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SEMrush Holdings, Inc. (SEMR)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered a top-line beat and strong cash generation: revenue $105.0M (+22% YoY) above consensus and prior guidance, non-GAAP operating margin 11.6%, and free cash flow $18.5M; GAAP diluted EPS was $0.01, a significant miss vs consensus due to elevated GAAP operating expenses (SBC, amortization, and one-time costs) .
  • Enterprise momentum accelerated: nearly 200 Enterprise SEO customers at ~$60k ARR per account and customers paying >$50k grew 86% YoY to 388; AI Toolkit reached >$4M ARR shortly after launch, and AI Optimization (AIO) entered open beta; management targets ~$$30M Enterprise SEO ARR exiting 2025 .
  • Guidance reiterated: Q2 2025 revenue $108.2–$109.2M and ~11% non-GAAP operating margin; FY 2025 revenue $448–$453M, ~12% non-GAAP operating margin, and ~12% FCF margin; macro FX adds an incremental ~$8M expense headwind (EUR/USD 1.13 vs 1.05 prior) but management remains confident in growth and profitability .
  • Stock reaction catalysts: sustained enterprise adoption, AI product traction, and reiterated FY guide despite FX headwinds support the growth narrative; the EPS miss vs consensus and FX sensitivity could temper near-term enthusiasm .

What Went Well and What Went Wrong

What Went Well

  • Enterprise scaling and ARPU expansion: nearly 200 Enterprise SEO customers at ~$60k ARR/customer; customers paying >$50k up 86% YoY to 388, with >5,000 customers paying >$10k; “We reported a strong first quarter…executed on our cross-sell and up-sell strategy” .
  • AI product traction: AI Toolkit became one of the fastest-growing new products in company history and surpassed $4M ARR; AIO launched into open beta, with strong early interest from enterprise accounts .
  • Cash generation and profitability: cash from operations $22.1M and free cash flow $18.5M (17.6% margin); non-GAAP operating margin 11.6% (+30 bps YoY) .

What Went Wrong

  • EPS miss vs consensus: GAAP diluted EPS of $0.01 vs Street ~0.074; elevated stock-based compensation ($9.1M), amortization ($1.4M), and restructuring/acquisition costs pressured GAAP EPS even as non-GAAP margin expanded *.
  • FX headwind to margins: FY 2025 non-GAAP operating margin guide maintained at ~12% but absorbs ~$8M expense headwind due to EUR strength; ~30% of expenses are EUR-denominated while revenue is USD-denominated, leaving margins unhedged .
  • Operating income dipped: GAAP loss from operations of ~$0.1M (operating margin -0.1%) vs +$1.5M in prior-year quarter, reflecting higher GAAP opex despite revenue outperformance .

Financial Results

Results vs Prior Periods

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$97.4 $102.6 $105.0
Net Income Attributable ($USD Millions)$1.09 $3.35 $0.85
Diluted EPS ($USD)$0.01 $0.02 $0.01
GAAP Operating Margin (%)1.8% 1.7% (0.1)%
Non-GAAP Operating Margin (%)12.4% 11.5% 11.6%

Estimates vs Actuals (Consensus from S&P Global)

MetricQ1 2025Q2 2025
Revenue Consensus Mean ($USD Millions)$104.36*$108.81*
Revenue Actual / Guidance ($USD Millions)$105.02 $108.2–$109.2 (guide)
Primary EPS Consensus Mean ($USD)$0.074*$0.080*
Diluted EPS Actual ($USD)$0.010 N/A (guiding margin only)

Values with asterisks (*) retrieved from S&P Global.

KPIs and Cohort Metrics

KPIQ3 2024Q4 2024Q1 2025
ARR ($USD Millions)$401.0 $411.6 $424.7
Paying Customers (000s)>117 ~117 ~118
Dollar-Based Net Revenue Retention (%)107% 106% 106%
Cash from Operations ($USD Millions)$8.1 $11.9 $22.1
Free Cash Flow ($USD Millions)$6.2 $9.5 $18.5
Free Cash Flow Margin (%)6.3% 9.3% 17.6%

Q1 2025 Enterprise and AI Snapshot:

MetricQ1 2025
Enterprise SEO customers (approx.)~200
Enterprise SEO ARR ($USD Millions)~$11
Avg ARR per Enterprise SEO customer ($USD)~$60,000
Customers paying >$50k388
Customers paying >$10k>5,000
AI products ARR ($USD Millions)>$4
AI Toolkit pricing (SMB)$99 entry tier

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q1 2025$103.9–$104.7 Actual $105.0 Raised/Beat
Non-GAAP Operating Margin (%)Q1 2025~11% Actual 11.6% Raised/Beat
Revenue ($USD Millions)Q2 2025N/A$108.2–$109.2 New
Non-GAAP Operating Margin (%)Q2 2025N/A~11% New
Revenue ($USD Millions)FY 2025$448–$453 $448–$453 (reiterated) Maintained; adds ~$8M FX expense headwind
Non-GAAP Operating Margin (%)FY 2025~12% ~12% (reiterated) Maintained; FX headwind
Free Cash Flow Margin (%)FY 2025~12% ~12% (reiterated) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3’24; Q-1: Q4’24)Current Period (Q1’25)Trend
AI/technology initiativesExpanded AI Overviews tracking; multiple AI feature launches (Social Assistant, Strategic Market Insights, Video SEO Builder) AI Toolkit became one of fastest-growing products; >$4M ARR; AIO open beta targeting AI search visibility Accelerating
Enterprise SEO scalingStrong demand with new logos; Q4 closed >40 enterprise deals; ended 2024 with $9M ARR across 144 enterprise customers ~200 customers; ~$60k ARR/customer; target ~$30M Enterprise SEO ARR exit-2025; >$50k customers up 86% YoY to 388 Accelerating
Macro/FXLimited macro color in Q3/Q4 releases EUR strength adds ~$8M expense headwind; ~30% expenses in EUR, revenue USD; margins unhedged; no elongation of sales cycles observed yet Emerging headwind
SMB product performanceSocial and App Center upgrades; TikTok integration; added apps and data integrations AI Toolkit $99 entry tier supporting SMB adoption Positive uptake
Data platform moatProduct expansion highlighted CEO emphasized data platform as a unique moat for AI and enterprise solutions Strengthening

Management Commentary

  • “AI and the emergence of AI-driven search presents a once-in-a-generation opportunity for Semrush… we will double down on AI and extend our early leadership position in AI-driven visibility” — Bill Wagner, CEO .
  • “We now expect our Enterprise SEO Solution… to exit the year with $30 million in ARR” — Bill Wagner, CEO .
  • “Our first quarter revenue was $105 million, exceeding the high end of our guidance… non-GAAP operating margin of 11.6%… free cash flow margin of 17.6%” — Brian Mulroy, CFO .
  • “Approximately 30% of our expenses are denominated in euros… our margins are effectively unhedged against this exchange rate movement” — Brian Mulroy, CFO .
  • “We are reiterating our previous full year 2025 guidance” — Press release and CFO prepared remarks .

Q&A Highlights

  • AI-driven search implications: management views AI as expanding the pie; AI Toolkit among fastest-growing products; strong demand for enterprise AIO; advised customers to shape content and monitor presence in LLMs and AI search engines .
  • ARR growth and seasonality: Q1 ARR just under 20% was planned; mix shift to higher-value, lower-volume enterprise customers drives different seasonality but supports long-term CAGR .
  • Net revenue retention (NRR) trajectory: consolidated NRR at 106% is backward-looking; enterprise cohorts and higher-ARPU segments expected to lift NRR over time .
  • AIO pricing and bundling: AIO to be sold as an add-on to Enterprise SEO or standalone; SMB-oriented AI Toolkit at $99 supports lower end of market .
  • Macro tone: no evidence of elongated sales cycles yet; growth drivers intact, with FX as the notable headwind .

Estimates Context

  • Q1 2025 vs Street: revenue beat ($105.02M vs $104.36M); EPS miss ($0.01 vs $0.074) — bold beat/miss dynamics reflect strong top line and FCF alongside higher GAAP opex from SBC, amortization, and one-time costs *.
  • Q2 2025 set-up: revenue guide $108.2–$109.2M broadly in-line with consensus $108.81M; ~11% non-GAAP operating margin guide balances FX headwind and enterprise growth *.

Values with asterisks (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Top-line strength with improving quality: revenue beat and high FCF underscore durable demand; enterprise mix and ARPU expansion support margin scalability over time .
  • Watch GAAP/Non-GAAP gap: EPS miss highlights GAAP cost items (SBC, amortization, restructuring/acquisition) — non-GAAP operating margin expansion suggests underlying efficiency; expect continued reliance on non-GAAP metrics for performance tracking .
  • Enterprise is the growth lever: nearly 200 enterprise customers and a ~$30M Enterprise SEO ARR target by year-end, plus AIO pipeline, position SEMR for multi-year upmarket expansion .
  • AI is a narrative and monetization catalyst: AI Toolkit ARR >$4M and AIO beta validate demand; broader AI visibility management could drive incremental pricing and multi-product adoption .
  • FX sensitivity: ~30% EUR-denominated expenses with USD revenue introduces margin volatility; ~$8M FY headwind incorporated — a factor for near-term margin outcomes .
  • Near-term trading lens: expect positive reaction to revenue/FCF beats and reiterated FY guidance; EPS miss and FX commentary may cap upside until further evidence of sustained margin expansion .
  • Medium-term thesis: scaling enterprise cohort, data moat enabling AI-led products, and consistent FCF argue for compounding growth with improving margins as FX normalizes and enterprise penetration deepens .