the expected performance of our business and our future financial results, our strategy, the potential impacts of the COVID-19 pandemic and it's 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 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 20th 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 information available as of today's date, May 11, 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 presentations of results and on our call today are expressed on a non-GAAP basis.

In particular, we referenced 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 on 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.

Then we will open up the call to questions from sell-side landlords in attendance.

Please note that we published a detailed discussion of our First 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 to everyone joining the call today. I'm happy to have you all here on our one year anniversary of being a public company. We started 2022 strong, and post excellent result. Revenue grow 51 % over Q1 last year, and exceeded $44 million in the first quarter. Our customer base grew 27 % year-over-year to nearly 3,700.

And our average accounts spend nearly $60,000 with us annually. Furthermore, over 53 % of our annual recurring revenue comes from customer who will spend more than $100,000 per year with us. Those results excites us as we continue to see momentum building in our business.

The one thing that I think we at Similarweb do better than anyone else, is predict how the internet behave. In order to create this prediction of digital behavior, of how traffic move on to digital world, we take vast amounts of digital signals generated from activity in the digital ecosystem, and convert it into Intelligence and market data.

We process the data using advanced proprietary machine learning techniques to produce comprehensive and timing digital signals.

The solution that we built on top of the data enhanced the essential revenue driven operations team of our customers, which includes sales, marketing, analytics, e-commerce and are designed to directly benefit a wide range of users from the c-suite to operational teams.

The refined data and actionable insight we provide our customers give them a competitive advantage to win their market. We seek constantly how to innovate and improve our solution and our underlying data.

This quarter, we made major investment and improvement in our mobile web and mobile app datasets across all marketing channels, which include referrals, keywords and other topic metrics.

We're also enhancing our solution to leverage up data from Data.ai, previously known as App Annie, which is delivering app intelligent data, as well as shipping new feature releases that constantly make our product portfolio more valuable to our customers. Our go-to-market execution continue to be highly efficient globally.

54 % of our revenue comes from outside of the United States in the first quarter. The expansion of our global customer base, consisting of SMB enterprise and strategic accounts, looking to gain an edge in the markets continue to gain momentum.

Today, 35 % of our relationships consist of multiyear contracts and metrics that continue to expand year-over-year since 2020. Our customer appreciate the strong volume we offer, with nearly 80 % of our customer base currently purchasing more than one solution from us.

Before concluding, we would like to take a moment to recognize the contribution of our 65 team member in Ukraine, who continue to work when and where they can for an extraordinary situation. Our hearts are with you and you are inspiring us all.

Again, we're off to a great style in 2022 and 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. And thank you to everyone joining us on the call today. For those of you will have been on our previous earnings calls, you will notice that we are conducting things differently. Based on investor feedback, we are prioritizing spending time on answering investor questions and reducing prepared remarks.

As part of this shift, we published a shareholder letter which discusses our results in detail as a supplemental part of our quarterly reporting will briefly cover a few clarifying topics now, then we will open up the call to questions. Our results in the first quarter continued to show our commitment to disciplined execution.

Revenue reached $44.3 million for the quarter, and exceeded our outlook of $41.5 million on the high-end of our range. Importantly, our overall dollar-based net retention rate, or NRR, increased to 115 % as compared to 103 % in the first quarter of 2021.

And for our $100,000 ARR customer segment, NRR increased to 127 % as compared to 115 % in Q1 last year. Our go-to-market execution during the quarter was stellar as our remaining performance obligations, or RPO s, increased 68 % year-over-year to $159 million.

Our plans for 2022 include increased investment in customer acquisition costs ahead of our historical payback period. We are executing in line with our plan to remain below 18 months on average, as indicators for returns remain consistent. As we exceeded our plans in revenue, we saw incremental gains flow through to our bottom-line.

Our non-GAAP operating loss was $19.8 million, which was less than the $20.5 million loss on the low end of our guidance range. This result includes noncomparable expense impacts from our acquisition. Importantly, we would achieved an estimated 32 % incremental non-GAAP operating profit margin from the midpoint of the ranges.

Turning now to Q2, 2022, we expect total revenue in the range of $45.5 million to $45.9 million. To the full year, we are raising guidance and expect total revenue in the range of $196 million to $197 million, representing 43 % growth year-over-year at the midpoint of the range.

Non-GAAP operating loss for the second quarter is expected to be in the range of $-23 million to $-23.5 million. And for the full year, between $-82 million and $-83 million. Compared to last year, our outlook includes impacts to cost of goods sold related to our Data.ai partnership and to the acquisitions of Embee Mobile.

We anticipate non-GAAP gross margin will be approximately 73 % to 74 % in Q2 2022 and 75 % to 76 % for fiscal year 2022 as a result of these impacts. Our first-quarter 2022 results indicate we are starting on track to reach our three-year target of $450 million to $500 million in ARR and positive free cash flow as we exit 2024.

With that, Or and I are happy to take your questions..

Yes. Thank you. And as mentioned at this time, we will be conducting a question-and-answer session. [Operator Instructions]. [Operator Instructions] For participants using speaker equipment, it may be necessary to put on your handset before pressing the keys. Hold on please while we poll for questions.

And our first question today comes from Arjun Bhatia with William Blair..

Perfect. Thank you very much, and congrats on a great Q1, guys. I wanted to start with the net retention rate. Obviously, a lot of strength there. That metric continues to move up as up-sell and cross-sell takes hold. I'm curious if you can just dig into maybe the underlying drivers a little bit.

Is it more seats, more data consumption, cross-sell that's driving that? I know you didn't mention 80 % of customers are using multiple products, but let's just get in unpacking of that metric and how high you think that can go if there's continued momentum there as the year progresses here?.

Hi, Or speaking. Thank you for that question. So if I had to think out of my head about different methods contributes to the growth, I think all of them has a nice contribution. Some of them is the cross-setting of introducing a new products, like the shopping or sell solution for our customers. Some of that is more about data consumptions.

And some of the users, we offer the tool and up-sell our API products, and then it's grow with the consumption. And also, we have success with the meter, the approach, and that is there is more users, and other up-sell capabilities that each one of the lines of business have.

And I think we will continue to have a great momentum, and that's the way we're getting better. And we continue to innovate and bringing more solution and improving our own products so our customers are happy and buying more..

Very helpful, Or. Thanks. And then what if I follow up working on the App Annie, or the Data.ai partnership rather, can you just give us a sense for any updates on the development of that solution.

On the mobile side, are we still set to launch by Q2 and would love to hear if there's any early customer commentary since the partnership was announced in terms of reception or potential deployments?.

Yeah. So we also are very excited about this partnership. The team here is working really hard as we quoted before, and it will be in launch and introduced into the market in the next few weeks. And the team is very excited about it.

I think it's unlocked a lot of opportunities for us in specific region, and in region whereas more dominant like Southeast Asia and those areas where we have customers. And because it's more dependent on that ecosystem. So we're going to introduce this and of course, I think there's also a nice contribution to the upset across to lend motion as well..

Perfect. Thank you very much and congrats again, guys..

[Operator Instructions] Thank you. And the next question comes Ryan MacWilliams with Barclays..

Thanks for taking my question. And just want to say I appreciate the shareholder letter on your website. That was definitely helpful when looking through the quarter.

Jason, just on the full-year guidance and also just from this most recent quarter, was there any impact from FX or anything we should think about as move through this year?.

Not materially for us getting most of our contracts. And by the way, Ryan, it's good to hear from you and thanks for the feedback. But most of our contracts are denominated in U.S. dollars. So while there often is hold by in euro or otherwise. But it wasn't a material impact this quarter..

Appreciate that. And then look, sounds like RPO growth accelerated and there some strength in net retention in your business.

Before, while you guys may have seen any impact from macro headwinds at this point, how do you think about your exposure? Do you know the potential for a worsening macro-environment, and how do you think your customers would maybe interact more or interacts less with Similarweb under those circumstances?.

So as it's a good question.

And from what we saw historically, even when we look in the -- when COVID happened and there was a lot of uncertainties in the market, what we discovered back then and I can also think which will happen if the world will go into this uncertainty time, the needs for market data is growing because companies in that stage need more context about where they stand.

If the uncertainty is hurting them more than others, they all go into re-planning their strategy and they need market data for that. So I hope that the engagement will increase. I hope that answers your question..

That helps for sure, love this format. Thanks, guys..

Thank you..

[Operator Instructions] Thank you. And the next question comes from Jason Helfstein with Oppenheimer..

I'll ask two questions.

One, if we do start to see slowing corporate spending, and we're obviously seeing companies talking about current pausing and slowing headcount already, what's the -- you maybe call it the seasonality on account renewals, and then just when you would start to see that if you had clients taking longer to sign up, renew, etc., or how that would play into your typical cycle of up-selling new products with each renewal? And then second, obviously, the market is increasingly focused on cash flow and visibility to cash flow.

You guys put in the letter that you expected to get to positive free cash exiting '24. I mean, any discussion about accelerating that and any commentary on that? Thank you..

Thank you, Jason. Good to hear from you. So regarding the sales cycle, and as we evolve, 40 -- 35 % of the deals we have are multi-year. So this big chunk of the book of business, especially the big contracts, are already locked in for multiple years.

And I think that the other accounts that are smaller, even if it's the big companies, still our average contract is around $50,000. So I think it's not a significant amount of closed companies to try to optimize that as the core product is not that expensive. It is around.

So I'm not sure we're going to -- Let me slow down there, and now it's -- maybe it's too early to know. And regarding the cash flow question, so we do look on the market dynamics and we did communicate our faster in 2024 and we're working how -- into that direction. And I think that also internally we did look how we can be more efficient.

So we understand the market dynamic and the tone of voice coming and so we do now put a lot of emphasis, well disciplined, execution, making sure that we do not spend money in places we don't do. We have great momentum, just continue to do what we do, and continue to deliver, and be more efficient as we do that. So we are seeing that and executing..

[Operator Instructions] Alright. Thank you. And the next question comes from Brent Thill with Jefferies..

Jason, just on the economic environment, I guess when you think about raising guidance into the face of a stiffening macro headwinds, are you assuming in the guide a lower close rate on what you're seeing in the pipe, or are you assuming the same conversion rates as you go into the back half of the year? Meaning, is your pipeline that good and you're taking close rates down and you still can raise guide, or are you keeping the same methodology in place based on what you see right now?.

Yes. Hey, it's good to check. Like Or said, we've got a very, very disciplined approach to execution and how we forecast. And so we've got great visibility into our pipeline and we also have great visibility into our backlog.

Having lower that backlog and being a really -- an ARR business, not just a monthly month-to-month contracts that are multiplied by 12, gives us that confidence into being able to give the guidance that we do.

So we're obviously, we'll be looking at the numbers, looking at the pipeline and looking at the conversion rates that we had in the first part of the year and in current quarters, and using that as we guide, , to give guidance that we know we can meet..

Okay. Great. And just a quick follow-up, Jason, on the multi-product adoption by customers. Can you just give us a sense of the average number of adopted products versus pass levels, and what you're seeing on there? And maybe add on what's happening with shopper Intelligence..

Sure. So as we said in the prepared remarks, nearly 80 % of the customers today purchased more than one solution. Often times that starts with both the Digital Research Intelligence and the Marketing Intelligence because those two go hand-in-hand.

We see more and more customers that are now getting onto a third solution as well, and depending on the business that they are in, if they're in a transactional like a retail or CPG business, the add-on that they do afterwards is Shopper Intelligence if they're more of a B2B or a publisher business.

The thing that they add on thereafter is really the sale solution. So we see that trend and that customer journey going from one to two, two to three happening, just the mix of which product sets or solutions that are looking for vary depending on the industry that customer's in..

Thank you..

[Operator Instructions]. Thank you. And the next question comes from Tyler Radke with Citi..

Great. Thanks so much for taking the question. I wanted to unpack the improvement in net retention rate that I think you saw, both from the 100K customers, as well as the overall customers.

What's the primary driver of that? Is it more on the gross retention side or is it just the cross-sell and uptake of some of the new products? And how are you thinking about the sustainability of that improvement as you think about the rest of the year?.

I think that the improvement come in many angles. First, also, global retention is improving very well, and cross-sell, up-sell is improving. Customers are happier. Product has improved. We're doing a much better job on the relationship, and working with our customer.

We put a lot of emphasis in the past year-and-a-half, and really grew at top notch customers success organization because the customer services. And we hired a lot of great consultants that work with our customer, helping them, working on the system, get the insight, get data lines.

So all of those efforts, we put testing almost two years ago, are really helping to get fruits now, and I think this is the majority now.

Jason, you have any more thoughts around that?.

Yeah, Or. I think you hit on that really well. It's obviously both sides, Thailand, both from the gross retention, as well as the upsell which drives the net. But I think what you mentioned is that more and more, our customers are able to see and measure the ROI.

And that, I think it's a good mention of the Forrester report that was available on our site, that we mentioned in the press release, that suddenly we're able to have not only the sales solution which we had previously had good metrics on the ROI, but also now on the Digital Research Intelligence and Digital Marketing Intelligence Solutions.

And that's over 600 % ROI for the customers that Forrester interviewed. I think it's a good metric for folks to look at. That quantifiable ROI that drives that growth for our customers and ultimately drives that net retention that we're delivering in the results that we showed today..

And Jason, are you expecting that net retention to continue to improve from here or should -- is this a peak, just as you think about what's embedded in the guide?.

We don't guide on NRR. We think -- we're very proud of the achievements, and we think that this is something that we've worked hard on. The results you're seeing in the numbers today, remember, is the results of all the investment that we've done over the last 12 to 18 months because NRR's really a 12-month look back number.

And that has to do with that disciplined execution that we've been talking about internally and ensuring we have due because recognizing the need to, not only land, but go from land to retain, and retain to expand, that's the model that we've been executed..

Great. And then I just wanted to follow-up on Brent’s question about close rates. It sounds like you're saying that you have very good pipeline visibility, and so you're not really making any material changes in your curves rate assumption. I just wanted to clarify that that's what you meant.

And then, secondly, if you could just characterize how you've seen the environment and business environment evolve through April and May, if it's better or worse than what you saw in March. Thank you..

Sure. So we're seeing activity continue in line with what we saw previously. Again, we're conscious of the macro headwinds. We've taken that into account in the guidance that we've put together.

Again, it's just the way we've been operating for a long time, and we are very humbled by the results that we are able to deliver and report to you now, and the up guide that we did.

That said, when we think about, I think, that weren't mentioned, when we think about the macro environment, we look back at what happened over the last 2.5 years when you thinking about with the start of COVID, I think we all and here internally we were not yet a public company.

We were concerned as what would that do to pipeline and how that would impact spending and adapting Similarweb.

I think the takeaway that we learned from the results and from our conversations with customers is that they need Similarweb as much, if not more, in tough times than in good times because in good times you want to drive your -- about driving your growth in the digital intelligence that Similarweb provides, enables decision makers and operators to make smarter business operating decisions.

In tough times, like we see the macro trends today, it's even more important to be able to optimize and know where you should be investing and where you should be optimizing, where you should be focused on in order to deliver the business growth that you're looking for.

And where are there the opportunities to take advantage or to steal market from your competitor or to identify which markets you maybe should reduce your investment in. And we've seen that happen over the last two years.

And I think that that's something that we hear from customers today as they're thinking about, has it leveraged Similarweb as they plan their -- the remainder of 2022 budgets and going into '23 in today's macro environment. Thank you..

Thank you. [Operator Instructions]. And our next question comes from Patrick Walravens with JMP..

Great. Thank you. And let me add my congratulations on two quarters in a row of 50 % plus growth. And Or, let me add my thoughts, prayers, and well wishes for your team in Ukraine. Jason, on -- can we just talk more about the cash in the burn.

So you have a $120 million in cash and no debt, right? And your operating loss this quarter was $20 million, but you only burned for. So that's great.

But how much should we expect you to burn through the rest of this year? Was this quarter really unusual because of collections or something like that?.

Hey, Pat. Sure. I maybe take a step back on that and just talk about how cash flow works in Similarweb in general. There is some seasonality to the renewal cycles that we have. Those typically have higher renewal cycles in Q4 and beginning for Q1, and you see that cash flow come in heavily in Q1 and Q2.

And because we typically invoice our customers a year in advance, upfront, so you've got higher cash collections in the first part of the year than in the back-end of the year.

And so this is something that we do account for, and we think that is something that we've shown in the past or perform that way if you've looked back over the last couple of years as well.

Having said that, we are going -- we aim -- we will be burning less than overall on an operating basis, less than $50 million this year, and including, obviously, the burden that we had for this quarter. So we're talking we have more than enough.

And from a cash on the balance sheet today, we have a $125 million plus the additional $75 million credit facility. So we look at our available cash as being over $200 million. We think that's more than enough to take us the way through to the cash flow profitability that we guided to and our reaffirming today..

Yeah. It sounds like it's more than enough.

And I heard Or's comments about we're looking for efficiency, but when you look at , when you look at all the startups that are starting to, just say, okay, we're going to grow less fast and we're going to conserve our cash, I mean, do you guys think about that? How do you -- what do you burn rate and going down?.

We don't think we should slow down, but we shouldn't speed up. This is the different approach because we're seeing a huge term in front of us. We, as I like to say, we are all just getting started, and we are seeing a huge market to capture our technology and offering is very unique.

And so in a different world, in different environment, maybe we would even accelerate our growth. As we've seen, the macroeconomics and they said internal voice, I think that we need to continue to execute the same as we are doing now. Jason, maybe you have anything to add..

Maybe I'll just add to what Or said. When you look at how -- if you look at the payback period that we, again, we shared both in the shareholder letter and in the investor presentation, we're tracking now on a 15 to 16 months payback on a gross profit basis for customer acquisition.

On the flip side, when you look at that second-year, that net retention rate, we've got a better 45 % to 50 % contribution margin. And just to clarify what that is, that gross margin minus the cost, the sales and marketing resources, the customer success that we have in order to retain and expand those customers.

That's providing a 45 % to 50 % contribution margin when you look back over the trailing for our quarter. So this -- the model itself, is highly efficient and we were focused on that.

And if you look back, right as we came to mark in the IPO a year ago, we have taken the company to a cash flow break-even business and slightly profitable on a cash flow side. We're growing at 32 %. As Or said, we see the massive tab ahead of us. We know that the model itself is efficient.

We've got that disciplined execution that we've been doing for a number of years in order to deliver that cash flow profitability in 2024 on $450 to $500 million of ARR..

Great. Thank you..

[Operator Instructions]. Thank you.

And the next question is a follow-up for Ryan MacWilliams with Barclays?.

Back again. Thanks, guys, for taking the question.

Or, I know last quarter you talked about desire to further your market-leading position and alternative data intelligence, but with addressing off Patrick question, some of the challenges that start-ups or late-stage companies are seeing, are you tempted to be the market consolidator or add additional functionalities as we go through this year, maybe pick up some teams or products that might take longer to develop?.

Okay. It’s great question. We are still inspired to be the leading player in what we call the alternative data and ecosystem. I think expecting new market that is now raising in the public investor ecosystem, and we are already have really great momentum. And this quarter, we plan to launch a new platform dedicated for the Investor Solutions.

So it's going to be a platform that you will be able to stock and not website, like we have in our apps, like we have in our core products. And this platform will enable us to integrate much faster, more decent data sources.

And this helped to invest all and get signals and both performances, like data, alternative data, which is out ability to get usability. And I hope that once we going to launch and starts rolling in this platform, those are going to help make our -- it will make us -- enable us to buy and integrate company faster.

And then we can be even more bullish on acquisition and consolidation in this market. Stay tuned. We put it in better this quarter..

Appreciate that color. And Jason, just on the gross margin side, great to hear about the rebound and step-up plans for the second-half. Can you just walk through some of the components of the how you're getting more leverage on the gross margin line? Is just more usage of Embee Mobile Products? Just more color there would be helpful. Thanks..

Both the Embee Mobile as well as what will be the Data.ai license agreement that starts hitting across the sales this quarter, are at fixed costs. And so much like our other parts of data acquisition or a data assets that we build out, those are fixed costs that service as the same number of customers, whether that's 50 or 500 or 5,000 customers.

And as more and more cost, we increased the number of customers and increased the revenue per customer, and therefore, the overall ARR and revenue for the company, we're able to leverage those fixed costs more.

And that's the historical trend that we saw previously that took a gross margin from 54 % in 2018 to 71 % to 77 % to 78 % over the three years thereafter to here. Like we mentioned last quarter, Embee and the then announced Data.ai partnership, we're going to be short-term hits as we integrated those costs into our data edge.

But once that starts delivering and attracting more and more customer and revenue, you'll see that amortizing and leverage to drive additional gross margin..

Excellent. I appreciate the color. Thanks, guys..

Thanks, Sam..

[Operator Instructions]. Thank you. And that concludes about the question and answer session, as well as the event itself. Thank you so much for dialing in. You may now disconnect your lines..

Thank you..