Similarweb - Earnings Call - Q1 2025

Transcript

Operator (participant)

Greetings and welcome to the Similarweb Q1 Fiscal 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rami Myerson, Vice President in Investor Relations. Thank you. You may begin.

Rami Myerson (VP of Investor Relations)

Thank you, Operator. Welcome, everyone, to our First Quarter 2025 Earnings Conference Call. Joining me today are our CEO and Co-Founder, Or Offer, and our CFO, Jason Schwartz. Yesterday, after market close, we released our results for the first quarter and published a discussion of our results in a letter to shareholders, as well as an investor presentation with a strategic overview of the business on our Investor Relations website at ir.similarweb.com. Certain statements made on the call today constitute forward-looking statements which reflect management's best judgment based on the currently available information. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our earnings release and our most recent annual report filed on Form 20-F for more information on the risk factors that could cause actual results to differ from our forward-looking statements.

Additionally, certain non-GAAP financial measures will be discussed in the call today. Reconciliations to the most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation. We will begin with Or and Jason's highlight of the quarter, and then we will open up the call to questions from sell-side analysts. With that, I'll turn the call over to Or. Or, please go ahead.

Or Offer (CEO)

Thank you, Rami, and welcome everyone joining the call today. I'm extremely proud of the first quarter financial result that we report yesterday. Revenue increased by 14% to $67 million ahead of our expectation. Our customer base grew 19% year-over-year to more than 5,700 ARR customers at quarter end. We reported six quarters of positive free cash flow while we continue our investment to realize the long-term potential of our business. The investments we begin in the fourth quarter in sales and R&D are starting to generate positive returns. We doubled the number of inside sales reps selling in this quarter as compared to Q1 last year, and our progress on releasing new features like GenAI, Traffic Intelligence, and three AI Agents are stuff to be proud of.

We completed an accelerated recruitment of new salespeople at the end of the first quarter, and we are encouraged by the indication of improved productivity as they went. More than 80% of the new hires should be fully ramped by Q3, and we expect this team to deliver in the second half of the year as planned. I'm excited by our customer reaction to the launch of the new products since the beginning of the year. Those products provide tools that empower our customers to maximize ROI they get from our data and reduce time to value. We launched App Intelligence, expanding our app data and incorporating the acquisition of 42matters last year. I'm super happy that Similarweb can now provide digital data on more than 4 million iOS and Android mobile apps in 58 countries.

App Intelligence gives our customers visibility on app data, including download usage patterns, engagement, retention, and audience demographics. We are seeing strong demand, and 484 of our customers have already signed up for the App Intelligence. We're excited to be the leading company providing full digital visibility to brands, combining web, mobile web, and app data, and providing our customers with a holistic real-time view of the entire digital world on one platform. This comprehensive coverage is really turning Similarweb into a mission-critical resource for anyone that needs to understand digital behavior and market dynamics around the world. We continue to develop products and capabilities to capitalize on the AI revolution.

In March, we launched our AI Chatbot Traffic Intelligence into our platform, and I'm really excited that our customers can now see data on the prompts and chatbots products that are sending traffic to the website as part of our Web Intelligence offering. As more customers move from traditional search to chatbots, this information is becoming critical to companies to drive impact in this new digital channel. I believe that we are the leading company in the world providing this critical information to our customers that want to succeed in the digital ecosystem, and I'm very proud of that. The response from our customers is truly amazing, and the commercial pipeline for this data is growing fast. On top of that, we are also rolling out a series of AI agents to help our customers maximize the commercial opportunities provided by our data.

Our first three AI agents are now already live in our platform. The first one is the SEO Strategy AI Agent, which shows digital marketing professionals what they should do to promote their content strategy and how best to do it in order to win. The second agent is our Traffic Trend Analyzer AI Agent, which automatically detects unusual spikes in search demand and identifies their cause, thereby helping companies act before the competition. Until now, analyzing and formulating an understanding of the reason, the why for those changes was very hard and time-consuming, and this now can help them save time and get to the insights faster. The third agent we release is our Meeting Prep AI Agent for sales team.

This agent builds a strategic one-pager meeting brief using our digital signals and our market data to reduce the time of the salesperson spending time on researching the prospect and helping improve his win rate. The new product launches in the quarter are the first encouraging indication that the investments that we begin will grow faster, and we will produce higher margins going forward as part of this journey as an AI-first company. As I like to say, we are just getting started. Thank you, everyone on the call, for your continued support. With that, I will turn the call over to Jason.

Jason Schwartz (CFO)

Thanks, Or, and everyone joining on the call today to discuss our first quarter results. I'll provide highlights of our financial performance, and then we'll open up the call to questions. We generated $67.1 million of revenue in Q1, a 14% increase relative to Q1 2024. Revenue growth was driven by the 19% growth in customers, mainly in the below $100,000 ARR cohort, as well as expansions and upsells from our over $100,000 ARR customers. NRR for our over $100,000 customers increased by 400 basis points year-over-year to 111%, and 300 basis points year-over-year to 101% for the overall customer base. We are proud that 52% of our ARR is contracted under multi-year contracts, up from 42% last year. We believe this demonstrates the importance and critical nature of our data to our customers, and we expect these multi-year contracts will contribute to improved retention rates ahead.

Our remaining performance obligations, or RPO, totaled $253 million at the end of Q1, up 18% year-over-year. We expect to recognize approximately 69% of total RPO as revenue over the next 12 months. Our operational performance in the quarter was in line with expectations, and we reported a non-GAAP operating loss of 2% in Q1 due to the increased investment in sales and R&D discussed in the past. We're committed to profitable growth over time, and if returns on these investments do not materialize as planned, we're prepared to rapidly respond and improve profitability as we have in the past. We think it's worthy to note that over the last three years, we've improved operating margins by more than 4,000 basis points from minus 45% in the first quarter of 2022.

This performance and our unit economics provide us with confidence in our ability to achieve our profit and cash flow targets. We generated $5 million of normalized free cash flow in the quarter, a 7% free cash flow margin, and the sixth consecutive quarter of positive free cash flow. We expect to continue to generate positive free cash flow on a quarterly basis in 2025. Turning to our outlook, we continue to monitor the global macroeconomic and market developments, leveraging the insights provided by Similarweb digital data to assess the potential impact of tariffs on our different end markets. So far, we have not experienced a material impact on our business.

For the full year 2025, we are maintaining our previous guidance and expect total revenue in the range of $285 million-$288 million, representing 15% year-over-year growth at the midpoint of the range, and expect our non-GAAP operating profit to be between $1 million and $4 million. For Q2 2025, we expect total revenue in the range of $68.6 million-$69 million. Non-GAAP operating loss for the second quarter of 2025 is expected to be in the range of $500,000-$1 million. We remain focused on delivering profitable growth over time, as well as achieving our long-term profit and free cash flow targets. Or and I are ready to answer your questions.

Operator (participant)

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we pull forward questions. Our first question comes from the line of Arjun Bhatia with William Blair and Company. Please proceed with your question.

Arjun Bhatia (Partner, Co-Head Tech Equity Research and Software Analyst)

Perfect. Thank you so much. I'm curious, obviously, the investments are a big part of the in Q4 and into Q1, a big part of the story here. It seems like you've completed the accelerated hiring process. I'm curious, Or, how you feel just about the hires you've made, the quality of the team that's been brought on. As you're tracking kind of the ramp to productivity for some of the go-to-market investments and the sales reps, what exactly are you looking at just to make sure that there is ROI on those investments and the ramp to productivity is happening in line with expectations to get your team kind of up and productive by, I believe it was Q3 that you mentioned here?

Or Offer (CEO)

Hi, Arjun. And of course, thank you, everyone, for joining the call today. I look forward to speaking with everyone. And thank you, Arjun, for the first question. Regarding the quality of the hiring, we're very happy from the quality. We learned a lot over the past few years about how we can bring the right persona to sell our specific offering that are about insight, data, and analytics. We built a very good process about measuring the activities and what we expect from those new hires to deliver in every part of the onboarding process, how many meetings, how many win rates we expect to see. Right now, looking good.

Arjun Bhatia (Partner, Co-Head Tech Equity Research and Software Analyst)

Great. Then on the product side, you've kind of integrated the AI chatbot traffic data into your platform now. What sort of early indications of usage or interest are you seeing from your customer base? Obviously, very pertinent and timely, given some of the comments we've heard recently from the ecosystem of maybe traffic starting to shift from search to the AI chatbots. Would love to hear what you're seeing in your customer base in terms of interest of your innovation on that front.

Or Offer (CEO)

Yeah. So it's super, super nice. The customers are really excited about it. They see that, and it's like there is like a wow effect when we show them the data. It's very unique. So it's very nice to see that. It feels like in the early days when we launched Similarweb, and it felt like magic that people didn't realize that this data is out there and the insights we can get out of it. The reaction is super nice. It surfaced up a lot of interesting insight and visibility of something that right now is a very black box. I think most of the website owners right now out there don't have an idea about the impact of how much traffic those chatbots are generating in the channel. Also, they have no visibility about what people are asking as prompts.

We bring those two data now. It is very nice to see. Giving them and the impact is super nice.

Arjun Bhatia (Partner, Co-Head Tech Equity Research and Software Analyst)

All right. Perfect. Thank you, Or.

Operator (participant)

Thank you. Our next question comes from the line of Raimo Lenschow with Barclays. Please proceed with your question.

Eamon Coughlin (Equity Analyst)

Hey, guys. This is Eamon Coughlin for Raimo Lenschow. Thanks for taking the question. Great to hear that the new talent you recently recruited has been driving improved yield and strong pipeline. Can you help us understand the level of visibility that you have for some of the deals that are supporting the revenue re-acceleration in the second half of the year? Just trying to gain clarity on the mechanics of the growth implied by the guide in the second half.

Or Offer (CEO)

We hire many people all across the go-to-market organization, and there are many different positions there. You have AM that need to drive upsells and renewal. You have in the sales, in the new sales. You have a few tiers of sellers. You have inside sales that need to land like $20,000 deals. You have enterprise people that need to land higher deals. You have start people that need to do high expansions. You also have a lot of entry-level that need to work on our self-serve customers and move them to yearly. Each one behaves differently and has different ramp time. The more senior the rep and the more enterprise and above, it's taking longer, much longer sales cycles. In the inside sales organization, you can see much faster the ramp, and you can recognize faster the yield.

The other ones are taking more time by nature.

Eamon Coughlin (Equity Analyst)

Got it. Thanks, Or. Maybe just one for Jason. Is there anything factored into the top and bottom line guide from The Search Monitor acquisition?

Jason Schwartz (CFO)

Yeah, nothing material on that. It was a small business. We're excited to have them on board, not material contribution for the quarter or the year.

Eamon Coughlin (Equity Analyst)

Got it. And then just one quick one, if I may. Is there any change to your guidance philosophy for the rest of the year? I understand that it's an uncertain environment, so just kind of understand some of the mechanics for the rest of the year. Thanks, guys.

Jason Schwartz (CFO)

We haven't changed a lot of the assumptions, FX and the like, but we'd like to give guidance that we know that we can meet. Same philosophy.

Eamon Coughlin (Equity Analyst)

Thanks, guys.

Operator (participant)

Thank you. Our next question comes from the line of Surinder Thind with Jefferies. Please proceed with your question.

Surinder Thind (Analys)

Thank you. Or, can you maybe talk a little bit about your larger clients, the $100,000 clients, the behavior that you're seeing there, and some of the ongoing conversations, perhaps? It looked like the NRR number dipped a little bit quarter-over-quarter by about a percentage point.

Or Offer (CEO)

Yeah. Of course. I think the decline of this 1% was kind of a mechanism because last year in Q3, we had a big upsell at Q1, sorry. I think it increased the base a lot. This year, the upsell was not as big as Q1, so this is why you have that. Overall, this bucket of $100,000 customers, I think we have above 400. You see that it's also a few different types there. You have a lot of very big, big companies, Fortune 100, that are engaged and looking at us as the trusted digital market data provider, and they continue to buy more and more different data sets, and they're growing significantly. Then you have a big part of companies that are digital first, and digital is very important, and they are engaging above $100,000 with us.

Surinder Thind (Analys)

Got it. Just kind of the reverse with maybe some of the smaller clients in the SMB space.

Or Offer (CEO)

You want to know what type of customer in that bucket?

Surinder Thind (Analys)

No, no. Just in terms of just the trends and the demand. It sounds like you onboarded a lot of new customers this quarter in terms of just the number of accounts that grew. And just kind of what you're seeing there, it sounds like still a healthy appetite, actually improving appetite, if I was to potentially characterize it.

Or Offer (CEO)

Yeah. We still see a big demand on top of the funnel, and we have many, many registrations, hundreds of thousands per month. We are seeing great success converting them to customers, yearly customers. Also, as we said in the earnings call, we see a big increase in the multi-year engagement. That is something very good that is for us a good indication of companies that want to engage for the long term with us as they see value in our offering.

Surinder Thind (Analys)

That's helpful. And then just one final one for me. As you think about your strategy around building insights for the different chatbots, is there any color that you can provide on all of the different partnerships that you can get to or what coverage you can get versus what you currently have?

Or Offer (CEO)

I think that regarding coverage, we feel confident that we can cover all of the big chatbots out there and provide the full visibility. We hope to launch this quarter like a full module around AI intelligence that will have the mix of the first product we launch that gives you the traffic intelligence. The second part will help you track your market share and how much you're visible on the chatbot because a lot of the time the chatbots are quoting your brands, talking about your product, but don't give you links and send you outside to go to other websites. There are two sides of the data brands want to see. One, how much traffic they're getting from chatbots and the prompts generate those topics.

They want to see overall how much market share, how much time my brand has been mentioned versus competition, and if the mention was, if the sentiment was positive or negative. This second part we launch this quarter, and we will have a very strong offering for companies who want to get better visibility and success on this new digital channel, I will call it.

Surinder Thind (Analys)

Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Jason Helfstein with Oppenheimer & Company. Please proceed with your question.

Jason Helfstein (Head of Internet Research)

Thanks, everybody. I guess I'll ask a few. One is, as you look to sell the AI-related products, is it a different you selling to a different audience at the client? I mean, a lot of what you started with typically is with the marketing department, but then does it have to kind of go to a bigger level? Just how do you envision selling the AI products differently than some of the legacy products? Two, I guess besides upgrading the overall quality of salespeople, how is the strategy different now under the new Chief Revenue Officer? Lastly, the billing did slow in this quarter. I don't know if there's like—and again, last year, first quarter was your slowest growth in billing.

I don't know if there's an emerging pattern around first quarter is the slowing billing quarter, but just any color, Jason, just on around that. I don't know if there was like there were some comments about upsells last year and that made tougher comps, but just any other color there. Thank you.

Or Offer (CEO)

Okay. Thank you, Jason, for the questions. I heard three questions. The first one, who is the ICP, ideal customer that can buy the AI intelligent module? The second one is around CRO, and the third one is billing. I will start answering the first two, and I will give Jason to answer the billing. Regarding the ideal customer to buy the AI intelligent data, as we all know, it's a very new motion. Right now, we are presenting it to most of our users, and there is a big excitement around all personas because I think this is something very new and inside there appealing to many different roles from marketing, branding, SEO, PPC, product, executive. Right now, the excitement is around all different customers we have in the platform. It's early to say who will be the buyer.

I think it will land probably somewhere around marketing and I guess somewhere around search, dimension, acquisition, or maybe brand. Regarding the second question on the CRO, like every executive, our CRO just finished first year, and usually when you hire executive C-level, they need one year to set up the organization the way they need, and then they start to execute. Their CRO just finished her first year in the company, and we're excited to see how she's going to execute going forward with all the changes she rolled up. I'll let Jason answer the billing question.

Jason Schwartz (CFO)

Hey, Jason. On the billing side, it's just a function of the invoicing schedules. Sometimes, and that's really a seasonal thing. Sometimes there are customers that are asking to move from one month to another month, and you get some of that shifting. Overall, what you see is free cash flow is still very strong. We did a 7% free cash flow generation this quarter, and I think we've guided that will continue to be positive free cash flow all throughout the year.

Jason Helfstein (Head of Internet Research)

Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Tyler Radke with Citi. Please proceed with your question.

Tyler Radke (Managing Director and Equity Research Analyst)

Hey, gentlemen. Good morning. Thanks for taking the question. Wanted to follow up on the questions around billings, but actually ask about bookings. It looks like current RPO bookings, if we just take a look at the sequential change in current RPO, that growth has slowed quite a bit over the last couple of quarters. I know there's been some pretty large compares in that number over the past year and a half with some of the large deals that you've signed. Help us understand what's driving that and any changes that you're expecting in terms of seasonality to the business. In other words, should we expect that current RPO to reaccelerate or rebound in the back half of the year?

Jason Schwartz (CFO)

Hey, Tyler. Thanks for that. Yeah. Current RPO is up 9% year-over-year, but we do think of that as somewhat seasonal. You see some of those bigger deals that we signed last year were in Q2, Q3, so those burn down, and then when the renewals come up, those get invoiced again. The bookings and the current RPO will match that, we believe, going in the back end of the year. I think that's just a function of some of that change that you had year-over-year.

Tyler Radke (Managing Director and Equity Research Analyst)

Got it. Okay. So we're lapping some pretty big deals in Q2, Q3, so we should see some replenishment of those numbers.

Jason Schwartz (CFO)

Yeah. I think exactly. Same thing on the NRR comment that Or made before. Remember all those big upsells and big deals we announced last year, two customers that crossed over to eight-digit customers. At this point, when we're at a 12-month lookback, those are already in the baseline, so the NRR has to grow even bigger numbers. We're feeling good on the pipeline, but understand that there are, in the near term, over the next couple of quarters, we've got some big numbers to match.

Tyler Radke (Managing Director and Equity Research Analyst)

Yeah. Great. On the new customer additions, it looked like total new customers was quite strong. The quarter-over-quarter growth in new logos was well ahead of what you did in Q1 of last year. Can you just talk about the size of those deals? Is the average deal size for new lands, is it consistent with last year? Is it maybe lower because you're just prioritizing new logos? Any changes in the profile of customers now that you have kind of a new sales motion and a bigger sales force that's going after those?

Jason Schwartz (CFO)

I'm sorry about that. Yeah. Very consistent with our strategy that we laid out over the last 18 months. We talk about the barbell strategy. Part of the strategy that we said is that on one hand, we've got 60%-61% of our business that are of revenue that's generated from customers who spend more than $100,000 a year. Those customers are spending, on average, nearly $370,000 each. At the same time, we've got this momentum motion and velocity motion that is bringing in new customers every single day, every single quarter. I think we were up 230-some-odd customers just quarter-over-quarter, just under 1,000 net new customers over the past year. That's the function of that. Yes, the land of those customers is lower than the average revenue per customer, and you see that happening.

I think one of the interesting things, when you look at the over $100,000 customers, we have those 400-plus customers that today are $100,000 or more. More than 80% of those customers started well below $100,000. We have a history of knowing how to land, retain, and expand, and that's what you see going on over the last couple of quarters and continued in Q1.

Tyler Radke (Managing Director and Equity Research Analyst)

Great. Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Luke Horton with Northland Capital Markets. Please proceed with your question.

Luke Horton (Senior Equity Research Analyst)

Yeah. Hey, guys. Thanks for taking the questions and congrats on the quarter. Jason, in your prepared remarks, you mentioned about the investments in the new sales hires that they do not end up performing as expected. You mentioned being prepared to kind of rapidly respond and improve profitability. Just wondering how long of a kind of timeline the new sales hires are given here to start to show some results, and then if it does not pan out the way it was thought, what are kind of those nearest levers that you could pull to improve that profitability?

Jason Schwartz (CFO)

Yeah. We've done this before. One of the nice things that we mentioned in the quarter that we're already seeing more sellers selling and closing business in Q1 than we had last year. Looking at just the inside sales, and as Or mentioned, the inside sales team, you actually see relatively quickly over the first couple of months whether these guys are ramped and able to sell or not. We're very encouraged by that. Looking at the pipeline that we have, we think, and we've said, I think, now both in the letter and in Or's comments, that we expect 80% of all of the new heads, the people that we added to the team, to be ramped up by Q3.

That gives us a lot of confidence that if for some reason this is not going to be in place, we'll be able to reduce unproductive capacity and continue to execute. It is very similar to the change that we did taking sales and marketing. If you look back historically, sales and marketing was about 65%-66% of revenue going back to Q1 2022. Over the course of five or six quarters, it got down to below 50%. That was just taking out unproductive resources and still driving revenue growth. We believe that the hires that we did should be accelerators on the back end of the year going into 2026, and that is what we are continuing to do.

Luke Horton (Senior Equity Research Analyst)

Okay. Great. Yeah. I appreciate the color there. Then just one last one here, just on the 2025 outlook. Is this still accounting for that 1%-2% foreign exchange headwind for revenues, or has that assumption changed at all here as we kind of got through the quarter?

Jason Schwartz (CFO)

We haven't changed any of our assumptions. I think we're all seeing that things keep on, has volatility day by day, and we're going to stay with that guidance that we, that the assumptions that we used in building our guidance at the beginning of the year.

Luke Horton (Senior Equity Research Analyst)

Okay. Got it. Awesome. Thanks for taking the questions, guys.

Operator (participant)

Thank you. Our next question comes from the line of Adam Hotchkiss with Goldman Sachs. Please proceed with your question.

Adam Hotchkiss (Analyst)

Great. Thanks for taking the questions. Or, just a high-level question for you. What, in your mind, is the most important execution item for you this year, whether that's ramping salespeople, accelerating growth, selling new products, innovating the platform, or is it something else? What do you need to see to validate the vision that you've laid out through doubling down on investment that you did earlier this year? Thanks so much.

Or Offer (CEO)

Thank you for the question. I think if I had to choose one that I think can generate the most impact is to drive the upsell enterprise motion. We've been lucky to have more than 1,000-plus amazing enterprises that engage in our customers that buy one or two solutions, and today we have at least seven, eight different solutions to offer them that can really help and drive ROI for them. I see a huge opportunity to drive more expansion on the book of business. This is something that I'm excited about, and I feel that if I will crack that to get top-notch, it will drive a lot of impact. Also, if you think AM enterprise, it's the function that has the most in this commercial organization.

If I will be able to take this organization and make them overperform, it's going to drive a lot of impact.

Adam Hotchkiss (Analyst)

Okay. Great. That's helpful. I know you've mentioned it a lot in the past. I didn't hear it as much on this call. Just your updated view of the data as a service and broader large language model or small language model opportunity, maybe how that progressed in Q1 relative to your expectations. Thanks.

Or Offer (CEO)

Yeah. Those motions are very successful internally. I think in the data as a service, we have an OEM team that sells our data to other software vendors that use our data to improve the offering. This team is rocking and highly successful, and we're seeing a lot of demand from a new vertical of software companies that want to give insight on chatbots and GenAI. This is a nice opportunity. Also, around everything about chat AI data, it is a hot topic, drives nice revenue. It did not perform very well this quarter.

Adam Hotchkiss (Analyst)

Great. Thank you very much.

Operator (participant)

Thank you. Our next question comes from the line of Patrick Walravens with Citizens. Please proceed with your question.

Austin Cole (Software Equity Research Associate)

Great. Thank you. This is Austin Cole on for Pat Walravens. Or, I just wanted to go back to the AI chatbot traffic product. This kind of idea of visibility into GenAI output is something you guys have talked about as an opportunity for a while now. Now that you have this kind of product offering, maybe you could comment just specifically on what you're seeing in terms of engagement from customers and specifically on the pipeline as it relates to that product. How does that kind of inform your idea of the total opportunity there?

Or Offer (CEO)

Yeah. I think it's a great question. The opportunity, I think, that is a complete opportunity is once we're going to develop the second part of the AI offering is to help you measure your market share and visibility on the chatbots. Because if you think that out of, I will say, let's say, a million people that are using chatbots to ask questions about running shoes, and the chatbots give them answers about five, 10 brands, a very small part are clicking and getting out of the chatbots. The majority are staying there or doing something else. I think the second part that we're going to introduce this quarter will bring you more visibility about how much time you appear and the sentiment.

When we can develop that and combine that with the traffic, then we will have a very strong proposition, and we will start monetizing it as a standalone model. Right now, we opened the traffic GenAI as a beta to our paying yearly customers to see their reaction and drive engagement and ROI. We did not start monetizing it, but it did help to convert a lot of no-touch customers paying with credit cards. They did not have access to that model. We are using this model. It really helped convert a lot of leads or credit card customers to yearly. This is when we saw a dollar impact. I assume that this quarter, after we launch the second part and start charging for this model, it will have a bigger impact.

Austin Cole (Software Equity Research Associate)

Okay. That's super helpful. Maybe one for Jason. I had the same kind of question regarding what you said in your prepared remarks around the investments. Maybe just to put a point on it, it does not sound like it, but I just want to clarify that there is not anything in the pipeline today that makes you think that you would need to make that change regarding investments.

Jason Schwartz (CFO)

No. There is nothing that we would see today. This was just a comment and sentiment that we had felt from a number of investors over the last couple of months, and we wanted to make sure that we clarify that.

Austin Cole (Software Equity Research Associate)

Okay. Appreciate it. Very clear. Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Scott Berg with Needham & Company. Please proceed with your question.

Scott Berg (Managing Director and Senior Research Analyst)

Hi everyone. Thanks for taking my questions. I appreciate the comments on pipeline activity with the ramp in sales reps, but how's expansion activity going? If I look at your customer additions over the last year, it looks like they're coming in at a slightly lower maybe rate than some of your historical customers, but you've already had, at least historically, had a good opportunity to expand with customers over time. How is that kind of process going in this macro? Are you seeing any changes to what that cadence looks like? Any commentary there would be helpful. Thanks.

Jason Schwartz (CFO)

Hey, Scott, it's Jason. A couple of things on that. We mentioned that we are seeing actually good, healthy pipeline build over here. We see the NRR numbers are actually reflecting, as we mentioned earlier, some of the hurdles that we set last year with some big sales and upsells that we had. I mean, we had some good experience this quarter. One thing that I think stands out to me was a large U.S. retailer who became a customer in 2023. It's a Fortune 500 U.S. retailer who purchased Web Intelligence for their SEO and performance team going back in 2023, really to understand standard voice and content strategies, the classic, what I would call the classic keyword use case. They were a $100,000 customer back in 2023. In Q1, they expanded to the category management team and e-commerce merchandising team.

They went from the marketing team to the category management team and the e-commerce merchandising team to really understand, to build out the custom segments and understand the category performance versus their competitors, and then also bought Shopper Intelligence to look at the product-level performance on Amazon versus their competitors. That customer now, that upsell that they did, that customer has grown 4x in just two years. Again, as an example of the kinds of value that a large retailer could see and grow, it is something that is very encouraging to us. We are looking forward, as Or said, to see more and more of these upsells with the portfolio of customers, portfolio of products that we have over the remainder of the year.

Scott Berg (Managing Director and Senior Research Analyst)

Helpful. Thanks, Jason. I heard there's no real impact on guidance with your acquisition of The Search Monitor. How do we think about that impacting your product platform kind of going forward?

Or Offer (CEO)

Yeah. Thank you. We're very excited about this opportunity and this acquisition because Search Monitor has, I would say, two main use cases that we are not strong. One is to help PPC team pay the acquisition at Search to save money on their brand protection budget. Many brands right now are spending millions, if not tens of millions of dollars on protecting their brand in Google. We have some of our customers in the insurance vertical, banks, CPG that literally spend tens of millions of dollars monthly to protect their brand, and they need to do it sometimes worldwide in many different countries. They need a tool to monitor where they should spend more or where they can spend less. This tool is very sticky and very ROI-driven. We can think that we will take this offering now with our current book of business.

We can really show great ROI for those PPC paid search teams. The second part they have is for affiliate team to help monitor the affiliate program to see that the affiliates they're bringing on board to promote their products are compliant with the guidelines they put for those affiliates and not start putting ads on their brand name. Those are two strong use cases with very clear ROI, very sticky, very operational offering that can fit perfectly with our assets and our market data. Combining our market data with their stickiness workflow tools can be very powerful. Hopefully, we integrate them, and maybe Q4, Q1, we're going to roll out those new offerings into our existing book of business.

Operator (participant)

Thank you. We have reached the end of the question and answer session. I would like to turn the floor back to the CEO Or Offer for closing remarks.

Or Offer (CEO)

Thank you, everyone. We're super excited for this quarter and this year. I want to thank you, everyone, for joining the call, especially our shareholders for their confidence. We look forward to speaking with all of you in the next few weeks. Thank you so much.

Operator (participant)

Thank you, ladies and gentlemen. This concludes today's teleconference. You may disconnect your line at this time. Thank you for your participation, and have a great day.