Semrush is a SaaS platform that helps businesses improve their online visibility. I first came across their IPO when TMF introduced them back in April. As I used the software in several positions I held I was already familiar with what they offer.
What I like:
Good revenue growth 50%+ CAGR
High gross margin 76%
Little to no debt
FCF margin 2%
High NRR of 121%
Operating income 20%
Small market cap 2.75B
FY21 outlook of 182-184M
I believe covid accelerated the need for such tools. And especially SEMrush as it is the leading tool used by professionals. It recently won the best SEO award (https://investors.semrush.com/news/news-details/2021/Semrush…).
I took a started position when it IPOed at around 12$ and it has grown organically into a 15% position as of today.
Earnings call (8/11/21):
Glassdoor score (4.4):
Fool introduction (08:00:47):
Thanks for bringing this up. Martech plays are always intriguing since they provide a lot of support for marketers in this digital age of marketing. I really like SEM Rush as a product, it’s one of the most cost effective and superior solution IMO vs the other enterprise SEO tools like BrightEdge, Conductor, etc.
Given the importance of SEO and paid search and SEM rush’s move to social, I think there is a lot of opportunity and a big TAM. I think one of SEM rushes biggest advantages is that its subscriptions are only $3000-5000 a year which is literally 75 percent cheaper than competitors. Their NRR is expanding since they have great add ons that provide a lot of value.
Revenue (in millions)
Q1 Q2 Q3 Q4 Total
27.8 28.5 32.2 36.4 124.9
40.0 45.0 47.7*
36 29 35 41
44 58 49*
Revenue increased 12.5% sequentially an acceleration from 9.8% and YoY revenue growth seems to be strong.
Guidance was 6% sequentially and so they will beat that like they did and may come back with another 10-12% quarter.
They are definitely a small cap but I think they are in a solid space with lots of runway. They are IMO the superior solution vs other tools and can grow organically or eventually be acquired.
They are in the smb to mid market space but seem to moving up market but even without enterprise there is a huge TAM just for smb to mid market.
Their land and expand strategy is working working with DBNRR increasing to 121 from 116 and ACV increases 19%.
Their customers are increasing at a solid clip too at 29% YoY and 5.6% sequentially though a slight slowdown from 7.5% in Q1.
They have a 17 EV/S and given their growth rate and performance and multiple relative to other martech (ie SPT and HUBS) and low market cap of $2.7 B, I think this company is ripe for a double with a good chance to 4 bag in the next few years given their low multiple and 40-50%:revenue growth.
I’m likely going to take a starter position tomorrow.
I hadn’t heard of this company before and so I headed to Glassdoor. 4.4 stars–looked great, although not a ton of reviews. And located in Boston. But then I read the list of cons. Again, there aren’t many, but I’m cutting and pasting the top “cons” on their Glassdoor page:
“high turnover and we are never told why- employees are on edge at times” (in 7 reviews)
“Our developers are located in Russia, which can present issues sometimes” (in 5 reviews)
“Duplication of job duties in Russian office causes employees to question whether the US office will remain open” (in 4 reviews)
“Bad Management, low pay, poor work environment” (in 3 reviews)
“US Management serves only as mouthpiece for Russian office” (in 3 reviews)
I have a strong screen for geopolitical risk, so I’m not biting on this one.