To be clear, all currently and previously reported historical actuals reflect our prior definition, which only excludes stock-based compensation. The updated definitions will be reflected when we report our first quarter 2024 financials. With our year-end earnings release, we are also providing a reconciliation from the old definition to the new definition for the periods presented. In anticipation of this change, we are now providing guidance using this updated definition. We believe this update will allow investors to better understand our financial performance, better align with the measures used internally by management in operating our business, and permit a better evaluation of the efficacy of the methodology and information used by management to evaluate and measure our performance.

And with that, let me turn the call over to Oleg.

Oleg Shchegolev: Thank you, and good morning to everyone on the call. I am pleased with our team' s ability to execute in 2023. We succeeded in accelerating ARR growth, increasing our pipeline of new customers and expanding our platform as we continue to drive towards sustained profitability. In the fourth quarter, we delivered revenue of $83.4 million, up 21% year-over year. And, for the full year, revenue grew 21% to $307.7 million. Importantly, we also generated strong profitability exceeding our guidance, reporting non-GAAP net income of $11.4 million in the fourth quarter while closing out the full year with $16.3 million in non-GAAP net income. As demonstrated by our 2024 guidance, our business is focused on driving strong, sustainable growth, expanding profitability and generating free cash flow.

Before handing it over to Eugene and Brian to talk about the quarter in more detail, I would like to touch on a few highlights about our strategy to continue to scale the business and capture our significant market opportunity. On our last call, I talked about our strong competitive positioning as the platform of choice for businesses to improve their online visibility. I also discussed our differentiation in the market due to our unique data assets and positive industry dynamics. We firmly believe our success and ability to grow is more about factors that are within our control and less about competitors. We have a significant greenfield market opportunity ahead of us and we continue to focus on educating our customers about the value of our unique data assets and diverse portfolio of products.

To put it simply, businesses need to be seen online and in places where consumers are. We help customers in a number of ways. We help them organize their websites in order to rank highly for search engines to find them and to be woven into conversations in social media. We assist them with their keyword strategies to achieve higher rankings. Also, we help businesses optimize the location-specific elements about their site so that they show up in the local listings. Clients also need to gather intelligence about consumers and competitors and our platform provides them with those capabilities. To illustrate our solutions, consider how a potential customer's journey might look. A customer would come to Semrush initially seeking to elevate their digital presence with higher rankings on search engines, higher levels of customer engagement, and more visibility across several marketing channels.

They would start by researching their competitors' ads and selected keywords to figure out which ones have the best ROI potential. They would then use our Ads Launch Assistant to run campaigns using those keywords. As they begin to understand the limitations of relying only on paid media, they would then use our platform to make their physical store more easily discoverable on Google Maps. Their subscription to Semrush Local would automate their online listing updates in over 70 directories, and then the platform would track their rankings in maps for keywords. Of course, they would also want to use our social tool and leverage our AI features to respond to reviews quickly, while at the same time generating content with those high-value keywords included.

As a result of their engagement with our tools, they could choose to share valuable data with us, which we could then use to further increase the accuracy and predictability of our algorithms. To complete this hypothetical example and to demonstrate the breadth of our platform, they would also likely want to use our tools to find niche influencers which they can collaborate with to better enhance their brand visibility and credibility. With the help of AI Social Content Generator, they could then create reels and videos in seconds for Instagram and TikTok to capitalize on organic promotion opportunities. This hypothetical customer journey highlights the growing trend of businesses of all sizes investing more time, effort, and resources into enhancing their online visibility, which is a trend Semrush will continue to benefit greatly from.

We believe businesses that are best able to analyze, plan, and execute their digital marketing activities will have the potential for exceptional results, and as you can see, our platform provides all the tools, in one place, where they can do this. We have also created a network effect as we share highly actionable insights with our customers, and they in return, share their proprietary data with us; this dynamic makes our algorithms stronger and even more predictive, enabling a flywheel effect. The stronger and more predictive our algorithms are, the happier our customers are, which fuels new ARR growth. Looking ahead to 2024, we are focused on continuing to grow our core business, up-selling and cross-selling our offerings, expanding our platform and exploring new acquisition opportunities.

In conclusion, I am very optimistic about 2024 and am excited about our strong competitive market position and ability to capitalize on future growth opportunities. I will now turn the call over to Eugene and Brian to discuss the results of the quarter and our outlook in more detail.

Eugene Levin: Thank you, Oleg. We delivered another solid quarter and continue to focus on our three main growth pillars that set us up for long-term, durable growth, and we are making progress on each front. To review, we are focused on: one, increasing new user growth with our existing offerings; two, driving expansion revenue by delivering higher value to our customers by cross-selling and up-selling within our base; and three, adding new products to our portfolio. Let me provide updates from this quarter. First, we continued increasing new user growth. We have nearly 108,000 paying customers today, but there are tens of millions of marketers and small business owners that we believe will benefit from our platform and product offerings.

In Q4, we achieved solid net new customer additions and registrations with a more efficient sales and marketing engine than we've seen in prior quarters. Looking at this further, organic marketing is one of many channels companies leverage to enhance their online presence. It has multiple benefits and our tools provide the data and technology that allows customers to fine tune, analyze and measure the impact of various organic marketing initiatives. Over the past year, we have seen some considerable improvements in optimizing our sales and marketing spend where we pivoted towards our organic efforts to boost our own online presence. Much of our success can be attributed to leveraging our own Semrush tools and following recommendations to deliver very successful results.

While every marketing channel has its place in an effective marketing strategy, organic marketing can be more cost effective in the long run, and importantly, it is trustworthy. You are more likely to trust an organic search result for relevance and quality than a paid ad that anyone can place based on your search needs. Organic marketing is like owning a house where you're building equity, whereas paid media can be like renting a house where you get to live there, but when you're done paying, you don't own any real estate. As Oleg highlighted, Semrush's tools are focused on boosting a company's organic presence, in contrast to the focus that companies like Google and Facebook have on paid advertising. This is one of Semrush's key competitive differentiators and something that we believe provides us with a clear path in the ecosystem.

The efficiency with which we generated our results this quarter demonstrates the power of organic strategy. Turning to the second growth pillar, we have a strategy to cross-sell and up-sell our customers in an effort to expand our average ARR per customer, which as reported today, is over $3,100. Our cross-sell focus is on search engine optimization, search engine advertising, social media, local marketing, digital PR, content marketing, and competitive intelligence. These are our core competencies, where we believe Semrush clearly differentiates itself in the marketplace and we saw continued success in Q4. Before we talk about our third growth pillar, which is adding new products to our portfolio, I'd like to take a few moments to discuss a segment of our customer base that we believe represents a significant growth engine for us.

Companies that fall into this broad segment are businesses that tend to have multiple marketing team members that are each Semrush users and they generally have significantly higher ARPU, or average revenue per user, than our average customer. While this is a reasonably broad description, the point I'm trying to demonstrate is that they are different from our solopreneur and small business customers. What's exciting about these more sophisticated accounts is that: they add additional products to their subscription at a healthier clip than our average customer, so their ARPU grows rapidly as they leverage more Semrush tools to achieve their business goals; and two, their net revenue retention is meaningfully higher than our average. This cohort of accounts already comprises a meaningful double-digit percentage of our ARR and we expect that this will grow significantly as time goes on.

We believe that these high-level metrics covering ARPU growth and net revenue retention demonstrate that the adoption of our products within these more sophisticated accounts points to a bright future for this customer segment and will help support strong, sustainable growth for Semrush overall. We also believe that the relative strength of this customer set gives us increased confidence that our new enterprise product will be met with the strong adoption, further supporting our goal of driving strong, durable growth on both our top-line and bottom-line. This leads me to our third growth pillar, expanding our product portfolio. During 2023, we launched numerous AI apps and tools and added multiple apps to the AppCenter. We officially launched an enterprise SEO product into the market.

Although we are in the early stages, and this will take time to be material contributor to our overall revenue, the early signs we are seeing are very encouraging. Our enterprise offering has the opportunity to create a meaningful inflection of our ARPU, as this product carries ARPUs that tend to be 10 times to 15 times our client average. We believe our early adopter customers are experiencing significant returns on their investments after migrating to the platform. Features like automated workflows, corporate-level access controls, customizable dashboards, and built-in professional services are helping our customers drive meaningful improvements in efficiency while also delivering significant time and cost savings. To support this anticipated growth in our enterprise product, we spent the last several months analyzing our go-to-market infrastructure and sales motion and making the requisite adjustments.

As a result of this very detailed exercise, we reallocated the headcount of several SMB-focused sales teams into more enterprise-facing roles. We believe this will result in optimized LTV-to-CAC ratio as we leverage our product-led, low-touch sales strategy down-market while we shift more of our investment focus to the high-value enterprise area. In summary, I am very pleased with our success driving new customer growth, our success up-selling and cross-selling, and our ability to expand our product portfolio and move upmarket. I will now turn the call over to Brian who will provide a more detailed discussion of our financial performance and guidance. Go ahead, Brian.

Brian Mulroy: Thanks, Eugene. Before I discuss our results in more detail, I'd like to remind you what I highlighted last quarter on my plan for the finance organization. As I sit here one quarter later, my confidence has only grown stronger in our ability to drive durable growth over the next several years as we further penetrate our served markets. Evidenced by our recent results and guidance, I see an opportunity for us to do this while also making significant improvements to our profitability. To bring this to fruition, our finance team focuses on data and metrics for decision-making throughout the organization. Because Semrush has such a valuable customer data set, we have the ability to segment our user base to understand their buying patterns, retention dynamics, and interest in new products, among many other things.

You heard Eugene talk about this a moment ago, and taking that example of how our corporate accounts have extremely robust characteristics for growth, retention, and ARPU, we rigorously analyze this data and allocate our investments in sales, marketing, and product accordingly. We expect the outcome of doing this on a regular basis to result in a disciplined approach that enables us to capitalize on our biggest opportunities while simultaneously driving operating efficiencies. We expect this ROI framework will apply to our capital allocation decisions, whether that is for internal projects, external M&A, or the optimization of our capital structure. With that, I'd like to turn to our fourth quarter results in more detail. We had a very strong quarter across the board.

Our revenue in the fourth quarter was $83.4 million, growing 21% year-over-year. For the full year revenue increased 21% to $307.7 million. Growth was driven by new customer additions and the expansion of our average revenue per customer as we continue to execute on our cross-sell and up-sell strategy. Our dollar-based net revenue retention for the fourth quarter was 107%. We expect our dollar-based net revenue retention to trough within the next quarter or two as we increase adoption of our full portfolio of products, tools and add-ons within our installed base. Annual recurring revenue for the quarter grew 23% to $337.1 million compared to a year ago. We reported significant improvements in our operating margin, which was up approximately 2,500 basis points year-over-year.

This improvement is the result of a number of factors: First, our gross margin improved 100 basis points year-over-year to 83.6%. Gross margin benefited from higher revenue and our continued ability to gain scale and leverage from our efficiently engineered platform. We continue to expect strong gross margins above 80% in the near term and view the way in which our stack is engineered as a key competitive differentiator. Our healthy gross margin also provides us the flexibility to invest below the gross profit line, which gives us a structural advantage in the market. Second, we continue to execute on our commitment to drive efficiencies, carefully manage expenses and further expand our profitability. In the short time I've been here, I have implemented policies and programs to objectively examine spending initiatives, and I believe there are additional opportunities to drive durable growth while also expanding our profit margins through focus and discipline.

During 2023, across the company, we carefully managed expenses and maintained our headcount. Moving down the income statement, during the fourth quarter, we had positive non-GAAP net income of $11.4 million, and $16.3 million for the full year, both surpassing the high end of our guidance range. The strong non-GAAP net income relative to our guidance was the result of the flow-through of our operating performance and the accounting treatment for gains on investments we made in 2021 and 2022. Turning to the balance sheet, we ended the quarter with cash and cash equivalents, and short-term investments of $238.6 million, up from $230.1 million in the previous quarter. Our cash flow from operations in the fourth quarter was $11.6 million. Turning to guidance.

I am very confident in the underlying trends in the business and capabilities of our team to continue on the path to deliver strong growth and profitability. Our business is very strong, and we are encouraged not only by what we have accomplished so far, but we are optimistic about what we see as the opportunities in front of us. Looking at the first quarter, we are off to a strong start with respect to net new customer additions, as we're seeing a similar seasonal pattern to previous years where customers that paused their subscriptions in the fourth quarter returned to the platform in Q1, a trend we attribute to the holidays. As mentioned in the forward-looking statements, we are now guiding to revenue, non-GAAP operating margin and free cash flow margin.

So, for the first quarter of 2024, we expect revenue in a range of $84.7 million to $85.3 million, which translates to growth of approximately 20%. Because we are already two months into the first quarter, this range is a bit narrower than what we expect to normally provide during the remainder of 2024. We expect first quarter non-GAAP operating margin to be approximately 8%. For the full year 2024, we expect revenue in a range of $364 million to $368 million, which translates to growth of 18% to 20%. We expect full year 2024 non-GAAP operating margins to be between 10% and 11%, and full year free cash flow margins to be in the range of 7% to 8%. To help you with your modeling, the difference between our non-GAAP operating margin and our free cash flow margin is the result of interest income offset by capital expenditures and cash taxes.

Finally, our guidance assumes a euro exchange rate of 1.08. As a reminder, approximately 30% of our expenses are denominated in euros. In closing, we are confident in our ability to grow and scale our business and remain committed to a disciplined and balanced approach to spending in 2024. We are focused on driving improved efficiency and profitability, even while we invest in future growth opportunities that we expect will deliver long-term value to our shareholders. With that, we are happy to take any of your questions. Operator, please open the line for questions.

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