quarter and crossing the $200 million threshold. When you look at the business trends exiting 2021, and Evgeny, you may have touched on this in terms of the customer growth expectations in the second half of the year. Are there any specific factors or headwinds that are being translated in the model today that might improve or change in 2022 or any broader macro considerations that you’re embedding in your guidance today for the next year?

Right. So we -- thank you for the question, Clarke. Our expectations for the new customer growth or the total customer growth, I would say, for the beginning of the year is similar to what we’ve seen at the exit of 2021. So I’d say on par with our normal growth rate. However, I might say that with our early indications that the beginning of the year is slightly better. Otherwise, I think, we’ve made some changes on effects. Our initial effects expectations were, I would say, more moderate in terms of the ruble rate, but then we’ve adjusted it to the like, every trade for the quarter, like, year-to-date, which will probably change as we go into Q1. I mean, like favorably in terms of the expenses. Apart from that there are no major changes that we’ve anticipated.

Great. And then maybe a follow-up, very interesting to see Kompyte have an average contract value over 20,000, as well as the departmental presence in sales. As we think about departmental expansion, is sales -- is the sales expansion one of your primary focuses near-term and how could you -- how much could you imagine the investment into other departments beyond the marketing department come from an organic or an inorganic basis?

Thank you. And I am happy you read the press release because that was one of the key focuses around M&A thesis for this deal. Not just a bigger every check, not just something that we can cross-sell to our existing customer base by going after new buyer personas. And actually, it’s kind of a result of years of research that we have done. We wanted to have a product that would be used across many different groups within organizations. So Kompyte, for example, can be used by the leadership team, I use it myself, can be used by marketing departments, demand gen product marketing part, and obviously, sales teams can use battle cards and competitive transactions to have higher win rates. I think in general, there is definitely a desire to work with more people within organizations. Currently, we are expanding into sales organizations with this acquisition. Down the road when we feel comfortable, we would be open to pursue other areas. In general, we want to work with more people and we want to bring the value of market data, market intelligence to all stakeholders who can benefit from it.

Okay. Thanks. Look forward to it.

There are no further questions at this time and this will conclude the SEMrush Holdings’ fourth quarter 2021 results conference call. Thank you for participating and you may now disconnect.