Q3 2024 Summary
Published Jan 15, 2025, 2:30 PM UTC- Similarweb's unique digital data is critical for training AI models, leading to large contracts with major tech companies, including two 8-figure deals. This demonstrates significant growth opportunities in the AI space as companies rely on Similarweb's data to keep their language models up to date.
- Accelerated customer growth driven by improved marketing capabilities and increased brand awareness, resulting in a 21% year-over-year increase in total customer count. This shows enhanced growth trajectory and success in attracting new customers.
- Strong demand across multiple product offerings, such as Web Intelligence, Sales Intelligence, and Advisory Services, indicates diversified growth. Additionally, the company is investing in sales force expansion to capture increasing demand and expand in the large enterprise market.
- The company's revenue growth relies heavily on a few large deals with big tech companies, but it's unclear how sustainable or repeatable these deals are. The CEO mentioned securing their second 8-figure customer, which took nearly 10 years to develop, suggesting that similar deals may not occur frequently. ,
- The Q4 revenue guidance indicates a sequential slowdown in growth. Despite being asked about potential conservatism in the guidance, the CFO attributes the lower growth to revenue recognition timing but does not provide specifics, raising concerns about the company's ability to sustain its growth momentum. ,
- The net revenue retention rate (NRR), while improving, may not return to previous higher levels. The CFO expresses optimism but does not commit to reaching past NRR levels, indicating potential challenges in expanding within existing customers or retaining them.
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2025 Revenue Growth
Q: Any early insight into revenue growth for 2025?
A: Management will provide full guidance at the beginning of the year but noted that current momentum and exit rates are good indications of future growth. They plan to focus on profitable growth with operating and cash flow profit on a quarterly basis going forward. -
Large Eight-Figure Deals
Q: Tell us about the journey to the two large eight-figure deals.
A: The two eight-figure deals highlight long-term relationships built over nearly 10 years. These companies started with small engagements in Web Intelligence and expanded to solutions like Sales Intelligence. Trust in Similarweb's data led to advanced engagements, making the company a trusted adviser for digital market data. Management expects more such deals as companies rely on digital data for revenue growth. -
Fourth Quarter Revenue Guidance
Q: Is the Q4 revenue guidance conservative compared to prior quarters?
A: Timing of deals and revenue recognition impacts guidance. Revenue is recognized over subscription terms once customers start using the data. The consistent methodology and a commitment to meet guidance contribute to the outlook. There's no indication of negative trends affecting next year. -
Net Revenue Retention Trajectory
Q: Can net revenue retention return to prior levels?
A: Management is encouraged by momentum in retention and upsells. With 45% of revenue locked in multiyear commitments, they have confidence in retention. Large deals demonstrate their ability to land, retain, and expand customers from thousands to multimillions, supported by investments in customer success and account management. -
AI Deals Structure and Size
Q: What's the nature and size of AI-related deals?
A: AI deals involve two products: training LLMs with digital data, and providing brands with consumer perception data via chatbots. Training data deals start from six figures, growing as customers add data sets. Consumer perception deals start from five figures and increase with demand. These contracts are expected to renew due to the need for fresh data. -
Product Mix and Momentum
Q: Which products have the most momentum?
A: Core product Web Intelligence is performing well, with increased demand in SEO following an acquisition two years ago. Sales Intelligence is seeing high demand, leveraging AI capabilities like sales assistants and AI agents. Advisory services also have strong momentum with big brands seeking insights on digital activity. -
Impact of LLMs on Customer Behavior
Q: How are LLMs changing customer behavior and impacting business?
A: Brands realize consumers are changing how they consume information, increasingly using chatbots over traditional search. They seek market data to understand their presence in chatbots and how it drives consumer actions. Similarweb provides digital data to help brands understand and act on these changes. -
Accelerating Sales Hiring
Q: What's the focus in accelerating sales hiring?
A: The company aims to hire more salespeople to handle increased inbound demand and to actively approach enterprise clients. With over 5,000 customers and a massive market opportunity, they plan to present their multi-solution offerings to drive growth in the enterprise segment. -
New Head of Sales, Susan Dunn
Q: How is the new head of sales, Susan Dunn, performing?
A: Susan Dunn is doing an amazing job. With over 20 years of experience leading large teams at NielsenIQ, she brings deep industry knowledge in selling data and insights. She is making all the right moves to ramp up go-to-market strategies and position the company for success. -
Path to 25% Operating Margin
Q: When will you reach the long-term model of 25% operating margin?
A: Management expects to reach a 25% operating margin at revenue levels between $400 million to $450 million, with 85% gross margin and 30% free cash flow, translating to $120 million to $135 million in free cash flow. -
New Customer Growth Drivers
Q: What's driving stronger new customer growth?
A: The marketing team is driving increased brand awareness and conversions, leading to higher registrations and customer growth. Internal improvements and a strong top-of-funnel are contributing factors.