SEMrush Holdings, Inc.

Good morning, thank you for attending today's SEMrush first quarter 2025 earnings conference call. My name is Megan and I'll be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would now like to pass the call over to Brinley Johnson with Blue Shirt Group.

Please go ahead. Good morning and welcome to SEMrush Holdings first quarter 2025 conference call. We'll be discussing the results announced in our press release issued after market close on May 7th. With me on the call is our CEO, Bill Wagner, and our CFO, Brian Mulroy. Today's call will contain four looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Four 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 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 and growth strategies, sales and marketing activities and strategies, future spending and incremental investments, our guidance for the second quarter of 2025 and for the full year 2025, statements about future pricing and operating results, including margin improvements, revenue growth and profitability, statements about transition and the impact of recent changes to our executive management team, 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 duties to update these statements. Forward-looking statements are just matters that are subject to risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. For discussion of the risks and important factors that could affect our actual results, please refer to our most recent annual report on Form 10-K, filed with the Securities and Exchange Commission, as well as other filings with the SEC. And finally, during the course of today's call, we refer to certain non-GAAP financial measures. There's a reconciliation schedule showing the GAAP versus non-GAAP results currently available in our press release issued yesterday after market closed, which can be found at theinvestors.semrush.com. Now, let me hand the call over to Bill.

Thank you, and good morning. I'm thrilled to be joining you all on my first earnings call as the CEO of SEMrush. As a SEMrush board member over the last several years, I've had the opportunity to watch the company grow and evolve from a single product SEO solution for specialists to the leading digital marketing platform for companies of all sizes. Now as CEO, I'm excited to work with the team as we continue on the next stage for SEMrush. an era in which we will be expanding our best in class data platform, seizing the emerging opportunity presented by AI, adding new capabilities to our platform, and expanding our reach into the enterprise market. We reported revenues of $105 million in Q1, representing more than 22% year-over-year growth and exceeding the high end of our guidance. we delivered non-GAAP operating margin of 11.6% and increased our free cash flow margin by 360 basis points over the same period last year. We are especially pleased by the strong performance of our enterprise SEO solution, as we now have nearly 200 paying customers at an average ARR per customer of approximately $60,000, almost 20% higher than the expectations we shared at our analyst day last fall. We are also encouraged by the customer reaction to our AI products, which in a short period of time have grown to over $4 million in ARR. This includes AI Toolkit, which we launched in Q1 and quickly became one of the fastest growing new products in the company's history. As I step back and reflect on my first 60 days in the CEO seat, I want to share some early observations. Over the past eight weeks, I've been spending time with employees and customers alike from around the world. And without a doubt, I am even more optimistic about the market opportunity and future of SEMrush. A few takeaways. First, AI and the emergence of AI driven search presents a once in a generation opportunity for SEMrush. While it's still early, Companies I've spoken with are anxious to understand the impact of answer engines on their business. We expect SEMrush will become the go-to source companies will turn to to analyze, monitor, and proactively shape their brand presence within these new AI-driven search environments. Second, the enterprise SEO experiment for SEMrush is over, and the results are in. we are confident the enterprise market will become a significant growth driver for SEMrush for years to come. We now expect enterprise SEO solution, which we released less than 12 months ago, to exit the year with $30 million in ARR. Third, even though I was closely connected with the company as a director, I still did not fully appreciate the value of our data platform. It is essentially a data warehouse for digital marketing turning messy fragmented marketing signals across almost every digital channel into clear real-time insights that drive action. The vastness and quality of our data, along with our ability to continue adding new data sources, represents a unique moat that is highly valued by our customers. Lastly, I've been inspired by our employees. Now I'm sure most CEOs think their employees are special, But as I've traveled our offices and spoken to hundreds of employees, I've been particularly impressed with their adaptability and their innovation. Two traits that will serve us well on the next part of our journey. Of course, I still have a lot to learn as I continue to work with the team and talk to customers, but my early observations have allowed me to form early conviction around four immediate priorities. First, We will double down on AI and extend our early leadership position in AI driven visibility. We know AI is a game changer and I am confident no company is better positioned than SEMrush to help companies of all sizes build their brands and generate online visibility across both search engines and answer engines. In addition to the introduction of AI specific products, We are already leveraging AI within our products to automate workflows and help customers move more quickly and efficiently. But honestly, I think we are just scratching the surface and the teams are excited to push even harder in this direction. Second, we will accelerate the pace of innovation and new product introductions to drive even more growth in the enterprise segment. We have proven we can successfully sell into the world's largest brands, even if this initial success has been driven by a single SEO solution. Our next solution for the enterprise market, AI optimization, is now an open beta, and we have already seen strong interest from our customer base. We expect AI optimization to go GA later this quarter and to be followed by several additional enterprise solutions later this year. Third, we will make it easier for our customers of all sizes to purchase and use our platform. True to our belief that marketing should be accessible to every business, in the second quarter, we are introducing a new guided onboarding flow, as well as AI assistance that helps users get started, highlights opportunities to increase visibility, and automatically optimizes campaigns in real time. These changes remove friction and deliver value faster, especially for smaller resource constrained teams. Later this year, we'll be making additional enhancements to purchase and onboarding flows to continue to reduce friction and decrease the time to value for our customers. Lastly, we will further strengthen our best in class data platform. Our early success in AI underscores the value of our structured data, and the team and I believe we have an opportunity to increase the richness of our data and extend the durability and value of our data platform. This will require some additional focus from our product and engineering teams, but we expect to cover any additional expenses by reallocating existing resources. In summary, there's a great deal to be excited about. My first 60 days makes me believe that there is a much bigger opportunity in front of the company. Of course, we have a lot of work to do, and like everyone else, I'm mindful of the uncertain geopolitical and macroeconomic environment. I believe SEMrush has built an incredibly strong and durable platform, and we remain focused on unlocking opportunities to accelerate both top-line growth and profitability. With that, I will turn the call over to Brian to walk you through the financial results of the quarter. Brian?