Sprout Social ($SPT) vs Semrush ($SEMR)

Investment Analysis Clubs Saul’s Investing Discussions
#1

After JabbokRiver42 introduced Sprout Social (SPT) a few weeks back, discussion.fool.com/sprout-social-spt-34927484.aspx?sort=whole#3…, I wanted to see how it compares against Semrush (SEMR) both as a service as well as an investment. Even though Semrush is not a social media management solution exclusively, it offers a social media tool kit as well semrush.com/social-media/#smp.

Capterra results

SEMrush capterra.com/p/151962/SEMrush/


Total score: 4.6/5 from 1410 reviews
Listed as a top performer in Social Media Management and Social Media Marketing.

Sprout Social capterra.com/p/121447/Sprout-Social/


Total Score: 4.4/5 from 449 reviews
Listed as a top performer in Social Media Marketing only.

Here you can see that Semrush is far ahead of Sprout Social as a Social Media Management Software capterra.com/social-media-management-software/#shortlist

Here’s the direct comparison capterra.com/marketing-analytics-software/compare/121447-198…

It was a bit surprising to see Sprout Social rank far behind Semrush in the Social Media Management (SMM) category as I was expecting SPT to be ahead since they are focusing on SMM exclusively. Maybe SEMR with all the data available and all the integrations makes it a better tool even for those seeking an SMM tool only.

Better investment?

Revenues $


SEMR 20.3 22.1 23.8 25.7 27.7 28.4 32.1 36.4 40   45 
SPT  23.3 24.6 26.2 28.1 30.5 31.4 33.6 37.3 40.8 44.6

QoQ Growth

  
SEMR 8% 7% 8% 8% 2% 13% 13% 10% 12%
SPT  5% 6% 7% 8% 3% 7%  11% 9%  9%

Gross Profit Margin (last 4 Qs)

  
SEMR 76% 75% 76% 76% 
SPT  73% 74% 75% 75%

DBNRR


SEMR 121%
SPT  110%

Customers (as of last Q)


SEMR 76K up 29% YoY**(30K active social media tool kit users, up 25% QoQ)**
SPT  29K up 21% YoY

Operating loss (last Q)


SEMR $279K (-$2.1M a year ago)
SPT  $5.3M (-$8.3M a year ago)

Non-GAAP net income


SEMR $290K (-$1.9M a year ago)
SPT  $0.0M (-$5.8M a year ago)

Market Cap


SEMR $3.7B
SPT  $7.6B

Conclusion

Is the discount in valuation simply because of the Russian origin? Many successful companies are not born in the US but carry a hefty evaluation nonetheless (MNDY, GLBE, and many others). However, from the latest 10-Q s27.q4cdn.com/202248034/files/doc_financials/Semrush-10-Q-Q2… we can see that the company has 6x their property and equipment in the US in the last 6 months alone while reducing their other geographic locations including Russia.

My thesis remains intact. Semrush is needed by more and more companies in different sectors. Even management seemed surprised by the increasing demand especially after covid in the latest earnings call. The tailwinds remain strong especially with eCommerce on the rise and the aggressive shift to digital. As the COO of Salesforce said today, If I started a company today, I’d start with my digital headquarters". He was referring to Slack as being the digital headquarters for every company. Similarly, companies now come to realize that SEO/SEM tools are at the very core of every business.

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#2

Thanks Pavlos for a great comparison.

I also just take a look at SEMrush and was surprised that I did not know about it earlier.
The growth is accelerating in the last 2 quarters, cheap valuation (compared to other companies).
Could anyone think of any bear cases for this company? Other than it’s not a US company like Pavlos mentioned?

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#3

Coincidence, I just saw this article on another new mention around here.

Monday and Semrush:
“Semrush, a leading online visibility management SaaS platform, today announced an integration with monday.com, a leading cloud-based work operating system. This integration empowers organizations to build data-driven marketing workflows to manage a website’s health and visibility more efficiently. For the first time, teams can automatically bring their valuable online marketing research data into monday.com, easily turning real-time keyword insights into actionable plans and collaborating across SEO and content marketing tasks — all from monday.com.”

That’s part of a news feed on my brokerage site, so no link, but looks interesting to see these two growing companies already working together.

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#4

Could anyone think of any bear cases for this company? Other than it’s not a US company like Pavlos mentioned?

It’s not that it’s NOT a US company, it’s that it’s a Russian company and yes, this will make many US companies wary of using their products. I am not making a judgement if this is justified or fair, only that it is a hurdle for this company and certainly part of the discount is because of this.

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#5

Indeed as MFChips mentioned above, it might make some US companies wary of using their product. However, as of June 30, 2021, Semrush has over 76,000 paying customers. Out of those 76K+ customers, 46% are based in the US, 11% in the UK, and 43% in the rest of the world. Paid customer count grew 29% YoY in the last Q (excluding Prowly customers semrush.com/news/semrush-acquires-fast-growing-saas-pr-tech-…).

So, at the moment Semrush has about 35,000 (76,000 x 46%) US-based customers. This proves that SEMR has no problem acquiring US customers. Of course, this doesn’t take away the fact that some US companies might not want to use the service because of the Russian factor. However, if they keep growing as they currently do, it might be easier down the line for other US companies to become paying customers too.

Current paying customers include Disney, eBay, Facebook, Salesforce, Skyscanner, Hubspot, Mailchimp, the Washington Post, Seeking Alpha, and even The Motley Fool. Here you can read 70+ customer success stories semrush.com/company/stories/

Also, Semrush is headquartered in Boston and has offices in Philadelphia, Dallas, Prague, St. Petersburg, Warsaw, and Limassol (my hometown). With more than 1000 employees across 5 countries, 7 offices, and 115 open positions — including senior and junior positions in the US — Semrush gives me the impression that they want to be an international company even if the management originates from Russia and they invest heavily to accomplish that.

Pavlos
(added to my SEMR position during the pullback last week)

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#6

There were recent insider trading for $SEMR. Some key employees decreased their position to 0 including a CFO. I guess CFO should be aware of Company finances and they closed position before reporting. Not sure if such news are enough to close a position.

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#7

https://www.sec.gov/Archives/edgar/data/1831840/000184937621…

That’s a misunderstanding of the Form 4/A that was filed, btw.

The CFO converted class B shares to class A shares, resulting in not owning any more class B shares (holdings of 0 after transaction).

The CFO sold 3/4 of his class A shares and kept ~$500,000 worth of those shares. Additionally the CFO has millions of shares still coming to him via the ESOP… as seen here: https://www.sec.gov/Archives/edgar/data/1831840/000184937621…

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