Summary
Semrush reported second quarter fiscal 2022 revenue of $62.6 million, up 39% year over year. Revenue increased in all regions, according to the filing. For the first six months, revenue was $119.7 million, up 40.9%. Gross profit was $50.0 million for the quarter, up 43.8%. Gross margin was 79.9%, up from the prior-year quarter. The top line benefited from more paying customers and higher average revenue per customer. The company ended the quarter with more than 91,000 paying customers, up approximately 18% from a year ago. ARR was $255 million as of June 30, 2022, up 35% year over year. Dollar-based net revenue retention was 125%, compared with 127% in the previous quarter. ARR per paying customer was $2,792, compared with $2,351 a year earlier.
Profitability moved sharply lower. Operating loss was $8.3 million, down from a loss of $15 thousand in the prior-year quarter. Operating margin was negative 13.2%. Net loss was $8.3 million, down from $279 thousand. Diluted EPS was negative $0.06, down from $0.00. The company spent heavily to expand sales and marketing, research and development, and general and administrative teams. Sales and marketing, research and development, and general and administrative expenses all rose because of headcount growth. General and administrative expense included a sizable increase in stock-based compensation. The company also incurred costs to wind down operations in Russia. Cash generation weakened. Operating cash flow for the six months was $0.6 million, down from $10.1 million. Free cash flow was negative $3.0 million for the six months, compared with $9.0 million a year earlier. Deferred revenue was $48.3 million, up 39.4% from the prior-year quarter.
Operational momentum was strong in several areas. Sequential growth accelerated in the quarter. The company said it added a record amount of revenue sequentially. Local listing add-on revenue rose more than 70% from the previous year. Customers paying more than $10,000 annually grew more than 80%, and customers on the two higher priced plans grew more than 25% from a year ago. The company added 9,000 new customers through the first six months. Its acquisitions, Backlinko and Kompyte, are already contributing. Kompyte achieved its first cross-sale to an existing Semrush customer. It continues to see strong demand from both new and existing customers for Kompyte. Management said the vast majority of eligible employees had been relocated ahead of schedule and under budget. As of August 10, 2022, the company no longer has operating subsidiaries in Russia. It expects relocations to be substantially complete by September 30, 2022, and total relocation costs of approximately $17.5 million to $21.5 million during fiscal 2022.
For the third quarter of 2022, revenue is expected to be $63.8 million to $64.2 million, up 30% year over year. Non-GAAP net loss is expected to be $13 million to $12 million, including incremental $7 million to $5 million of one-time relocation costs. For full-year 2022, revenue is expected to be $251 million to $253 million, up 34 to 35% year over year. Non-GAAP net loss is expected to be $32 million to $28 million, including $11 million to $10 million of one-time relocation costs. The company said a reconciliation of non-GAAP net loss guidance to the most directly comparable GAAP measure is not available without unreasonable efforts.
Management flagged a more uncertain economic environment. The company expects to continue to incur operating losses and negative cash flows for the foreseeable future because of investments in the business. It believes existing cash will be sufficient for at least the next 12 months. The company operates in several tax jurisdictions and maintains a full valuation allowance on its net deferred tax assets. It expects that trend to continue for the foreseeable future. The company may be required to seek additional equity or debt financing. If it cannot raise capital or generate cash flows, its business, results of operations, and financial condition could be adversely affected. Other risks include foreign currency fluctuations, a competitive labor market, and the need to execute on growth investments while managing the Russia wind-down. The quarter showed solid demand and customer expansion, but the sharp swing to a net loss and the drag on cash flow are the main items to watch.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $62.6M | $57.1M | +9.6% | $45.0M | +39.1% |
| Gross profit | $50.0M | $45.5M | +9.8% | $34.8M | +43.8% |
| Gross margin | 79.9% | 79.7% | +0.2 pp | 77.3% | +2.6 pp |
| Research & development | $9.7M | $8.1M | +18.8% | $6.0M | +62.2% |
| Sales & marketing | $30.9M | $25.8M | +19.6% | $18.3M | +68.8% |
| General & administrative | $14.2M | $14.2M | +0.4% | $10.5M | +35.2% |
| Total operating expenses | $58.3M | $48.1M | +21.1% | $34.8M | +67.5% |
| Operating income (loss) | -$8.3M | -$2.6M | -218.8% | -$15.0K | -54940.0% |
| Operating margin | -13.2% | -4.5% | -8.7 pp | -0.0% | -13.2 pp |
| Net income (loss) | -$8.3M | -$2.6M | -222.2% | -$279.0K | -2869.2% |
| Net margin | -13.2% | -4.5% | -8.7 pp | -0.6% | -12.6 pp |
| Diluted EPS | -$0.06 | -$0.02 | -$0.04 | $0.00 | -$0.06 |
Risks
Adverse or weakened economic conditions may reduce spending on sales and marketing technology, especially among SMBs that make up an important part of the paying customer base. Most paying customers are on month-to-month premium subscriptions that can be cancelled at any time, so a downturn could cause reductions, delays, or non-renewals.
Significant development operations were historically in Russia and more than half of full-time employees were located there. The company is winding down Russian operations and relocating employees due to the Ukraine conflict, expects to incur total relocation costs of approximately $17.5 million to $21.5 million in fiscal year 2022, and as of August 10, 2022 no longer has operating subsidiaries in Russia.
The company incurred a net loss of $10.9 million for the six months ended June 30, 2022 and had an accumulated deficit of $50.0 million as of June 30, 2022, and expects to continue incurring net losses. In Q2 2022, operating loss widened to $8.26 million from $0.02 million in Q2 2021, and net loss widened to $8.28 million from $0.28 million.
Operating cash flow was negative $7.44 million in Q2 2022 compared with positive $1.05 million in Q2 2021, and for the six months ended June 30, 2022 operating cash flow fell 94.1% to $0.59 million. Free cash flow was negative $3.0 million for the six months ended June 30, 2022 compared with positive $9.0 million in the prior-year period, and free cash flow margin was (4.8)% compared with 10.6%.
Substantially all revenue and cash flow come from paying premium subscribers, and most choose monthly subscription terms that allow them to terminate or adjust on a monthly basis. Dollar-based net revenue retention rate was approximately 125% as of June 30, 2022 compared with 126% as of December 31, 2021, and failure to renew or upgrade would harm results.
The market is fragmented, rapidly evolving, and highly competitive with low barriers to entry, and competitors may offer lower-priced or free point solutions. Pricing pressure may force the company to cut prices, offer discounts, or increase sales and marketing spending to attract and retain customers.
Sales and marketing expense increased 69% in Q2 2022 compared with Q2 2021 and 63% for the six months ended June 30, 2022 compared with the prior-year period, driven partly by advertising and personnel to acquire new paying customers. If unpaid or paid marketing efforts fail to attract new customers or if customers increasingly come from paid channels, customer acquisition costs could rise.
The platform relies on third-party data sources, including social media APIs and negotiated data agreements, whose terms can change with little notice. Loss of access or less favorable terms, including prohibitive fees or restrictions, could require costly alternatives and impair platform functionality.
Changes by search engines and social networking sites to algorithms, policies, or anti-spam rules may diminish the efficacy of products such as backlink analytics and Prowly. For example, if search engines stop using backlinks or stop penalizing unnatural backlinks, customers may devalue or stop using affected tools.
The company depends on executive officers and key employees, and relocation from Russia may cause loss of skilled personnel because employees may be unwilling or unable to relocate. Competition for software engineers and sales professionals is intense in Boston, Philadelphia, Austin, Amsterdam, Barcelona, Belgrade, Berlin, Limassol, Prague, Warsaw, and Yerevan.
The company acquired Backlinko and Kompyte in January and March 2022 for a total of $14.0 million and may continue to pursue acquisitions. Integration may divert management resources, disrupt operations, incur unexpected costs, and fail to realize expected benefits.
SaaS KPIs
All quarters →ARR per Paying Customer
Paying Customers
ARR
Dollar-Based Net Revenue Retention
Summary, forecast, risks and KPIs are extracted from SEMrush Holdings, Inc.'s SEC filings for Q2 FY2022 (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.