Greetings. Welcome to the Similarweb fourth quarter fiscal year 2022 earnings call. At this time, all participants are in a listen-only mode. The 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 call over to RJ Jones, Vice President of Investor Relations. Thank you. You may begin. Thank you, operator. Welcome everyone to our fourth 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 impacts 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. 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 the information available as of today's date, February 15, 2023. 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 presentations 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 press 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 our 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 fourth 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. Welcome everyone joining the call today. As we completed 2022, we reached a key milestone for our business as we crossed over the $200 million ARR mark. This was a special milestone for me. It took us almost seven years to grow to a $100 million ARR business, and we achieved that in 2020. It took us only two years to double that and cross the $200 million of ARR in 2022. While the year was filled with unexpected challenges, we were able to achieve healthy growth and begin accelerating our path to profitability. We reported a solid result in the fourth quarter as we navigated the challenging macroeconomic environment. Revenue grew 28% over Q4 last year to $51 million in the fourth quarter. The expansion of our global customer base, consisting of SMB, enterprise, and strategic accounts, has been steady. Our customer base grew 16% year-over-year to over 4,000 customers, and our average account spent about $52,000 with us annually, up 80% over last year. Furthermore, 55% of our annual recurring revenue comes from customers who spend more than $100,000 per year with us. Today, 39% of our ARR is generated from customers with multi-year contracts, demonstrating the durability of those customer relationships. This is a metric that has grown year-over-year since 2020. Looking forward to 2023, we believe current macroeconomic conditions will persist for some time. To succeed in this environment, we have adjusted our strategic objectives and sharpened our focus to deploy resources carefully on core activities that create revenue and improve profitability. Our first objective is to successfully serve strategic customers. Now more than ever, our strategic customers are increasing and expanding their use of our data. Our second objective is to grow our number of accounts through product-led growth and effective go-to-market strategies. We have barely penetrated our multibillion-dollar total addressable market that consisting of hundreds of thousands of businesses that all need digital market data to win and to be successful in digital world. We will experiment with different approaches to packaging and pricing this year. The third objective is to accelerate the adoption of new products and add-ons. Today, Similarweb is a multi-solution company with many products and solutions we can offer to our customers. We see a big opportunity to continue cross-selling those solutions to our current book of business. Last but not least, we'll strive to operate efficiently with an excellent and efficiency. We will optimize our execution this year with a focus forward finding new efficiencies across our sales and marketing areas. This will enable us to achieve cash flow positive by the fourth quarter of this year. We believe that our digital data is simply the best, period. Our customers tell us that our solutions are more valuable than ever in today environment. We'll continue to double down on our customers needs to survive and win in this unpredictable economy. 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 fourth quarter results. I will briefly address our financial performance, and then we will open up the call to questions. Our results in the fourth quarter continued to demonstrate our disciplined execution. Revenue reached $51.3 million for the quarter and exceeded our outlook of $50.9 million on the high end of our range. Our overall dollar-based net retention rate, or NRR, was 109% as compared to our 113% in the fourth quarter of 2021. For our over $100,000 ARR customer segment, NRR was 120% as compared to 125% in Q4 last year. Our remaining performance obligations, or RPO, increased 24% year-over-year to $171 million, 80% of which will be realized over the next 12 months. As we exceeded our plans on the top line, we also exceeded expectations on our bottom line. Our fourth quarter GAAP operating loss was $14.6 million, while our non-GAAP operating loss was $10.9 million, which was less than the fourteen and a half million dollar loss we had anticipated on the low end of our guidance range. Notably, our non-GAAP operating margin improved 25 percentage points versus the prior year. This result reflects the impact of our broad-based operating efficiency measures we have implemented across the business. Turning now to Q1, 2023, we expect total revenue in the range of 52.5 million to 53 million dollars. For the full year, we expect total revenue in the range of $221 million-$222 million, representing approximately 15% growth year-over-year at the midpoint of the range. Non-GAAP operating loss for the first quarter is expected to be in the range of -$11 and a half million to -$12 million, and for the full year between -$30 million and -$31 million. We anticipate non-GAAP gross margin will be approximately 77%-77.5% in Q1 2023, and approximately 78%-79% in fiscal year 2023. Importantly, we intend to achieve sustained positive free cash flow by the fourth quarter of 2023. Please note that our free cash flow may fluctuate seasonally as we progress through the year. In particular, we anticipate substantial improvement in the first half of 2023 as compared to the first half of 2022. Ultimately, we expect our quarterly cadence will be positive when we finish the year. Our projected growth trajectory in 2023 reflects our assessment of the impact of recessionary conditions on our business that will persist for an indeterminable amount of time. As Or discussed, we have aligned our strategic objectives to balance our expectations for moderating growth with accelerating our path to profitability. Our team, our business model, and our balance sheet remain resilient as we navigate the challenging environment. With that, Or and I are ready to answer your questions. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two 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 poll for your questions. Our first questions come from the line of Arjun Bhatia with William Blair. Please proceed with your question. Perfect. Thank you for taking the question. Or maybe Jason, can you just flush out a little bit of what you saw in the buying environment in Q4, how that differed versus the past few quarters, and maybe what you're incorporating into the 2023 outlook that you provided? Hey, thank you for the question. It's Or. I think I would summarize Q4 as more stable quarter. You know, if you look on last year and 2022 as a whole, Q1 was, you know, business as usual. I think most of our sector started seeing market dynamic around Q2, Q3, when I think business dynamics becoming tougher as more and more corporates start to tight their budgets. I think Q4 we saw a little bit more stability. Hopefully that looking into this year, I think companies start to understand what is the new way of doing business. I think it's guided Q4 hopefully reflect on how 2023 will look like. Okay. Got it. That makes sense. Maybe just one another one on the product side, rather. I noticed you mentioned the data as a service offering. Can you maybe just give us a sense for where you are in bringing that product to market, especially with larger customers? It seems like something that would resonate. How should we think about the monetization of that offering? Yeah. We indeed put a lot of effort in the past few quarters to kind of enhance and improve our data as a service offering. It's meaning that more data is available through APIs and data feed, so it's more coverage and more different way to consume the data. In the API ecosystem, there's few motion to push the data and to more you query, you get the answer. It's called Batch API, S3, et cetera. There's another approach when you have bulk of data, like integration, that you can get the data through Snowflake, through AWS. We put a lot of efforts to have everything available, and this unlocked a lot of opportunities to companies to get the data in the way that's more benefits to them. It really help our OEM vertical. We have a big sectors of companies that use our data to enrich their own products. We're seeing a big success there in the past few quarters. This investment really yield a good ROI for it. Perfect. Thank you for taking the questions, guys. Thank you. Our next questions come from the line of Ryan MacWilliams with Barclays. Please proceed with your questions. Thanks for taking the question. Hey, Or, how are you feeling about the new deal pipeline at this point? Like, are you experiencing enough net new inbound customer opportunities? What is driving some of the enterprise strength that you're seeing? I think I'm looking on the pipeline. We feel strong confidence on the pipeline. Now we need to see how the role will go. I think even a lot of our organization right now that's been through a lot of cost saving, you know, they're building a new process about how purchase need to be done and the approval. I think overall pipeline looks strong. Excellent. One for Jason. Jason, just on the full year guide, you know, can you just break down some of the assumptions that led you there and, you know, feel this is conservative, and if there's anything, you know, baked into the guide for the macro? Thanks. Sure. You know, our guide does take into effect of some of the things that we're hearing in the industry, and broadly in the economy in terms of, you know, inflationary environment and where folks' budgets are. At the same time, a lot of the feedback that we're getting, that we're hearing from our customers, that they use Similarweb as a very strategic part of building out their strategy and have a and not just a tactical tool. We look at that, we look at the pipeline and fortunate is again, that we have a significant amount of our ARR that is tied up in or contracted on multi-year deals. We have today, you know, over 39% of our ARR is contracted on multi-year deals. We have a very good visibility into the recurring revenue base. Appreciate the color. Thanks, guys. Thank you. Our next question comes from the line of Jason Helfstein with Oppenheimer. Please proceed with your questions. Thanks, guys. Just wanna ask about the e-commerce product, which is something I know you've been excited about. Just given that obviously e-commerce has kinda gone through a kinda COVID hangover, do you feel like that has impacted your ability to get clients to kinda upgrade to that more expensive package? kind of as we kind of burn off the COVID hangover, which, you know, looks like it's starting, but it's still kind of month to month, that's something that you could see a more meaningful uptake. Thanks. Hey, Jason. Thank you for the question. The Shopper product is mostly focused for CPGs. They are the main target audience. We see strong demand there. I think Q4, logo-wise was one of the strongest for that product. It enjoyed a lot of net new logos. I think we are happy overall from the progress now. Jason, you may be muted. Did you have a follow-up? No, I'm all set. Thank you. Okay, thank you. Our next question has come from the line of Brent Thill with Jefferies. Please proceed with your questions. Hi. Thank you. This is John Byun on behalf of Brent Thill. I had two questions. One, not a question on the macro, but I'm wondering what you're seeing so far in the environment, you know, six weeks or month, you know, quarter and a half into the new year, especially in Europe. I mean, Europe seems to have stabilized at least a little bit in terms of, you know, energy costs and so on. Just want to see what you're seeing so far in the first six weeks. Second, in terms of, you know, your major product lines and add-ons, where are you... You know, which one of those is being, you know, most resilient in terms of demand and expansion? Thank you. I'll go. The first question is around Europe. Happy to say that Europe was more stable in Q4, and we had good success, especially in the U.K., and much better than what we've seen in Q2, Q3. Regarding the different add-ons that we have, we just start introducing the new product for the investor. We call it Stock Intelligence for the current book of business last quarter. It was going very well. I'm very happy about that. I think from stability-wise, one interesting dynamic, we have one product called Sales Intelligence for sales organization. With the layoffs around that happened, we saw that there was little decrease in new sales. We didn't see a big impact on revenue, there. This specific product is more correlate with user growth. With the dynamic in the market, we saw that, there probably gonna be less upsells going forward. This is the only thing I can think about, from the different, line of products we have. Thank you. Very helpful. Thank you. Our next question comes from the line of Brett Knoblauch with Cantor Fitzgerald. Please proceed with your questions. Hi, Or, Jason. Thanks for taking the question. Or, I guess in your prepared remarks, you talked a bit about experimenting with packaging and pricing. Could you elaborate a bit more on that, I guess, with which products are you thinking of maybe repackaging or what type of price changes are you thinking about? Yeah. We have two big initiatives that I'm extremely excited about that I think will have a significant impact about it. The first one, we are introducing what we call enterprise package. You know, as we have more and more big customer that we work with, we realize that we need to treat our pricing and packaging differently. Like, to care about something that will be more easy to the enterprise to buy, that give them the ability to have multiple entities in multiple regions, and then it's easy for us to close deals and NSA with them. Another thing put there in this enterprise package, a lot of the enterprise need, like SSO, all kinds of user admin restrictions and big API manage, and all kinds of restrictions that mostly big enterprise need. This is the first thing is to introduce this enterprise package. We hope this would increase our ACV with those big accounts at length. Will also make the signing agreement with them easier and faster. The second motion we're gonna introduce later on in Q2 is a new pricing and packaging that will enable us to cross-sell and upsell better the core offering we have, which is the research solution and the marketing solution. A lot of the time we sell that as a bundle today, and I think with this new pricing and packaging, we will be able to bring better solution to the specific customer. An enterprise one that I talk, we will introduce this quarter. The big pricing and packaging for the core product, research and marketing, we will introduce in Q2. Those two things that are going to happen that I think will have very good impact. I know. That's helpful. Then you guys kind of briefly talked about, you know, I guess, improving the efficiency of your go-to-market strategy, whether that's kind of shortening deal cycles, making it easier for people or I guess customers to buy. I guess, what are you doing on your end? You know, I think we've done research where we found, you know, customers who trial your, especially your Shopper Intelligence product, the trial to purchase rate of those customers who actually trial it is extremely high. So I guess how do you get that product in front of more customers and, you know, how do you guys, you know, do that while keeping an eye on the bottom line as well? Just want to understand the question is how we can accelerate the sale of the Shopper solution product. I guess all products, your entire GTM in general. I guess how should we think about you guys, you know, driving profitable growth or kind of, you know, making that go to market more efficient? Yeah. We made a lot of good decision how to optimize this process. Like, for example, specifics for Shopper, we basically dedicated the go-to-market organization in the big region, like in the US market, is split by the sector, by industry. What we did, basically we have a pod, a very successful pod in the US market that sells for CPG. We basically now went to this pod and a group of people and tell them, "Listen, you're now also in charge of accelerating the Shopper product other than also selling the other product." By aligning them with one of the different business line, we kind of hoping to accelerate the growth of the Shopper product outside of the current book of business as we currently have it run. Those kinds of- Got it. things we change will still make us be very efficient and also drive the growth of the cross-sell of different solutions that we have. Got it. Then maybe a question for Jason, just on the kind of the long-term kind of growth model. You know, guiding to call it 15% growth for 2023, obviously macro is a big concern. Hopefully that doesn't last forever. You know, assuming, you know, say macro improves, you know, in 2024, will you guys, you know, begin to, you know, increase investments to re-accelerate growth? Would you guys sacrifice profitability to do so? You know, would you kind of say that you guys kind of crossed the Rubicon for profitability and expect to generate kind of positive free cash flow from here on out, and you'll expect to be able to do that while accelerating kind of growth in a, at a better macro environment? Yeah, Brett, that's the plan. In other words, once we, you know, turn sustained cash flow positive, our intention is to continue to maintain that going forward. We, you know, we have always trained ourselves and managed the business on very profitable unit economics. As we've talked through before, once you hit a certain growth rate and a recurring base, that business, that recurring business is throwing off 45%-50% contribution margins on an annual basis. We think that'll be a great way to continue to invest while driving continuous free cash flow. Great. Sorry, if I could just ask one more. Gross margins were really strong this quarter. The guide for this year is also really strong, or at least better than what I was expecting. I guess, can you just break into what drove the kind of sequential margin improvement? You know, is that maybe more of an uptake of your App Intelligence product and you're getting leverage with that? It's the way that we've always run the business. I think I've been talking about this for a couple of quarters. Go back a little over a year ago, we were at the 78%, 79% gross margin. There were short-term hits that we had to take as we consumed new data elements that we were integrating, including the MD acquisition and the data.ai partnership. But as soon as that gets, you know, We start generating revenue from those products, you start seeing the leverage that we have on the fixed, on the fixed cost. A re-reminder that our data costs are really a fixed cost. I mean, none of the deals that we have a variable component in there, which is what drives such efficient gross margin economics. Awesome. Thanks for your time. Thank you, guys. Thank you. Our next questions come from the line of Noah Herman with JP Morgan. Please proceed with your questions. Hey, guys. Thanks for taking our questions. you know, I noticed in the shareholder letter you called out a few verticals where you saw really strong growth during the quarter. Were there any verticals in particular that stood out, you know, just positively but also negatively during the quarter? I just have a quick follow-up. No, nothing, you know, for a particular industry. I mean, I think it's tracking similar to what we're seeing overall in the economy, e-commerce being a little weaker, and some of the other things overall, you know, showing continued growth. We've seen growth all across the board and also good net retention numbers and more importantly, gross retention numbers across our customer base. I think that's one strong takeaway that we're hearing from our customers. As customers went through, you know, their their cost optimization exercises, whether that was headcount or software tools and the like, our customers are telling us that Similarweb is not that product. That they're evaluating whether they need it or don't need it because we have the the best data and they can't get, you know, can't get that kind of information anywhere else. So they're relying on us, and I think that's what you're seeing in more and more of that ARR being contracted for multiyear commitments. Got it. That's great to hear. Yeah, maybe just quickly on the guidance for the year, on the margin side. You know, based on the first quarter guidance in the fiscal year, it sort of, you know, implies a pretty, you know, rapid expansion, I think, towards the back half of the year. Can you maybe just unpack, you know, what are some of the key levers driving that for the business? Thanks. Yeah. I think that you're gonna see... You know, a lot of our costs are fixed costs, as the revenue grows, the margin expands. That's the beauty of being a real data business. You know, it takes a lot to start building this stuff out. If you look at a lot of other data businesses, what happens is as they start hitting critical scale, you get, you know, wildly profitable operating margins. I think that's what you're seeing over the last couple of quarters as we've taken the right decisions to drive operational efficiency. You're seeing, you know, this quarter, again, a 25 percentage points improvement on the bottom line. It is our intention to continue to drive that kind of profitability. I think the first indication that you guys will continue to see is our drive to hitting sustained positive cash flow. We look forward, like we mentioned in the letter, to see meaningful improvement in the cash flow already in the first half of the year compared to what it was, last year for the first half of the year. Thank you. Our next question has come from the line of Pat Walravens with JMP Securities. Please proceed with your questions. Thanks for taking the question. This is Owen on for Pat. I was looking at the kind of the long-term gross margins. My question is, I guess, have the efficiency gains from the RIF back in November been fully realized and kind of representative in this quarter's results? Or can we expect to kind of see margin improvement continue to accelerate going forward? Thanks, Owen. It's Jason. Yeah. I think that you'll see that happening in starting more in Q1. Q1 always has some, you know, one-time kind of expenses like company kickoffs and the like that hit the first quarter. We've taken that into our modeling and our guidance, and I think that like you're seeing, based on the guide, that you're gonna see further operational efficiencies and margin improvement over the course of the year. That's the guide. Great. Thank you. That's it for me. Thanks for taking the question. Thanks so much. Thank you. Our next question has come from the line of Tyler Radke with Citigroup. Please proceed with your question. Yes, thanks for taking the question. Or, I'm curious how you're thinking about the generative AI opportunity, specifically with some of the announcements around ChatGPT from a search perspective. You know, how are you thinking about integrating this into your product, and what are the future opportunities for monetization? Oh, love this question. This is a big thing for us, and we already have multiple teams here internally working, integrating, and it's really amazing technology in many area of our business. I can talk about two areas when we're really enjoying the benefits of this technology. The first one is categorization, especially in the e-commerce world. AI and OpenAI have really great capabilities to help you categorize elements or different products to different brands. In the machine learning, this is kind of tough problem, and they do very well, very easy, very efficient. The second thing I think that is more important, and the nice thing about the OpenAI technology is that you can fill them with data, and then it can summarize, give you answers, pull insights, and then it's all about if you have a unique data set that nobody else have, this is a big, big advantage. This is how we leverage because we have a unique data that nobody else has. You know, our digital data, how the internet is working, we're doing it better than anyone else's, and it's our proprietary data. We're feeding it to the AI, and then we can ask him question on top of our data. We can tell them, "Please tell us what is the digital strategy of CNN and company." Then you look on our data, and then it pull out an amazing summary that explain you again, it's very easy, very simple, what they do, what is the insight, and so and so. We kind of trying to leverage to put this on top of our platform to pull automatically for you all the insights and summarize a lot of the information that is there. A lot of exciting stuff we're gonna release using these capabilities down the road. Thanks. Jason, just in terms of ARR, I think you added about $35 million or $36 million of net new ARR in 2022. How are you thinking about the net new ARR, and just overall ARR growth for 2023? How have you kinda de-risked the assumption there given what you're seeing in the macro? obviously we're looking at our pipeline numbers that we see and the discussions that we're having with our customers. We've, you know, we've been looking at that and looking at, you know, upsell opportunities that we have. The greatest part when you talk about net ARR growth starts with knowing that we have a strong retention base. That's where, again, the confidence that we have with the coming into Q1, we had a significant amount of the ARR that was up for renewal. It's already been contracted either through multi-year commitments or also people who when in Q4 said it's time to renew and renewed early in order to make sure that they had the budget that they were gonna be able to do. We had, you know, I think a good base to start with, and we have confidence in the, in the recurring base that we have. Then use our assumptions on pipeline in order to build out ARR and ultimately the revenue guidance that we've given today. Okay. Thank you. Thank you. There are no further questions at this time. With that, this does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time and enjoy the rest of your day.