Summary
Semrush closed its first quarter as a public company with revenue of $40.00 million, up 43.9% from $27.79 million in the prior-year quarter. Gross profit rose 47.5% to $31.22 million, and gross margin improved to 78.1% from 76.2%. The company swung to an operating profit of $1.51 million from an operating loss of $1.87 million a year earlier, and operating margin came in at 3.8%, compared with a negative margin in the prior-year quarter. Net income was $1.47 million against a net loss of $1.93 million, and diluted earnings per share came in at $0.01 versus a diluted loss per share of $0.02.
Cash generation stood out. Operating cash flow was $9.01 million for the quarter, up from $0.56 million a year earlier. Capital expenditures dropped to $0.17 million from $1.08 million, as the company bought less computer equipment and capitalized less internal-use software. Free cash flow, which the 10-Q defines as operating cash flow less purchases of property and equipment and capitalized software development costs, was $8.7 million, and free cash flow margin was 21.8%. That is a meaningful turn for a business that had been burning cash.
Recurring revenue metrics point to healthy demand. ARR reached $168 million as of March 31, 2021, up 53% year over year. Paying customers grew to more than 72,000 from 56,000, an increase of 29%, and ARR per paying customer rose to $2,274 from $1,942. Dollar based net revenue retention was 116%, which means expansion inside the existing base is doing real work. No single customer accounted for more than 1% of revenue. Deferred revenue, current portion, was $32.08 million at quarter end.
Product activity continued. Semrush launched an App Center marketplace for third party developers, added a Core Web Vitals report to its Site Audit tool, and relaunched Social Media Poster as a free product with native Instagram support. Its Backlinks database now holds more than 41.2 trillion links, up 52% from the previous year. The company also ranked #26 on G2's 2021 list of Best Global Software Sellers.
Expense growth was broad, and it was funded by revenue growth rather than restraint. Headcount rose across the business, including a 95% increase in the teams supporting cost of revenue, a 47% increase in general and administrative, a 31% increase in research and development, and a 24% increase in sales and marketing. Advertising spend rose as the company worked to acquire new paying customers. Even so, total operating expenses fell to 74% of revenue from 83%, which is what allowed the operating margin to turn positive.
The IPO on March 29 raised $140.0 million in gross proceeds from 10,000,000 Class A shares priced at $14.00, or roughly $126.6 million net of underwriting discounts and offering costs. Cash and cash equivalents ended the quarter at $171.9 million, alongside $2.4 million of accounts receivable. The company also has a $45.0 million revolving credit facility that matures on January 12, 2024.
For the second quarter of 2021, management guides to revenue growth of 49% year over year and a non-GAAP net loss of $4.4 million to $4.1 million. For the full year 2021, the guidance calls for revenue growth of 40-42% year over year and a non-GAAP net loss of $7.9 million to $6.3 million. A reconciliation of the non-GAAP loss guidance to the comparable GAAP measure is not available without unreasonable efforts, largely because share-based compensation and related employer taxes depend on future hiring, turnover and retention.
The risks are the usual ones for a fast-growing SaaS platform. Competition is intense in a rapidly changing market. The company has to keep attracting new paying customers, converting free users, and retaining and expanding existing accounts. It also flagged COVID-19 as a factor for its business and industry. Management warned that apart from this quarter it expects to keep incurring operating losses and negative cash flows for the foreseeable future. The quarter was profitable on a GAAP basis and generated real operating cash, but the guidance implies a return to losses in the second quarter and across the full year as investment continues.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2021 | Q4 FY2020 | QoQ | Q1 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $40.0M | — | — | — | — |
| Gross profit | $31.2M | — | — | — | — |
| Gross margin | 78.1% | — | — | — | — |
| Research & development | $5.4M | — | — | — | — |
| Sales & marketing | $16.5M | — | — | — | — |
| General & administrative | $7.9M | — | — | — | — |
| Total operating expenses | $29.7M | — | — | — | — |
| Operating income (loss) | $1.5M | — | — | — | — |
| Operating margin | 3.8% | — | — | — | — |
| Net income (loss) | $1.5M | — | — | — | — |
| Net margin | 3.7% | — | — | — | — |
| Diluted EPS | $0.01 | — | — | — | — |
Risks
Substantially all revenue and cash flows come from paying customers with premium subscriptions, and paying customers predominantly choose monthly terms that can be terminated or adjusted monthly as external factors change. The risk is material because revenue rose 43.9% to $40.0 million in FY2021 Q1 versus FY2020 Q1 and depends on renewing and expanding that base.
Future performance depends on upgrading paying customers to higher-price point subscriptions and selling add-ons such as Prowly, Sellerly, and Competitive Intelligence, while customers may downgrade to lower-cost or free subscriptions if they do not perceive value. If expansion efforts fail, the revenue growth rate may decline.
Growth relies on unpaid content marketing and paid advertising to attract visitors, register trials, and convert them into paying customers, and increased marketing spend may not generate more paying customers without raising customer acquisition cost. MD&A shows sales and marketing expense rose 28% and advertising expense increased $1.5 million in the three months ended March 31, 2021 versus the prior-year period.
The market is fragmented, rapidly evolving, and highly competitive with low barriers to entry, and competitors may offer lower-priced or free products, bundle solutions, or use lower-cost marketing. Pricing pressure may force price cuts, discounts, or higher sales and marketing spend.
The platform depends on publicly available and paid third-party data sources and APIs, including Facebook, Twitter, Instagram, Pinterest, and LinkedIn, and provider terms can change with little or no notice and little or no right of redress. Loss of access or less favorable terms could require expensive alternatives and harm platform functionality.
Design and development is primarily conducted in Russia, the Czech Republic, Cyprus, and Poland, and approximately 55% of revenue for the three months ended March 31, 2021 was generated from paying customers outside the United States. Risks include geopolitical instability, military conflicts impacting Russia, sanctions and export restrictions, and foreign currency fluctuations.
With customer consent, the company obtains confidential and personal data and credit card information, and it has experienced security breaches, including a brute force attack that resulted in access to affiliate program partner contact information, with residual risk from the SolarWinds supply chain attack. A breach could damage customer relationships, trigger liability, and allow annual customers to terminate for uncured material breach.
Success depends on executive officers and key employees including CEO and co-founder Oleg Shchegolev, COO and co-founder Dmitry Melnikov, and Chief Product Officer Vitalii Obishchenko, and competition for software engineers and sales professionals is intense in Boston, Trevose, Dallas, Prague, Limassol, St. Petersburg, and Warsaw. Immigration restrictions may inhibit international recruiting.
Adverse or weakened general economic conditions may reduce spending on sales and marketing technology, especially among SMBs that make up an important segment of the paying customer base, and most paying customers are on month-to-month subscriptions that can be cancelled at any time. Prolonged slowdowns may lead to renegotiation, payment defaults, or non-renewal.
The COVID-19 pandemic remains uncertain and could cause SMB and marketing agency customers to further reduce or delay technology spending, while office closures and remote work may affect sales, employee productivity, and customer retention. In April 2020 the paying customer growth rate declined and the company offered free or discounted pricing to retain certain customers.
Changes by search engines and social networking sites to algorithms or policies, including Google anti-spam policies, may limit the efficacy of products such as backlink analytics or the link building tool and Prowly. If Google stops using backlinks or takes action against customer emails, customers may devalue or cease using affected tools.
On January 12, 2021, the company entered a credit agreement with a $45.0 million revolving credit facility and letter of credit sub-facility, with a borrowing base tied to annualized retention applied to monthly recurring revenue. Covenants limit indebtedness, liens, dividends, investments, acquisitions, and capital expenditures, and default could accelerate indebtedness and allow lenders to exercise remedies on substantially all assets.
The company has experienced rapid growth in customers, sales, revenue, locations, and headcount, with paying customers increasing from over 56,000 as of March 31, 2020 to over 72,000 as of March 31, 2021 and seven global offices. Managing a dispersed employee base is harder as COVID-19 limits travel for onboarding and integration.
Privacy and security laws such as the CCPA, Massachusetts data security law, and New York SHIELD Act impose prescriptive requirements and civil penalties, and unfavorable cookie or tracking regulation could diminish customer acquisition and product development. Compliance may increase costs and restrict collection, disclosure, and use of personal data.
A total of 124,905,954 shares, approximately 93% of outstanding Class A and Class B common stock, are restricted from immediate resale but may be sold in the near future after lock-up agreements expire 180 days following March 24, 2021. Sales or the perception of sales could depress the market price.
International operations and transfer pricing policies may be challenged by taxing authorities, which could require additional taxes, interest, and penalties, higher effective tax rates, and reduced cash flows. Changes in tax laws or non-income based taxes could also increase tax obligations.
The dual-class structure gives Class B common stock ten votes per share, and as of March 31, 2021 directors, executive officers, and affiliates held in aggregate 93% of voting power. This concentrated control limits other stockholders' ability to influence corporate matters and may make the stock ineligible for certain indices.
The intellectual property portfolio consists primarily of registered and unregistered trademarks, unregistered copyrights, domain names, know-how, and trade secrets, with no issued or pending patents. Foreign jurisdictions may provide inadequate protection and enforcing rights may require significant resources.
SaaS KPIs
All quarters →ARR per Paying Customer
Paying Customers
ARR
Free cash flow
Free cash flow margin
Dollar Based Net Revenue Retention
Summary, forecast, risks and KPIs are extracted from SEMrush Holdings, Inc.'s SEC filings for Q1 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.