We're ready to get started here. Thanks everyone for joining us for our 26th Annual Growth Conference. My name is Scott Berg. I lead our enterprise software and SaaS research efforts here. Today with us, we have Semrush. For those that are maybe less familiar, we have the company's president, Eugene Levin. Thanks for joining us, and I can't call you the new CFO Brian anymore. Brian Mulroy, thank you for joining us. So, I guess we'll get started. How about an overview of the company for those less familiar with Semrush? Sure, I can start with that. This is on, right? Everyone can hear? Okay. All right, so basics are, we're a SaaS recurring revenue business. Our focus is in marketing, and in particular, top-of-funnel online visibility. We're a very good growing company, so growth is over 20%. We've been one of the few companies in 2023 with the macro environment that's been able to accelerate growth. So our growth has increased from Q2 to Q3, and again, we're projecting in our fourth quarter that it will accelerate further. Our focus areas in terms of products are in search engine optimization and marketing, in digital PR, social media, competitive intelligence, c ontent marketing, and local marketing is some of the core areas that we focus on. Couple of things, just some background on the company. We have a really good, strong foundation, so over the last 12 years, the company has been investing in a combination of data and technology that allows companies to enhance their online presence. The key thing for companies is, they need to be seen online and in the places where consumers are, and make sure that they're ranking at the top of searches and in the conversations in social media, and of course, have intelligence about consumers and competitors, and our platform provides that visibility. The second key thing is we have a really strong competitive moat, so there are point solutions out there, but Semrush is the one platform that brings it all together, and has a more comprehensive solution for marketers and small business owners to enhance their online visibility. And then third thing, we're benefiting from a secular market shift, where companies are shifting even today, a lot more of their marketing spend from physical visibility into online. That's a trend that's been going on for a while, but it's accelerating lately, and Semrush is in the position where we provide unbiased advice, data, metrics, and technology that allows companies to figure out where to place their investments online and in digital experiences and then make sure that they're getting the the highest ROI. As a finance guy, I'm not a technologist, but as a finance guy, I like to think of Semrush, we're like the GPS of the internet, so we can guide and direct companies on where to go, how to reroute their content and marketing to make sure that they're present, and consumers are finding them in the places where they have interest. And then, like I said before, just from a financial perspective, well-funded, we have $240 million on the balance sheet. We're growing, very profitable, with 83% gross margins. We're continuing to improve that and our operating margins each quarter, and have, you know, incredible capability of reinvesting back into the company to continue on the journey that we're on. One bit of housekeeping, we will take questions from the audience. If there are any, feel free to chime in on those later. We have about 25 or 30 minutes of questions here, and then we'll jump into that. You know, big picture, online visibility management, it's kind of funny, at breakfast this morning, there's someone in the audience here that said, "Hey, you know, give me three, four, five ideas for end of this year." And I mentioned Semrush. He goes, "I have no idea what this company... I've never heard of them. What do they do?" And I said, "Online visibility management." I'm giving him a little bit of this picture, Brian, kind of like what you did, just said, and a lot of questions came up from that, but it's a mouthful to say at least, online visibility management, let alone define. I guess, what makes it complex, and why are there not really any other vendors with the breadth of product that Semrush, you know, currently has? I know a lot of small, local IT firms that help with SEO management. I know other vendors that do bits and pieces of, obviously, the Semrush platform, but why is this the right combination? Why is it complex enough that gives you an advantage? So I think there are two parts of that question. So first one is, why what we do is hard, and there are very few people who can do even parts of that, right? So we didn't arrive where we are, you know, instantly, right? It took us many, many years of development and R&D and platform expansion to become a true place where any business can buy everything they need to improve their online visibility. But it's a long journey, and the best part of those, you know, there are some journeys that even though they're long, they're worth taking, because once you're there, it provides a lot of benefits. So if you think about every small business, they don't have huge marketing teams, so they don't have a person doing just PR or just SEO or just social media for them. They usually have a team that does pretty much everything. In the morning, they reply to customer reviews, let's say, on Google Maps or TripAdvisor, and then in the evening, they write blog posts and manage social media and so on. So they do everything. And for them, there is a tremendous benefit in having everything in one place. So that's, I guess, first part of the answer, why it makes sense for customers. The second one is why it's very hard to do what we do, and that boils down to really moat around data assets. So a lot of data assets that we have, they're very hard to replicate, and some of this goes down to network effects. For example- ... let's say you wanna help people understand their market share and what they need to do. So you need to figure out effectively traffic estimates for every other website out there, so you can, you know, estimate market share for your client. If you need to, you know, figure out traffic estimates, you will use certain data inputs and machine learning algorithms. But those algorithms will become more and more accurate if your training samples are more accurate. And the way you get those training samples, you know, effectively, your customers share it with you. So you get a network effect, where the more customers you have, the more data they share with you. That improves accuracy of your, let's say, metrics and estimates, and that leads to your product being more and more attractive for new customers. So you get more customers, who share more data, that drives more accuracy, that drives more customers, and this flywheel just keeps going. So I think that's kind of the second part of this answer. I think, you know, a lot of people in MarTech took shortcuts, where we didn't, and we invested a lot in our platform and competitive advantages, and it... Even though it took time, I think at this point, we're at the place where it's, it's just extremely hard to compete with us and provide the same value, to the same type of customer. I know in your last couple calls, you've talked about a network effect. Can you define that a little bit more? What's the network effect that Semrush enjoys today? That's kind of where I was going with this data example, right? Let's say I have a customer who wants to get certain type of insights, and, for example, they want me to audit their website. I ask them to connect their first-party data, for example, things like Google Analytics or Google Search Console, so I can provide them better insights. So they connect those data sources, and I can use them to calibrate my models. So when it comes to search volume estimates, I know what keywords are searched more frequently or website traffic estimates. And like I said, as my models become more and more accurate, people who, for example, search for, like, best keyword research tool, they find me because I have the most accurate keyword data. Or if they are trying to find a tool that provides the market share, they also find me because everyone on the internet recommends Semrush. And this advantage, this quality of data, is based on, you know, hundreds of thousands of customers who have shared their own data with me to help me improve my models. So technically, like I said, the network effect is based on users who share data, and the more users you have, the more data they share, and the more data they share, the better your product becomes for everyone. And that drives, of course, better retention, but also new acquisitions. So better data means more users. Again, more users, more data. More data, higher quality. Higher quality, more users. I love the... Just one thing. I love the- Yeah ...... GPS example. 'Cause in the early days of maps and GPS, it would tell you how to get to a location, but there was no real-time insights into: Is there traffic? Is there an accident? How's the weather? Over time, you could start to use machine learning and analytical models to say, "All right, it's Monday morning, there's a lot of traffic," but still no real-time insights. Now that you've got more users on the platform, who are reporting information, sharing their speed, and giving that real-time insight, now you know there's an accident on 95, there's a problem with the road here or there. So it starts to get more real time and more trained over time as more users are using the platform and providing their data and insights into the platform. One of the questions I get frequently is, you know, the data assets, great tagline, obviously a ton of data there. But don't the large tech giants also have this? Why can they do this, or can they not do this, like the Facebooks, Googles, et cetera? Yeah. I think there are definitely companies who probably have more data than they should, but I'm not to judge anyone. It boils down to not technical ability or access, but to really financial outcome that it drives. So the companies that you've mentioned, tech giants, Google, Facebook, they make money by selling ads. That's biggest chunk of their revenue for pretty much all of them, right? And they don't, you know... If you think about their relationships with advertisers, they don't want people to advertise on other platforms. And even if it's, for a business, a better decision, like for Semrush, for example, is running a lot of ads for us. So I've never heard sales rep from Google telling me to spend more money on Facebook, and vice versa, I've never heard sales rep from Facebook telling me to spend more money on Google. So there is a lack of unbiased information when it comes to those platforms. None of them have financial incentive to build something that is truly in the interest of the end customer. So that's why there is, there is a necessity to have independent players like Semrush, who can help businesses to understand where they can get better efficiency. And by the way, we're talking about advertising, but best efficiency is not even always advertising. Often, companies should be creating more content or should be spending more time doing PR or, you know, building relationships with influencers. So we have, like Brian said, the sort of GPS, so we know which road leads where, and when people ask us: What is the best way to get from point A, where I have, let's say, m illion users, to point B, where I have two million users? We can give them the most efficient, fastest way to get there, regardless of what platforms and marketing tactics they need to use... and big giants, unfortunately, they cannot do this because it damages their business model. So let's move to maybe talking about a couple of the newer pieces of functionality in the platform. I know, Eugene, if I go back probably a year, a little bit more, you were super excited about App Center. You know, can you provide us an update maybe of, of how this product has helped shape the platform, and to date, how has it performed relative to your expectations with customers? Yeah, I can, I can just start to frame it up. Just, just step back and give there might be some new investors here. Our App Center is our third-party an opportunity for third-party partners to integrate into our platform and extend our platform out to other apps and features that we don't develop or offer ourselves. But it's worth talking about Semrush's growth strategy first, and then I can get into the App Center. So we basically have three main growth vectors. As of today, we have 107,000 paying customers and a million free users. And of course, we believe we're still in the early innings. There's tens of millions of marketers and small business owners who can benefit from our platform. So 107,000 today, we're expecting and believe it could grow into the millions. So that's just one part of overall growth. Second thing is, as of today, on average, our customers are paying $3,000 a year, and we have a cross-sell, upsell strategy, where we are focused on our core competencies and close adjacencies that can add value to, and, and make sure that our customers are inside our platform for a longer part of the day. I mentioned earlier, those key focus areas are social media, search engine optimization, digital PR, competitive intelligence, local marketing, and content marketing. But the reality is, that's top of funnel, but marketing, there's thousands of apps and thousands of processes that marketers need to be able to learn and understand and leverage to do their best work. And we are building this company to be a marketing player. But for now, we want to be investing in our, our R&D in areas where there's a big market opportunity, we feel like Semrush is positioned to win, and it's a close adjacency to what we're already doing. But to extend further, we're going to leverage partners. So we built this App Center. It gives us an opportunity to push new apps and features into our customer base, and the partners love it because there's over 100,000 of them, and it gives them an opportunity to monetize their technology. And they leverage our go-to-market engine, our support engine, and capabilities to do that. And right now, we're getting a 40% rev share for that, so we're, we're building out, pushing more apps and features. Early on, we're focused on quality, not quantity, so we're trying to make sure we build out a good foundation of third-party partners that are consistent with the Semrush brand, to create a loyal customer base, with a sticky product that adds a lot of value to marketers and small business owners. I guess lastly, on products, we can't, we can't have a conversation on software without talking about two letters, A and I. Maybe we've all heard something about it over the last year. But obviously, AI was a big topic across my entire space last year for a variety of different reasons. But how has the AI product adoption fared within Semrush? Maybe you can give a little background in terms of what it is, because I look at most of the AI functionality in my coverage space, really driven around content, which actually can be really beneficial to your platform. So absolutely agree with you. And, for us, the level of hype was a little bit surprising because we've been using GPT from early days and earlier versions. For example, in our product called Writing Assistant, we had a feature called Rephraser with that, that was powered by GPT. So a lot of people, you know, they know what they want to say, but they're not necessarily Pulitzer Award-winning writers, so they use rephraser tool to really refine the text that they're creating. And that's, you know, we've been doing this for several years, even before, you know, ChatGPT. So, for us, AI always was a technology that we used to enhance our products, and we were very happy that the, you know, broader population of, you know, people, consumers, and businesses now understands the value of AI. Because for us, it's definitely a great productivity booster that helps people to do more work in a shorter period of time, and also a great enabler. One of my favorite examples, you know, we had a customer who was in local services business, so plumbing and you know, those kind of services. And they had a lot of expertise in what they're doing, and we always were telling them, "Well, if you just start sharing this knowledge, there are a lot of things people are searching in your area, and there is no good coverage. Nobody is explaining how to do those things." But they were always saying, like: "Well, yeah, but we're not exactly good writers. And you know, if we start hiring in-house writers, it becomes expensive. We're a small business," and so on. And with AI, now they're writing several blog posts a week, and they're getting a lot of organic traffic. And without AI, they were just not at the level to write content that, you know... high-quality content, let's say. So it enables a lot of people to start doing things that they were not able to do before. The same with banner advertising. So we have products in App Center that help people create banners. We have products in App Center that help people to create social media posts with pictures and so on, you know, even if people have no experience in graphic design. So another example, like I said, is efficiency. So we've integrated several AI components into our local listing management product, and now customers can use it to reply to reviews. Actually, there's even an option to allow AI reply automatically. So it either replies automatically or it gives you set of examples that you can use, push a button, say, "Yes, I like this posted." And we've noticed that, you know, first of all, the level of adoption for this feature was probably highest we've seen in any new product that we introduced to existing user base. But also, it almost instantly started to drive tangible results for them. Because as they shortened the amount of time it takes to reply to review, they started getting way more engagement, way more positive engagement, and they started- their listings started ranking better for specific services because they had more review, more engagement around those reviews, more positive reviews, and so on. So that's kind of how we use this technology right now, but if you think about long-term vision, for us, you know, there are several types of technology. There are technologies that are... or technological innovations that are just products. For example, iPhone is just a product. You buy it, you use it. Or internet is really, you know, consumer product. I think everyone has some level of internet subscription. AI, for us, is a little bit different. It's more like AWS. It's something that enables other people to build technologies on top of this technological layer, and that's exactly how we're using it. We look at specific problems that our customers sell have, and we ask ourself question: Is there a better way to solve this problem with AI? And in many cases, the answer is yes, there is a better way to solve this problem with AI, and we are, you know, very quickly implementing those features in, you know, existing and new products. Let's talk about go-to-market a little bit, and a topic that's definitely germane to 2024 here for you guys. You know, with Google's plans to, you know, deprecate 100% of its third-party cookies in Chrome by the end of the year, what type of impact does that have on your business or maybe your marketing spend overall? So in terms of our own marketing, it doesn't really have that much impact at this point. We lived in a reality where cookies don't exist for a while. I think the best example is Safari. So they've done this step earlier, so before Chrome, and, you know, by default, there are no cookies in Safari. And if I look at our number of new customers, total customers from Safari, this trend is absolutely the same as the trend for every other user segment. So technically, no impact but, you know, we already decided long time ago, you know, even before 2021, that we need to build our marketing in a way that it does not depend on cookies. With respect to product, we actually don't use cookies in our products to you know either collect data or provide insights to our customers, so also no impact for us. In terms of broader impact on the industry, I think I was always saying that the deprecation of cookies really drives reallocation of marketing budgets from more programmatic advertising to more contextual and audience-based advertising. And those are areas where we help people, so especially with contextual marketing, both organic and paid, and content marketing. So in a way, it benefits us because it moves money from more programmatic advertising or marketing into less programmatic, where we have broader portfolio of products. But at the same time, I think this reallocation mostly have already happened, so there may be some laggards who are still like, "Oh, we, you know, we're going to suffer," or, "We are going to change our marketing strategy because of cookies." But I think the best companies already have done this transition. On your third quarter call, the company mentioned it was the best bookings quarter ever. Now, best has a lot of definitions, right? For a variety of different reasons. I guess two-part question in there is: Can you help us define what best meant? 'Cause it could just be customer account, maybe it's ARR, you know, net new ARR, it's a variety of things. But then secondly, within that, the company really changed its go-to-market focus after doing a number of tests and trials in 2022. It certainly made a difference in the number of customer additions you've had year to date, at least through the third quarter. Can you talk about how those improvements that you took out of those 2022 learnings have drove that best quarter in Q3? I can take the first part- Yeah. -and you take the second. So first part, just on the best, it was our best, net new ARR, for a third quarter. So our, our business is seasonal. Our best quarter tends to be the first, when everyone has budgets and they're, basically starting to map out their plans for the year. It's, it's the typical time when companies and marketers will subscribe to Semrush products and then expand, the portfolio that they're leveraging for the year. For a third quarter over the summer, a lot of people are on holidays, but it was one of the best, third quarters we had, and it was actually in the top three, overall, so fantastic quarter. Mm. There's a couple of drivers for it. I mentioned before, we have these three growth vectors around adding new customers, cross-selling and upselling, and then just continue to diversify our portfolio through acquisitions, partners, and then just our own R&D efforts and organic investments in the business. We had record gross demand in the third quarter. We continue to see a lot of positive activity and traffic coming onto our digital assets, where companies and marketers are really interested in learning about what we're all about and how we can add value to their process, and ultimately help them to not only generate traffic, but then convert that into paying customers so that they can grow their own revenue. That was, we had a good quarter there. And then, you know, we're really taking seriously our position in the market, the fact that we've got really good brand loyalty and over 107,000 paying customers as of the end of the third quarter. And seeing that there's opportunity to extend our footprints, and do more for these companies. So we monetized social media, we launched an enterprise product, we built AI into the platform, and we did a price increase that reflected incremental value that we've been building into the platform. So it was a combination of really good demand for Semrush in general, and then our ability to cross-sell and diversify the set of products that our customers are subscribing to. Yeah, and in terms of allocation of marketing dollars, we always believe that, you know, when you spend money on marketing, of course, you're looking for ROI and customers, but the second thing you should be always looking for is knowledge. Where to advertise, where not to advertise, what kind of content works, what kind of content doesn't work, and so on. So, and you should always be learning and improving. And that's exactly what we've done in 2022. We've done tons of experiments. We've experimented a lot with organic marketing, with brand marketing, and after that, we could make conclusions where to spend more money, and in our case, of course, we started spending a little bit less on brand marketing and way more in organic marketing. So our organic marketing investment in 2023 was probably highest ever. But what's even more important, we even started in... You know, last year, we started seeing the results of investments that we've made the year before. Organic marketing is kinda like building a house. You know, it takes time, but once you have it, you own it. And advertising is more like renting. So you pay money, you get the property right, right at that moment, but the moment you stop paying, you lose it. So that's why I think, you know, investments that we've made last year and keep making, they will drive a lot of demand in the future. I have two questions left, and then we'll open it up to audience Q&A. I guess from a financials perspective, we have the CFO here, so we have to ask at least one or two, right? One or two here is you recently implemented a pricing increase for a very small cohort of customers. I you know from as I understand it. But how do you view pricing as a lever for your net revenue retention into 2024? Is this something that you take maybe on a one-time basis or something you can do on a more consistent annual basis? And what did you learn from that test trial and that cohort that gives you some confidence that that might be a good strategy to deploy more broadly in 2024? Yeah, we did. In the third quarter, we did an 8% price increase to new, and then we've been experimenting with a small cohort of existing users where we didn't grandfather them. But majority of our installed base, we did grandfather, so they're still on the old pricing. And the one great thing about Semrush is we're all about data and metrics, so we, of course, eat our own dog food, and we can leverage that data to evaluate different patterns and buying behavior for our own customers. So when we rolled out this price change, we're able to monitor how that's impacting traffic and conversion of that traffic to new customers, what customers are upgrading, and how they're expanding and subscribing to other products that we offer. So we are monitoring it that now. We're pleased with the results to see the impact it has on retention, upsell, upgrades, and we see that as an asset going forward. We provide a tremendous amount of value. We have a really good, strong R&D team and strong profitability that allows us to reinvest back into the organization. So the value that we provide will continue to increase, and we see, like I said, pricing as an asset. We're not committing to anything in 2024 yet, and we'll share more details when we guide for 2024 in early March. But for now, we see that as an asset and so far pleased with the results we're seeing from what we did do in the third quarter. All right, last question on profitability in 2023, or at least what we saw year to date. Brian, you've been with the company roughly a year now. Yep. But the profitability of the company has markedly improved this year relative to beginning of year expectations. Even if you adjust out the exit costs from your Russian operations there, what has—where have you driven the efficiencies, or maybe what's been different in your approach this year than what the company's seen in the past? And I know we're not guiding for 2024 here, obviously, right now, but should we think about consistent margin opportunities at this point going forward? For sure. So just to put some numbers behind what Scott said, we increased our operating margin by 1,900 basis points in the third quarter, year-over-year, and then sequentially from the second to third, 700 basis points. So, I mentioned in opening remarks that Semrush has just an incredible capability of delivering profitability. It starts with gross margins, where we have 83%. So our cloud is as optimized as you can get. We do a lot of custom technology that allows us to deliver our products and value to millions of users.... in a very efficient way, and we'll continue to gain scale and leverage out of that, out of our cloud environment. We're also looking throughout the year at R&D. We are committed to being disciplined and balanced in our spend and making sure that we're investing in, like I said, close adjacencies to our core competency in areas where we feel like we have the strongest competitive moat and ability to win, and of course, a market opportunity that's in the billions, that will allow us to drive top-line growth. So we've been prioritizing our investment and making sure that we've got the most wood behind the arrows that will have the most important effect and drive long-term value. From a sales and marketing perspective, we're always focused on being efficient. We have a lot of data that allows us to see how our sales and marketing activities and tactics are influencing traffic, that traffic crossing over to our website and then ultimately converting into a paying customer. Then once a customer is on board, we can see their usage of the product and then how their journey evolves from the beginning. We can constantly, in real time, fine-tune our marketing and sales activity, and we're always driving efficiencies in the organization to make sure our customer acquisition and support and expansion costs are as efficient as possible. We went public in early 2021, so we're just turning the corner into about three years as public. What I found was there was opportunities for efficiency. Our G&A spend, there were investments early on that we've been able to implement systems and processes that allow the company to grow and scale. So all of that combined, plus a very disciplined, and balanced focus from the executive team, is driving profitability. It's increasing it. We'll continue to increase it from here, and, believe it's sustainable and, won't have an effect on our ability to grow. But just to tie that back together, we are, in spite of the drive towards profitability and efficiency, we're growing over 20%, and that's been accelerating. So we're, we're pleased with, the impact of the efficiency and disciplined and, expect that we'll continue to be able to drive that going forward. All right. With that, we have time for a couple questions from the audience, if there are any. Any thoughts on kind of long-term margin targets in this spot? So, just to reiterate the question, so we get it online, just thoughts on long-term, long-term margin targets. Yeah. So we think about it all the time. So what's important for us is balance. So we have a multi-billion dollar opportunity ahead of us, even with the portfolio that exists today, and we have an incredible asset with over 100,000 paying customers and 1 million free users, and just what seems like an endless expansion of apps and features and technology that marketers and small business owners need to be able to leverage to be successful. So our focus, we're not afraid to spend. Our focus is on investment and making sure we can drive long-term growth and value. But the company, as it exists today, we could easily get to 30% EBIT margins, but we are, we're investing. So, we'll give some guidance on where we're going to land that, what the mix of investments and profitability will be next year. But, you know, I've been on board nine months. I'm very impressed with the company, their ability to be disciplined and balanced and efficient in the way we go to market. And it just, the company just has incredible ability to generate profit, but you won't always see that because we're going to continue to invest, drive long-term growth and value, and make sure we can deliver durable growth for as long a period of time as possible. Any others? Certainly have time for one more. Probably that's about it, though. Yeah. Just wondering, across all the marketing categories in the platform, which one is usually the one that's, you know, coming in the top third, and then in that category, you talk about competitive landscape within your top category, search category, whatever it may be, which competitors are you going to be in the next three? On that? Yeah. So in terms of providing the same value, the same type of platform, I don't think there is, another company where you can buy this, the same portfolio of products. In terms of historical competition, you know, we started in search engine marketing space, so that's traditionally... If you ask, industry veterans who Semrush competes against, they probably mention companies from the search engine marketing space. You're probably going to hear names like Moz. That's kind of an old legacy player in that space. Not, I mean, I don't want to comment on their financial situation, but not, not doing well. We see this on our end when a lot of customers move from them to us. There's a company called Ahrefs, small company in Singapore. As we move upmarket into enterprise, there are going to be different names, you know, some of them bigger than others, but we always focus on our own product, on quality, on value that we provide for customers. We focus very little on what other people are doing. They have their own businesses to run, and historically, this approach worked for us really, really well. We're not obsessed with competition. We're obsessed with our customers. But in terms of, you know, landscape, yes, I know, like, personally, hundreds and hundreds of companies, and we try to have really good relationships with all of them, but we're, we're never concerned or scared. You know, if there is a space where there is a company that is very strong, and we're concerned about, we just don't go in that space. Every market where we compete, we're confident we can win it. All right. With that, we will wrap and get everyone off to their next meeting. Thanks, everyone, for their time. Eugene and Brian, thanks so much for-