Summary
Semrush ended FY2022 with Q4 revenue of $68.8 million, up 28.0% year over year. Full-year revenue was $254.3 million, up 35.3%. Gross profit was $56.8 million in Q4, up 34.7%, and $205.8 million for the full year, up 40.9%. Gross margin improved to 82.6% in Q4, an increase of 4.1 percentage points, and full-year gross margin was 80.9%, up 3.2 percentage points. The top line and gross profit kept growing at a healthy clip.
Profitability went the other way. Q4 operating loss was $15.3 million, and the loss widened from the prior-year quarter. Full-year operating loss was $36.4 million, and it widened from the prior year. Operating margin fell to negative 22.2% in Q4, down 15.4 percentage points, while full-year operating margin was negative 14.3%, down 13.0 percentage points. Q4 net loss was $13.9 million, and the net loss widened. Full-year net loss was $33.8 million, and it widened. Full-year diluted EPS was negative $0.24, and the per-share loss widened.
Cash flow flipped negative. Q4 operating cash flow was negative $9.6 million, down year over year. Full-year operating cash flow was negative $9.6 million, down from the prior year. Capital expenditures were $0.2 million in Q4, down 73.5%, and $4.2 million for the full year, up 77.9%. Deferred revenue, current portion, was $49.4 million at December 31, 2022, up 22.7% from the prior-year quarter. The combination of widening losses and negative operating cash flow shows the cost of the company's growth push.
Operational metrics show customer growth. Paying customers were more than 95,000 at December 31, 2022 and more than 82,000 a year earlier. ARR was $275.1 million, compared with $215.7 million. ARR per paying customer was $2,868, compared with $2,631. Dollar-based net revenue retention was approximately 118% at December 31, 2022, compared with 126% at December 31, 2021. The company also increased the number of customers that pay more than $10,000 annually by more than 50% year over year and expanded its App Center to 37 apps, including 17 third-party apps. It acquired Backlinko and Kompyte during 2022.
Management's annual report points to long-term operating leverage but calls for more spending in the near term. For the full fiscal year ending December 31, 2023, Semrush expects sales and marketing expenses to increase in both absolute dollars and as a percentage of revenue compared with the year ended December 31, 2022. Research and development spending is expected to rise in dollar terms. General and administrative expenses are expected to increase in absolute dollars but decline as a percentage of revenue over time. Cost of revenue as a percentage of revenue is expected to decrease over time. The company expects to continue incurring losses in the short term and may not achieve profitability. It also expects to maintain a full valuation allowance on net deferred tax assets for the foreseeable future.
Risks remain familiar for a high-growth SaaS platform. Semrush cites intense competition, the need to innovate and differentiate from point solutions, and the challenge of hiring, retaining, training, and motivating qualified personnel and senior management. The company also needs to acquire new paying customers, retain existing customers, and expand revenue from its base. It faces foreign currency swings, and the winding down of Russian operations has added complexity, though management does not expect remaining exit costs to be material in future periods. For now, the quarter shows strong demand and improving gross margin, offset by much larger operating losses and a cash burn that investors will watch closely.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2022 | Q3 FY2022 | QoQ | Q4 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $68.8M | $65.8M | +4.5% | $53.7M | +28.0% |
| Gross profit | $56.8M | $53.4M | +6.4% | $42.2M | +34.7% |
| Gross margin | 82.6% | 81.2% | +1.5 pp | 78.5% | +4.1 pp |
| Research & development | $13.3M | $10.1M | +30.9% | $6.8M | +94.3% |
| Sales & marketing | $39.6M | $30.6M | +29.5% | $25.7M | +54.1% |
| General & administrative | $17.4M | $17.0M | +2.3% | $13.3M | +30.6% |
| Total operating expenses | $72.1M | $63.6M | +13.3% | $45.8M | +57.3% |
| Operating income (loss) | -$15.3M | -$10.3M | -48.9% | -$3.7M | -318.0% |
| Operating margin | -22.2% | -15.6% | -6.6 pp | -6.8% | -15.4 pp |
| Net income (loss) | -$13.9M | -$9.1M | -52.9% | -$3.9M | -259.9% |
| Net margin | -20.2% | -13.8% | -6.4 pp | -7.2% | -13.0 pp |
| Diluted EPS | -$0.10 | -$0.06 | -$0.04 | -$0.03 | -$0.07 |
Risks
Semrush derives substantially all revenue from paying customers with premium subscriptions, and customers predominantly choose monthly terms that can be terminated or adjusted monthly. MD&A reports dollar-based net revenue retention rate was approximately 118% as of December 31, 2022 and 126% as of December 31, 2021, while FY2022 Q4 revenue was $68.78 million, up 28.0% versus FY2021 Q4.
Growth depends on attracting new trials and converting them to paying customers; marketing spend may need to increase without generating more customers, raising customer acquisition costs. MD&A says sales and marketing expense increased 56% for FY2022 year to date and is expected to increase as a percentage of revenue in 2023 compared with FY2022.
The market is fragmented, rapidly evolving, and highly competitive with low barriers to entry, and Semrush competes with point solutions and free or lower-priced products. Competitors may force price cuts, discounts, or higher sales and marketing spending.
Adverse 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, increasing exposure to discretionary spending cuts.
Semrush historically had more than half of full-time employees in Russia and no longer has operating subsidiaries in Russia as of August 10, 2022. It incurred $11.3 million of relocation costs in FY2022 and may need additional operational measures in response to the Russia-Ukraine conflict, affecting profitability.
The platform relies on third-party data from web crawling, paid data providers, and social media APIs including Facebook, Twitter, Instagram, Pinterest, and LinkedIn. If providers change terms, limit access, or cease operations, Semrush may need costly alternatives and could lose platform functionality.
Semrush handles personal data and credit card information and has experienced a brute force attack that resulted in access to affiliate program partner contact information. Future breaches could lead to liability, customer loss, and reputational harm.
Net loss widened to $33.8 million for FY2022 year to date from $3.3 million for FY2021 year to date, and operating cash flow decreased to negative $9.6 million from positive $23.8 million. MD&A says Semrush expects to continue to incur losses in the short term and may not achieve profitability.
Future performance depends on upgrading paying customers to higher-price point subscriptions and selling add-ons such as Prowly, Sellzone, and Market Explorer. Customers may downgrade to lower-cost or free subscriptions if they do not perceive value, which could pressure revenue growth.
Changes by search engines, social networking sites, and other third parties to technology configurations or policies, including anti-spam policies, may limit the efficacy of products such as backlink analytics and Prowly email distribution. Responses such as reducing prices or discontinuing affected products may be costly or ineffective.
The attractiveness of the platform depends on API integrations with third-party applications such as Google, Facebook, Instagram, Twitter, YouTube, LinkedIn, Pinterest, and Majestic. Providers may change features or restrict access, which could negatively impact offerings and customer experience.
Semrush relies on third-party data center hosting facilities and cloud locations for redundancy, primarily three U.S. data centers and two Google Cloud locations. Disruptions, failures, or increased costs at these providers could interrupt platform availability and harm results.
The business depends on executive officers and key employees, and competition for talent is intense. FY2022 headcount increased 40% in research and development, 38% in sales and marketing, and 41% in general and administrative, increasing personnel costs and execution risk.
Semrush grew paying customers from over 82,000 as of December 31, 2021 to over 95,000 as of December 31, 2022 and operates 16 offices globally. Rapid growth may strain management, operational, and financial resources.
Semrush acquired Backlinko and Kompyte in 2022, following prior acquisitions such as Prowly. Integration may be difficult, costs may exceed expectations, and future acquisitions could dilute stockholders or create debt constraints.
The $45.0 million revolving credit facility contains covenants limiting indebtedness, liens, dividends, investments, and capital expenditures. Availability depends on a borrowing base tied to monthly recurring revenue, and a default could accelerate debt and allow lenders to exercise remedies against substantially all assets.
SaaS KPIs
All quarters →ARR per Paying Customer
Paying Customers
Annual Recurring Revenue (ARR)
Dollar-based net revenue retention rate
Summary, forecast, risks and KPIs are extracted from SEMrush Holdings, Inc.'s SEC filings for Q4 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.