SEMrush Holdings, Inc.

My name is Breaker and I will 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. I would now like to pass the conference over to your host, Brinley Johnson of the Blue Shirt Group. Thank you, you may proceed Brinley.

Good morning and welcome to SEMrush Holdings second quarter, 2025 conference call. We'll be discussing the results announced in our press release issued after market close on August 4th, 2025. With me on the call today is our CEO, Bill Wagner and our CFO, Brian Mulroy. Today's call will contain forward looking statements which are pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements include, but are not limited to, statements concerning our expected future business and financial performance and financial condition, expecting growth, adoption and existing and future demand for our existing and any new products and features, our expected growth of our customer base and specific customer segments, the continued development of our products, industry and market trends, our competitive position, market opportunities and growth strategies, sales and marketing activities and strategies, future spending and incremental investments, our guidance for the third quarter of 2025 and the full year 2025, statements about future pricing and operating results, including margin improvements, revenue growth and profitability, assumptions regarding foreign exchange rates and plans and expectations and statements regarding our share repurchase program. Forward looking statements are statements other than statements of fact and can be identified by words such as, expect, can, anticipate, could, plan, seek, believe and will. These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date and we do not undertake any duty to update these statements. Forward looking statements address matters that are subject to risks and uncertainties that could cause actual results but for 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 10K filed with the Securities and Exchange Commission as well as other filings to the FCC. And finally, during the course of today's call, we refer to certain non-GAAP financial measures. There is a reconciliation schedule showing the GAAP versus non-GAAP results currently available in our press release issued yesterday after market closed which can be found at .semrush.com. Now, let me turn the call over to Bill.

Thank you and good morning. I'm pleased to share that Semrush had another quarter of strong revenue growth and solid margins. Revenue in the quarter was $108.9 million representing 20% -over-year growth and non-GAAP operating margin came in at 11%. We once again reported very strong performance in our enterprise segment, a major area of focus for us in 2025. We continue to see strong demand for our enterprise search engine optimization products in this segment and our enterprise SEO solution grew to 260 customers with an average ARR of approximately $60,000. We believe this growth underscores the compelling value proposition and the continuing importance of SEO for larger organizations. Importantly, enterprise SEO is now the largest contributor to overall company growth. Continuing on the enterprise theme and building on the success of enterprise SEO, in June we introduced our enterprise AI search product, AI optimization. In a few short weeks, we had over 30 enterprise customers purchase this new AI product for a total ARR nearly $1 million underscoring the relevancy and timeliness of this solution. Overall, this success moving up market in the enterprise segment is reflected in the company's average ARR per customer, which is up 15% -over-year, while the number of customers paying over $50,000 per year grew by 83%. Despite this early success, we believe we are at the beginning of our journey and see a long runway for continued growth. As a reminder, we have approximately 9,000 enterprise accounts using Semrush for SEO and fewer than 5% are on our enterprise SEO solution today. Another top priority that I outlined on our last call was doubling down on AI. The strong growth in our AI products also continued during the quarter. As I just mentioned, we successfully introduced AI optimization in Q2 and will be introducing significant enhancements in the second half of the year. AI Toolkit, which we launched at the end of Q1, is the fastest growing product in the company's history, growing from zero to $3 million ARR in a few months. We believe we are approaching a time when every SEO expert will need to add AI search capabilities. Our usage data shows that when customers purchase AI Toolkit, we see a 20% increase in their activity in our SEO Toolkit, showing the highly complimentary nature of these products. For Semrush, we believe AI Toolkit is the tip of the spear and we plan to make new AI search capabilities available to our customers in the upcoming quarters. To underscore our success in both enterprise and AI, we expect ARR from these products to approach $50 million by the end of the year. While we are excited by the growth and adoption of our enterprise and AI products this quarter, we continue to experience softness at the lower end of the market. This customer segment includes freelancers and less sophisticated users who have historically had the highest turn rate of our customer cohorts. We also saw a dramatic increase in paid search, cost per click in the quarter, which increased our cost to acquire these customers. In the face of the declining unit economics for this lower value customer segment, and given the strong returns we are seeing from our investments in AI search and the enterprise segment, we made a strategic decision to not increase our marketing spend, which would have pursued volume and near-term revenue at the expense of long-term value. Instead, we directed more of our marketing and engineering resources toward our high growth, high retention areas, specifically enterprise and AI search, where we are seeing rising customer demand and compelling returns. While this deliberate resource shift may contribute to near-term revenue headwinds, we are confident it positions us for stronger, more sustainable growth. As Brian will outline shortly, we are adjusting our full-year guidance to reflect these near-term market conditions and our prioritization of resources on higher value segments. Before wrapping up my comments this morning, I wanna share our view of the changing landscape in digital marketing and why I remain so bullish on the opportunity in front of us. We believe, and the data shows, that Chachibiti and Google's AI mode are increasing the size of the opportunity. We agree with Google's perspective that overall search is growing. AI is powering an expansion in how people are searching and accessing information. Our own data shows a positive correlation between the use of Chachibiti and the use of SEMrush products. We believe this is because today's marketers understand that they have to get their brands show up in classic search results and in answers generated by a user's prompts into an LLM. It's because the things that marketers had to do to rank in search, namely build credibility and authority, are the same things they need to do for LLMs. The big difference is that the number of sources has grown by an order of magnitude. This means that marketers have to better understand the prompts that people are using to find their products or brands, understand how those brands show up in answers, optimize their content for those prompts, and make sure their message is showing up not only on their website or in their blog, but also in videos on YouTube and local reviews and on sites like Reddit and Quora. This is exactly what SEMrush does, and we believe the shift to LLMs and answer engines creates an enormous opportunity for us. With the changes we've made to accelerate our innovation in AI search, I'm confident SEMrush will merge as the leader in this field. In summary, we are very excited about our position in the market and the opportunity in front of us. We have made an intentional shift in our allocation of resources to capitalize on the largest opportunities in front of us, including the changing search landscape to the large and untapped enterprise segment. With that, I'll turn the call over to Brian to walk you through the financial results of the quarter and discuss guidance.