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    Similarweb Ltd (SMWB)

    Q1 2024 Summary

    Published Jan 15, 2025, 2:30 PM UTC
    Initial Price$5.35January 1, 2024
    Final Price$8.79April 1, 2024
    Price Change$3.44
    % Change+64.30%

    What went well

    • The company is consistently meeting or exceeding guidance and has raised its full-year profitability guidance, demonstrating strong financial performance. They delivered non-GAAP operating profit for the third consecutive quarter and generated nearly $10 million in free cash flow in Q1 2024.
    • AI-driven product innovations, such as SAM (their AI-powered sales assistant model), are showing positive early results, with customers reporting a significant increase in outreach response rates, potentially driving future growth.
    • The company is very bullish on its Investor Intelligence product, targeting a large and growing $10 billion alternative data market. They plan to introduce more data sets, which could lead to significant growth.

    What went wrong

    • Despite a strong Q1 performance, the company did not raise full-year revenue guidance, indicating potential caution about revenue growth for the rest of the year.
    • The macro environment remains challenging and is not improving compared to 2021 or early 2022, which could impact enterprise spending and the company's growth prospects.
    • Management expresses uncertainty about future demand from companies using SimilarWeb's data to train large language models, which could affect a potential growth area.

    Q&A Summary

    1. Guidance and Outlook
      Q: You beat Q1 but didn't raise full-year guidance. Is that conservatism?
      A: We prefer to give guidance we know we can meet. We're proud of hitting the high end of our guidance and see that trend continuing. On profitability, we're seeing efficiency gains and have raised our guidance from $6–8 million to $7–9 million for the year.

    2. Macro Impact on Business
      Q: How is the macro environment affecting your business and enterprise budgets?
      A: The macro environment remains the same; we don't see it improving like in 2021 or early 2022. It's more like 2020 levels. We need to work hard and execute better to scale. Enterprise budgets look good for the rest of FY24.

    3. Investor Intelligence Products
      Q: Discuss the state and growth potential of Investor Intelligence products.
      A: We're super bullish about our Stock Intelligence solution. It helps evaluate public company performance before earnings releases. We're part of the $10 billion and growing alternative data market. Currently, we support 3,000 stocks with basic data and over 100 stocks with advanced signals like revenue and customer growth. We're adding more datasets, such as app installation and technographic data, to enhance predictive capabilities.

    4. Acquisition of AdMetrix
      Q: How will the AdMetrix acquisition contribute to growth and financials?
      A: AdMetrix didn't materially contribute to the quarter, but combining their knowledge with our data will help us build an outstanding ad intelligence product. This can be monetized across our Research Intelligence, Investor Intelligence, Marketing Intelligence, and Shopper Intelligence solutions, driving ROI on the acquisition.

    5. Tailwinds from AI and LLM Training
      Q: Are you seeing tailwinds from tech customers using your data to train LLMs?
      A: We're still seeing nice momentum from companies buying data to train their LLMs. There was good activity in the quarter, but it's uncertain if this will remain a hot topic going forward.

    6. Retention Stabilization
      Q: What's driving the stabilization in retention rates?
      A: Retention is based on historical data; those who churned in Q1 decided to do so late last year and didn't benefit from recent improvements. We've made significant changes to our customer success organization in Q1, focusing on product engagement and education, especially for SMB customers. We expect these initiatives to increase retention over time.

    7. ARPU and Customer Growth
      Q: When will ARPU stabilize given the new lower upfront pricing?
      A: Our model involves two ends: large customers over $100,000 growing to millions, and a continuous flow of new customers starting small. Most of our 378,000 customers started well below $100,000. We're focused on expanding strategic accounts and acquiring new customers who become future NRR. If blended ARPU fluctuates by $500 over time, we're comfortable with that.

    8. Go-to-Market Changes and New CRO
      Q: How are customers receiving your go-to-market changes and new CRO's initiatives?
      A: We made two big changes: centralized customer success efforts for SMB customers to focus on value, and aligned our strategic accounts by sector for better support. We're seeing great success with these changes. Our new CRO, Susan, joined recently; she brings extensive experience in selling data within market research and will help us scale our strategic motion, closing more 7-figure deals.

    9. Sales Intelligence and AI
      Q: Where are you seeing incremental demand among your products, particularly in Sales Intelligence?
      A: Our innovation products like Shopper Intelligence and Stock Intelligence are doing well. In Sales Intelligence, we've implemented AI to enrich user workflows, automating processes like prospecting and email outreach. This approach increases response rates, and we're excited about its potential.

    10. Vertical Performance in Q1
      Q: Any notable performance in particular verticals during Q1?
      A: Our teams selling to investors and OEMs are executing very well. The investor vertical continues to perform nicely, and OEMs integrating our data into their solutions are doing really well.

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