Greetings, and welcome to Similarweb Q2 Fiscal 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. RJ Jones, Vice President, Investor Relations. Please go ahead, sir. Thank you, operator. Welcome everyone to our second quarter 2022 earnings conference call. During this call, we will make forward-looking statements related to our business. These statements may include the expected performance of our business and our future financial results, our strategy, the potential impact of the COVID-19 pandemic and its associated global economic uncertainty, our anticipated long-term growth and overall future prospects. These statements are subject to known and unknown risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected or implied during the call. Again, actual results and the timing of certain events may differ materially from the projected results or the timing predicted or implied by such forward-looking statements. Further, reported results should not be considered as an indication of future performance. Please review our Form 20-F filed with the SEC on March 25, 2022, in particular, the section entitled Risk Factors therein, for a discussion of the factors that could cause our actual results to differ from the forward-looking statements. Also note that the forward-looking statements made on this call are based on available information as of today's date, August 10, 2022. We undertake no obligation to update any forward-looking statements we make today, except as required by law. As a reminder, certain financial measures we use in presentation of results and on our call today are expressed on a non-GAAP basis. In particular, we reference non-GAAP operating loss, which represents GAAP operating loss less share-based compensation, adjustments and payments related to business combinations, amortization of intangible assets, and certain other non-recurring items. We use this and other non-GAAP financial measures internally to facilitate analysis of our financial and business trends and for internal planning and forecasting purposes. We believe these non-GAAP financial measures, when taken collectively, may be helpful to investors because they provide consistency and comparability with past financial performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. However, non-GAAP financial measures have limitations as an analytical tool and are presented for supplemental informational purposes only. They should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. A reconciliation between these GAAP and non-GAAP financial measures is included in our earnings release, which can be found on our investor relations website at ir.similarweb.com. Today, we will begin with brief prepared remarks from our CEO, Or Offer, and CFO, Jason Schwartz. We will open up the call to questions from sell-side analysts in attendance. Please note that we published a detailed discussion of our second quarter 2022 results in a letter to shareholders for investors to reference, as well as an updated investor presentation with a strategic overview of the business, both of which are available on our investor relations website. With that, I will turn the call over to Or Offer, CEO of Similarweb. Thank you, RJ, and also thank you to everyone joining the call today. We posted an excellent result in our second quarter as we focused on more efficient growth for our company. Revenue grew 46% over Q2 last year to $47.6 million in the second quarter. The expansion of our global customer base, consisting of SMB, enterprise, and strategic accounts, remains strong. Our customer base grew 25% year-over-year to over 3,800, and our average account spend about $51,000 with us annually, up 16% in just a year since our IPO. Furthermore, over 53% of our annual recurring revenue comes from customers who spend more than $100,000 per year with us. Today, 36% of our relationships consist of multiyear contracts, a metric that has continued to expand year-over-year since 2020. As the global macroeconomic environment has become more uncertain, Similarweb offerings and solutions have become even more important to our customers. The visibility into the digital ecosystem and how it behaves and changes is critical information to in those times that help our customers make the right strategic decisions to navigate through economic stormy weather and be successful. As a reminder, we collect extensive online data, then we refine it and package it into solutions of actionable insights for our customers, which enable them to make better decisions in their competitive market. The solution we build on top of our data impact the revenue-driven teams of our customers, including sales, marketing, analytics, and e-commerce. Are designed to help a wide range of users from the C-suite to the operational teams. Every quarter, we seek to innovate and improve upon our solution and add to our underlying data. Our customers look forward to our regular feature additions. This quarter, we took a major step forward that enable us to provide more value to our customers. First, we acquired Rank Ranger, which immediately enhanced our SEO capabilities with the complementary technology and data. This acquisition represent a great example of our M&As as a strategy which we aspire to continue. Second, we launched our App Intelligence product that incorporate data from our data.ai, formerly App Annie partnership, which give our customers an expanded view of activity across the digital world. The initial customer responses are positive, and we plan to add more features over time. Lastly, we are in the middle of exciting build cycle for our Investor Intelligence solution, which will deliver timely insights for a new experience to our investor customers. We anticipate we will bringing the new experience to market in the back half of the year. Again, our customers greatly appreciate the value we deliver, especially in times of uncertainty. We are adapting to the macroeconomic environment with our customer. As we continue to innovate and grow, we are also focusing more on operational efficiency that will lead us to becoming profitable. We are only just beginning to unlock our potential within a multi-billion-dollar market opportunity. Jason, I will turn the call over to you. Thank you, Or. Thank you to everyone joining us on the call today to discuss our second quarter results. I will briefly address our financial performance and then we will open up the call to questions. Our results in the second quarter continue to show our commitment to disciplined execution. Revenue reached $47.6 million for the quarter and exceeded our outlook of $45.9 million on the high end of our range. Importantly, our overall dollar-based Net Retention Rate, or NRR, increased to 115% as compared to 106% in the second quarter of 2021. For our $100,000 ARR customer segment, NRR increased to 127% as compared to 118% in Q2 last year. Our remaining performance obligations, or RPOs, increased 53% year-over-year to $160 million, 87% of which will be realized over the next 12 months. We exceeded our plans in revenue, we also exceeded expectations on our bottom line. Our non-GAAP operating loss was $19.8 million, which was less than the $23 million loss on the low end of our guidance range. The two factors driving this result were sales above expectations and operating efficiency across the business. This result includes non-comparable expense impacts from our acquisitions as compared to the prior year. Turning now to Q3 2022, we expect total revenue in the range of $48.8 million-$49.2 million. For the full year, we continue to expect total revenue in the range of $196 million-$197 million, representing 43% growth year-over-year at the midpoint of the range. non-GAAP operating loss for the third quarter is expected to be in the range of $20.9 million-$21.5 million, and for the full year, between $80 million and $81 million. Compared to last year, our outlook includes impacts to cost of goods sold relating to our data.ai partnership and to the acquisition of Embee Mobile. We anticipate non-GAAP gross margin will be approximately 74%-75% in Q3 2022, and between 75%-76% for full year 2022 as a result of these impacts. Our second quarter 2022 results indicate we are running our business very efficiently during a time of increasing challenges globally. The decisions we are making reflect our focus on maintaining strategic flexibility and balance sheet resilience and pursuing profitable growth. With that, Or and I are happy to take your questions. Thank you very much. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we hold for questions. Our first question comes from the line of Ryan MacWilliams with Barclays. Please go ahead. Thanks for taking the question. Guys, just as we enter, you know, a more difficult macro environment, I appreciate you calling out in the prepared remarks that you're starting to see maybe a little more softness from customers in the EU, and maybe those that are more focused in the SMB as well. Can you just highlight some of the things you're seeing on the ground and, you know, how that may impact your strategy, you know, over the next 6-12 months? Hey, it's Or speaking. Thank you for the question. I think it's we do see, you know, a softness in the market. I think it's, you feel it more as just a little bit harder to do business. Just the life cycle of closing a deal takes longer. I think there's like a lot of hiccups when the customers have people switch jobs or they are, you know, allocating the budgets and et cetera. We're seeing this slowness, I think a lot in Europe, but also in other regions. Yeah, it's similar to what we're seeing with, basically across the software universe. That makes sense. For Jason, you know, just for on free cash flow in the quarter, can you provide some puts and takes there? Any changes that are worth calling out? How can we think about the path forward from here for the rest of this year, just on the free cash flow line? Thanks. Yeah, sure, Ryan. So I think that, you know, you see that thing kind of disciplines execution. We've given some guidance on that we think that the free cash flow, the normalized free cash flow, was, is, should not exceed $50 million for the year. You know, we're here at the halfway point. I think we've been managing that well. I just as a reminder, you know, from a cash flow perspective, a significant amount of our renewals happen in Q4 and Q1, and so a lot of that cash flow comes in in the end of Q4, beginning of, I think the Q1 to April of the year. We're getting into the trough from a billing standpoint of the seasonal weaker part of our cash flow cycle, and technically what we always do is look at it on a rolling 12-month basis. The one other thing to call out is, as you saw in the release, is that we did move into our new headquarters here in Israel. We had you know cash capital expenditures that related to that, to the build-out in the new headquarters here that we had talked about a few quarters ago. You see that coming through on the cash flow line this quarter. We break that out and you know show you both the total free cash flow and a normalized free cash flow in the release. Appreciate the color. Thanks, guys. Thank you. Our next question comes from the line of Jason Helfstein with Oppenheimer. Please go ahead. Hey, thanks, guys. Just wanna ask just about how you're thinking about gross margins into next year. There's obviously been investments that have depressed the gross margin first half of this year. Do you feel like next year, with what you have in kind of the product pipeline, we should be able to see meaningful growth in the gross margins? I mean, I don't know if it'll get back to, you know, 70%, 79%, but something, you know, call it, you know, more like high 70s%, you know, more something like we saw in 2022, 2020 and 2021. Then separately, how you're thinking about sales and marketing investment to the extent that the world is a little bit slower and if you let more flow to the bottom line. Thank you. Thank you, Jason. Good to hear from you. Let's talk about the gross margin. The short answer is yes, we are hoping to improve the numbers. Not saying that we're gonna get to the 80s% as like the long-term model, but definitely improving. Most of the calls are coming from the operational and data acquisition. This is the biggest chunk around our data about our costs there. And I think looking into the future, I think it's definitely not gonna increase. We are in a very good place currently. The answer is yes, and probably will increase nicely. Regarding S&M, again, we make a lot of decisions to be more efficient. You know, it's very important in this time. We are optimizing and hope to have also good improvement around the sales and marketing spend going forward. Jason, our Jason, do you have anything to add on that? Yeah, I agree with you, Or, on that. I think that one of the things is you already start seeing that efficiency flow through this quarter. You know, we have a 200 basis point improvement on the sales and marketing line, and a lot of that revenue growth, you know, fell to the bottom line in this quarter. We're making decisions actively to be more efficient. It's part of the strategy, and I think you're starting to see that come through in the numbers already in Q2. Jason, do you have any more questions? Go ahead. Our next question comes from the line of Brent Thill with Jefferies. Please go ahead. Hi, this is John with Brent Thill. Thanks for taking the question. Looking through the guidance for the rest of the year, looks like Q4 implies similar growth to Q3. Wondering how you're thinking about, you know, how much macro is embedded, and also how the trends are going so far in the quarter in July, August, whether it's a notable change from let's say June. Second part of question, just wanted to ask about just in terms of the broader operational efficiency, you know, how you're thinking about the cost structure, rest of the year and into next year. Any change in headcount plans and so on? Thank you. Hey, John, thanks for the question. First we'll talk about the growth trend and then talk about, you know, how we think about the operating efficiency. As Or mentioned, you know, we're not immune to the macroeconomic trends that we see happening where, you know, we talk about deal cycles that are getting done. They're just, you know, taking longer or requiring additional levels of reviews within the organizations. That's stuff that we take into account as we prepare our guidance. You've heard me say it before that we like to give guidance that we know we can meet, and so that is, those assumptions that we have are baked into the guidance. From an efficiency standpoint, you know, like I said, we are proactively making decisions to balance that growth and cash flow and to be more efficient. You see that coming through on the lines already. We do as we mentioned in the shareholder letter that we released last night. This is something that we are focused on, to work diligently as we have with that kind of disciplined execution and focus on our unit economics to drive those operational efficiencies to get to sustained cash flow. That is baked into our assumptions as we start thinking about planning and guiding for 2023. Thank you. I would add that on top of that, we did, you know, looking into our headcount plan for 2023, you know, that Q3 and Q4 now is the time that we have started, you know, hiring and planning to hire the people for next year, for 2023. Of course, we're taking into account because of the decision we made to be more efficient will probably impact the future hiring plan. Thank you for the color. Thank you. Our next question comes from the line of Tyler Radke with Citi. Please go ahead. Good morning. I was wondering if you could talk about your performance in other geographies relative to plan. We've heard mostly from companies that they're seeing some issues in Europe, but just wondering if you're assuming that those conditions that you saw in Europe spread to the rest of the geographies and you know kind of what you're baking in from a geo perspective for the rest of the year. Thank you. It's interesting question. We did that also internal look around that. Interesting enough, we have some region that had good quarter, like our Japan operation was doing well, and our U.S. also, I think we're doing very well. It represents now almost 55% of our revenue. I think it was up, so it was 50% to U.S. and it was up 55%. U.S. was good performing. Europe was interesting and dynamic. For example, we have a very good scaling operation in Germany and, but U.K. and France, we were more sort of struggling. I'm trying to think if any more information. Although Jason, maybe you have anything more. No. I think this is a good overview about the global impact. Sorry, Jason, maybe just what you're assuming on the guidance, you know, from a geographic perspective, if you're assuming things get worse or kind of stay the same? We've taken some assumptions over there based on regions and some of the things that we see in the pipeline already. You know, even in Europe, we've got still a good solid pipeline that's there. We look at all of those factors as we put together our guidance, you know. There's some things that will be, we assume will be similar, some things that we'll assume, you know, who knows? We wanna make sure that we're always giving guidance that we can meet. Great. From a hiring perspective, could you just give us a sense what are the areas that you're maybe slowing down or pulling back on the most? Is it primarily kind of marketing related or is it, you know, on the direct sales side? Just give us a sense where you're spending less on from a headcount perspective. Thank you. I think on the marketing side, we did a lot of changes lately. I think we had to optimize our marketing organization as it was a little bit bigger than what we were planning. We did probably reduce headcount there in the marketing organization, maybe a little bit around client services, and maybe a little bit in R&D areas. I think those are the major. Also on HR, you know, in recruiting. When you have planned to recruit X amount of people and you need X amount of recruiters, now when you bring an adjustment to your hiring plan, you need less workforce to execute on that. Great. Thank you. Thank you. Our next question comes from the line of Arjun Bhatia with William Blair. Please go ahead. Perfect. Thank you guys for taking the question. I think you mentioned a couple times in your prepared remarks and in the shareholder letter that, you know, demand could increase in uncertain times. Certainly makes sense as customers, you know, I think rely on data to drive their business a little bit more. Could you just maybe dig a little bit deeper into how that's actually coming through? Are there certain products that you expect will benefit more than others in a more uncertain environment within your portfolio? Do you think it's gonna be more concentrated in new customers versus existing customers? I'm just curious how you're thinking that might play out. Yeah. Of course. We see in the past a similar phenomenon when COVID hit. When the world was going through distress and then many sectors were struggling, and the travel was a great example. When we thought back then we're gonna lose all of them, they all came back and bought more in order to adapt their strategy. We do think that we're gonna get into a similar motion now as the market gets more hectic. One area we do see now that there is a little bit increase in demand, for example, is in the investor vertical, when we're seeing that a lot of institutional investors now try to realize when is the right time for the market to bounce back. The more signals they can get about when things start to look better, they can start planning when to start investing again. Similarweb is the best data source to give you those indications about, you know, digital world performance. We start seeing them having more interest to get more data, more services from us. I think those are the first vertical that start thinking about, now let's use the situation. We're probably gonna see more of those verticals and start getting more demand for marketing, for digital marketing mapping. Got it. That's very helpful. Then maybe one for Jason. Just, it seems, you know, your net retention rate is obviously doing very well in this environment. Can you just give us a sense for how you expect that might play out for the remainder of the year as, you know, the macro backdrop gets a little bit more challenging? I'm wondering if you have any more granularity in that metric that you can share with us in terms of, you know, which customers are expanding and how the gross retention might be changing, if at all. Arjun, it's great to hear from you. The gross retention numbers are actually, for the most part, pretty stable. The thing I think that we look at is really the rate of expansion and the buying powers that a lot of customers have. You know, one of the things that gives us some confidence in our numbers and the durability of our ARR is that already 36% of the ARR is on, you know, signed up for multiple years. Those are things, even though we report as, you know, and think of our business as an annual recurring revenue business, but having already 36% of that signed up on multiyear deals means that that's revenue that is not up for renewal, if you will, during that period of time. That gives us that confidence over there. We're seeing in a number of the large customers that, you know, they, the things that they need or expand, getting more detail, as Or mentioned, being able to get that intelligence in different regions. People are expanding within products to additional regions. Also where they need some of the deeper product information, like Shopper, where we saw Shopper Intelligence pick up this quarter. I think that's something that we're starting to see, and more and more customers are actually integrating our solutions into their stuff. We're seeing some great movement on our OEM strategy as more and more customers are integrating Similarweb into their products. Those kinds of things, to the extent that they continue during this, you know, these kind of macroeconomic trends, we think are gonna be upsides to the number and things that we continue to watch for. Awesome. That's very helpful. Thanks. Thanks again, guys, and nice job. Thanks so much. Thank you. Our next question comes from the line of Noah Herman with JPMorgan. Please go ahead. Hey, guys. Thanks for taking my questions, and congrats on a solid quarter. Can you provide us any color on maybe customer usage on the platform, and what are your expectations for pricing going forward? Thanks. Pricing on the platform? Can you repeat the question? Yeah, just any change in maybe pricing or, you know, maybe if you could touch on any maybe pricing power you have for the platform itself. The pricing and packaging I think is an area that we are still not optimized as well as I want us to be. I think that the more our solution gets to more deep and more holistic, be able to better introduce a better pricing and packaging to our customer to have a win-win scenario. We have a strong belief about keeping win-win that the more our customer gets more ROI from the platform, then we can able to increase the price. We are driving into an area when each one of the lines of business, we have five of them, we will have a very strong land-and-expand approach. On top of that to have a good, better best to each one of them and an arsenal of add-on and plug-in we can have on top of that. We're not in a perfect place, but we always are optimizing, and we just hire a director of pricing and packaging, so I really hope that there's a lot of leverage to get more efficient there. I hope it answers the question. Got it. Thank you. Just maybe, you know, any color on what you're seeing in terms of usage from customers, maybe over the past few months and what you've been seeing heading into the most recent quarter as well? Usage is going up always, and we are putting a lot of effort in our product team to work on discoverability and easy to use of the platform. We have ongoing teams that's always working to improve usage, and not only the day-to-day usage, but also to help customer to discover more and more features. We have a very deep platform with many functionalities. It's something that we are working currently, and we're having great success. Great. Thank you. Thank you. Our next question comes from the line of Brett Knoblauch with Cantor Fitzgerald. Please go ahead. Hi, Or, Jason. Thanks for taking my question. I was just wondering if you could provide some incremental color on the demand you're seeing for your App Intelligence product. Is that exceeding your expectations? Similarly, an update on maybe adoption of your Shopper Intelligence product as well, as that has much higher ACBs. You know, how's the sales force thinking about selling those two? Are they prioritizing either of them or are they still landing with your core Digital Research and Digital Marketing products? Yeah. First of all, thank you for the question. Regarding the App Intelligence module, the first initiative were great. We have hundreds of requests from many customers to see a demo, getting more and more information about this new offering. It's a very good indication. Also we already closed numbers of deals, so it's a good momentum. As the market dynamic becoming tougher, we're seeing that it's taking just longer to close this pipeline. It's part of the market dynamic. We're also seeing that some of the first initiatives are great and we're excited about this offering going forward. Regarding Shopper Intelligence, indeed it was introduced to the market with very high APV, mostly because we launched the product and we didn't put a lot of ways to have good, better, best offering. We sell it as much as you can for one big price. It was very good momentum in the beginning, but down the road it was tougher to continue because every industry affect one different part of the platform, and it was hard to charge them full price. Few months ago we changed and the ability for us to also slice and dice the Shopper offering and introduce good, better, best offering. This enabled us to scale the logo acquisition for Shopper this quarter. That was very good compared to the quarter before that. Regarding the core product, they doing well as always. Perfect. Thank you for that. Maybe just on your full year revenue guide. It kind of implies, you know, 13.5% sequential growth between 3Q and 4Q. You look at, you know, last year you grew, call it, you know, 12.5% or so, you know, in that time frame. Backdrop is obviously much more difficult in this macro environment. Can you just help us understand what gives you confidence that you're gonna see the kind of acceleration in 4Q, you know, faster than what you maybe saw last year, given the relatively more uncertain macro environment? Yeah. We look at the backlog and the deals that we've got in place as well as, you know, just the pipeline that we're looking at and the discussions we're having. We put all that together and that helps us, you know, form our guidance and confidence that we have to put that together. You know, our goal is to, you know, always aim to give guidance that we know we can meet, and we continue to do that through these times as well. Perfect. Understood. Thanks very much. Thanks, guys. Operator, any other questions? Yes, sir. There is one question. Our next question comes from the line of Pat Walravens with JMP Securities. Please go ahead. Oh, great. Thank you. Let me add my congratulations on the continued growth. All right, Jason, let's talk about cash. You have $94 million on the balance sheet. You burned $19 million on a normalized basis. I get the collections will be better in the back half of the year, but even so, the operating losses you're guiding to are, you know, still the $20 million per quarter. The bear case, which I just think we should address it, is that you have five quarters of cash, right? I know that's not the case, but let's address it. You haven't guided yet for next year. What can you tell us, where are you comfortable having that cash balance bottom? When do you expect to be free cash flow positive? When do you think you'll make these decisions? Great. Pat, thanks so much for the question. You're right. We ended the quarter with just under $94 million of cash on the balance sheet. A reminder, we also have a $75 million undrawn credit facility. We view ourselves as having over $160 million of liquidity and feel very comfortable with the cash and the liquidity resources that we have available for us in order to execute on our plan. That being said, one of the things that we continue to do is focus on that same disciplined execution that we've done throughout our history. I like to always go back to where we were pre-IPO. Pre-IPO, we took this company from being a - $26 million cash-burning company in 2018 to following year, cutting that burn by more than a half, by more than 50% to $11.5 million, and then the following year to less than $5 million. In Q1 2021, right before going, becoming public, we turned into a cash-generating cash-positive free cash flow company. What we did, as part of our execution was to accelerate that growth, use the proceeds of the IPO to drive that growth, on very favorable unit economics and deliver the kind of growth and outstanding results in terms of net customer adds, in terms of ARPU per customer, revenue per customer, and of course the net retention numbers driving to an over 50% revenue growth. What we're doing now is continuing to balance growth and cash flow. We're making those decisions proactively in order to be more efficient. You're already starting to see that come through this quarter, in terms of the margin improvement all across the P&L. We think that you know those are the indications that hopefully the investment community will be following to see that operating efficiency come through. As we've guided, this is something that we've been focused on to get to that sustainable free cash flow. Already talking about that earlier this year when we started guiding our 2022 numbers, and that we continue to be focused on that as we plan for 2023 and beyond. All right. Great. Thanks for that perspective, Jason. Thanks. Thank you. Ladies and gentlemen, this concludes the question and answer session. On behalf of Similarweb, that concludes this conference. You may disconnect your lines at this time. Thank you for your participation.