Similarweb Ltd.

Good day, ladies and gentlemen, and welcome to the SimilarWeb second quarter fiscal 2023 earnings call. Our host for today's call is Raymond Jones, Vice President of Investor Relations. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. I would like to now turn the call over to your host. Raymond, the floor is yours.

Thank you, Operator. Welcome, everyone, to our second quarter 2023 earnings conference call. During this call, we will make forward-looking statements related to our business. These statements may include the expected performance of our business and our future financial results, our strategy, the potential impact of rising interest rates, rising global inflation, and current macroeconomic conditions, challenges in our business and in the markets in which we operate, our anticipated 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. Further, reporter results should not be considered as an indication of future performance. Please review our Form 20F filed with the SEC on March 23, 2023, and in particular, the sections entitled Cautionary Statement Regarding Forward-Looking Statements and Risk Factors. for a discussion of the factors that could cause our actual results to differ from the forward-looking statements. Also note that any forward-looking statements made on this call are based on information available as of today's date, August 9, 2023. We undertake no obligation to update any forward-looking statements we make today except as required by law. As a reminder, certain financial measures we use in presentations of results and on our call today are expressed on a non-GAAP basis. In particular, we reference non-GAAP operating loss, which represents GAAP operating loss, less share-based compensation, adjustments and payments related to business combinations, amortization of intangible assets, and certain other non-recurring items. We use this and other 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 in our earnings press release, which can be found on our investor relations website at ir.similarweb.com. Today, we will begin with brief prepared remarks from our CEO or offer and CFO, Jason Schwartz. Then we will open up the call to questions from sell-side analysts in attendance. Please note that we publish a detailed discussion of our second quarter 2023 results in the letters to shareholders for investors to reference, as well as an updated investor presentation with a strategic overview of the business, both of which are available on our investor relations website. With that, I will turn the call over to Orr Offer, CEO of SimilarWeb.

Thank you, RJ, and welcome everyone joining the call today. In Q2, we reported another quarter of growth and operating improvements. We grew our revenue 13% over Q2 last year to 53.7 million. Our global customer base grew 12% year-over-year and over 4,300 customers. And our average customers spend nearly $51,000 with us annually in line with Q2 last year. I'm very proud of our great progress in this quarter on our path to profitability. Our non-GAAP cross margin was nearly 80% again, and our Q2 non-GAAP operating margin showed a strong improvement of 35% point compared to last year. That is extremely significant. Earlier this year, we announced our goal to achieve sustained positive free cash flow by Q4. Our Q2 results show we continue to make great progress and we feel very strongly that we will achieve our goal this year. When we originally planned our outlook for this year, we thought we would see market trends start to recover in Q3 and Q4. In fact, we see that our pipeline remains strong. We are adding new customers and expanding our penetration into the market. But at the same time, we see that enterprises still continue to optimize their budgets and spending. Sales cycles are longer than in the past, and some customers needed to reduce their spending with us in order to fit their corporate budgets while remaining a similar web customer. And despite this, our logo retention of our $100,000 customers remain at 98%. Our results also show we are investing efficiently in our marketing, R&D, and product divisions. In marketing, Q2 metrics at the top of our funnel stayed positive. We had more than 25 million unique visitors using our free tools at similarweb.com in Q2. And we are forecasting that more than 100 million unique visitors we'll use our free tools this year. This is truly a remarkable achievement for our marketing organization. Our product team have been working on new features in our solution that will provide more value to our customers. We have an exciting list of the lists coming up in Q3. One of them is called SimilarWeb3.0, which is a new way of how we package our offering that includes new data, insight, and navigation, and will lead to a better pricing alignment with our customer that will enhance our go-to-market motion and improve our offering to our enterprise customers. We had a really exciting recent launch of a feature called Similar Ask that is already live in the platform. and is being used by our early adopter customers. Similar ask is the first digital intelligent AI system designed to answer real question that users type in free text without having to know how to navigate our platform. We're solving one of the hardest problem every insight and analytics software have. That is the ability to find insight in the data quickly and action them. And by introducing SimilarAsk, we hope to solve this holy grail of data to insight and insight to action. In the future, we believe that using SimilarAsk and the AI capabilities will be like having a conversation with the world's most effective and talented market researcher, analyst, strategy consultant, and data scientist combined in one. The AI can give answers to critical business questions instantly. This will accelerate our time to feature development and drive more efficiency in our product development cycle and product adoption. We believe our upside potential for working with AI is high, and we look forward to bringing similar asks into the market. In our view, similar web digital data is the best of its kind available on the market today, and merging it with the AI capabilities will unlock amazing growth potential for us down the road. With that, Jason, I will turn the call over to you.