Similarweb Ltd. Q2 FY2021 Earnings Call

Greetings, welcome to Similarweb Second quarter fiscal twenty twenty one Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note that today's conference is being recorded. With us today are Or Offer, Co-founder and CEO and Jason Schwartz CFO. At this time, I'll turn the conference over to Annie Rosenberg with Investor Relations. Annie, you may now begin.

Thank you, operator. During this call, we will make forward-looking statements related to our business, including statements related to the expected performance of our business, future financial results strategy, the potential impact of the Covid-nineteen pandemic and associated global economic uncertainty, long-term growth and overall future prospects. These statements are subject to known and unknown risks, uncertainties and assumptions that could cause actual results to differ materially from those projected or implied during the call. Actual results and the timing of certain events may differ materially from the results or timing predicted or implied by such forward-looking statements. And reported results should not be considered as an indication of future performance. Please review our filings with the SEC, including our final prospectus and the section entitled Risk Factors therein filed with the SEC on May twelve, twenty twenty one for a discussion of the factors that could cause our results to differ. Also note that the forward-looking statements on this call are based on information available as of today's date. We disclaim any obligation to update any forward statements except as required by law. As a reminder, certain financial measures we use in this presentation and on our call today are expressed on a non-GAAP basis. We use these non-GAAP financial measures internally to facilitate analysis of our financial and business trends. And for internal planning and forecasting purposes. We believe these non-GAAP financial measures when taken collectively may be helpful to investors because they provide consistency and comparability with past financial performance by excluding certain items that may not be indicative of our business, results of operations or outlook. However, non-GAAP financial measures have limitations as an analytical tool and are presented for supplemental informational purposes only. They should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. A reconciliation between these GAAP and non-GAAP financial measures is included at the conclusion of our Earnings press release, which can be found on our Investor Relations website at ir.Similarweb.Com.

Thank you, Annie. And thank you all for joining us here today for our Q2 earnings call, which is also our first as a public company. It is a real privilege to be here with all of you on the call today. Our recent IPO was an exciting milestone for our employees, customers, investors and partners, and I want to thank them for their confidence in us over the years. I also like to welcome our new investors to the Similarweb family. During today's call, Jason, our CFO and I will provide details of our Q2 results as well as provide Q3 and full year guidance for twenty twenty one. I will start today by covering highlights of our financial performance. Q2 twenty twenty one was a record quarter for us, and I'm pleased to report that our revenue increased forty-nine percent year over year to thirty-two point five million dollars. We are also very happy that we were able to accelerate our growth versus Q2 twenty twenty, continuing our trend of accelerating growth. We also took advantage of a strong demand for our solution as companies across the globe focus on digital transformation. In Q2 we also improved our gross margin by more than two hundred fifty basis points year over year to seventy-eight point five percent, highlighting the scalability of our platform. Our free cash flow was negative three point three million dollars reflecting the strong fundamentals of our business even as we expanded our operations. I want to expand further on those results and also touch on a few key trends that we see existing for our business, but first, since many of you are new to Similarweb, I wanted to spend a few minutes talking about our business and market opportunity and how we believe our offerings are disrupting a traditional market and helping businesses compete and win in the digital world. Similarweb was born out of my own personal pain. I was trying to do some market research for my offline business many years ago, but no matter what I searched for, I couldn't find anyone with the insight I needed. I saw a market opportunity and fourteen years later, Similarweb is a leader in market intelligence for the digital world. Today, our customers are some of the largest and best brands, leaders like Walmart, Google, Publicis, Merck, DHL, and CNN and many more. A lot has changed since we wrote our first lines of code; digital has become a treasured way to communicate, transact and deliver products and services. It is an important growth driver and strategic focus for most businesses today. At the same time, it's made every market much more competitive. In this environment businesses have no visibility into the online activity of the customer, prospects, partners and competition. In reality, they are flying blind. Similarweb cuts through the lack of visibility, delivering a comprehensive view of the digital world to our customers, providing them with market data and insights to help them win in the digital world. The data and more importantly, the actionable insights that we provide empower our customers to be more competitive in the markets. We call this digital intelligence. Digital intelligence is embedded in critical business processes and gives organizations the means to understand and gain insights from all relevant digital activity. It creates a powerful competitive advantage. It empowers companies to make better business decisions, increases their confidence, and helps them win their market. Sometimes it can mean the difference between business success and failure. To paint a picture of how digital intelligence can make this kind of impact, I want to share a conversation we recently had with one of our customers, the head of digital marketing at Stay Sure, one of the top travel insurance companies in the UK. When Covid hit, their entire business was at risk of failure. Similarweb helped them to adapt to the new reality. With Similarweb, they were able to quickly identify which market recovered the fastest from the initial lockdown and focused on those opportunities. They also used Similarweb to identify new market segments, for example, younger travelers looking to ensure against Covid-nineteen risk. They were able to create new products designed for this emerging segment and use Similarweb insights to build the strategy to reach the new audience according to the company and I quote, 'Similarweb kept us in business.' When times are challenging, it's all about understanding what the competition is doing, where we fit in the market, and what's going on in the market overall. It's not uncommon that in Q2 we completed an upsell deal with Stay Sure, increasing the ARR value of the contract by over thirteen percent. This example isn’t unique. Now more than ever, companies need visibility into what’s happening in the digital ecosystem if they want to survive and win. Digital transformation is accelerating, but all that investment cannot be optimized without comprehensive, accurate and timely market data that integrates into the corporate workflows. This makes digital intelligence mission critical. We believe in this massive opportunity and we estimate that our total addressable market today is over thirty-four billion dollars. Delivering this kind of impactful digital intelligence isn’t an easy task. It is extremely difficult to gather massive quantities of digital signals across the internet, each signal providing only a small perspective of what's going on in the digital world. And it's even harder to use those signals to build the models that are designed to measure and predict how the digital will behave. This is what we do. Just think about it; every day, we need to estimate traffic for tens of millions of websites and analyze data in over one hundred ninety countries and in over two hundred industries, and we need to do it really well because we know that leading companies and investors around the world will make critical business decisions based on the insights we provide in our platform. We have been working on solving this problem and creating this technology for over ten years. Over time, we have invested significant resources to fund our data assets and acquisition and build a very strong competitive moat around our technology. To achieve that, we've built a unique R&D organization that operates in an innovative, fast-paced culture. Every month, this team delivers hundreds of innovative data and feature enhancements that improve our customer retention and increase average customer spend. We have continued to expand this team, which now includes nearly two hundred fifty top-notch developers, PhD data scientists, and big data engineers, and we’re very proud of their work. We also built a very efficient sales and marketing organization to approach and attract this very large market opportunity. This starts by attracting and engaging prospects with our widely used free tools on our website and through a popular browser extension. We provide free access to a broad range of basic capabilities as well as opportunities to explore our paid offerings. The cost-effective leads from this premium inbound motion are efficiently converted to pipeline opportunities for our sales team to pursue. We complement this with an outbound sales motion focused on developing new opportunities with larger target accounts. After successfully landing a new customer, we also have a team of client success to help our customers realize more value from our platform, resulting in more strategic relationships and expanding revenues. This land and expand motion is working exceedingly well for us. I want to turn now and discuss our Q2 performance. I would like to mention a couple of highlights and how they illustrate several of our business strategies, specifically around our land and expand sales motion, creating new channels of indirect growth, and the introduction of new products and datasets. Let's start with our land and expand. Over the last twelve months, we accelerated new logo acquisition, landing over six hundred new customers and crossing the three thousand customer logos threshold in Q2. We are building on this strong new logo acquisition by refining our motion around customer retention and growth. As an example of this, in Q2, we completed one of the largest deals in Similarweb's history with a major e-commerce company. This customer began working with us in twenty sixteen, starting with one use case and around fifty thousand dollars in annual ARR. Today, they use Similarweb across twenty-five teams globally with around fifteen hundred users, representing over three point five million dollars in ARR. Our Q2 upsell was a seven figures ARR upsell with a multi-year commitment that included the addition of hundreds of new users as well as an upsell of premium product features and extended datasets. This also highlights our land and expand motion in operation. Although we started small, we were able to expand additional users, use cases, departments, and geographies within the customer. This land and expand motion is driving significant growth among our largest and most strategic customer segments—those companies where we are generating more than one hundred K in ARR. We grew the number of those accounts by fifty-two percent year over year, and nearly sixty percent of this growth came from existing customers whose ARR expanded to more than one hundred K. Our ability to retain customers and expand ARR is reflected in the highest level of net revenue retention (NRR) that we have ever recorded. NRR strongly improved from one hundred and one percent at the end of twenty twenty to one hundred and six at the end of Q2. In the critical customer segment of accounts with over one hundred K in ARR, we improved NRR to one hundred and eighteen percent, up from one hundred and thirteen percent at the close of twenty twenty. Beyond our direct sales motion, we continue to develop indirect sources of demand. First, we recently announced the availability of Similarweb digital insights on the AWS data exchange. With the AWS data exchange, companies ranging from CPGs to hedge funds can enrich their big data analysis with digital marketing intelligence including website traffic, keywords, and digital transactions. While this did not have a material contribution to Q2 results, I believe that this partnership will broaden our customer reach and further help customers integrate Similarweb into their workflows. And in Q2, we also introduced an affiliate marketing program and partner referral program, launching two new indirect channels for lead opportunity creation. Also, in Q2, we launched our new solution, Shopper Intelligence, which is targeted at the rapidly growing e-commerce segment. Shopper Intelligence analyzes consumer shopping behavior across desktop and mobile, providing a comprehensive solution for understanding the digital customer journey and what consumers are buying online. Our goal is that Shopper Intelligence would analyze and deliver insights about digital consumer behavior across both e-commerce marketplaces and first-party shopping websites. We are off to a strong start with this new solution. We have already closed new businesses in a diverse range of industries—not just in the primary CPG audience but also in retail, pharma, technology, and private equity. I'm looking forward to giving you more details on those wins in the future. We believe that Shopper Intelligence is an innovative product with features that are unique in the market, and I'm super excited about it. I think we have a huge opportunity in front of us with this new offering. In Q2, we also made significant additions to the scope of data and insights available through the Similarweb platform. We completed the acquisition of the assets of SimilarTech, which we believe is one of the best providers of technographic data in the market. The acquisition enables us to more completely integrate SimilarTech’s data into our solution and leverage their data to build some exciting new features as well. Separately, we recently announced a significant advancement in our capabilities in our keyword generator, which enables sales professionals to find and explore keywords relevant to expanding their business. The keyword generator now includes support from YouTube, the world's second largest search engine, as well as Amazon, where sixty percent of product searches currently originate. Those enhancements expand our coverage by over eight hundred million keywords, extending our breadth of coverage and keyword volume accuracy. Beyond these efforts, we continue to invest in our organizational growth and development. We continued to scale our organization to support our strong growth. Employee headcount in Q2 grew nearly sixty percent year over year. We continue our international expansion, opening up a new direct sales presence and office in Germany. Recently, we also announced a new office in Reston, Virginia, where we will focus on hiring sales and marketing professionals and where we expect to tap into strong local talent in the areas of digital measurement and market research. Finally, I’m very excited to announce that last week we closed on a new headquarters facility in the Tel Aviv area. This new building will accommodate our rapid growth, and we will be able to fully design this space to meet our needs for our growing team. Our new Similarweb headquarters is located in the center of the Tel Aviv metropolis, and I expect that when completed, it will be a significant attraction that will enable us to continue to recruit top talent here in Israel. Finally, as we said during the IPO, we will leverage our momentum and continue to pursue both organic and inorganic growth strategies. We will invest in our sales and marketing efforts to accelerate customer acquisition because of the high ROI we get on those investments, and the big market opportunity we see. We will take advantage of our strong financial position to opportunistically target and acquire companies in order to improve and expand our data use cases and addressable market. We are operating in a fragmented market and we believe we have the opportunity to be the consolidator. Wrapping up, I'm very proud of the company we have built. We have followed our twenty twenty performance with strong and accelerating growth in the first half of twenty twenty one. We have outstanding leadership, and our team is smart, bold, fast, talented and experienced. We have a strong balance sheet. Our solutions are market-leading and provide timely and comprehensive data and insights that we believe our customers cannot get anywhere else. Everyday thousands of businesses rely on Similarweb solutions to make mission-critical decisions. We believe we are recognized as the standard for measuring the digital world. Our insights are frequently referenced publicly by CEOs, major publications, and respected research firms. Our platform has become a required experience for job opportunities and a notable skill that users highlight on LinkedIn. We are confident in our growth strategy and have a track record of strong operational execution. It's still early in our journey, and we believe we are in a great position to capitalize and capture an increased share of a very large market. As I like to say, we are just getting started.

Thank you, Or. I'm going to start with an overview of our financial model, and then I will review our financial results for the quarter and wrap up with our guidance for Q3 and full year twenty twenty one. Our financial model is built on the delivery of strong and predictable revenue growth, substantially all of which is generated from SaaS subscriptions. We deliver a high net dollar base retention rate (NRR) and also maintain high gross margins and unit economics that drive cash efficiency. In Q2, we delivered record revenue of thirty two point five million dollars reflecting forty-eight point five percent year over year growth. We increased our total number of customers to three thousand sixty-eight, up twenty-four percent from two thousand four hundred seventy-nine in Q2 last year. This includes as Or mentioned, a strong increase in our one hundred thousand dollars or more ARR customers, which grew by fifty-two percent from one hundred forty-five in Q2 twenty twenty to two hundred twenty in Q2 twenty twenty one. Most of these customers began initially as small customers and have expanded through our successful land and expand motion. Today, these customers comprise forty-nine percent of our overall recurring revenue base. In discussing the remainder of the income statement, please note that unless otherwise stated, all references to our expenses and operating results are on a non-GAAP basis and are reconciled to the GAAP results in the earnings press release that was issued just before this call. Our gross profit totaled twenty-five point six million dollars in the quarter, representing a gross margin of seventy-eight point six percent versus seventy-six percent in Q2 twenty twenty. This margin improvement reflects the significant operating leverage we've been able to realize in our fixed SaaS infrastructure and data costs. Operating expenses grew to thirty-six point three million dollars in Q2, up from nineteen point one million dollars in Q2 twenty twenty, largely reflecting the investment in personnel across the business from product and R&D to sales and marketing and our G&A team to support our business growth. We see a large TAM and opportunity ahead of us, and we'll continue to invest in personnel and initiatives that help us capture more market share. The specific components of our operating expenses were, Research and development, eight point three million dollars versus four point seven million dollars in Q2 twenty twenty. This excludes six hundred and ninety-six thousand dollars of retention payments relating to the acquisition of SimilarTech during the quarter. We anticipate an additional three hundred and fifty thousand dollars in Q3. Sales and marketing, twenty-one point four million dollars versus eleven point eight million dollars in Q2 twenty twenty. General and administrative, six point six million dollars versus two point six million dollars in Q2 twenty twenty. This excludes one point two million dollars of non-recurring expenses related to our initial public offering. As a result, our non-GAAP operating loss in the quarter totaled ten point eight million dollars increasing from two point five million dollars in Q2 twenty twenty. Free cash flow for the quarter was negative three point three million dollars compared to one point five million dollars in Q2 twenty twenty. In May, we successfully completed our initial public offering of our ordinary shares, raising net proceeds of one hundred and fifty point seven million dollars after deducting underwriting fees and commissions and related offering costs. During the quarter, we also repaid all outstanding amounts under our credit facility such that as of the end of the quarter, we have no outstanding debt. As a result, we have a strong cash position that totaled one hundred and seventy-seven million dollars of unrestricted cash balances as of June thirty twenty twenty one. We have additional capacity available to us under our seventy-five million dollar credit facility with Silicon Valley Bank. As such, we believe that we have sufficient liquidity to successfully execute our business growth plans. As Or mentioned, last week, we signed an office lease agreement for our new Israel headquarters. We anticipate investing eight to ten million dollars of leasehold improvements over the next four quarters in advance of our anticipated moving date in Q2 twenty twenty two, which will be amortized over the ten-year term of the lease. We are introducing guidance for both Q3 and the full year twenty twenty one. For Q3 twenty twenty one, revenue is expected to be in the range of thirty-two point eight million dollars to thirty-three point two million dollars. Non-GAAP operating loss is expected to be in the range of fourteen point five to fourteen point nine million dollars. Full year twenty twenty one revenue is expected to be in the range of one hundred twenty-nine million dollars to one hundred thirty million dollars. Non-GAAP operating loss for the full year twenty twenty one is expected to be in the range of forty-nine million dollars to fifty million dollars. I'll now hand the call back over to Or for his closing remarks.

Thank you, Jason. I would like to close by thanking my leadership team and our employees around the world for working hard to deliver a very successful first half of the year. Our IPO was a milestone for us as we continue to grow, and I’m pleased to welcome our many new investors to the Similarweb family. With that operator, please open the call up for questions. Thank you.

Thank you. And our first question is from the line of Sterling Auty with JPMorgan. Please proceed with your question.

Yes, thanks. Hi guys. So wanted to start with the question around the AWS marketplace partnership and deal. Can you help us understand does this just make it easier for customers to access the data and monetize? Does just change where they're getting the data from or does it actually add incremental reach to new customers that perhaps you weren't getting to before?

Hi Sterling. It's Or. I will try to answer this question. So I think the quick answer is yes to all of the above. It will increase our ability to approach many more customers than before that operate on the AWS platform and buy data on the data marketplace. So we do expect to get more customers. It will provide an easy way for them not only to access the data, but also another layer of selling for us. They need to get the API key, and it's easier to obtain and access our data as well as charge for trying the data because the data is already integrated, and if they have an AWS account, it’s much easier for them to buy, use, try it, and also charge because they are already connected to the Amazon invoice system. Furthermore, Amazon is providing incentives for their customers and giving them free credits to try out many data sets on the data marketplace. So we will also leverage the momentum from Amazon pushing their customers to try and buy data assets.

Great. And then one follow-up, with the improvement in the net dollar retention, can you talk about the number of different ways that you can expand—more users, more data, more geographies— which one of those really stood out the most in the quarter in terms of driving that net dollar retention?

I don’t have the exact answer, but I can tell you that what I'm seeing driving really great expansion is cross-selling our offerings. I talked a little bit about Shopper Intelligence. So we saw a great success there with people buying additional solutions from us. So I think purchasing more solutions is a great driver. But I also noticed a great deal of customers buying more users or other add-ons or integrating APIs. So, I think it's a combination of all of the above, but my feeling is that this quarter has been particularly strong for selling new solutions we’ve introduced to our customers.

Great. Thanks, guys and welcome to the public markets.

The next question from the line of Drew Foster with Citigroup. Please proceed with your question.

Hey guys. Thanks for taking the question. Jason, for the past six quarters or so, your top line has been growing sort of directionally in line with your sales and marketing spend. This quarter, it was up another thirty points sequentially relative to Q1. So you’re clearly accelerating that. To the extent that sales and marketing is a leading indicator for your top line, at a high level, how should we think about the pace and magnitude of investments within that envelope over the next six quarters? And then if you could just remind us, what's the breakdown of how much of that incremental spend is related to marketing and advertising where you might get a quicker return on those dollars and how much is related to adding incremental salespeople and sales infrastructure, where the return on those investments is a bit more protracted?

Hey Drew. Thanks for the question. So, what we see right now is a huge TAM and opportunity ahead of us. And as a result of that, we're continuing to invest to capture a larger share of that market. We have accelerated hiring, and you may have seen that in the press release that headcount has grown across the business. Our approach is really to invest in a responsible way, balancing that growth and efficiency. That's what we're going to continue to do, and we do think that that's an indication of further growth down the road. As far as the split, we don't break down the split between marketing dollars and headcount dollars, but what we do say is about sixty percent of our marketing and sales spend goes to new customer acquisition and about forty percent of it is spent on customer retention and expansion.

Really helpful. Thanks. And then you had strong gross margin improvement. I think you called it out at the top of your press release. So could you just maybe unpack what's driving that and where you think you could drive those to over time? Thanks guys.

Yes. Sure. A lot of our cost of sales is comprised of fixed costs, including infrastructure and typical overhead costs. We have hosting and support, we actually host at AWS, as well as all the investment that we make in both internal costs and external costs in our data assets, which is really a fixed cost for us because it's the same amount of data that we need whether we're providing service to five hundred or five thousand customers. So there’s natural leverage that we gain on those fixed costs. That's the improvement you're seeing not only in this quarter but over the trend over time over the last two to three years. We’re comfortable with the guidance that we've given; we're staying at the same levels for the near term, and then potentially going forward as we think about guidance, we will, of course, update you.

Thanks a lot.

The next question is from the line of Bhavan Suri with William Blair. Please proceed with your question.

Hey guys, congrats and welcome to being a public company. Nice job. I guess I just wanted to touch quickly first on the new customer strength. I'd love to sort of understand what's driving momentum. Obviously increased sales and marketing, you've got partners. But I guess as you look at that, are these customers replacing another vendor or is this web intelligence new for them?

A good question. I think that the majority of the deals we are closing are greenfield. We are not replacing existing providers in most cases. It's mostly a new opportunity.

Got you. And then you re-launched a platform in nineteen with sort of these five key use cases. Have you seen any change in how customers are adopting solutions? Are they changing where they start and are they building different data strategies once they've implemented a couple of solutions? How should we think about that progress from the customer and their strategy from when they adopt to when they change? Thank you.

It's a good question. I see that the more we develop our offering and bring new solutions to market, we unlock new strategies for our customers. Once we demonstrate our solutions better and show their value, particularly with CPG customers, they recognize how they can drive new strategies from the insights we provide. An example would be in verticals like investing when we come with the more targeted offerings that give them comprehensive perspectives about how to think and develop strategies around data and insights going forward. I do see that. I also believe that the innovations we present are new and unique even to existing customers, and they are beginning to understand the power of digital intelligence and how they can use it to drive more strategic decisions across their businesses.

Gotcha. Thanks for the color and nice job guys. Thanks for taking my questions.

Next question comes from the line of Brent Thill with Jefferies. Please proceed with your questions.

Hi, thank you. This is John Dan for Brent Thill. I had two questions. One of the five major solutions you have any particular strength to highlight among the five, and maybe if you just could shed some light on the relative contribution. And then second, it’s probably for Jason. Just want to see if any comments on the linearity during the quarter, the trends by month, any particular variations to note including quarter to date? Thanks very much.

I will start answering about the solutions, and then Jason can talk about the trend. So all of the solutions are growing very nicely, and we're very happy with the overall growth. We noted strong success with the new tools for investors and our shopper solution, which accelerated nicely. However, I think the majority of our business still comes from our core solutions, which historically have been bundled together. All of them are growing well, and we are putting substantial efforts into their development and improvement. Jason, do you want to comment on the trend?

Yeah, sure. Within the quarter, there’s some variability from quarter to quarter. But in general, because we run on an ARR model, we've got good visibility and predictability into the revenue trends as we start the quarter.

Great. Maybe just a little bit on that. I mean, were there anything that you noticed in terms of customer activity as opposed to the revenue trend? Ups and down variations and that will be it for me. Thank you.

Not, not material. I think we see a lot of customer activity and a lot of customer demand throughout the quarter. We're pleased with that continued motion.

The next question is from the line of Raimo Lenschow with Barclays. Please proceed with your question.

Hi. This is Sheldon on for Raimo. Congrats on the IPO and thanks for taking my question. Interested in the enhancements to the keyword generator tool. Can you help me understand how differentiated the new capabilities are compared to competitor solutions and the existing Google suite capabilities? And additionally on YouTube SEO, it seems like we're still in the early innings there. Can you provide any color on the opportunity? Thank you.

Thank you for the question. I believe that the new enhancements to our keyword generator display that we can deliver very unique data assets—like no other competitor in the market—with our distinctive approach to providing insights. We know that search is continually evolving, with YouTube as the second biggest search engine out there, and Amazon being the largest for e-commerce transactions. We recognize that our customers want to understand emerging trends and create their sales strategies accordingly. Therefore, we aim to deliver innovative, high-quality results through our keyword generator, and we're pleased with the data accuracy we achieved, covering almost eight hundred million keywords that users can investigate. I truly believe this will lead to new ideas and strategies for our customers to pursue to acquire more traffic.

Our next question is from the line of Jason Helfstein with Oppenheimer. Please proceed with your questions.

Hey guys. This is Patrick Josephs on for Jason. Thank you for taking our questions, and congrats on a strong start out of the gate. I just want to dive a little bit deeper into the record consolidated and ARR metrics. Specifically, were there deals that led into the second quarter that could not be closed during the pandemic? Or is it just broadly a shift in client behavior which is driving more spend at Similarweb? Also, I know that you guys are guiding to NRR metrics, but should we expect NRR to remain greater than one hundred five percent going forward on a consolidated basis?

I will try to answer from my side, and Jason can add his opinion. Our NRR growth over the past many quarters is a lot of hard work we did historically, and now we start to collect the fruits; a lot of improvement in our data, platform, sales approach, pricing and packaging, and building relationships with our customers has all been key in introducing new offerings that have strong ROI and value for our customers. This is why we see fantastic NRR results and the corresponding increase in spending with us. Jason, do you want to add anything?

I completely agree, Or. It's the result of all the hard work combined with strengthening across all customer segments on retention and upsell, which is what's driving that NRR metric.

Okay, great. Thanks. And just a follow-up question related to the app measurement product. Could you give us an update on the development of the app measurement product and whether there have been any delays given the iOS update? Thanks.

So yes, we decided to double down on our app offering and provide more market insight around the app ecosystem. We are making great progress there and plan to make significant advancements with Android data in the coming months. We also hope to introduce significant improvements to iOS data by the end of the year. We are committed to scaling and enhancing our app offerings.

Okay, great. Thanks for the questions.

Thank you. Your final question comes from Pat Walravens with JMP Group. Please proceed with your question.

Great. Thank you. Congratulations, you guys. So my first question is, if you look at this—it's a great win expansion with the e-commerce company, the three point five million dollars in ARR. So my first question is how much more room is there at a company like that? At three point five million dollars, are you done or can it keep getting bigger?

This is a great question because I was just talking with my team about this. I told them that my target is for this customer to become our first ten million dollar customer. This is what I hope and think. So there is certainly much room to grow.

Okay great. That's what I was hoping. And then how many other customers are there? Have you disclosed how many customers you have that are north of a million in ARR? If not, what does the pipeline look like for other customers that can achieve over a million dollars in ARR?

We haven't officially reported the specifics on how many seven-figure customers we have. However, we see an opportunity to increase this segment of customers. As I mentioned during the roadshow, we have a significant portion of the Fortune 500 already as our customers, and I believe most of them will need to pay seven figures down the road. Jason, do you want to add anything?

As Or said, our current focus and the metrics we talk about are our strategic customer groups that are spending over one hundred thousand dollars with us. We're pleased to see a fifty-two percent year-over-year growth in that cohort this quarter. Today, about forty-nine percent of our ARR is made up of these accounts. We believe over time we can continue to grow our existing customers into the seven-digit accounts.

Great. And then last one for me. Obviously, you're not guiding for the long term, but just Jason, how should we think about the growth aspirations for the longer term? What's the plan you’re building internally regarding your hiring, quotas, and new products coming to market, and how fast do you think the company can grow over the long term?

It's a great question, Pat. Like we said, we foresee a huge market opportunity ahead of us. We have observed our performance, and we know how to grow efficiently and sustainably. We will continue to invest responsibly to strike a balance between growth and efficiency. We are committed to leaning in and capturing a larger share of that market.

Okay. That’s it for me. Thank you.

Thank you. At this time, we've reached the end of the question and answer session. I’ll now turn the call over to management for closing remarks.

Thank you, everyone. I'm really excited to be here and answer your questions. It's our first time on this call, and there will be many more to come. We hope to continue delivering results that will make our investors happy. Thank you, and here's to an amazing year ahead.

Bye.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.