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SEMrush Holdings, Inc. (SEMR)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $102.6M, up 23% year-over-year, and exceeded the high end of company guidance; non-GAAP operating margin was 11.5% and free cash flow margin 9.3% .
  • Strong enterprise momentum: 40+ enterprise SEO deals closed in December; 144 enterprise SEO customers exited 2024 with ~$9M ARR, and customers paying >$50K rose to 336 (+82% YoY) .
  • Management announced leadership transition: Bill Wagner to become CEO (effective March 10, 2025), with co-founder Oleg Shchegolev shifting to CTO to focus on AI/product; company issued FY 2025 guidance for 20% revenue growth and ~12% non-GAAP operating margin with ~12% FCF margin .
  • Near-term stock narrative catalysts: enterprise adoption ramp, AIO (AI Optimization) product commercialization ($99/month PLG pricing currently in test), and a prudent FY25 “investment year” with free cash flow margin expansion; SMB softness remains a watch item .

What Went Well and What Went Wrong

What Went Well

  • Exceeded guidance and delivered durable growth with profitability and FCF: Q4 revenue $102.6M (+23% YoY), non-GAAP operating margin 11.5%, FCF margin 9.3%; “overachieving on our top line growth and profitability” .
  • Enterprise SEO traction: “closed over 40 deals in December alone…more deals in Q4 than the rest of the year combined,” exiting with 144 enterprise SEO customers and ~$9M ARR; average ARR per enterprise SEO customer >$60K .
  • Strategic clarity and AI momentum: management emphasized AIO (AI Optimization) roadmap and enterprise-grade capabilities; “by leading with AI…most accessible and actionable digital marketing platform” .

Selected quotes:

  • “Fourth quarter revenue grew 23% year-over-year…exceeding our fourth-quarter guidance…non-GAAP operating margin of 11.5%.”
  • “We closed over 40 deals in December alone…and we now have 144 enterprise SEO customers.”
  • “By leading with AI, we believe we can bring together the best of what AI has to offer...”

What Went Wrong

  • SMB/low-end softness persisted: “we continue to experience softness in the lower end of our market,” contributing to NRR rounding down from 107% to 106% .
  • Q4 GAAP operating margin remained low at 1.7%, reflecting stock-based compensation and acquisition-related costs (offset at non-GAAP level) .
  • FY25 framed as an “investment year” with flat non-GAAP operating margin (~12%), signaling near-term opex growth ahead of expected revenue acceleration in specific segments/products .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$91.0 $97.4 $102.6
Diluted EPS ($USD)$0.01 $0.01 $0.02
GAAP Operating Margin %3.7% 1.8% 1.7%
Non-GAAP Operating Margin %13.4% 12.4% 11.5%
Free Cash Flow ($USD Millions)$7.6 $6.2 $9.5
Free Cash Flow Margin %8.4% 6.3% 9.3%
ARR ($USD Millions)$377.7 $401.0 $411.6

KPIs

KPIQ2 2024Q3 2024Q4 2024
Paying Customers (approx.)>116,000 >117,000 ~117,000
Dollar-Based Net Revenue Retention (%)107% 107% 106%
Avg ARR per Paying Customer ($)—>$3,400 >$3,500
Customers Paying >$10K (count)—>4,000 4,300
Customers Paying >$50K (count)—~300 336
Enterprise SEO Customers (count)—70 (as of end-Q3) 144
Enterprise SEO ARR ($USD Millions)——~$9.0

Notes:

  • Non-GAAP reconciliations exclude stock-based compensation, amortization of acquired intangibles, restructuring and acquisition-related costs per company definitions .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q4 2024$100.8–$101.8 Actual: $102.6 Raised vs guidance (beat)
Non-GAAP Operating Margin (%)Q4 2024~11% Actual: 11.5% Raised vs guidance (beat)
Revenue ($USD Millions)Q1 2025—$103.9–$104.7 New
Non-GAAP Operating Margin (%)Q1 2025—~11% New
Revenue ($USD Millions)FY 2025—$448–$453 New
Non-GAAP Operating Margin (%)FY 2025—~12% New
Free Cash Flow Margin (%)FY 2025—~12% New
FX AssumptionFY 2025—EUR/USD 1.05; ~30% of expenses in euros New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Enterprise SEO adoptionLaunched in May; pricing 10x–15x vs core; early traction; deals with DigitalOcean, HSBC, RBC Expanded logos (Salesforce, HSBC, LG, Samsung, Alibaba, Sony, DoorDash, TikTok, Square); enterprise cohort growing; 70 customers by end-Q3 40+ December deals; 144 customers; ~$9M ARR; 60/40 existing vs new; >$60K avg ARR per enterprise SEO customer Up
AI initiatives (AIO)Multiple AI features across portfolio; ContentShake AI; personalized AI recommendations Continued AI tracking of Google AI Overviews; product roadmap; AI seen as tailwind AIO pricing test at $99/month (PLG); enterprise version planned H1’25 Up
Macro/SMB cohort107% NRR; solid mid/enterprise; SMB softness noted 107% NRR; segment NRR >120% for sophisticated accounts NRR 106% (rounding); SMB softness continues; prudent FY25 outlook Mixed (SMB soft)
Pricing/ARPUCore price increase in 3Q23 benefitted ARR; ARPU up 12% YoY ARPU >$3,400; pricing headwinds as last year’s increase laps; focus on enterprise upsell ARPU >$3,500; growth driven by cross-sell/upsell and enterprise adoption Up
M&A/integrationBrand24 majority stake; Ryte acquisition (technical SEO) Third Door Media acquisition expands content/education reach TDM closed; ~$3.7M cash used in Q4 Stable
Leadership changes——CEO transition: Bill Wagner to CEO; Oleg to CTO, effective Mar 10, 2025 New
Financial disciplineMargin expansion since 4Q22; long-term targets 22% non-GAAP op margin/25% FCF margin Raised FY24 guidance; outlined near-term CAGR ~20% FY25 “investment year”; flat non-GAAP margin (~12%); FCF margin +260 bps to ~12% Mixed (investing)

Management Commentary

  • Strategic positioning: “By leading with AI, we believe we can bring together the best of what AI has to offer to ensure our customers have access to the most accessible and actionable digital marketing platform.” — Oleg Shchegolev .
  • Enterprise momentum: “We closed over 40 deals in December alone…ending 2024 with 144 enterprise SEO customers…average ARR per customer exceeding $60,000.” — Brian Mulroy .
  • AIO roadmap: “We plan to launch our new AI optimization solution in closed beta [in H1’25].” — Oleg Shchegolev .
  • FY25 stance: “We’re going to make this an investment year…maintain [~12%] margin…but free cash flow margin will expand by 260 basis points.” — Brian Mulroy .
  • CEO transition: “I will step into the position of Chief Technology Officer…to dedicate 100% of my energy to product development…” — Oleg Shchegolev ; “I’m thrilled to step into the CEO role…scale up what the company has already been doing.” — Bill Wagner .

Q&A Highlights

  • Macro and SMB: Management remains prudent; “not really seeing any change to the macro…softness in the lower end of the market” — CFO .
  • Net revenue retention: NRR rounded down to 106%; enterprise/more sophisticated accounts >120% NRR; larger initial deals may temper NRR optics but are positive for ARR timing — CFO .
  • AIO pricing: Product-led version live at $99/month during testing; enterprise version planned H1’25; focus is on adoption and feedback before final packaging/pricing — Management .
  • Enterprise deal mix: ~60% existing customers upgrading; ~40% new wins or displacements; substantial ARPU uplift from ~$10K to >$62K — CFO .
  • FY25 investments: Year characterized by investment in enterprise capabilities across multiple hubs (paid, social, local, brand, content) alongside AI; free cash flow margin expansion expected — CFO .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable due to retrieval limits at time of analysis; as a result, beat/miss vs consensus cannot be determined. The company nonetheless exceeded its own Q4 guidance on both revenue and non-GAAP operating income .
  • Where estimates are required for modeling, we recommend referencing S&P Global directly once accessible and updating comparisons accordingly.

Key Takeaways for Investors

  • Enterprise flywheel is accelerating: 144 enterprise SEO customers and ~$9M ARR at year-end, with 40+ deals in December; average enterprise SEO ARR/customer >$60K — a key growth and mix driver .
  • ARPU expansion sustained: average ARR per paying customer rose above $3,500, supported by cross-sell/upsell and enterprise adoption; cohort growth in >$10K and >$50K customers continued .
  • FY25 is an “investment year”: expect flat non-GAAP operating margin (~12%) but free cash flow margin expansion to ~12%; investments target enterprise product depth and AI-led innovation .
  • AIO commercialization could unlock incremental monetization: PLG pricing at $99/month currently in test; enterprise AIO version targeted for H1’25 .
  • SMB softness persists: monitor NRR (106%) and cohort mix as enterprise/mid-market/agency (>120% NRR) offset low-end softness .
  • Leadership transition is strategically aligned: Wagner as CEO and Shchegolev as CTO focuses organization on scaling and AI/product innovation — potential credibility and execution boost with enterprise customers .
  • FX exposure: ~30% expenses in euros; guidance assumes EUR/USD 1.05 — watch for FX effects on FY25 profitability .

Selected Supporting Data Points

  • Q4 revenue: $102.6M (+23% YoY); non-GAAP op margin 11.5%; FCF margin 9.3% .
  • ARR: $411.6M (+22% YoY) at year-end; paying customers ~117,000; NRR 106% .
  • Cash and short-term investments: $235.6M at Q4-end; ~$3.7M used for Third Door Media acquisition .
  • Q1 2025 guidance: revenue $103.9–$104.7M; non-GAAP op margin ~11%; FY 2025 revenue $448–$453M, non-GAAP op margin ~12%, FCF margin ~12% .