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Greetings and welcome to the similar web fourth quarter fiscal year 2024 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Rami Meyerson, Vice President Investor Relations. Please go ahead.

Thank you, operator. Welcome everyone to our fourth quarter 2024 earnings conference call. Joining me today are our CEO and co-founder, Orr Offer and our CFO Jason Schwartz. Yesterday, after market closed, we released our results for the fourth quarter and published a discussion of our results in a letter to shareholders, as well as an investor presentation. With a strategic overview of the business on our investor relations website at .SimilarWeb.com. Certain statements made on the call today constitute forward looking statements which reflect management's best judgment based on the currently available information. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our earnings release and our most recent annual report, file them for 20F for more information on the risk factors that could cause actual results to differ from our forward looking statements. Additionally, certain non-GAAP financial measures will be discussed on the call today. Reconciliation to the most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation. We will begin with Orr and Jason's comment to the quarter and then we will open up the quarter's questions and sales side answers. With that, I'll turn the call over to Orr. Orr, please go

ahead. Thank you, Remy and welcome everyone joining the call today. I'm extremely proud of the financial results for the fourth quarter and the 2024 that were reported yesterday. Revenue for the year of nearly $250 million was up 15% year over year and for Q4 was up 16% year over year. Overall, NRR was 101% and for the over 100K ARR customer, the NRR was 112% up from 111 in Q3 and 107% for last year. Our customer base grew 17% year over year ending with more than 5,500 ARR customers. In Q4, we signed 15 customer contracts, each of which were 7-digit contract values. Our top line demand remains strong with more than 10 million visitors to our website on a monthly basis and more than 120 million users visiting our similar web website in 2024. I'm encouraged by two new customer relationships with companies that are global leaders in the financial sector. In December, we announced that S&P Global, a leader in credit scoring and risk management analytics, will begin to integrate similar web digital data into its credit risk analysis. And today, I'm also excited to share that Bloomberg Professional Services has entered into a multi-year agreement to supply similar web digital data to Bloomberg terminal subscribers. I believe that these deals highlight the strength and the versatility of our data assets as alternative data for investors. But 2024 was not only about revenue and customer growth. We also demonstrate our disciplined execution. As the top line growth accelerated, we delivered our first full financial year of non-GAAP operating profit. And free cash flow. And I'm super proud that we delivered a rule of 26 performance for the full year of 2024 with a great mix of accelerating growth and improving possibility. As a leading supplier of digital data, the AI evolution presents a significant opportunity for similar web. High quality, comprehensive, actionable, and trusted data like similar web is a critical component for every AI and LLM tech stack. The AI revolution presents a significant opportunity for our digital data with many new use cases. Last quarter, I discussed about four different opportunities for us to capitalize and monetize the generative AI opportunity. The first one is embedding AI solution into our own platform. The second one is helping brands navigate the shift in consumer behavior that driven by increased of the use of the chatbots and all those brands need this visibility and they come to us. The third one is providing fresh data for LLM training. And the last one is stream internal process and make more efficiency internally in our company. To capitalize on this huge growth opportunity, we have decided to ramp up our investment in R&D and our -to-market teams. We plan to increase our investment in R&D to enhance our data collection and measurements for the new gen AI world and continue to develop additional products and solutions that companies require to compete and win in this new world. We are also investing in our -to-market teams, hiring people across all the geographies, as well as upskilling and expanding our Salesforce to capture the opportunity presented by the AI revolution and the high demand we are seeing on top of our funnel. I believe that we are still only starting to realize the potential of our data and the addressable market we serve. This investment will reduce our operating profit in the short term, but I believe it will enable us to continue to accelerate growth and capitalize on the growth opportunity. As we have demonstrated, we know how to drive efficiency and scale and believe that this is the right time for us to make those investments. And as I like to say, we are just getting started. Thank you to everyone on the call for continued support and with that I will turn the call over to Jason.

Thanks, Oar and everyone joining us on the call today to discuss our fourth quarter results. I'll provide highlights of our financial performance and then we'll open up the call to questions. We generated $65.6 million of revenue in Q4, a 16% increase relative to the fourth quarter of 2023. For the full year of 2024, we generated $249.9 million of revenue, representing 15% growth over 2023. Revenue from our $100,000 ARR customers increased and represents 61% of our overall ARR. The number of $100,000 ARR customers grew to 405 at the end of 2024, increasing 11% year over year. As this customer base grew, the average ARR per customer increased 7% year over year to approximately $376,000. The increase in the average annual revenue per customer was driven by further product adoption and expansion by our customers. We are proud that 49% of our ARR is contracted under multi-year contracts, up from 42% last year. We believe this demonstrates the importance and critical nature of our data to our customers and we expect these multi-year contracts will contribute to improved retention rates ahead. Our remaining performance obligations or RPO totaled $246 million at the end of Q4, up 26% year over year. We expect to recognize approximately 69% of total RPO as revenue over the next 12 months. Our operational performance in the quarter and the full year demonstrates our continued commitment to disciplined execution and we delivered a non-GAAP operating margin of 4% in Q4, a sixth consecutive quarter of non-GAAP operating profit. For the full year, we delivered a non-GAAP operating margin of 6% and 800 basis point improvement relative to 2023 and our first full year of operating profit on a non-GAAP basis. We generated $2.7 million of normalized free cash flow in the quarter, a fifth consecutive quarter of positive free cash flow and $27.7 million in 2024, reflecting an 11% free cash flow margin. We expect to continue to generate positive free cash flow for 2025 as well. Turning to our outlook for 2025, for the full year of 2025, we expect total revenue in the range of $285 to $288 million, representing 15% year over year growth at the midpoint of the range. In Q1 2025, we expect total revenue in the range of $66 to $66.5 million. For the full year, we expect our operating profit to be between $1 and $4 million. Non-GAAP operating loss for the first quarter of 2025 is expected to be in the range of $1 to $1.5 million. Our guidance reflects increased operating expenses to accelerate our hiring to capture the opportunities presented by the growing demand for our data and solutions as Orr mentioned. After delivering a year of accelerating revenue growth, non-GAAP operating profit and positive free cash flow, we remain focused on delivering profitable growth over time as well as achieving our long-term profit and free cash flow targets. And with that, Orr and I are ready to answer your questions.

Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull over questions. Thank you. Our first question is from Surrender Finn with Jefferies. Please proceed with your question.

Thank you. Can you provide a little bit more color on this incremental spend? I'm estimating it's about $20 million versus expectations here. How much of that is towards the -to-market strategy? How much is that towards R&D? And how should we think about the cadence of hiring as we look across the year?

I think the majority of the spend is for accelerating our -to-market and ramping it up. We just see also nice investment in R&D. But I think also the forks and pressure that we saw in Q4 and Q1 is also part of that $20 million that you're talking about.

And then just the cadence of the spend, like how did you come up with that number in terms of just thinking about, was it that you just wanted to keep margins kind of positive at this point? Like why not more? Why not less

at this point? Yeah, I think it's a great question. So ours is also see it was always that we are pivoting our company to profitability and we're going to stay profitable moving forward. As long we're going to see good opportunity to accelerate our growth. We're still a small cash company. Now ending up the year with close to $250 million meaning that we have a lot of markets to capture. And we did a lot of strong demand on the whole of the fund. So we made a decision to do a big investment and help capture this opportunity as long as we are And we can maximize the opportunity as we do see that we can bring similar work to be one of the top growing social company in the public market. And we want to capture it.

Got it. And then I guess it's my second or the follow up question here. Can you talk a little bit about the growth outlook in terms of the midpoint being 15% year over year? That seems like it's roughly the same as what it was in 2024. So with the incremental spend is the idea that you're expecting to see an acceleration growth in 2026 then or Is there expectation of what how do we think about the return or what we should expect in terms of the acceleration that we should expect and And maybe why is there not perhaps? Higher expectations or growth given all the spending in 2025.

I think it's an excellent question and you're right. I think there's two elements that That this is why we decided to come with the 15 as a starting line for the year. What we did see is that because we are arming our go to market and hiring a lot of people during the end of Q4 and still continue hiring them And in Q1 and and a lot of our sellers and managers are spending time with interviewing ramping people And also going through change management. So we replace managers and no performance in Q4 and then ramp up People so we did see a little bit softness with the execution in Q4 now going into Q1 And on top of that we have the forex pressure We as a global company around 50% of the revenue come outside of the u.s we saw a headwind from the forex on Q4 that hurt the growth And you know that if you start the year already below so you need to close that up Then you saw another headwinds on the forex from into Q1 meaning that The the Q1 is a little bit soft And we guide for 12% but you see we are very confident on the 15 for this year meaning that During the next quarter we kind of see an acceleration of the growth that means that we are expecting a much more growth rate going to Q3, Q4 as an easy rate for In 2026 so you're going to see a significant increase in growth in the second part of the year And and this is why we decided to one to give 15 at the starting point

Okay, thank you. That's helpful on understanding the near-term dynamics

Thank you our next question is from ryan mcwilliams with bark lays please proceed with your question

Um, maybe for jason How did revenue results in the fourth quarter? Before immersing your expectations into the quarter. It looks like you guys kind of came in around the high end of your guide and usually you Do a little higher than that and then can you quantify any? One-time impacts to consider for the fourth quarter like if there was an fx impact what that looked like either on the revenue or profitability side

So as orb mentioned we saw you know some of the FX pressure hitting in q4 and part of that is built into the guide It's about one to two percent on on run rates. So that is built into some of what you see in in Achieving the high end of our of our guide for q4 as well as the Guide that we have going forward

Okay, and then just on the fourth quarter was there any fx impact to that quarter and then I guess how would you characterize Um the quarter in general versus your expectations into the quarter

So I I think that again from a overall perspective that it was a it was a good quarter you see You know acceleration in terms of the the larger customers both in growth of 11 percent year over year in a customer count the the aur average revenue from those customers up seven percent Seeing the nrr for that group pick up another one percent. We think that that was Uh, very strong indications of of what was going on as well as some of these large You know relationships that that one of which we had shared previously while we were on the road of the s&p the second one which Sorry, the second one which we announced just today with bloomberg a multi-year Relationship of as well. We think those things are Good indications as to what we were have been working on and continued that that growth So we were pleased with the where where it was we would you know, the the fx headwinds are are something that we are, you know dealing with in terms of The guidance going forward, but we feel comfortable with the overall momentum that we're seeing In the in the business

I'll leave it there. Appreciate the color. That's yes

Thank you, our next question is from arjun badia with william blair, please proceed with your question

Perfect, uh, thank you guys Um, or maybe one for you on the ai investments you're making Um, I know you mentioned a lot of us, uh go to market but on the product side I think you mentioned you're investing in data collection and forecasting Um to get ready for for the gen ai kind of revolution Can you expand on that a little bit because I I I had assumed that The platform the way it exists today Um has a lot of those capabilities and um can be maybe more easily Uh pivoted for for for gen ai, but it sounds like there's um some some more change on the platform required So what what are you changing and what's evolving on the product side?

Yes, hi arjun, thank you for for the questions and there's two fronts now that we need to make investment basically, we need we want to Integrate ai in order to accelerate the insight coming from our data to make our customer Life easier to discover value and get away from the platform So we're starting a really amazing innovation with that. We're basically putting agents On top of our platform and you know automatically generating insight so we Shifting lots of the teams to start working on those innovations And we don't want to stop the regular cadence. We had to do some investment at that front to Continue the development to make our platforms And much better and for the majority of the users. This is the first front The second front as we getting more and more demand for brands That's one to get better visibility on the change chat both and gen ai is having the consumers and the way they search consumer information and making purchase decision And in order to do that, we need to collect and analyze much more granular data around chat Conversation and the different channels and basically introducing what I will call gen ai intelligence The brands can understand the sentiment and the impact each one of those can have on their brand and purchase decision So this is some investment that we are doing now to collect these data Productize that we can start presenting to customers in more scalable ways. So this is another front investment that we are doing

Okay Um understood. Thank you. Um, and then uh, jason one for you again on the on the revenue guidance. Um Did you it seems like there's a few changes on go to market that you're that you're incorporating in but are you Is it fair to say this is more this is a more conservative outlook on 25 than you've given historically Are the changes is driving any kind of? In in in your guidance philosophy as you maybe wait to See how the year unfolds in the first half year before Before growth really starts to pick up like what did you consider? When you were doing the revenue guidance

Sure arjun, yeah, as you know, we like to give guidance we know we can meet and uh, we looked at at the with the backlogs that we have as well as the Um some of the the macro like the fx impact and we built all that into to our assumption Um as or mentioned when you look at at the guide Which starts at you know at a midpoint of 12 percent for q Uh for q1 and ends with a 15 for the full year it that that mathematically means that we are Expecting to have a strong back end of the year that is already built into our philosophy, which is Exactly what we've been talking about that. We are accelerating the investment in our -to-market teams in order to drive that Contribution happening in the back end of the year and we think this is the right way to approach it Okay, got it, thank you

Thank you our next question is from luke horton with northland securities, please proceed with your question

Yeah, hey guys, uh, just wanted to touch on gross margin, which is down sequentially here Uh, could you just talk a little bit about what drilled this? Um, and then is this kind of a level? You see it being added across 2025 as you guys are investing in the business

Yeah, um So I think this a little bit decrease in grossing margin is to mostly invest in this new data capturing For the genei, so we need to pursue the investment And then on top of that we also introduce two data sets of App intelligent and add intelligent this is to acquisition we did in 2024 So we are now Integrating those data sets. So every time we are adding more data sets, it's increasing global the gross margin, but we expect that to Get better over the year

Got it, uh, and then just on the bloomberg customer announcement, um, seems like a very nice win Uh It was just wondering if this is going to be like an add-on that people will be paying separately um As as an add-on for that service or if this will be just embedded into everyone who has a bloomberg terminal and if this is Kind of a fixed contract for you guys or if it has anything to do with People adding that on to their their bloomberg

Yeah, so we're very proud on this engagement it's many years of dialogue and bloomberg testing our data and Getting to the conclusion that we are the number one digital data providers of choice And this is why they decided to go with us And it was a long discussion and we feel very proud about this relationship and what I Remember that they will add us as a They will take a small portion of our data That represents digital growth and will add it as part of their alternative data solution for the subscribers and I'm not sure if it would be Free the subscribers or with a little bit premium but the consumer will be able to be exposed to the concept of digital marketing data and how it can predict Public companies growth and if they would love and use it they can come to similar web and buy more advanced Solution that we are offering with our stock intelligence So what will we see in bloomberg is a small part of our capabilities? And for I think for all of their subscribers

Got it makes sense. Awesome. Well, thanks for taking the questions guys

Thank you our next question is from jason helstein with opinheimer, please proceed with your question

Um, hey everybody. Um, so just really it's kind of like one question How do you think about the timing of the payback on the increased investments again around like ai and go to market? Um, should we think about target margins for 26 and 27? Um, or do you want to think about it's like your progress to a rule of 40 scale? And then can you kind of be maybe a bit specific on You know how you see yourself progressing over the next few years is obviously given that everyone's surprised by the level investment But you obviously are confident around the payback. Thank you

Yeah, we are confident Thank you for the question jason We are confident on the demand because it solves the hardest part that is bringing demand And and it's there and we just need to approach and prioritize it And what we're doing now is just changing the way we are growing we are focusing more on growth But still maintaining profitability I think that last year we were super proud, you know, with driving 15 growth and 11 percent And free cash flow and going into this year. We're just going to change the balance to You know and be more on the growth side And I think we're going to see the return in the second part of the year while this investment And and going into 2026 we are positioning the company to be top-notch growth software company And of course profitable and would start to work on increasing possibility and To probably double digit around 2026

Thank you Thank you our next question is from scott burg with needham and company, please proceed with your question

Hi everyone, thanks for taking my questions Or I wanted to focus on a comment you had early in the q a that you did see some softness in your fourth quarter execution Can you help elaborate on that a little bit? And um, I guess as you look at that softness Is it corrected for in q1 or how do we think about the timing to returning to a more normalized sales case?

Thanks Yeah, we start seeing an Improvement, you know, we have an amazing new cro and it came over from nelson iq And as she you know driving good changes And And doing some great change management in order to send the foundation for the growth and you know, so Moving low performance getting new strong managers and increasing the hiring We saw that it creates as some you know More noise in the go-to market and we're able to stable it And we're seeing better performance Now in the q1 Funny enough all across our team around the world and the seller has got too many meetings And from the high demands that it starts hurting the win rate So we were not hiring fast enough in q4 and we now also closing the gap in q1 And so we do see strong performance now, so hitting the floor

Uh Very helpful and then jason as we look at your guidance for this year This is kind of a follow-up to the last question your revenue growth guidance suggests The rest of the year accelerates from the from the q1 guidance here today First of all is that an accurate statement? I assume that it is given how the math works, but the two is your confidence High in in that acceleration relative to what you're seeing on the sales execution side here in q1

And so on the first question the answer is yes, like you said that's the way that's the way the the math works Um, so we do see that acceleration coming in the in the back end of the year. We also see, you know pipeline and so we have some visibility that gives us the confidence that we build a the guidance and like I Like to say we'd like to give guidance. We know we can meet

The face again

Thank you our next question is from adam hopskis with goldman sax please proceed with your question

Great thanks so much for taking the questions You talked a lot about this initiative to monetize brands that are navigating shifts in consumer behavior I just want to get an update on how that's trending particularly your conversations into the beginning of the year How are brands sort of evolving to the evolving gen.i environment and how does similar web plan to address that?

Yeah, I think more and more brands are to Look out there for more visibility about how much Consumers are querying chatbots about their brand or about the industry And how the answer that chatbots are giving Changing the decision of purchase they're going to make and they want to understand like this Is positive around them or negative or if the Chatbots are bringing them at the right choice And how they can impact the chatbots to to understand the resource the chatbots are using in order to carry those answers And this is not that probably Only similar web can bring maybe a very few companies in the world can give the visibility about what people Asking the chatbots what are those answers? How they're impacting the consumer journey? So we are positioned I think the best in the world to supply those answers That are becoming more and more important To brand as the consumer behavior change and they start using more and more of those chatbots for purchase decision decisions

Okay, great that's helpful and then could you just give us an update on the large language model opportunity I know this evolves quickly and you've signed a couple of eight-figure deals here But i'm curious how you're thinking about monetization potential now that we're a couple of months away from some of those announcements

Have you had any

incremental conversations with folks that give you confidence around monetization? How should we think about that?

Yeah, I think there is not a lot of companies with numbers that's trying to build those chatbots and probably Less than hundreds maybe single digit that it's not a big market. It's a lot of Investments they need to do in order to build those simple from this market is not big But when they are going into those adventure to bring in chatbots, they will need the best To feed those llm And when they want to choose the best data providers like bloomberg they all ended up engaging in similar web as they recognize us as the leader for digital market data They know that we are the best one to provide this data and so it's you know Low-level engagement because there's not a lot of them And but if we have it's great engagements

Okay, thank you very much

Thank you our next question is from patrick walravans with citizens jmp, please proceed with your question

Oh great. Thank you. And and thanks for all the color on this Forgive me or if I go back to q4, I mean how sort of a series of questions here How soft was the execution in q4 like was it a pretty big miss by the sales team? When's the last time you guys had? You know a soft execution quarter Was susan's surprise? Right, and and when you broke it down after you know, where what caused it, right? so like we don't usually hear that too many leads or too many meetings is the reason for a miss right usually hear things like You know customers didn't want to commit so if you could if you could drill into that more that would be great and I just think the reason it's important is because You're investing on the back of that so we just want to we want to sort of close that Get a better understanding why you decide to invest sales and marketing if q4 wasn't very good, right? Thanks so much

Yeah, yeah, of course, and I think it's it's a great question. Thank you for raising it I think that q4 Was okay wasn't great usually our q4 is amazing if you look historically on 2023 and 2022 And q4 was okay like it's uh, it was soft. I wish it was better but But uh, it was okay And we had some areas in the business when we the softness were stronger mostly because of the gerial and low performance and and this isn't it wasn't been cleaned before and if you for we looked opportunity to improve and Improvement around the market and we did some change management in meha And it was behind the change management in japan when they were behind The numbers and I think this is also was impacting, you know the performance little bits And but the new people we hired our place and they look Looking good. So i'm fully confident and I see the numbers and we are investing because we We polish on the what we see

That's super helpful, thank you

Thank you Thank you our next question is from ashley kim with city, please proceed with your question

Hi oran jason, thanks for the question. Um, just wanted to ask about the 15 customer contracts. Um, that were seven figures Could you um kind of give more color on whether the deals grew into that or um, whether any anywhere new lands and Um, how many of those were ai related

Yeah, hi ashley first of all, thank you for asking this question because I think it's important to discuss this great indication This is a record high quarter spot for closing seven figures And as you saw in the past Quotals start reporting eight figures engagement all of those indicate that we are now ready to increase our engagement with our customers and most the majority of those 15 seven figures were expansion It's meaning that we have more and more customers that are now Ready to invest more with us And we from our side are now ramping up and more senior than again on the process to know to negotiate and expand And really great Business of customers that similar web have and you can also see that with the multi-year Increase of our customers We are now going into this year with almost 50 percent of the book of businesses multi-year This is a very strong indication that the customer are trusting our data and want a long-term relationship I think this system is showing you that a lot of them are now ready to Invest more with us Really from our side just need to hire more executive more experienced sales and people And on both sides in order to drive this expansion and improving our and are going forward

Thank you Thank you, there are no further questions at this time i'd like to hand the floor back over to management for any closing remarks

Thank you everyone for the question We have confidence for a really great year the end of 2024 with a really amazing result And we are looking very positive going into this year and good luck to all of us. Bye

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