Good day, ladies and gentlemen, and welcome to Similarweb Quarter 1 Fiscal 2021 Earnings Call. [Operator's Instructions] At this time, it is my pleasure to turn the floor over to your host, Rami Myerson. Sir, the floor is yours. .

Thank you, operator. Welcome, everyone, to our first quarter 2024 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 rising interest rates rising global inflation and current macroeconomic and geopolitical conditions, including the current war in Israel, challenges in our business and in the markets in which we operate are 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 the forward-looking statements discussion in our shareholder letter, along with our Form 20-F filed with the SEC on February 28, 2024, and in particular sections entitled Cautionary Statement regarding forward-looking Statements and 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 any forward-looking statements made on this call are based on information available as of today's date, May 8, 2024. 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 profit or loss, which represents GAAP operating profit or loss, net share-based compensation adjustments and payments related to business combinations, amortization of intangible assets and certain other nonrecurring items.

We use this and other non-GAAP financial measures internally to facilitate analysis of our financial and business strengths and for internal planning and focus and 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 information purposes only. They should not be considered in orvilationFrorm or as a substitute for financial information prepared in accordance with GAAP.

A reconciliation clans 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 after and CFO, Jason Schwartz.

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

Please note that we published a detailed discussion of our first quarter 2024 results and a later to shareholders through investments to reference as well as an updated investor presentation of the 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. Or, please go ahead. .

Thank you, Rami, and welcome to the team and your first conference call with us. And good morning, and welcome, everyone, joining the call today. We kick off 2024 with continued momentum in both top line and bottom line performance and delivered a very strong first quarter 2024 results.

We grew our revenue by 12% over Q1 last year to $59 million, and we generated nearly $10 million of free cash flow, an amazing achievement we are proud of. Our global customer base grew 16% year-over-year to over 4,800 customers and the demand for our solution at the top of the funnel remains strong.

Our customers and prospects appreciate and value the importance of our digital market data for the business. As a result, our pipeline remains robust, and we are adding new customers and expanding our penetration into our market. We continue to invest to expand and enrich our similar web digital market data.

In March, we acquired Admatic, digital and intelligent leader. I would like to take this opportunity to welcome the metrics team to the similar web. And intelligent is an important tool for corporates and marketing agencies. Online display advertising is estimated to attract more than $174 billion in spending in 2024, according to Statista.

For certain global brands, it's already compresses of 60% of their global advertising budget. We plan to leverage our digital ad data, along with the matrix team's expertise to enhance our digital and intelligence offering and launch what we believe will be the best and most comprehensive digital advertising intelligent data in the market.

This will supercharge our competitive intelligent offering. We plan to integrate and monetize this intelligent data for all of our solutions as well. For our shopper intelligence solution, we will add visibility into retail media online spend for our stock intelligent offering, we would ad for public company ad spend and ad revenue.

And for our sales intelligence, we will improve our ability to help add sales team with better data to find and qualify digital advertisers and publishers. And this is why I'm very excited about this opportunity. Last year, we introduced and successfully launched similar SAM, our AI-driven digital intelligent assistant.

Today, I am excited to tell you about SAM. Term is our AI-powered sales assistant model. SAM is designed to enhance sales efficiency and effectiveness by automatically delivering precise data-driven insight about prospects directly into our customers' sales workflow.

As we all know, our e-mails are bombarded with cold outage emails from salespeople that we all market spend, making it very hard for sales team to engage with our prospects. With SAM, salespeople can use a tax generation to suggest sales speech that are match more likely to resonate with a potential customer.

Same utilize our market insight data and prepare relevant database insight ins that explain to the prospect while they need to engage with the sales teams. And we're already receiving fantastic feedback from early adopters of them, we have reported a significant increase in outreach response rates.

For one of our customers, SAM increase pro rates by 20x compared to their previous response rate. The same data is now open, and we are looking forward to seeing and it's adapting by our customers and its impact over time. I'm very proud of the continued profitability and free cash flow momentum.

We delivered our third consecutive quarter of non-GAAP operating profit and a very strong free cash flow in the quarter. This is a great achievement for us and a solid result of the smart work and discipline of the whole similar team.

I'm also really happy to welcome Susan Dunn, our new Chief Revenue Officer, having spent 32 years at Nielsen IQ, including as its revenue Officer, Susan knows the market research world inside and out.

She has a deep expertise in delivering the business value and operating impact of the market intelligence to many of the largest consumer brands in the world. Welcome, Susan. I'm confident that you are the ideal sales leader to drive our next phase of growth and expansion.

Finally, I want to thank our team for another quarter of outstanding results and great execution. Remember, we are just getting started. Thank you, everyone, for your continued support. With that, Jason, I will turn the call over to you. .

Thank you, Or, and let me join you in welcoming Rami and Susan to the team as well. Thank you to everyone joining us on the call today to discuss our first quarter results. I will briefly address our financial performance, and then we will open up the call to questions.

Our performance in the first quarter reflects good top line and bottom line momentum. Revenue was $59 million for the quarter at the high end of our guidance range. Our $100,000 ARR customer segment now represents 58% of our total ARR, an all-time high and NRR was 107%, consistent with Q4 2023.

An area of strength for us was in our largest customers, where we closed 4 7-digit contracts during the quarter following the 10 7-digit contracts we closed in the fourth quarter and excellent results that supports our positive momentum.

At the end of the first quarter, 42% of our ARR is contracted under multiyear commitments, demonstrating the strength and longevity of our customer relationships.

Our remaining performance obligations also reached a new record of $214 million, up from $195 million at the end of Q4, providing a positive indicator of our performance durability going forward. While our results on the top line were towards the top end of expectations, we exceeded expectations on our bottom line.

Our non-GAAP gross margin was 81% in the first quarter compared to 80% last year. Our first quarter GAAP operating loss was $2.7 million, while our non-GAAP operating profit was $2.8 million.

This resulted in a non-GAAP operating margin of 5% and represented an improvement of 19 percentage points versus the prior year and the third consecutive quarter of non-GAAP operating profit.

Our sustained focus on operating efficiency continues to deliver excellent results, and we generated $9.7 million in positive free cash flow in the first quarter, a 16% free cash flow margin and the second consecutive quarter of positive free cash flow.

As a result, we ended the first quarter with nearly $55 million in cash and cash equivalents and no outstanding debt. Turning now to Q2 2024. We expect total revenue in the range of $60 million to $60.5 million.

For the full year 2024, we continue to expect total revenue in the range of $242 million to $246 million, representing approximately 12% growth year-over-year at the midpoint of the range. Non-GAAP operating profit for the second quarter is expected to be in the range of $1.5 million to $2 million.

For the full year, we expect our operating profit to be between $7 million and $9 million, up from our previous expectations of $6 million to $8 million. As we discussed at the beginning of the year, we are focused on delivering profitable growth and making further progress towards the rule of 40 over time.

We anticipate being profitable on a non-GAAP basis and generating positive free cash flow in all of the remaining quarters of 2024. And with that, Or and I are ready to answer your questions. .

Thank you. The floor is now open for questions. [Operator's Instructions] And our first question comes from Arjun Bhatia from William Blair. .

Congrats on the strong results here. I wanted to ask on the go-to-market changes and the pricing packaging adjustments that you've made.

Could you just share with us how customers are receiving those, both at the low end and maybe how you plan to adjust or where you are in the process of adjusting go-to-market with -- on the enterprise side, and I know you hired a new CRO, Susan, I'm curious what initiatives you might implement as she gets up to speed here. .

So what I heard that there was 2 parts for the first one about change we rolled into the go-to-market. So I think there was 2 big changes we did in the beginning of the year. One is to centralize and give more focus around customer success effort to a lower part of our customers for our SMB customers to give them more focused on value.

And the second part is a line on our strat account, basically building more focus spot-by sector in order to give better support and value to our start account. So those 2 changes rolled up in the beginning of the year.

And we're seeing great success with them in the few months we hold them -- and regarding the second question about Susan joining, so super excited. We just joined last week. So she editor second week. We're very excited to come with a lot of experience selling data inside market research.

And I think she can help -- if she will help us scale a lot or strata motion that is new to us. We're getting better. As you heard from the earnings, we start closing more and more 7-figure deals, and we're seeing a huge success and potential at the start as our data is very unique. We consider really the top digital and data provider in the world.

And I think there's a lot of potential, especially with the Strata we're sure that Susan can help us a lot there. .

The other one I wanted to ask on sales intelligence or maybe if we zoom out even where you're seeing incremental demand amongst your product suite? It sounds like you are making some investments in sales intelligence from a product perspective, which is why I brought that up. But yes, can we can zoom out and just kind of think product by product.

And then on sales, specifically, I'm curious how you plan to monetize the SAM.

Is that nothing that's just going to be embedded or something that you could potentially have an that pricing for?.

Yes, of course. So I think you're right, it's looking good on a few products that we sell on our innovation products doing really nicely. We have a shopper intelligence or stock intelligence. It's new products we introduced lately that's doing well.

We have a lot of custom product people come and want some unique data more on the strategic side that is doing very well. And on the sales intelligence, yes, there's a lot of great innovation, mostly on AI. And it was the first product we implemented the AI strategy in order to enrich the workflow for the user.

And if you think about it, we are like a market research company and the sales organization used us to find the most ideal prospects they should approach.

And they use our platform to find interesting insights to share with those prospects to tell them, listen, I see this in this data and similar web you should speak with me, I have a solution to help you solve this pain, as I say. Now with AI, all these workflow can be automatically. So it's very nice.

So you can tell AI listen, I'm selling a marketing automation software. Please find me all the companies online that their e-mail traffic is not doing well compared to the competition. And right e-mail to send them to show them that they are not in a good place and they should speak with me.

So the AI can automize all these process like the e-mail and really help them open the door. And this is a very unique approach to sell because, as I said in the earnings call, we all feel the pain that we battle with a lot of e-mails of people trying to prospect to you that are just cold e-mail that everybody markets spend.

And when you get these kinds of insights, the tailored to you, they show you that you have a pain, somebody can really help you. This approach of consoles is very powerful. And really, we're seeing a great increase of response rate to the customer that work with SAM -- so we bit excited about it. .

And our next question comes from Ryan MacWilliams from Barclays. .

This is Pete Newton on for Ryan MacWilliams.

Or now that we're kind of further into the year, how have you seen macro impact your business at this point? And how do enterprise spending budgets look for the rest of FY '24?.

Yes. So macro environment is kind of the same, like we don't see it getting better like it used to be in 2021 or beginning of 2022. It's kind of -- I feel, going back to 2020 and when it was before. And we always need to do -- we work out do better job and execution to scale. So I think this is what we see.

And there was a second question or there was only one. .

That was just one for now and then just how you think about budgets or the rest of the year on the enterprise side based off what you've seen so far early this year. .

I think it's looking good. I think it's looking in a good place. .

Okay. Great. And then just a quick follow-up. Anything to call out in 1Q in terms of vertical performance. .

Yes. I think on the vertical performance, we have 2 teams that are doing a great job, still executing very well. We have a vertical selling to invest a they still perform really nicely. And we have the OEM in the sell to companies that want to integrate our data into their own solution and software but is also doing really well. .

And our next question comes from Brett Knoblauch from Cantor Fitzgerald. .

This is Tommy Shinke on for Brett. Congrats on the quarter. Just on the acquisition of Ad metrics, just I guess how we should be thinking about that.

How much of the customer growth in the quarter can be attributed to customers coming over from that platform? And then how should we think about this contributing to the financials, both on revenue and margins as we progress throughout 2024 and beyond?.

It's Jason. Tom, thanks so much for the question. AdMetrix was really not a material contribution to the quarter.

It's a great business and what we think Admetrix is really going to provide us to -- when we take their knowledge together with our data, we're going to be building out a outstanding ad intelligence product and intelligence data that can be monetized across not only our research intelligence solution, but also our investor intelligence, back intelligence, shopper intelligence, everybody really needs those data points to tell them what's going on in whether you're an investor looking for that alternative data or whether you're a CPG company and trying to understand the trends of retail adds.

So all of that is that we think it's going to be the driver of that ROI on this acquisition. Really excited about it. .

Awesome. Sounds great. And then just if I may, on retention, I guess, good stabilization in the quarter.

We're seeing broader software churn, so it's great to see this I guess, what's driving the stabilization? Is it the new pricing and packaging model with similar web, Demand for AI? I guess you guys mentioned the SAM a lot in the call in the press release. So I'm just curious to hear on that. .

The retention is historical data information so you think that the people that churn in Q1, they made it -- so you're talking about customers that decided to churn in November, December last year. So they don't -- didn't enjoy from all those nice benefits we launched now.

I think if you're talking about the stabilization of the rate because a lot of you're pulling last year that we now start collecting the fruit.

We still did a lot of great changes, as I said, around our customer success organization in Q1 that were very eager to see how it's going to impact the retention going forward as you put a lot of around our SMB sector, and we removed most of the people there to be valued people focused on product engagement and education.

So still of that all these initiatives will help to increase the tension of time. .

And our next question comes from Tyler Radke from Citi. .

Jason, maybe for you. Just wanted to see if you could put a little bit more color on the assumptions and the outlook. Obviously, decent beat here in Q1. You guided in Q2 slightly ahead but not raising the full year.

Is that just conservatism? I know there's some go-to-market changes, macro is a little bit shaky, but any changes that you'd like to highlight as you're thinking about the second half relative to 90 days ago?.

You know us, we like to give guidance that we know to meet. We're really proud that we're hitting the numbers on the high end of the guidance that we've done. I think that we see that trend continuing.

And on the profitability, where we are seeing that efficiency coming through, we took the opportunity to raise the guidance on the profitability from $6 million to $8 million to $7 million to $9 million for the year. So we are looking at that where we see that makes sense. .

Great. And then as you think about the similar Web 3.0 with a lower upfront pricing, just as we're thinking about customer ARPU here. Obviously, that's putting some short-term pressure on that.

When do you think that stabilizes just in terms of that ARPU? Is that next quarter? Or could this take a while just given that you are still seeing pretty strong new customer additions?.

Yes. I think that the way to think about the model of about the businesses that we really have 2 ends of a barbell. On one hand, we've got these large customers, the over $100,000 that we take them from -- starting at thousands or tens of clusters together hundreds of thousands of dollars.

And now you're seeing those guys taking up to millions of dollars on transactions. And that's a journey that we're really proud of. And in fact, when you look at the 378,000 customers that we have at the end of the quarter, the overwhelming majority of them started well less than $100,000. Most customers don't start at that level.

And so -- what we've seen is that journey is the right way for us to do. And we think that that's -- that has been our success over time, and that's one of the things that we're doubling down. On one hand, you're going to see those large customers, their strategic accounts getting bigger.

And at the same time, we want to keep on having flow of 100, 200 customers every single quarter that come in because those customers become the NRR for 2025 and 2026 and beyond. So we're actually very happy with the levels that we're seeing over here. And if it goes up or down by $500 over time on the blended ARPU, we think that, that's okay. .

Our next question comes from Pat Walravens from Citizens. .

First question, what of tailwinds are you seeing from tech customers using your data to train their large language models? And maybe can you help us quantify that in 1Q relative to 4Q and how you expect it going forward?.

I think we're still seeing nice momentum of companies looking to buy data to training their Liana. So we still saw some nice activity in the quarter. Going forward, I don't know. It's an interesting question. We need to wait and see if this will still be a hot topic. .

And then are, can you talk about the current state of the Investor Intelligence products? What's on the road map there? I think you mentioned in your prepared remarks adding ad-spend and ad revenue and how meaningful driver of growth to envision investor intelligence being going forward?.

So I'm super bullish about this product, this solution of stock intelligence. I mean it's our product that help you get all the different signals from the digital world that you can evaluate public company performance before they release their earnings.

And this software is part of what we will call the alternative data market that we assume is probably $10 billion market and growing. And we believe that the more we're going to increase the coverage. Right now, we support 3,000 stocks in the basic data. That is not electrofica engagement.

And we have, I think, around a little bit above 100 stocks that are more advanced when you can get signals that can show you revenue growth, customer growth and we get more signal that correlate with what the company is reporting and this is very exciting.

I can really see a very clear square that we can predict some Now going forward, we still have a lot of data assets we need to map to different signals and upload to this platform.

So I know that in the road map, they're going to introduce our app that we have very good update about usage and think about that you can see how many people installed Tesla app on their phone. This is a very strong correlation to how many Tesla cars have been sold on the.

So these data sets will go into the platform in this quarter, and we have more data set like technographic about how many people implement Zendesk checks in their website. This is a very strong signal for Zendesk customer in a quarter. Those are amazing signals.

This technographic data set would introduce also or this quarter or next quarter into the stock intelligence. So a very exciting thing there and absolutely bullish about this solution. .

Thanks so much. [Operator's Instructions] And there appear to be no further questions at this time. I'd like to turn this back to management for any closing remarks. .

Thank you, everyone. We're super excited on the quarter results, especially the almost $10 million free cash flow. And I'm super proud on that and just getting started. Thank you, everyone. .

Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful.