Good morning, and welcome to Semrush Holdings third quarter 2024 conference call. We’ll be discussing the results announced in our press release issued after market close on Thursday, November 07. With me on the call is our CEO, Oleg Shchegolev; our President, Eugene Levin; and our CFO, Brian Mulroy. 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, but are not limited to, statements concerning our expected future business and financial performance and financial condition, expected growth, adoption and existing and future demand for our existing and any new products and features, our expected growth of our customer base and specific customer segments, the continued development of our products, industry and market trends, our competitive position, market opportunities, sales and marketing activities, acquisition activity, integration and results of recent acquisitions, future spending and incremental investments, our guidance for the fourth quarter of 2024 and the full year 2024, and statements about future pricing and operating results, including margin improvements, revenue growth and profitability, and assumptions regarding foreign exchange rates. Forward-looking statements are statements other than statements of fact and can be identified by words such as expect, can, anticipate, could, 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 most recent quarterly report on Form 10-Q and our annual report on Form 10-K, filed with the Securities and Exchange Commission, as well as our other filings with the SEC. 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 yesterday after market close.

Good morning to everyone on the call. I am pleased with our results this quarter, delivering revenue of $97.4 million, up 24% year-over-year, and IRR growth of 24% year-over-year. We reported income from operations of $1.7 million and non-GAAP income from operations of $12.1 million in the third quarter. Non-GAAP operating margin increased to 12.4% compared to the non-GAAP operating margin of 9.5% in the prior year period. We exceeded our guidance, and I am pleased to say we are raising our full year 2024 guidance and are very excited about our growth opportunities in 2025. We continue to expand our leadership position in online visibility and are succeeding in combining strong, durable growth with profitability and free cash flow generation. We recently hosted our first Analyst Day two weeks ago in New York, which was very exciting for us, so I will keep my remarks today brief. In case you could not attend in person, a webcast along with the slides is available on the Investor Relations section of our website. One of the highlights from our Analyst Day was the discussion around our total addressable markets. We have more than tripled our TAM from $13 billion at the time of our IPO to roughly $40 billion today. What is really exciting about this TAM is that it provides Semrush an opportunity to gain share within an existing fragmented market and, more importantly, to capture new white space created by the ever-evolving digital marketing landscape. Our platform solves marketers' increasingly complex and critical problems. The volume and diversity of available content is immense, the amount of time we spend online is maxed out, the algorithm is changing, and it is getting more expensive to navigate through all this. This is where we come in. Our Semrush digital marketing platform utilizes data and intelligence at its core and is surrounded by AI-powered interconnected hubs focused on search engine optimization, paid advertising, social media management, local marketing, brand marketing, and content marketing. We continue to innovate on our platform to help marketers find opportunities to deliver efficient results across numerous marketing channels. I'm especially excited about the early momentum we are experiencing from our new enterprise product. Prior to the enterprise SEO product launch, we successfully acquired 8,000 enterprise-sized accounts, our term for companies with over 500 employees, and we believe these 8,000 enterprise-sized accounts are ideally situated to migrate to our enterprise SEO products. Today we closed new deals with Salesforce, HSBC, LG, Samsung, Alibaba, Sony, DoorDash, TikTok, Square, and many more. We believe the demand for our innovative enterprise SEO products is strong and we have a long runway for growth ahead. Semrush's edge over the competition comes from our strong culture and history of leveraging our differentiated data to elevate the digital marketing activities of our customers, and as we add more customers and data to our platform, our competitive moat increases. This data generates a flywheel effect as it strengthens the quality of our algorithms and enhances the effectiveness of our recommendations to customers. In summary, Q3 was another solid quarter for us, which is a testament to our integrated and complete platform approach to serve companies of all sizes. With our continued revenue growth acceleration, I'm confident that we have built a strong foundation for the future. We plan to leverage our profitability to invest in new products that extend our reach and drive cross-sell and upsell capabilities. We have a strong balance sheet and a disciplined capital allocation approach around M&A opportunities. I look forward to keeping you updated on our progress. I will now turn the call over to Eugene and Brian to discuss the results of the quarter and our outlook in more detail.

Thank you, Oleg. We delivered another solid quarter and continue to scale and innovate, all while driving strong growth. Our platform is very powerful and helps marketers all over the world improve their online visibility. We continue to expand our product portfolio by leveraging our innovative internal development teams, partnerships, and mergers and acquisitions. Most recently, we acquired the digital marketing publisher Third Door Media, whose brands include Search Engine Land, MarTech, Search Marketing Expo or SMX, and Digital Marketing Depot, which are all known for their contributions to search and digital marketing education. We believe this will help us expand our reach of industry-related content and insights to marketers. This acquisition, coupled with our presence at over 200 accredited universities, is part of our commitment to inspire and equip both current and future generations of digital marketers with the know-how to succeed in an increasingly competitive landscape. To help illustrate our successful top-of-the-funnel marketing strategy, I'd like to highlight two recent customer wins. The first is a new enterprise customer, a market-leading provider of efficient resource-conserving cleaning systems. Prior to working with us, the company was using Searchmetrics with a unique user and access management approach, limiting their ability to oversee other market activities. They are now scaling our enterprise SEO solution across all of their markets. Semrush's customer success team is onboarding and training the entire organization, demonstrating our commitment to equip their teams with actionable SEO insights that drive consistency and coordination. In addition, the company is leveraging our Adobe analytics integration and unique data insights to better align digital strategy using custom dashboards for precise, data-driven decision-making across regions. The second example highlights Semrush's ability to successfully expand our platform within existing enterprise customers, one of the world's largest online retailers. Like all e-commerce platforms, success hinges on search visibility, attracting new customers, driving repeat purchases and increasing average basket size. Selection, price, and exposure are core; if they cannot understand all three in real time, they risk losing sales. In priority categories such as electronics, toys, and apparel, our customer was struggling due to significant competition in the market. This led to stagnation in new customer additions, repeat purchases, and flat average basket size. Leveraging our enterprise solution, they're now able to track hundreds of thousands of key items in real time. This is a process that used to take days or even weeks. Using AI and advanced analytics, our enterprise solution identifies what is impacting rankings and suggests immediate actions to boost visibility, driving revenue from both new and existing customers. This isn't just saving the customer time; it's delivering immediate business insights that directly drive revenue. Looking at our enterprise product and customer wins in more detail, in only five months since our general availability launch, we secured major deals with brands like Salesforce, HSBC, LG, Samsung, Alibaba, Sony, DoorDash, TikTok, Gartner, Square, and many more. Salesforce, Samsung, Sony, Alibaba, DoorDash, and Gartner were existing clients who made substantial upgrades, while HSBC, LG, TikTok, and Square represent significant new wins, choosing Semrush as their enterprise platform and displacing competitors. The strong demand from both existing and new clients achieved with minimal marketing gives us immense confidence as we continue to accelerate growth. In summary, I'm excited about our ability to service enterprise customers and continue to expand our portfolio of offerings reiterated by our customer examples and wins. I will now turn the call over to Brian, who will provide a more detailed discussion of our financial performance and guidance.

Thank you, Eugene. We had a solid third quarter across the board. Our revenue was $97.4 million, growing 24% year-over-year. Growth was driven primarily by an expansion of our average revenue per customer as we continue to execute on our cross-sell and upsell strategy. Before reviewing Q3 results in greater detail, I want to call your attention to the new disclosures we made during our Analyst Day in October, as I think it's worth driving home some key takeaways from them. Specifically, I would like to highlight the customer segmentation metrics we provided. We have 8,000 enterprise accounts, over 17,000 mid-market, and over 21,000 marketing agencies in addition to our strong SMB business. Our mid-market agency and enterprise accounts represent our most sophisticated users and contribute a healthy 55% of our overall annual recurring revenue. We also significantly expanded the number of customers paying more than $10,000 and $50,000 per year, and you can see that there was a noticeable uptick in 2024 as we've really chosen to focus more on this group. To demonstrate the increase, during 2018, we had approximately 200 customers paying more than $10,000 and close to zero paying more than $50,000. Fast forward to today, we now have more than 4,000 customers paying us over $10,000 and nearly 300 paying over $50,000. We expect both of these to increase significantly as our new enterprise SEO solution gains traction. In fact, since we launched the enterprise solution for general availability just a few months ago, we have already added 50 new customers to the $50,000 plus cohort. Our confidence in our ability to deliver strong growth and profitability going forward comes in part from a demonstrated success in these higher average ARR segments, where our retention rates are also the strongest. As we said during our Analyst Day, our net revenue retention rate in this group is above 120. Now, turning to our third quarter results, we came in slightly ahead of what we released a few weeks ago. Annual recurring revenue for the quarter grew 24% year-over-year to $401 million. We've enjoyed success in building out a very strong and loyal customer base, increasing it nearly three times since the end of 2018. During the third quarter, we added approximately 1,300 net new paying customers. Our calculated average ARR per paying customer now exceeds $3,400, up 13% year-over-year. This was due to both the relative mix of business and agency customers and also the strong upsell activity, including our enterprise product that we saw this quarter. We have consistently increased the average ARR per paying customer, which is up two times since the end of 2018. This strong average ARR per paying customer increase is a result of our success in our cross-sell strategy as well as our sophisticated customers growing as a percentage of our overall ARR, a trend we expect to continue going forward, especially with our new enterprise SEO product and upmarket investments in sales and marketing. Our dollar-based net revenue retention for the third quarter was strong at 107%. We believe our dollar-based net revenue retention will increase over time as we benefit from our enterprise go-to-market and product investments. Moving down the income statement, during the third quarter, we achieved positive non-GAAP operating income of $12.1 million. We reported another significant improvement in our non-GAAP operating margin to 12.4%, which was up nearly 300 basis points year-over-year and surpassed our third quarter guidance. Cash flow from operations in the third quarter was $8.1 million. Turning to the balance sheet, we ended the quarter with cash and cash equivalents and short-term investments of $233 million, up $1.3 million from the previous quarter as cash flow from operations was offset by the approximately $9 million in cash we disclosed last quarter that we used to acquire rights. Turning now to guidance. For the fourth quarter of 2024, we expect revenue in the range of $100.8 million to $101.8 million, which at the midpoint would represent growth of approximately 21% year-over-year. We expect our fourth quarter non-GAAP operating margin to be approximately 11%. For 2024, we are raising revenue guidance to be in the range of $375 million to $376 million, up from our prior range of $373 million to $375 million, which translates into growth of 22% at the midpoint. As it relates to full-year 2024 non-GAAP operating margins, we now expect to be approximately 12%, and we continue to expect a free cash flow margin of approximately 8%. Our guidance assumes a euro exchange rate of 1.08. Approximately 30% of our expenses are denominated in euros. Finally, looking beyond the current fiscal year, we expect to maintain a 20% compound annual revenue growth rate over the near term. In closing, we are very pleased with our performance. We executed well to overachieve on our top-line growth and profitability, advanced forward our strategic priorities, and placed Semrush in a strong position for our next phase of growth.

Thank you, Brian. We will now start the question-and-answer session. The first question comes from Scott Berg with Needham & Company. Please go ahead.

Hey everyone, this is Rob Morelli on for Scott. Thanks for taking the question. Congrats on the quarter. So we conducted a customer check recently which received positive commentary relating to your AI capabilities, with that customer interested in spending more and upgrading. Can you maybe touch on how your pricing strategy is being received? And which avenue of the pricing strategy overall is being received most positively in any sort of capabilities that are of most interest?

Hi, this is Eugene. Just want to clarify, when you say higher prices, you mean our core plans, of course enhanced now with AI features or enterprise plan?

Well, just they relate interest in potentially spending more for these AI capabilities. Just looking to understand which avenue of the pricing strategy, whether it's upgrades, whether it's enterprise SEO or describe adoption.

Right. Okay. So we think about AI monetization as something where you want to use all the available tools of monetization depending on the type of product you're selling. For our core plans, we have three main ways to monetize AI. Number one is we include certain AI capabilities such as our overview feature in reporting tools or our copilot feature and we make those features available for everyone. As engagement grows, it improves retention and of course improves conversion rates from free to pay as well. So that's one of the ways to monetize AI. If you have something more specialized that is a good fit, maybe not for 100% of your audience, but let's say for a certain segment like local businesses, then you want to put it on a SKU where only the target audience will have access to those features. So local is a good example where we use an AI feature called reply to review to help people upgrade from entry-level local plan to a higher-tier local plan. And that's another example of how we monetize it. Recently, we had tons of traction with our AI content creation tools such as Content Shake AI. This is a standalone SKU, standalone app that people buy separately from their core subscription. That's another way to monetize AI features when you have enormous value that justifies a standalone SKU and product tailored to a large audience. Of course, the enterprise product that we now sell for on average $50,000 is another product that benefits greatly from different AI features. Pretty much all of our workflows in the enterprise SEO product are powered to a certain extent with AI features. What we really like is that a lot of use cases would not be possible without AI. Hope those four examples help, but I can keep going pretty much for hours about this.

No, that is helpful, thank you. It's great to see NRR remaining flat rather than compressing. Any update on where you anticipate an inflection in this metric, understanding the enterprise SEO solution is a potential driver of that?

Hey Rob, we didn't pick up the actual metric you referenced. It was a little bit...

Sorry, just NRR, Net Dollar Retention.

Oh, net revenue retention. Yes. Net revenue retention is 107% for the quarter and it's been about that level for a number of quarters in a row here. What we've been saying is it's important to look at our business by segment to really understand that metric. At our Analyst Day, we showed that we have a solopreneur and freelancer segment that has a retention rate that's below 100%. On the other hand, our business and agency accounts, which include SMB, mid-market, and enterprise, have a net revenue retention that's above 120%. There are some dynamics occurring in the business by segment that are influencing that number. It's still strong at 107%. Two drivers could help us increase that number in the future: one is the solopreneur and freelancer dynamic to abate, which we expect will happen, and, of course, continued traction and momentum with our enterprise products and selling motion.

Got it. Helpful. Thanks for taking my questions and congrats on the quarter.

Thank you very much. I'll have my congrats. I was wondering, Eugene, are you sensing any extra interest in SEO recently on the heels of what Google has done in Google Search where they've infused AI into the search page? They're including those AI-generated snippets at the top of the search page. I'm just wondering if you're coming across more marketers that are reaching out to you to try to produce content that's going to be optimized for that or even trying to produce content that may be so complicated or lengthy that it cannot be used in those snippets? I'm just wondering what you're encountering there.

Yes, that's a fantastic question. We definitely see a lot of interest in the marketing community. A lot of people want to be featured, of course, in those new search elements. It occupies a big part of real estate at the very top of the page and usually there are three spots that you can occupy and there are decent click-through rates for a lot of those queries. It actually drives a lot of traffic to publishers. Of course, a lot of people are very interested in it. Now the question is, what are the rules of ranking there? Without tools like Semrush, you cannot answer that question. So, we've been one of the first to implement full support of AI overviews in our rank tracking tool and in our organic research tool. This allows people to start answering this question and to begin running correlations on what exactly they need to do to get featured there. The rules are not the same for different queries; for one query, you might need long-form content, while for another, you might need shorter content. It would depend on the industry. It's not one-size-fits-all advice. However, we definitely see a lot of people using our rank tracking and organic research tools to start getting a sense of what they need to do to get featured there. Additionally, as we run analyses on very large volumes of data, we can begin implementing those suggestions in our content writing tools such as Content Shape to help people create content that ranks well in those search elements in a more automated fashion. Tons of interesting research to do. We're very proud to be in a front-runner position and helping marketers get there and excited about the interest and adoption of these new features.

This is very well said at a high level. Is it creating a tailwind? You have like a fundamental change in the major search page for most companies. Is that a driver right now for people to reach out and maybe do more business with Semrush?

We would definitely see it this way. We always say every time there is something new, something that complicates analysis, it creates a greater need for products like Semrush that can use big data and AI to run this analysis for people in contexts where manual analysis is not going to lead to good results. Yes, we think it's a tailwind for us. To the same extent, featured snippets were a tailwind for us in the past.

Yes, okay. One thing as a quick follow-up for whoever wants to take it. When you're mentioning these enterprise customers, Salesforce, LG, Samsung, TikTok, Square, they're great logos. How large are the paying user populations that you're seeing? I'm just trying to understand the extent to which it might be clustering on SEO specialists or, as they pick up the enterprise product, it might also be expanding into the broader marketing teams, digital marketers or social media folks, or market researchers, etcetera. What are you seeing there?

Yes, so definitely our core focus right now is to sell them the enterprise SEO product, which is our most expensive SKU right now. At the same time, as we go into those deals, we also see that there is a demand for our market research features. A lot of those deals come with a large number of seats for the content creation products. We even had one with a good attach rate of social media, which is traditionally we focus more on SMBs, but we had an enterprise client who also purchased many seats for our social media features. You're absolutely right. There is definitely an opportunity to sell them, not just enterprise SEO, but definitely in plans. For now, we want to make sure we keep an eye on the ball and keep driving momentum for enterprise SEO. But when there are opportunities to sell more, we always do.

And just to give you a little perspective on the number of users for these, there are some that are approaching 100, while others are mid-50s. So there's a substantial number of users and subscribers to this enterprise SEO platform.

Great. Thank you so much. I wanted to circle back on the enterprise product penetration into the 8,000 enterprise account base that you guys currently have. In the prepared remarks, you reference that these customers are ideally situated to leverage the product. I was wondering if you could give us an update on how many have moved and what that could look like over the next year or so and just how we should think about the migration path for companies that are already in the existing base.

Yes, thanks for the question, Elizabeth. We're really pleased with the traction and the momentum we've been getting. We did just launch the product that went generally available in May. We have been talking about the 8,000 enterprise customers that we already have that are using our core solutions and, as we've said, are ideally situated to upgrade and increase the average ARR that they're paying. As we mentioned at our Analyst Day, at the end of our third quarter, we already acquired 70 or migrated 70 of our accounts up to the enterprise SEO solution. As of the end of October, it's already above 90. We're getting some really good traction and adoption of that platform. We feel that not only the 8,000 but also other companies, larger companies where it's crucial for them to enhance their online presence are also ideally situated to adopt this platform. At Analyst Day, Tommy talked about the three layers of our market opportunity: the 8,000 existing accounts, displacing competitors, and the biggest population of companies out there is really white space where many companies are using internally developed solutions, aggregating together a lot of disparate solutions, and then leveraging an army of engineers to pull together the environment that we believe we can displace with the enterprise SEO solution.

Got it. And then just as a follow-up, the acceleration in the growth of ARR per customer was a bit more muted than it had been previously. It does look like you guys are coming up on some tougher comps and I think there was some pricing action last year. So just how should we think about the durability in that ARR per customer growth metric given you have some of the tailwinds around the enterprise product? Just some of the puts and takes there.

Sure, yes. You're asking about ARR growth or the actual net new additions?

On the per customer side. That's the average ARR per customer, just given you took some of the pricing action last year.

Just year-over-year. Absolutely, yes. Remember our third quarter is when we rolled out a pretty significant price increase. What was different about the increase a year ago is we rolled it out through a cohort of existing accounts. There was an uptick in average ARR and ARR in general in the third quarter. That obviously works its way out in the fourth quarter where we had a one-time increment in average ARR and ARR in the third quarter from that existing cohort. Overall, independent of that, we're continuing to see really strong growth over average ARR. If you look at it by segment, we're seeing really strong growth in enterprise and mid-market driven by the enterprise SEO product. We are still in early days though. We just launched it in May and we believe that over time, as we start to see more adoption of our enterprise SEO products and gain more traction on the investments we're making in our enterprise bid to market, that you'll continue to see that number tick upwards.

Thank you.

Great. Thanks so much for taking the questions. I guess to start. When we speak to your customers, we often hear that the larger agencies and enterprises are using many SEO and visibility tools. Each of the point solutions seem to have their individual and unique value in the market. Is it the goal for you guys with the enterprise platform to ultimately take over what all of these solutions ultimately do for a customer? If so, how do you think about the organic and inorganic avenues to expanding your functionality?

That's a great question. In enterprise, when we sell to brands directly, we indeed see this sort of patchwork of different solutions poorly connected. Sometimes they will use some kind of custom code that is very hard to maintain. The person who wrote it the first time left five years ago and nobody knows what to do with it. They have a lot of spreadsheets, maybe with 100 different tabs for different slices of data. They need to update all this manually to do a report. So it's a struggle. What we offer is an alternative to that approach where you get everything fully integrated, customizable, and you don't need any kind of custom code; you don't need spreadsheets. It's all updated automatically. And it's error-prone compared to the manual approach. Customers are extremely excited; they don't just save time and money, but they also get results that they couldn't achieve before they got our platform. As you implement this platform, you usually don't need a lot of those point solutions anymore. That also helps to streamline their tech stack. For agencies, it's a bit different because they would have to buy everything their customers buy. If you have 100 customers, some of those customers might have some point solution, and you would still as an agency need access to that point solution to serve that particular customer. For agencies, it will be a bit longer to switch them entirely to the Semrush platform. For brands, we see lots of success for each implementation. We initially had a couple of customers who wanted technical SEO, which we didn't have back in June when we launched. Since then, we acquired Rights to enhance this capability. We're now very confident about our ability to fully consolidate the stack for all SEO needs.

Okay, that's helpful. Thank you. And then Brian, just on the monetization and revenue opportunity, can you just give us a sense of how you think that differs for agency versus non-agency customers? And generally what the difference is between what those individual types of businesses are using for at the higher end of customer sizes?

Sure, yes. It always depends on the company and the agency. We scale our offerings based on the amount of technology and marketing disciplines that you're focused on, the amount of data that you need, the number of keywords, phrases, and sites that you're focused on, and of course the number of users and marketers that need access to this technology. They scale in multiple ways. For most agencies or some agencies, they're specialized in one particular marketing discipline. In others, they're a full-stack shop. It all depends on the type of agency and company, but both agencies and companies are scaling based on those four pricing dynamics.

Thank you. I can confirm that does conclude today’s Q&A session. I would like to hand it back to management for some closing remarks.

Thank you all for joining us today. We delivered strong third-quarter results exceeding our guidance, which positions us to raise our full-year 2024 guidance. Thank you all.

Thank you all for joining. I can confirm that does conclude The Semrush Holdings third-quarter 2024 results conference call. Please enjoy the rest of your day, and you may now disconnect from the call.