Summary
Semrush reported first quarter fiscal 2023 revenue of $70.9 million, up 24.1% from $57.1 million in the prior-year quarter. Growth showed up in every region. Annual recurring revenue reached $293 million as of March 31, 2023, up 23% year over year. The company crossed 100,000 paying customers, roughly 15% more than a year earlier and up from 87,000, and it logged record net-new customer additions along with a record number of new trials. Gross margin improved to 82.2% from 79.7%, helped by lower hosting fees after a data center relocation.
Profitability went the other way. The net loss widened to $9.9 million from $2.6 million a year earlier, and the operating loss widened to $10.8 million from $2.6 million. Diluted loss per share was $0.07, steeper than the $0.02 reported in the prior-year quarter. Operating margin fell to -15.2% from -4.5%. Sales and marketing headcount grew 26% year over year, research and development headcount rose 19%, and general and administrative headcount was up 18%. The swing reflects a larger sales organization, higher research and development costs tied to moving staff to higher cost countries, and one-time exit costs. On a non-GAAP basis, which excludes stock-based compensation, the net loss was $7.1 million versus $1.6 million, and it included $1.0 million tied to substantially completed relocation efforts.
Customer metrics were mixed. Dollar-based net revenue retention, which measures the ability to retain and expand revenue from the existing base, slipped to 116% as of March 31, 2023 from 118% in the previous quarter. ARR per paying customer rose to $2.9 thousand from $2.7 thousand. Customers spending more than $10,000 a year grew by more than 45% year over year, and more than 20% of customers now buy two or more products. Registered free active customers topped 885,000, up more than 36%. The App Center ended the quarter with 51 apps, 25 of them from third-party partners. The company also acquired Traffic Think Tank, a marketing education business, and named a new chief financial officer and a new chief sales officer.
Cash generation turned negative. Operating cash flow was a use of $3.6 million, against $8.0 million provided in the prior-year quarter, as the wider net loss and working capital movements outweighed collections from new customers. Free cash flow, a non-GAAP measure, was negative $4.9 million compared with positive $7.4 million a year earlier. Capital expenditures were $0.3 million, down from $0.4 million. Deferred revenue climbed 18.3% to $56.3 million, a sign that billed subscriptions kept building.
Guidance frames a slower second quarter and a steadier full year. For the second quarter of fiscal 2023, management expects revenue of $73.6 million to $75.0 million, which at the midpoint implies growth of about 19% year over year, and a non-GAAP net loss of $3.0 million to $1.5 million. For the full fiscal year 2023, the company reiterated revenue guidance of $306.0 million to $309.0 million, roughly 21% growth at the midpoint, and still expects non-GAAP net income of breakeven to $3 million. Management noted that a reconciliation of the non-GAAP net loss guidance to the closest GAAP measure is not available without unreasonable effort. The plan leans on balancing paid and organic marketing, expanding the App Center, automating sales actions, and upgrading products. The risks are clear. GAAP losses are widening, net revenue retention has stepped down, and the sales and marketing build has yet to convert into profit.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $70.9M | $68.8M | +3.0% | $57.1M | +24.1% |
| Gross profit | $58.2M | $56.8M | +2.5% | $45.5M | +27.9% |
| Gross margin | 82.2% | 82.6% | -0.4 pp | 79.7% | +2.5 pp |
| Research & development | $13.9M | $13.3M | +4.7% | $8.1M | +70.6% |
| Sales & marketing | $35.5M | $39.6M | -10.4% | $25.8M | +37.4% |
| General & administrative | $18.6M | $17.4M | +7.2% | $14.2M | +31.6% |
| Total operating expenses | $69.0M | $72.1M | -4.3% | $48.1M | +43.4% |
| Operating income (loss) | -$10.8M | -$15.3M | +29.5% | -$2.6M | -315.8% |
| Operating margin | -15.2% | -22.2% | +7.0 pp | -4.5% | -10.7 pp |
| Net income (loss) | -$9.9M | -$13.9M | +29.1% | -$2.6M | -283.5% |
| Net margin | -13.9% | -20.2% | +6.3 pp | -4.5% | -9.4 pp |
| Diluted EPS | -$0.07 | -$0.10 | +$0.03 | -$0.02 | -$0.05 |
Risks
Substantially all revenue comes from premium subscriptions, and customers predominantly choose monthly terms that allow cancellation or adjustment monthly. Dollar-based net revenue retention rate was approximately 116% as of March 31, 2023 compared with approximately 118% as of December 31, 2022, and failure to renew or upgrade would harm results.
A large portion of paying customers are SMBs, which are more susceptible to economic fluctuations, and most customers are on month-to-month premium subscriptions that can be cancelled at any time. Adverse economic conditions could cause SMB customers to reduce or stop spending on our products.
Growing use of AI platforms such as ChatGPT could result in lower demand for traditional search engine technologies. We may need significant research, development, sales and marketing resources, and data access to build integrations, or our current integrations and functionality could become obsolete.
The market is intensely competitive with low barriers to entry, and competitors may offer lower-priced or free products or bundle solutions. Sales and marketing expense increased 37% for the three months ended March 31, 2023 compared with the prior-year period, and price-cutting or higher customer acquisition costs could harm results.
The platform relies on data from third-party websites, social media APIs, and negotiated data providers including clickstream and search engine data. Providers may change terms, limit access, or cease operations, and search engine algorithm or anti-spam policy changes could reduce the efficacy of products such as backlink analytics and email distribution tools.
Approximately 51% of revenue for the three months ended March 31, 2023 was generated from paying customers outside the United States, and design and development is conducted in multiple foreign jurisdictions. Risks include geopolitical instability, military conflicts, and relocation costs; exit costs were $1.0 million in Q1 2023.
The labor market is competitive and labor costs are increasing, including from relocating personnel out of Russia to higher cost countries. Sales and marketing headcount increased 26%, R&D headcount increased 19%, and G&A headcount increased 18% in Q1 2023 compared with the prior-year period, driving compensation cost increases.
Net loss widened to $9.9 million for Q1 2023 from $2.6 million in Q1 2022, and operating loss widened to $10.8 million from $2.6 million; operating margin declined to -15.2% from -4.5%. Accumulated deficit was $82.8 million as of March 31, 2023.
Operating cash flow decreased to negative $3.6 million for Q1 2023 from positive $8.0 million in Q1 2022. Free cash flow, a non-GAAP measure, was negative $4.9 million compared with positive $7.4 million, which could require additional financing.
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SaaS KPIs
All quarters →ARR per Paying Customer
Paying Customers
ARR
Free cash flow
Free cash flow margin
Registered Free Active Customers
Dollar Based Net Revenue Retention
Summary, forecast, risks and KPIs are extracted from SEMrush Holdings, Inc.'s SEC filings for Q1 FY2023 (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.