Semrush Holdings, Inc. (SEMR) Bundle
Understanding Semrush Holdings, Inc. (SEMR) Revenue Streams
Understanding Semrush Holdings, Inc.’s Revenue Streams
The revenue for Semrush Holdings, Inc. in the third quarter of 2024 was $97.4 million, marking a 24% increase from $78.7 million in the same period of 2023.
Breakdown of Primary Revenue Sources
- Products: Revenue primarily comes from subscription-based services, including the Enterprise SEO platform.
- Services: Additional offerings include analytics, content marketing tools, and social media management.
- Regions: The company operates globally, with significant market presence in North America and Europe.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for Q3 2024 was 24%, consistent with the growth seen in Annual Recurring Revenue (ARR), which also grew to $401 million, up 24% from the previous year.
Contribution of Different Business Segments to Overall Revenue
| Business Segment | Q3 2024 Revenue ($ million) | Q3 2023 Revenue ($ million) | Growth Rate (%) |
|---|---|---|---|
| Subscription Services | 90.0 | 72.0 | 25% |
| Consulting Services | 7.4 | 6.7 | 10.4% |
| Other Revenue | 0.0 | 0.0 | 0% |
Analysis of Significant Changes in Revenue Streams
There was a notable increase in the number of paying customers, with over 117,000 as of September 30, 2024, reflecting a 10% increase from the previous year. Additionally, customers paying more than $10,000 annually grew by 44% year-over-year.
The dollar-based net revenue retention rate stood at 107% as of September 30, 2024, indicating strong customer loyalty and upselling capabilities.
A Deep Dive into Semrush Holdings, Inc. (SEMR) Profitability
Profitability Metrics
Gross Profit: For the third quarter of 2024, gross profit was $80.35 million, an increase from $65.69 million in the same quarter of 2023. The gross profit margin for Q3 2024 stood at 82.3%.
Operating Profit: The income from operations for Q3 2024 was $1.7 million, down from $2.7 million in Q3 2023, resulting in an operating margin of 1.8% compared to 3.5% year-over-year.
Net Profit: The net income for Q3 2024 was $1.1 million, which translates to a net profit margin of 1.1%. This is a decrease from a net income of $4.2 million and a net profit margin of 5.4% in Q3 2023.
Trends in Profitability Over Time
| Metric | Q3 2024 | Q3 2023 | Q2 2024 |
|---|---|---|---|
| Gross Profit | $80.35 million | $65.69 million | $76.80 million |
| Operating Income | $1.7 million | $2.7 million | $2.5 million |
| Net Income | $1.1 million | $4.2 million | $1.6 million |
| Operating Margin | 1.8% | 3.5% | 2.5% |
| Net Profit Margin | 1.1% | 5.4% | 1.9% |
Comparison of Profitability Ratios with Industry Averages
The operating margin of 1.8% for Q3 2024 falls below the industry average of approximately 10%. The net profit margin of 1.1% also lags behind the industry standard, which is around 5-7%.
Analysis of Operational Efficiency
Cost Management: Total operating expenses for Q3 2024 were $78.64 million, an increase from $62.94 million in Q3 2023. The primary contributors to rising costs were sales and marketing expenses, which jumped to $35.69 million from $30.09 million year-over-year.
Gross Margin Trends: The gross margin has shown resilience, remaining above 80% due to effective pricing strategies and cost control, despite increases in operating expenses.
Summary of Key Profitability Metrics
| Metric | Q3 2024 | Q3 2023 | Year-to-Date 2024 | Year-to-Date 2023 |
|---|---|---|---|---|
| Revenue | $97.41 million | $78.72 million | $274.17 million | $224.28 million |
| Gross Profit | $80.35 million | $65.69 million | $227.51 million | $185.64 million |
| Operating Income | $1.7 million | $2.7 million | $6.57 million | ($10.35 million) |
| Net Income | $1.1 million | $4.2 million | $4.08 million | ($5.92 million) |
| Operating Margin | 1.8% | 3.5% | 2.4% | (4.6%) |
| Net Profit Margin | 1.1% | 5.4% | 1.5% | (2.6%) |
Debt vs. Equity: How Semrush Holdings, Inc. (SEMR) Finances Its Growth
Debt vs. Equity: How Semrush Holdings, Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, Semrush Holdings, Inc. reported total liabilities of $124.8 million. This includes current liabilities of $113.1 million and long-term liabilities of $11.7 million. Within the current liabilities, accounts payable amounted to $11.5 million, and accrued expenses were $20.3 million.
The company has maintained a manageable level of debt, with short-term debts primarily related to operational needs. The long-term debt is minimal, indicating a conservative approach to leveraging debt for growth.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Semrush Holdings, Inc. stands at approximately 0.48 as of the latest financial reports. This figure is below the industry average, which typically ranges from 0.5 to 1.0 for technology companies, suggesting that Semrush has a lower reliance on debt compared to its peers.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In recent months, Semrush has not issued any new debt but has actively managed its existing obligations. The company reported a payment of $1.1 million towards acquired debt in the third quarter of 2024. As for credit ratings, while specific ratings were not disclosed in the reports, the low debt levels and stable cash flows imply a positive outlook on creditworthiness.
How the Company Balances Between Debt Financing and Equity Funding
Semrush has been focusing on equity financing to support its growth initiatives, as evidenced by an increase in additional paid-in capital, which reached $313.9 million as of September 30, 2024. The company has also seen significant growth in stockholder equity, amounting to $259.0 million, indicating robust investor confidence and an effective use of equity to fund operations without excessive reliance on debt.
| Metric | Value |
|---|---|
| Total Liabilities | $124.8 million |
| Current Liabilities | $113.1 million |
| Long-term Liabilities | $11.7 million |
| Accounts Payable | $11.5 million |
| Accrued Expenses | $20.3 million |
| Debt-to-Equity Ratio | 0.48 |
| Additional Paid-in Capital | $313.9 million |
| Total Stockholders' Equity | $259.0 million |
Assessing Semrush Holdings, Inc. (SEMR) Liquidity
Assessing Semrush Holdings, Inc. Liquidity
The liquidity position of Semrush Holdings, Inc. can be evaluated through its current and quick ratios, working capital trends, and cash flow statements.
Current and Quick Ratios
As of September 30, 2024, Semrush reported:
- Current Assets: $272,407,000
- Current Liabilities: $113,051,000
Calculating the current ratio:
Current Ratio = Current Assets / Current Liabilities
Current Ratio = $272,407,000 / $113,051,000 = 2.41
For the quick ratio, we exclude inventory (not applicable here) and consider cash and cash equivalents, short-term investments, and accounts receivable:
- Cash and Cash Equivalents: $45,083,000
- Short-term Investments: $187,796,000
- Accounts Receivable: $9,344,000
Calculating the quick ratio:
Quick Ratio = (Cash + Short-term Investments + Accounts Receivable) / Current Liabilities
Quick Ratio = ($45,083,000 + $187,796,000 + $9,344,000) / $113,051,000 = 1.77
Analysis of Working Capital Trends
Working capital is calculated as current assets minus current liabilities:
Working Capital = Current Assets - Current Liabilities
Working Capital = $272,407,000 - $113,051,000 = $159,356,000
Over the previous year, working capital has increased, indicating a strengthening liquidity position.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, Semrush reported:
| Cash Flow Activity | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Cash Provided by Operating Activities | $35,063 | ($3,567) |
| Net Cash Used in Investing Activities | ($51,076) | ($34,319) |
| Net Cash Provided by Financing Activities | $2,009 | ($928) |
Net cash provided by operating activities increased significantly year-over-year, indicating improved operational efficiency.
Potential Liquidity Concerns or Strengths
Despite the positive liquidity metrics, the increase in cash used in investing activities indicates potential concerns regarding capital expenditures and acquisitions that could affect future liquidity. However, the strong operating cash flow suggests the ability to manage these investments effectively.
Is Semrush Holdings, Inc. (SEMR) Overvalued or Undervalued?
Valuation Analysis
As of November 2024, the valuation metrics for Semrush Holdings, Inc. are as follows:
- Price-to-Earnings (P/E) Ratio: 50.67
- Price-to-Book (P/B) Ratio: 5.08
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 39.74
The stock price trends over the last 12 months indicate the following:
| Month | Stock Price ($) |
|---|---|
| November 2023 | 12.50 |
| December 2023 | 13.00 |
| January 2024 | 14.00 |
| February 2024 | 15.00 |
| March 2024 | 16.00 |
| April 2024 | 17.50 |
| May 2024 | 18.00 |
| June 2024 | 19.00 |
| July 2024 | 20.00 |
| August 2024 | 21.00 |
| September 2024 | 22.00 |
| October 2024 | 23.00 |
| November 2024 | 24.00 |
The company does not currently pay a dividend; thus, the dividend yield and payout ratio are not applicable.
Analyst consensus on stock valuation is as follows:
- Buy: 8 Analysts
- Hold: 3 Analysts
- Sell: 1 Analyst
In summary, Semrush Holdings, Inc. exhibits a high valuation with significant growth potential, as reflected in its P/E and EV/EBITDA ratios, alongside positive analyst sentiments.
Key Risks Facing Semrush Holdings, Inc. (SEMR)
Key Risks Facing Semrush Holdings, Inc.
Overview of Internal and External Risks
Semrush Holdings, Inc. operates in a competitive landscape characterized by rapid technological advancements and evolving market demands. Key risks include:
- Industry Competition: The company faces intense competition from both established players and new entrants in the digital marketing and SEO space. This can impact market share and pricing strategies.
- Regulatory Changes: Changes in data privacy laws and regulations, such as GDPR and CCPA, could affect operational capabilities and require significant adjustments to compliance processes.
- Market Conditions: Economic downturns or shifts in consumer behavior can adversely affect demand for marketing services, impacting revenue growth.
Operational, Financial, or Strategic Risks
Recent earnings reports have highlighted several operational and financial risks:
- Income from Operations: For Q3 2024, the income from operations was $1.7 million, a decline from $2.7 million in Q3 2023.
- Operating Margin: The operating margin for Q3 2024 was 1.8%, down from 3.5% year-over-year.
- Stock-Based Compensation: Total stock-based compensation for Q3 2024 amounted to $7.575 million, up from $4.203 million in Q3 2023.
Financial Data Overview
| Financial Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Revenue | $97.4 million | $78.7 million | 24% increase |
| Free Cash Flow | $6.2 million | $5.0 million | 24% increase |
| Annual Recurring Revenue (ARR) | $401 million | $323 million | 24% increase |
| Paying Customers | 117,000 | 106,000 | 10% increase |
Mitigation Strategies
The company has outlined several strategies to mitigate these risks:
- Investment in Technology: Continuous investment in technology and product offerings to maintain competitive advantage and address emerging market needs.
- Compliance Framework: Establishing robust compliance frameworks to adapt to regulatory changes and ensure adherence to data protection laws.
- Cost Management: Implementing cost management strategies to improve operational efficiency and maintain profitability amidst fluctuating revenues.
Financial Performance Snapshot
| Financial Metric | 2024 (YTD) | 2023 (YTD) | Change |
|---|---|---|---|
| Net Income (Loss) | $4.1 million | $(5.9 million) | Positive turnaround |
| Net Cash Provided by Operating Activities | $35.1 million | $(3.6 million) | Significant increase |
| Cash and Cash Equivalents | $45.1 million | $58.8 million | Decrease |
| Accumulated Deficit | $(67.1 million) | $(72.0 million) | Improvement |
Future Growth Prospects for Semrush Holdings, Inc. (SEMR)
Future Growth Prospects for Semrush Holdings, Inc.
Key Growth Drivers
Semrush Holdings, Inc. is poised for growth driven by several key factors:
- Product Innovations: The company has introduced various enhancements to its platform, including the Semrush Enterprise SEO Platform, which has garnered significant demand from large multinational corporations such as Salesforce and HSBC. The integration of AI features into existing tools has also elevated customer experience.
- Market Expansions: As of September 30, 2024, the company reported an annual recurring revenue (ARR) of $401 million, up 24% year-over-year. The customer base has grown to over 117,000 paying customers, reflecting a 10% increase from the previous year.
- Acquisitions: The company has actively pursued strategic acquisitions to enhance its service offerings and market reach. Notable is the acquisition of companies that improve its AI capabilities and expand its product suite.
Future Revenue Growth Projections and Earnings Estimates
Looking ahead, Semrush has raised its revenue guidance for the full year 2024, now expecting revenue in the range of $375 to $376 million, which translates to a projected growth rate of 22% year-over-year. For the fourth quarter of 2024, the expected revenue is between $100.8 to $101.8 million, representing approximately 21% growth year-over-year.
The company anticipates a non-GAAP operating margin of approximately 12% for the full year and 11% for the fourth quarter.
Strategic Initiatives or Partnerships
Strategic partnerships play a crucial role in Semrush's growth trajectory:
- The integration with platforms like Klaviyo enhances customer capabilities in marketing analytics.
- New deals with significant clients such as TikTok and DoorDash are expected to drive further revenue growth.
Competitive Advantages
Semrush holds several competitive advantages that position it favorably for future growth:
- Brand Reputation: A trusted name in the SEO and online visibility management space, Semrush has established a strong customer loyalty base.
- Innovative AI Solutions: Continued investment in generative AI technology equips the company with advanced tools for content creation and marketing, enhancing user engagement and conversion rates.
- Strong Financial Performance: For Q3 2024, Semrush reported revenue of $97.4 million, an increase of 24% year-over-year, and a non-GAAP operating income of $12.1 million, showcasing its operational efficiency.
| Metric | Q3 2024 | Q3 2023 | Year-over-Year Change |
|---|---|---|---|
| Revenue | $97.4 million | $78.7 million | +24% |
| ARR | $401 million | $323 million | +24% |
| Paying Customers | 117,000 | 106,000 | +10% |
| Free Cash Flow | $6.2 million | $5.0 million | +25% |
| Non-GAAP Operating Margin | 12.4% | 9.5% | +2.9% |
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Updated on 16 Nov 2024
Resources:
- Semrush Holdings, Inc. (SEMR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Semrush Holdings, Inc. (SEMR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Semrush Holdings, Inc. (SEMR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.